Dispute as to claim by estate agents for commission for acting on behalf of intended lessees of office premises–Not retained by lessors–Office premises in West End of London introduced by agents–Commission claimed on basis of RICS Scale 24–A certain amount of negotiation carried out by plaintiff agents but lease in fact resulted from efforts of other agents who had been retained by lessors–Scale 24 not applicable in the circumstances but agents entitled to fee on quantum meruit basis–Judge’s observations on need for commission arrangements to be stated in clearest possible terms
This was an
action by the plaintiffs, Sinclair Goldsmith, against the defendants, Minero
Peru Comercial, for commission on RICS Scale 24 for introducing to the
defendants office premises at 10 Grosvenor Gardens, London W1.
P Flint
(instructed by Arnold Finer & Green) appeared on behalf of the plaintiffs;
N Chambers (instructed by Lee, Bolton & Lee) represented the defendants.
Giving
judgment, O’CONNOR J said: In this action the plaintiffs seek to recover the
sum of £4,646.16, which they allege is commission due to them under an
agreement made with the defendants. The defendant company were looking for
office premises in central London in October 1976. They were desirous of
gathering together various departments not only from London itself but from
Europe into a central office in the West End of London, and they set to work to
try to find premises. They undoubtedly engaged the services of the plaintiff
partnership to try to help them find suitable office premises. They also went
to other agents and they were quite plainly free to shop around as much as they
wished.
A meeting took
place between Mr Van Oordt of the defendant company and Mr Morris for the
plaintiffs in October 1976. It is the plaintiffs’ case that at that meeting Mr
Oordt was told that in the event of the plaintiffs introducing property in
respect of which they were not retained on behalf of the lessors they would
look to the defendants for their fees. Mr Oordt has no recollection of being
told any such thing. I am satisfied that he was told this and has forgotten it.
It is quite plain that that was a term on which the plaintiffs and the
defendants were to do business. The plaintiffs put it in a letter dated October
19 in which they accepted the instructions and wrote:
In order to
provide you with a comprehensive list of available properties, I have included
premises where we are not directly instructed by the lessors/assignors and in
these particular instances we would have to look to you for the payment of our
fees should you enter into a binding contract or possession.
Our fees, for
your information, are strictly in accordance with the scales laid down by the
Royal Institution of Chartered Surveyors and a booklet is enclosed for your
attention.
and they sent
them the booklet.
The plaintiffs
introduced various properties during October and November 1976, none of which
came to anything. At some stage, probably at the end of November or December,
through the agency of another firm, Anthony Barriman & Co, the defendants
were in hot negotiation for premises at 77 South Audley Street. They understood
the position that where there was an introduction by an estate agent who was
not retained by the lessors they would have to pay a commission. It is quite
clear from the details of that transaction, which will be found in the agreed
bundle of documents, that in assessing what the transaction was going to cost
them, they made allowance for the payment of the estate agent’s fee. That transaction
started off with a rental of £37,000 per annum for the first 18 months or so,
and thereafter there was a clause in the negotiating documents–because no
contract was ever signed–for an increased rent for a further period of five
years, or possibly a decreased rent. That transaction came to nothing. The
defendants had to clear the details on it with their head office in Peru and,
by the time they got an answer, 77 South Audley Street was gone elsewhere.
Thus it was
that on January 5 the defendants were extremely anxious to acquire office space
in London because they wanted to move everybody in at the beginning of
February, and in the result they telephoned around to various estate agents,
including the plaintiffs, pointing out the urgency of their problem and asking
for help to find premises. They also seem to have telephoned, among others,
some people called Lintott. As a result of that conversation, Mr Morris had a
list of suitable properties which he thought might fit the bill and on January
6 he was round at the defendants’ offices and, together with Miss Koch and Mr
Briceno, visited various properties, three in particular–accommodation at
Bowater House, accommodation at Cornwall House in Dover Street and
accommodation at 10 Grosvenor Gardens. The particulars for these various
properties were set out in a letter written after going round to visit them,
though it is obvious that Mr Morris must have had the information with him and
I have no doubt at least gave the size of the accommodation and the asking rental
in respect of each.
There was a
dispute as to what his instructions were at that stage. It is the defendants’
case that, having had the scale of rentals which had been tentatively agreed
for 77 South Audley Street approved in Peru, they thought they were free to
reach a similar bargain, and it is their case that they told Mr Morris that the
rental was not to be more than £37,500 per annum, whereas that in fact was not
the agreement in respect of 77 South Audley Street. I am satisfied that no such
limitation in terms was put upon Mr Morris. Indeed, Mr Briceno does not support
that situation. I am certain that he heard of £37,500 as a figure, but I am
satisfied that it was never brought home to him that it was no good considering
anything more. The proof of that pudding, as will appear in a moment, is that
in fact within a few days they entered into an agreement for substantially more
than that.
Having visited
these properties, Mr Morris immediately wrote a letter on January 6 and as far
as 10 Grosvenor Gardens is concerned he set out the accommodation on the
first floor. There was an asking rental of £47,500 per annum exclusive, and he
wrote:
With regard
to the first floor I have been informed by the lessors’ surveyors that their
clients would seriously consider offers in the region of £8 per sq ft (£44,200
pax).
