Estate agents’ commission — Successful appeal by estate agents against decision of county court judge holding that they were not, in the events which had happened, entitled to commission on the sale of a house — The instructions provided that, in the event of the appellants introducing a purchaser or effectively negotiating a sale to a purchaser who completed the purchase, the vendors (the respondents to the appeal) would pay the appellants commission — The appellants did in fact introduce prospective purchasers whose offer was accepted subject to contract by the respondent vendors — The vendors themselves at this point appeared to have found a suitable house to which to move and matters seemed to be progressing well — Unfortunately occurrences took place which led to the present litigation — The appellants’ branch manager, having heard a report of difficulties attending the sale of the house to which the respondent vendors were hoping to move, tried at first to contact them but without success — He then, unhappily as it turned out, considered it his duty to disclose these difficulties to the prospective purchasers of the subject property — The latter took alarm as to the fate of their own purchase and inquired whether the agents had any other suitable houses on their books — The manager thereupon put them in touch with the owners of a nearby property, who happened to be friends of the respondent vendors, and promptly informed them of what had happened — Respondents were extremely displeased at this intervention by the manager as they were prepared to complete the sale of the subject property even if their own expected purchase fell through and they had to move into rented accommodation — They terminated their instructions to the appellants, completed the sale of the subject property to the prospective purchasers, and moved into rented accommodation — They repudiated liability when the appellants claimed commission and the action resulted — County court judge decided that the appellants had been in breach of their duty as agents and were not entitled to commission — A number of authorities were considered by the Court of Appeal, including Keppel v Wheeler — Held that, although the appellants had been in breach of duty in communicating with the prospective purchasers before consulting the vendors, they had not been guilty of bad faith or any of the conduct which, according to the authorities, would disentitle them to their commission — The case was one of an action carried out in good faith under a misapprehension as to an agent’s duties and fell within the ruling in Keppel v Wheeler — If damage had resulted to the vendors there could have been a claim for damages, but no damage in fact resulted — The county court judge was in error and the appellants were entitled to commission — Appeal allowed
This was an
appeal by Robinson Scammell & Co, estate agents, against a decision of
Judge Peck at Reading County Court dismissing a claim by the appellants against
Mr and Mrs C J Ansell, the present respondents, for commission on the sale of
the respondents’ house at 4 Limmer Close, Wokingham, Berkshire.
P Darby
(instructed by Platel Simpson & Co, of Wokingham) appeared on behalf of the
appellants; P Gibbs (instructed by T Jenkin & Co, of Reading) represented
the respondents.
Giving the
first judgment at the invitation of Purchas LJ, ROBERT GOFF LJ said: There is
before the court an appeal from a decision by His Honour Judge Peck, sitting at
Reading County Court, by which he dismissed a claim by the appellants against
the respondents for estate agents’ commission.
The facts of
the case, which were largely undisputed, are as follows. The appellants,
Robinson Scammell & Co, are estate agents who carry on business in a number
of towns including Wokingham. The manager of their Wokingham branch was at all
material times Mr Yeardley. The respondents, Mr and Mrs Ansell, owned a house
at 4 Limmer Close, Wokingham. They decided to sell their house and move
elsewhere, and on July 31 1981 they gave instructions to the appellants, at
their Wokingham branch, to sell the house, acting as sole agents. On August 11
the respondents accepted the appellants’ terms, which included a term that, in
the event of the appellants introducing a purchaser or effectively negotiating
a sale to a purchaser who completed the purchase of the respondents’ property
at a price agreed by the respondents, the respondents would pay to the
appellants commission at the rate of 2% of such price, plus VAT. The rate of
commission was later varied to 1 3/4%.
The appellants
introduced prospective purchasers of the property, called Mr and Mrs Farr.
