Estate agents’ commission — Claim by estate agents for commission for finding suitable premises for the defendants — Commission to be payable by the defendants ‘subject to our offer . . . being accepted’ — The merchant bankers advising the lessors were not in favour of the grant of a lease to the defendants — Defendants suggested that the lease should be granted to another company who would grant an underlease to the defendants — This suggestion was adopted — Whether in these circumstances the plaintiffs were entitled to their commission — Plaintiffs argued that the interposition of an intermediate interest made no difference, whereas the defendants submitted that ‘our offer’ meant an offer by the defendants directly and no one else — Held that no term could be implied which would entitle the plaintiffs to commission in these circumstances and their claim accordingly failed
In this action
the firm of Richard Ellis claimed commission from the defendants, Pipe-Chem
(Holdings) Ltd, for finding suitable premises required by the latter for their
business of making petrochemical equipment. The premises in question were Cray
Valley House, Orpington, Kent, owned by Brigade Investments Ltd.
Alec Grant
(instructed by Lawrance Messer & Co) appeared on behalf of the plaintiffs;
Allan Levy (instructed by Lee & Pembertons) represented the defendants.
Giving
judgment, PATRICK BENNETT QC said: In the early part of 1978 the defendants, a
company specialising in the making of petro-chemical equipment whose main works
are in the north of England, wanted to open premises in the south of England,
and they approached the plaintiffs in this action (Richard Ellis, a well-known
firm of chartered surveyors and estate agents) for their assistance in finding
suitable premises. Mr A Whicheloe, an employee of the plaintiff firm, made a
number of inquiries for suitable premises and communicated the results of those
inquiries in correspondence to the defendants. The choice fell upon Cray Valley
House, Orpington, Kent, owned by a company called Brigade Investments Ltd, the
freeholders of the property, who had close links with a merchant bank (Keyser
Ullman). Mr Whicheloe, on behalf of his principals, negotiated with the
representatives of Brigade Investments Ltd, Leighton Goldhill & Partners,
consultant surveyors and estate agents, and, in particular, with a Mr I A
French [ARICS], who was also a director of Brigade Investments Ltd. As a result
of those negotiations, on March 7 1978 Mr Whicheloe submitted an offer on
behalf of the defendants to Brigade’s representatives in respect of the
property.
On the same
day Mr Whicheloe, who had not hitherto negotiated the terms of remuneration
with the defendants, had a telephone conversation with Mr Simon, a director of
the defendant company, in which authority to act on behalf of the defendants
was given to the plaintiffs, and the remuneration was discussed. That agreement
was recorded in a letter dated March 7 1978 from the defendants to the
plaintiffs as follows:
Following our
telephone conversation of today, we confirm we wish you to act on our behalf in
negotiating for the above-mentioned property and that we will accept a fee —
originally
expressed at 5 per cent
subject to
our offer of £45,000 per annum for the first five years and a rent free period
of six months being accepted.
The figure for
commission was altered, by agreement, to one of 7.5 per cent, but that letter
represents the gist of the telephone conversation and the agreement between Mr
Whicheloe and Mr Simon; it was consequent upon that agreement that Mr Whicheloe
wrote the letter of March 7 to which I have already referred. There is a second
letter dated March 15 1978 from the secretary of the defendant company to Mr
Whicheloe where he also confirmed that:
a commission
of 7.5% will be payable to you when the lease has been completed.
However, both
counsel agree that that second letter does not otherwise modify the terms of
the agreement of March 7 1978.
The matter
continued with the good offices of the plaintiffs. Brigade Investments Ltd
required among other things a sight of the defendants’ accounts for the last
three years and also satisfactory references. One of the referees whose name
was supplied by the defendants to Mr Whicheloe for onward transmission to
Brigade Investments Ltd was Amari Ltd, as appears from a letter dated March 28
1978. Amari Ltd were part of a group of companies in which Amari World Steel
Ltd was the major creditor and a debenture holder of the defendant company.
Unfortunately,
on receipt of the accounts of the defendant company, the surveyors of Brigade
Investments Ltd sought the advice of their merchant bankers (Keyser Ullman) and
it is clear that that advice was adverse to granting the defendants the lease
they sought. The matter was then discussed directly between representatives of
the defendants and Keyser Ullman. I say ‘directly’ because it appears that from
that stage onwards the negotiations which concluded the transaction took place
between the defendants and Brigade’s merchant bank.