Their first offer of £47,000 was rejected by the respondents; but on September
10 1981 the respondents accepted an increased offer by them of £48,500, subject
to contract. By September 29 the respondents had found a house to move to,
owned by a Mrs Bye. All seemed to be going well. Then, on October 20 there
occurred the events which had given rise to the dispute between the parties. Mr
Yeardley was aware that the Farrs were under pressure, and knew that all
parties wanted to complete as soon as possible. But on October 20, as a result
of a conversation with Mr Farr, he telephoned another firm of estate agents,
Messrs Nicholas, and was informed by them that Mrs Bye, the vendor to the respondents,
was ‘pulling out’. Nicholas believed that there was a problem further up the
chain of vendors and purchasers which had been established, of which the
respondents and the Farrs formed part; so Mr Yeardley then telephoned another
firm of estate agents, Messrs Scotchbrooks, who told him that Mrs Bye had
almost lost her purchase and that they believed that the top of the chain had
collapsed.
This was
obviously a potentially serious matter both for the respondents and the Farrs.
So Mr Yeardley tried to telephone Mrs Ansell, the second respondent.
Unfortunately, he was unable to speak to her. Then he made his mistake. Later
that day he telephoned Mr Farr, he thought in response to a call from him. It
is to be remembered that it was as a result of a previous telephone call from
Mr Farr that Mr Yeardley had telephoned the other estate agents. In the course
of his second telephone conversation with Mr Farr, Mr Yeardley outlined what he
had been told by Scotchbrooks and said that he was doubtful if things would
proceed at the speed Mr Farr wanted. Mr Farr expressed his unhappiness about
the situation, and
situation was not resolved. Mr Yeardley told him of other properties including
one in the same street as the respondents’ house: this was 15 Limmer Close, the
property of Mr and Mrs Pinchcombe.
Later the same
day, October 20, Mr Yeardley succeeded in getting through to Mrs Ansell on the
telephone. He informed her of what he had heard from Messrs Nicholas and Messrs
Scotchbrooks and advised her that it was in her own interests to find out what
was going on; he also told her that he had advised the Farrs of the problem.
Mrs Ansell was surprised and rather upset that Mr Yeardley should have taken it
upon himself to inform the buyers that there was a problem before he had a
chance to sort it out with the Ansells.
It so happened
that the Pinchcombes, the owners of 15 Limmer Close, were friends of the
respondents. Later on the same day, Mr Pinchcombe came across to see the
respondents; he said that he was embarrassed to have to tell them that the
appellants had made an appointment for the respondents’ buyer to view their
property. Mr and Mrs Farr came over later on the same evening to see the respondents,
and told them about the telephone conversation with Mr Yeardley. The
respondents told the Farrs that, if there was a problem with the property they
were purchasing, they would, if given the chance, move into rented
accommodation.
On the next day,
when Mr Yeardley telephoned Mrs Ansell about the meeting with the Pinchcombes
and the Farrs, she told him that what he had done without the respondents’
knowledge was disgraceful, and that from then on the appellants were no longer
acting for them. It appears that the respondents’ purchase from Mrs Bye did
indeed fall through; however, the respondents sorted matters out with the Farrs
direct and moved out of 4 Limmer Close into rented accommodation on December
13. The sale of the property by the respondents to the Farrs was then duly
completed.
On October 21
1981, after Mrs Ansell had terminated the respondents’ engagement of the
appellants as agents on the telephone, Mr Yeardley wrote to the respondents as
follows:
Further to our
recent and somewhat brief telephone conversation, I now write to try and
clarify the position with regard to our above applicants.
As you will
recall, I spoke to Mrs Ansell on October 20 1981, informing her that the chain
of people involved above Mrs Bye had run into problems and that Scotchbrook
Estate Agents had told me they doubted very much whether the chain, as it
currently stood, would ever go through to an exchange of contracts. I also
outlined that I would have to inform Mr Farr of this and in all probability he
would look for another property.
I was,
therefore, rather surprised at Mrs Ansell’s reaction when I tried to speak with
her on October 21 1981. I hope you can appreciate that after discovering there
was a problem with the chain, it was my duty to inform both yourselves and Mr
Farr of this occurrence. I was also duty bound to my clients, Mr and Mrs
Pinchcombe, to inform Mr Farr that their property was currently available, but
despite my honesty to all parties involved the whole situation has backfired.
I find it
particularly upsetting because I am now being blamed for this unhappy
situation. It was through my own endeavours that we discovered the problem,
whereas neither (sic) Scotchbrooks or Nicholas, who were both aware of the
problem, should have informed Mrs Bye and yourselves of all happenings relating
to the transaction. I did all I could by informing everybody involved that
there was strong possibility of the chain collapsing and Mr Farr withdrawing.
It appears that the blame does in fact lie with the estate agents higher up in
the chain, who, despite being aware that Mrs Bye was on the verge of losing her
purchase, did not inform the people involved. I simply am a victim of
circumstance.
I genuinely
thought the position was made clear to all those involved but if, however, some
of the blame can be attributed to myself I apologise most sincerely.
On November 7
the appellants submitted their account to the respondents, addressed to their
solicitors, in the sum of £920 (£800 commission at the agreed rate of 1 3/4%,
plus £120 VAT). However, the respondents’ solicitors, to whom they had passed
Mr Yeardley’s letter of October 20, rejected Mr Yeardley’s explanation of what
occurred. They wrote (on November 12):
To be frank
this appears simply to have been to rescue a commission where you had secured
good purchasers and not fulfilment of your professional obligation to my
clients. Indeed I would suggest that your action may have amounted to a breach
of contract thereby entitling my clients to repudiate.
The
respondents refused to pay the appellants any commission. In due course, the
appellants commenced proceedings in the Reading County Court for the sum of
£920 plus interest. In their defence, the respondents disputed the appellants’
claim on the ground that they had ‘conducted themselves in such a manner as to
repudiate the contract’ with the respondents.
As I have
already recorded, the judge dismissed the appellants’ claim. His reasons are
contained in the concluding para of his judgment. I quote from the note of his
judgment approved by the judge:
There is no
real doubt about the law of the duty of the plaintiffs. Mr Yeardley was under
no contractual duty to the Farrs, he was under a duty to the Ansells for whom
he acted. He should have told the Ansells first, but with indecent haste he
went ahead. Mrs Ansell treated the breach as repudiation as she was entitled to
do so and in my judgment the estate agents are not entitled to their commission
and I so order
It is against
that decision that the appellants now appeal to this court, with leave of the
single judge.
In considering
cases concerned with claims by agents for commission, it is, I consider,
important to bear in mind that there are a number of different grounds upon
which such a claim may be resisted, and that, although there may be more than
one ground for resisting a claim in a particular case, it is necessary, for the
purposes of analysis, to keep those grounds separate and distinct in one’s own
mind. For example, it may happen that, in a particular case, the agent has
committed a repudiatory breach of contract. Such a breach will entitle the
principal to bring the contractual relationship between them to an end; but the
mere fact that a contract has been so determined does not of itself divest the
agent of rights which have already accrued to him under the contract (see, for
example, Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39
Ch D 339 at pp 360-1 per Cotton LJ and pp 366-7 per Bowen LJ).
Again, in
another case, the agent’s claim for commission may fail because the
prerequisites of his right to commission have not been fulfilled; for example,
an estate agent’s claim for commission may fail because an introduction by him
of a purchaser has not been the effective cause of the sale of the relevant
house to that purchaser. Yet again, there is a line of authority, stemming from
the decision of the Court of Exchequer in Salomons v Pender
(1865) H & C 639, in which certain breaches of duty by the agent had been
held to have the effect that the agent loses his right to remuneration in
respect of the transaction in relation to which the breach was committed.
In the present
case, it was the submission of the respondents that the appellants had, by
their conduct, repudiated the contract between the parties, and that the
respondents had accepted that repudiation and so brought the contract to an
end. But they did not rely on the accepted repudiation as such as depriving the
appellants of their commission; nor did they contend that the introduction by
the appellants of the Farrs was not the effective cause of the sale which in
due course took place. They relied rather on the principle established in the
line of cases to which I have referred, submitting that the breach of duty by the
appellants in disclosing confidential information to the Farrs had the effect
of depriving the appellants of their right to claim their commission to which
they would otherwise have been entitled. The appellants have submitted,
however, that this principle did not deprive them of their right to commission.