It is common
ground that the defendants put forward the suggestion that Brigade Investments
Ltd grant a lease to Amari Ltd in terms identical to those sought by the
defendants, that Brigade Investments Ltd would grant Amari Ltd a licence to
grant an underlease of the property to the defendants on similar terms, but
that the underlease would be one day shorter in duration than the head lease.
This arrangement proved acceptable to Brigade Investments Ltd and their
advisers, and they granted a lease to Amari Ltd on June 1 1978 in the terms
sought by the defendants in their original offer to Brigade Investments Ltd.
Brigade Investments Ltd granted Amari Ltd a licence to sublet the demised
premises to the defendants, and on July 16 1978 Amari Ltd made use of that
licence and granted an underlease to the defendants in similar terms to those
contained in the head lease; the term of the underlease was one day less than
that granted to Amari Ltd by Brigade Investments Ltd.
On April 24
1978 the secretary of the defendant company wrote to Mr Whicheloe saying that
he was instructed by his directors to advise him:
that we no
longer consider ourselves liable to you for commission as set out in my letter
of March 15 1978
that being the
letter to which I have previously referred, which followed the letter of March
7 but which the parties accepted does not modify or alter the agreement of
March 7 1978. The letter continued:
as we were
unable to obtain a lease on the above premises from the landlord. Although we
are now hopeful of obtaining a lease on the premises via a third party, this
has resulted from our own endeavours: an ability to introduce to the landlords
a company acceptable to them as lessees.
The plaintiffs
replied to that letter on April 28 1978 to this effect. The writer said that he
had:
taken the
opportunity to look into the matter, and bearing in mind the content of the
letter dated March 7 of Mr Simon together with the letter of March 15, there is
a clear obligation on you to pay my firm’s fees if you have taken up a lease of
the property. I understand that there is now an intermediate interest involved
in the transaction, but notwithstanding this the property was introduced to you
by this firm.
The essence of
the conflict between the parties in this case is whether in those circumstances
the plaintiffs are entitled to their commission on the terms agreed between
them and the defendants.
One witness to
whom I must make reference, Mr French, a director of Brigade Investments Ltd
and a partner in their surveyors and estate agents, Leighton Goldhill &
Partners, expressed a censorious view of the defendants and said that in his
view this was a devious means of avoiding a fee, due in law, to the firm of
surveyors and estate agents. I acquit the defendants of any such deliberate
act. I find that there is no evidence on which I could believe that this was
anything other than a straightforward business view of the situation which
existed. If this had been a deliberate attempt by the defendants to avoid
payment by a cleverly contrived scheme, first of all by presenting unacceptable
accounts to Brigade Investments Ltd and their merchant bank and then to put
forward an acceptable proposed lessee, in spite of what Mr Levy has said I
would be very surprised if this court could not grant relief to the plaintiffs
in those circumstances. I am quite satisfied that those circumstances did not
occur in this case.
What happened,
as I find, was that the possibility that the defendants would not be acceptable
to Brigade Investments Ltd was not considered, nor was the solution of the
problem to which that unacceptability gave rise (that is, the solution at which
Keyser Ullman and the defendants appear to have arrived, namely, by finding an
acceptable lessee prepared to grant an underlease to the defendants) envisaged
by either the plaintiffs or the defendants at the time when the agreement of
March 7 1978 was entered into.
I have been
referred by counsel to a number of authorities. The plaintiffs say, first, that
the true and ordinary meaning to be attached to the words ‘subject to our offer
being accepted’ is wide enough to include the offer being accepted by Amari
Ltd. That is, that in the phrase ‘our offer’, to quote Mr Grant’s words: ”our’
can mean by our side or our camp’. With the very greatest respect to him, I do
not think that without an unjustifiable straining of language it would be right
to construe those words in that way. In my view, the normal and natural meaning
of the words ‘subject to our offer being accepted’ means ‘subject to an offer
by us being accepted’; ‘us’ being Pipe-Chem (Holdings) Ltd and not someone
else. Mr Grant says, however, that if such a construction is not permissible I
should imply a term into the agreement between the parties, to the effect that
if the offer was made in the circumstances of this case (that is, by someone
who thereafter would grant a sublease to the defendants; he uses the phrase
‘the defendants’ nominees’ to include those persons) then a term to that effect
was impliedly necessary to give the agreement business efficacy.