The issue in the present case depends therefore upon the scope of that
principle and its application to the facts of the present case.
As I have
said, the first case in this line of authority is Salomons v Pender,
in which it was held that an estate agent was not entitled to recover
commission from his principal in respect of a sale of the latter’s property to
a company in which he was a shareholder and of which he was a director. Various
reasons were given for the decision — for example, that the agent had departed
from his authority in making the bargain, and that he had undertaken that a
third party should be the buyer, and not himself. However, Martin B (at pp
643-4 of the report) also quoted and applied a passage from Story on Agency
to the effect that, if an agent of another were to become the purchaser of his
property, his duty to his principal and his own interests would stand in direct
opposition to each other; and that agents cannot act so as to bind their
principals, where they have an adverse interest in themselves.
That decision
was applied by a Divisional Court in Andrews v Ramsay & Co
[1903] 2 KB 635, in which it was held that an estate agent who has sold
property for his principal but has received a secret commission from the
purchaser must not only account for the commission to his principal but is
disentitled from recovering his own commission. Lord Alverstone CJ said (at p
638):
I think,
therefore, that the interest of the agents here was adverse to that of the
principal. A principal is entitled to have an honest agent, and it is only the
honest agent who is entitled to any commission.
Four years
later, the same principle was applied by the Court of
Ltd (1907) 23 TLR 630, on the ground not only that the agent had made a
secret profit, but also that he had concealed a material fact from his
principal. Cozens Hardy MR described the case (at p 631) as one in which ‘the
plaintiffs had so far abused their fiduciary position as to disentitle them to
any commission which they might otherwise have received’.
In Rhodes
v Macalister (1923) 29 Com Cas 19, another case concerned with an agent
obtaining a secret commission, the decision of the Divisional Court in Andrews
v Ramsay & Co was expressly followed and approved. The court held
that a breach of duty had been committed by the agent, on the principle
established in Boston Deep Sea Fishing & Ice Co v Ansell, in
receiving a secret commission. Bankes LJ stated the law in very wide terms,
when he said (at p 25):
. . . an
agent who commits a breach of his duty is not entitled to any remuneration
arising out of the transaction in which he has so failed to recognise what his
duty to his employer is.
As will
appear, that statement of the law has to be read subject to some
qualifications. Scrutton LJ, after expressing his approval of Andrews v Ramsay
& Co, stated (at p 28) that he decided the case:
on the broad
principle that whether it causes damage or not, when you are employed by one
man for payment to negotiate with another man, to take payment from that other
man without disclosing it to your employer and getting his consent is a
dishonest act.
Atkin LJ, too,
stressed the dishonesty of taking a secret commission, when he said (at p 29):
It is
dishonest of an agent to take a bribe from the other side, and for that act of
dishonesty he is, if he is discovered, liable to be summarily dismissed by his
employer, and he is precluded from recovering any remuneration for his conduct
as agent in respect of the transaction in which he in fact acted dishonestly,
and, if his employment is a general employment, any remuneration for that
conduct in respect of which he has committed his breach of trust.
The matter was
considered again by the Court of Appeal in 1926 in Keppel v Wheeler
[1927] 1 KB 577. In that case an estate agent who had obtained an offer from a
purchaser to buy his principal’s property, which had been accepted subject to
contract, received subsequently an offer from another person to buy at a higher
price. In the bona fide belief that he had performed his duty to his vendor
when the first offer was accepted subject to contract, he failed to inform him
of the higher offer. The sale was completed at the lower price. It was held
that the agent had committed a breach of duty which rendered him liable in
damages to his principal, but that he was nevertheless entitled to the
commission on the sale. Bankes LJ having stressed (at p 583) that the agent was
acting in good faith but under a misapprehension as to his legal position in
reference to his client, held (at p 588) that:
an agent
might quite properly claim his commission, and yet have to pay damages for
committing a bona fide mistake which amounts to a breach of duty.
Atkin LJ (at
p592) stated the law as follows:
Now I am
quite clear that if an agent in the course of his employment has been proved to
be guilty of some breach of fiduciary duty, in practically every case he would
forfeit any right to remuneration at all. That seems to me to be well
established. On the other hand, there may well be breaches of duty which do not
go to the whole contract, and which would not prevent the agent from recovering
his remuneration; and as in this case it is found that the agent acted in good
faith, and as the transaction was completed and the appellant has had the
benefit of it, he must pay the commission.
On this point,
Sargant LJ agreed with the other two members of the court.
Such are the
relevant authorities which have been drawn to our attention. The question
therefore arises whether the present case falls within the principles there
stated. We are not of course here concerned with the case of an agent who has
procured a sale to himself or to a company in which he is interested, so that
he has placed himself in a position where his interest conflicts with his duty
to his principal; nor are we concerned with a case where an agent has received
a secret commission from the purchaser, an act which has been regarded as per
se dishonest. We are concerned with a breach of duty by an agent who has
learned, not from his principal but from a third party, that his vendor’s own
purchase of a new house is in serious danger of falling through, and who has
communicated that information to the prospective purchaser of his vendor’s
house before communicating it to the vendor. He has, moreover, done this in
circumstances where:
(1) he knows that the prospective purchaser is
himself under pressure;
(2) he discovered the information as a result of
a telephone communication from the prospective purchaser;
(3) as soon as he discovered the information, he
attempted first to communicate it to his vendor but was unsuccessful in doing
so; and
(4) very shortly after informing the prospective
purchaser, he succeeded in getting in touch with his vendor and communicated
the information which he had received and the fact that he had informed the
prospective purchaser.
Now I am
satisfied that, in informing the prospective purchaser before informing their
vendors, the respondents, the appellants did indeed commit a breach of duty to
the respondents; if Mr Yeardley had spoken to Mrs Ansell first, he would have
been able to discover from her that, even if the purchase from Mrs Bye fell
through, the respondents would have been prepared to move into rented
accommodation in order to maintain their sale to the Farrs, and so there would
have been no need to give the Farrs the impression that their purchase was in
any danger. But there is no question hee, in my judgment, of any dishonesty or
bad faith on the part of the appellants. Indeed, I strongly suspect that Mrs
Ansell’s strong reaction on October 21 may well have been prompted by a belief
that Mr Yeardley had suggested to Mr Farr that he should look at another
property, rather than that suggestion having come (as it did) from Mr Farr. The
judge made no finding of bad faith on the part of the appellants, and in my
judgment there was no evidence which could justify any such finding. Mr
Yeardley was understandably concerned that Mr Farr, at whose prompting he had
made the inquiry of Messrs Nicholas, should find himself as part of a chain
which had collapsed above him and should be made aware of that fact; indeed, if
that was the case, common fairness required that he should be told. His error
was in acting too precipitately because he should first have informed and
consulted with his principals and decided with them on the appropriate course
of action to be taken; and, as I have said, if he had done this he would have
discovered that there was no need for alarm and so he would have been able to
allay, rather than arouse, any apprehensions on their part.
In these
circumstances, having regard to the decision of this Court in Keppel v Wheeler,
I can see no basis for depriving the appellants of their commission. I would
therefore allow the appeal.
Agreeing,
PURCHAS LJ said: As there seems a surprising lack of recent authority on the
particular question raised in this appeal I venture to add a short judgment of
my own.
The background
facts have already been set out in the judgment of Robert Goff LJ and need not
be repeated here. The question which this appeal raises is the right of an
agent to receive the commission provided for in his contract of agency. There
is clear authority that where the agent’s conduct is wholly inconsistent with
the implied right of the principal ‘to have an honest agent’, the agent is not
entitled to his commission (see Andrews v Ramsay & Co [1903]
2 KB 635 per Lord Alverstone CJ at p 638). Thus where an agent receives an
undisclosed commission or has placed himself in a position inconsistent with
his duty to be an independent and honest agent, he will be disentitled to
receive his commission (see per Scrutton LJ in Rhodes v Macalister
(1923) 29 Com Cas 19 at p 28). These principles apply even where the agent has
executed his contract of agency and where the principal may not have suffered
any damage. Of course, where the agent has not executed his contract of agency
no question of commission arises.