As I said
earlier, I have been referred by counsel to a number of authorities, the first
of which was the case of Luxor (Eastbourne) Ltd v Cooper [1941]
AC 108 at p 125, where Lord Russell of Killowen when discussing implied terms
said:
Implied
terms, as we all know, can only be justified under the compulsion of some
necessity. No such compulsion or necessity exists in the case under
consideration. The agent is promised a commission if he introduces a purchaser
at a specified or minimum price. The owner is desirous of selling. The chances
are largely in favour of the deal going through, if a purchaser is introduced.
The agent takes the risk in the hope of a substantial remuneration for
comparatively small exertion.
I do not wish
to denigrate the skilled and persistent efforts of Mr Whicheloe, but that
description by Lord Russell of Killowen is not entirely inappropriate to this
particular case.
I was
referred, also, to the case of Trollope & Colls Ltd v North West
Metropolitan Regional Hospital Board [1973] 1 WLR 601 at p 609, where Lord
Pearson said:
An
unexpressed term can be implied if and only if the court finds that the parties
must have intended that term to form part of their contract: it is not enough
for the court to find that such a term would have been adopted by the parties
as reasonable men if it had been suggested to them: it must have been a term
that went without saying, a term necessary to give business efficacy to
the contract, a term which, though tacit, formed part of the contract which the
parties made for themselves.
The third case
to which I was referred was Liverpool City Council v Irwin [1977]
AC 239. In that case Lord Wilberforce analysed the various categories or the
spectrum of implied terms. He does not accept the shade of colour (if that is
the right expression) which the Master of the Rolls had sought to add to the
spectrum. At p 253 Lord Wilberforce said:
To say that
the construction of a complete contract out of these elements involves a
process of ‘implication’ may be correct: it would be so if implication means
the supplying of what is not expressed. But there are varieties of implications
which the courts think fit to make and they do not necessarily involve the same
process. Where there is, on the face of it, a complete, bilateral contract, the
courts are sometimes willing to add terms to it, as implied terms: this is very
common in mercantile contracts where there is an established usage:
It was neither
pleaded nor proved in this case that in these circumstances which Mr Whicheloe
and Mr French described as ‘unique’ there was any established mercantile usage:
in that case
the courts are spelling out what both parties know and would, if asked, unhesitatingly
agree to be part of the bargain. In other cases, where there is an apparently
complete bargain, the courts are willing to add a term on the ground that
without it the contract will not work — this is the case, if not of The
Moorcock . . . itself on its facts, at least of the doctrine of The
Moorcock. . . . This is, as was pointed out by the majority in the Court of
Appeal, a strict test — though the degree of strictness seems to vary with the
current legal trend — and I think that they were right not to accept it as
applicable here. There is a third variety of implication, that which I think
Lord Denning MR favours, or at least did favour in this case, and that is the
implication of reasonable terms. But though I agree with many of his instances,
which in fact fall under one or other of the preceding heads, I cannot go so
far as to endorse his principle; indeed, it seems to me, with respect, to
extend a long, and undesirable, way beyond sound authority.
The present
case, in my opinion, represents a fourth category, or I would rather say a
fourth shade on a continuous spectrum. The court here is simply concerned to
establish what the contract is, the parties not having themselves fully stated
the terms. In this sense the court is searching for what must be implied.
At p 263, in
support of this view that such a term as was required to be inserted in the
contract of the Irwin case ought to be so inserted, Lord Salmon said:
I find it
difficult to think of any term which could be more necessary to imply than one
without which the whole transaction would become futile, inefficacious and
absurd as it would do if in a 15 storey block of flats or maisonettes, such as
the present, the landlords were under no legal duty to take reasonable care to
keep the lifts in working order and the staircases lit.
Applying those
tests to the question: is this term necessary to give the agreement business
efficacy, I cannot find that it is. There was a bargain made at arm’s length by
the respective agents of the plaintiff firm and the defendant company; namely,
Mr Whicheloe, who is a qualified professional man, and Mr Simon, a director of
the defendant company. I cannot see that it is necessary to imply such a term
into this agreement as that for which Mr Grant asks in order to give it
business efficacy. It is clear that neither party considered the possibility of
what did in fact happen, but I am not satisfied that had that matter been drawn
to their attention by an officious bystander or an obtruding listener on the
telephone, that both unhesitatingly would have said, ‘In those circumstances
commission is neverthe-
agreement) might have said, ‘Yes, I would agree to that’; but I am not
satisfied, and I do not find, that both would have agreed to this modification
had the possibility been pointed out to them. In the event I find that the
plaintiffs fail in their claim and are not entitled to the commission claimed
on the transaction.