The more
difficult question arises in circumstances where the agent has executed his
contract of agency but has been in breach of the relationship arising out of
that contract, although with no mala fides on his part.
It was
contended on behalf of the defendants that the relationship between the agent
and the principal was such that if the agent placed himself in a position of
conflict of any kind this would be in breach of the fiduciary relationship established
and would disentitle the agent from receiving his commission. In the case of
agents such as estate agents in respect of whom it is generally known and
acknowledged that they will have a number of principals, to each of whom they
will owe a duty arising out of the individual contracts of agency, in my
judgment this proposition is too broadly stated.
The only
authority directly in point, to which we have been referred, is the case of Keppel
v Wheeler [1927] 1 KB 577, to which my lord has already referred, where
an estate agent, although found liable to pay damages for breach of his
contract of agency,
I repeat one short extract from the judgment of Atkin LJ at p 592:
Now I am
quite clear that if an agent in the course of his employment has been proved to
be guilty of some breach of his fiduciary duty, in practically every case he
would forfeit any right to remuneration at all. That seems to me to be well
established. On the other hand, there may well be breaches of duty which do not
go to the whole contract, and which would not prevent the agent from recovering
his remuneration; and as in this case it is found that the agents acted in good
faith, and as the transaction was completed and the appellant has had the
benefit of it, he must pay the commission.
On the facts
found by the learned judge in this case, there is no suggestion of mala
fides. Mr Yeardley, who was acting for the plaintiffs, had made inquiries
about the proposed sale by third parties to the Ansells of a house which the
Ansells intended to buy, and thought, rightly or wrongly, that there were
difficulties. Perfectly properly, his first act was to attempt to contact the
Ansells, but he was unsuccessful. He then contacted Mr Farr, the person who was
in negotiation with the Ansells to buy their house, and told him that the sale
of the house to the Ansells was likely to fall through. Mr Farr inquired
whether Mr Yeardley had any other suitable properties on his books. As a result
of this inquiry, Mr Yeardley put Mr Farr in touch with other principals of his,
namely Mr and Mrs Pinchcombe who, by chance, were friends of the Ansells. Thus
it was that this second approach became known to the Ansells.
The learned
judge has found that to disclose the information which he had received to
prospective purchasers of his principals, the Ansells, was in breach of his
duty as an agent — certainly if he did this (as he did) before first contacting
the Ansells. I agree that the learned judge was right to consider this a breach
of the duty arising under the relationship of principal and agent. He
prejudiced the Ansells by assuming that if the sale to them fell through they
would necessarily be unable or unwilling to sell their own property. It also
may well have been a breach of confidentiality to disclose information of this
kind; but in the circumstances of this case I find it unnecessary to decide
this point.
In these
circumstances it is not possible to allege realistically that Mr Yeardley acted
in any way other than under an honest mistake of his position and of the facts.
This seems to me to distinguish this case from those cases where an agent
receives an undisclosed commission or bribe and falls clearly within the sort
of breach contemplated in the judgment of Atkin LJ, and clearly accepted by
Bankes and Sargant LJJ, as being grounds for a claim for damages for breach of
contract, but falling short of a breach of the fiduciary relationship which
would disentitle the agent from his commission. In this case the principals
suffered no damage that is recorded. By their own efforts they repaired the
position and the sale went through on the initially agreed terms. If they had
suffered any damage, then there would have been a claim in respect of this,
again under the principles recognised in Keppel v Wheeler.
For these
reasons, and those already given by my lord, I would allow this appeal and make
the order he suggests.
The appeal
was allowed with costs in the Court of Appeal, not to be enforced for 10 weeks,
with liberty for the Law Society to apply. The costs below would be repaid to
appellants. Leave to appeal to the House of Lords was refused.