Mr Morris told
me that he had inquired of Mr Newton of Hillier Parker May & Rowden, who
were one of the agents retained for letting this accommodation at 10 Grosvenor
Gardens, as to the sort of negotiation figure which might be acceptable and had
received that information from him. Mr Newton cannot remember the conversation,
but he says, ‘It very probably took place. I talked to Morris once every two
weeks or so. We are in the same line of business.’ I accept Mr Morris’s evidence about that. It
is quite plain that he had been on the telephone to make tentative inquiries as
to what the real negotiating figure might be. This is common form where estate
agents are dealing in property of this nature. I am satisfied that he had done
that. He added in his letter to his client:
However, in
my opinion, a commencing offer for this unit should be in the region of £7.50
which equates to £41,400 per annum exclusive.
It is said
that once he had given that advice the defendants were entitled to drop him,
because it was said that he had instructions that it was not to be more than
£37,500. As I have said, I do not accept that he had instructions in those
terms at all and this was a perfectly genuine piece of advice which he was
giving to his clients. He concluded his letter:
I do hope the
above information will serve as a guide for you and whilst writing, may I just
confirm that with regard to these instances we are not retained by the lessors
and as you are aware, should you or your Government enter into a contract or
possession of the above, we would look to you as agreed for the payment of our
fees which are strictly in accordance with the scales laid down by the Royal
Institution of Chartered Surveyors.
I look
forward to hearing from you with your instructions.
Mr Morris did
not hear from the defendants with any instructions from that moment forward,
and the reason that he did not do so was that, while that letter was in the
course of being sent, on the afternoon of January 6 Mr Lintott walked into the
office of the defendants and said that he was a retained agent, apparently, for
the lessors of 10 Grosvenor Gardens. He was not the same as the two agents,
certainly not Hillier Parker or Liptons, who seemed to be sharing the matter,
but somehow or other Mr Lintott had broken into the ring and here he was with
10 Grosvenor Gardens on his list, for which he was saying he was a retained
agent and therefore would look to the lessors for his commission and not to the
defendants. He had come in respect of some other property in which they were
interested, but he had this one on his list. As soon as he mentioned it the
defendants apparently told him, though I have had no one from Lintott, that
they had seen the place only that morning but that the asking price was beyond
their immediate financial limit, to which they got the reply that it was
negotiable and that he, Lintott, would go ahead and find out what his clients
would accept. Thus it was that an agreement was made in due course that there
should be a rental, first of all three months free of rent at all, then for the
next six months of 1977 at the rate of £37,500 and thereafter it was to be
substantially more up to the first break after five years. That was ultimately
agreed, and the defendants moved into the accommodation.
On January 10
Mr Morris was writing to the defendants offering them another property. He had
a conversation with either Miss Koch or Mr Briceno, but he received no
instructions about 10 Grosvenor Gardens and at that stage he said he did not
know that the defendants were negotiating for that lease behind his back with
Lintott and the lessors. He discovered it within a trice, because on January 12
a meeting took place between Mr Morris and Mr Sinclair acting for the
plaintiffs and Miss Koch and Mr Briceno acting for the defendants, at which the
plaintiffs simply claimed the commission at the scale rate on this transaction.
They referred to the scale rate which will be found in paragraph 24 of the
booklet which contains the scales of professional charges for the Royal
Institution of Chartered Surveyors. That paragraph provides:
For
negotiating a tenancy or lease when acting on behalf of the tenant or lessee:
(a) For seeking and negotiating the tenancy or
lease of a property on the instructions of a client:
The fee payable
for a letting of the same property under the appropriate letting scale.
For abortive
work under this part of this scale, a fee on a quantum meruit basis.
and the fee
payable for the letting of the same property under the appropriate letting
scale is found in paragraph 19, including the note (a) to the footnotes, which
provides:
If the rent
is a progressive one, the commission should be based on the average rent for
the period up to the first possible break in the tenancy,
and it is to be
10 per cent on one year’s rent, and that is how the sum claimed has been worked
out. The average rent is something over £43,000.
The
defendants’ reply to that was, ‘You have not negotiated this deal at all. You
have introduced it, yes, but you have not negotiated it. Indeed, you advised us
that you could not negotiate it at the sort of figure which we had in
mind.’ The parties broke up not in
disorder but without reaching any agreement. I am satisfied on the evidence of
Miss Koch that the defendants were quite prepared to pay something to the
plaintiffs for the introduction. They accepted that there had been an
introduction, but they were unwilling to concede that they were under a
liability to pay the scale fees.
The first
question that has to be decided is what was the nature of the real agreement
between the plaintiffs and the defendants. I have read the relevant
correspondence and I need not repeat it. It is effectively the plaintiffs’ case
that, once they had introduced a property to the defendants, if the defendants
took a lease of that property then scale 24 prevailed and they were entitled to
their 10 per cent. They did not in fact, I am quite satisfied, relate the work
which paragraph 24 requires to the earning of the commission. They were
thinking of it as an introductory commission. Naturally, in the ordinary course
of events, they would expect to do the negotiation on behalf of their client,
but the real basis of their claim is that if they introduced a property making
use of their know-how of the market and that property was acquired by their
client, they were entitled to a commission at the rate of scale 24. I do not
accept that the plaintiffs, although they may well have intended that, said it.
If estate agents wish to bind clients to paying commission at an ascertainable
or ascertained rate, they should say so in the clearest posible terms. If they
had said, ‘If you take a property which we introduce to you where we are not
retained, we are entitled to commission and you must pay us 10 per cent of one
year’s rent, calculated as an average up to the first break,’ there would have
been no problem, but they did not do that. They set to work to introduce
paragraph 24 into the agreement. It seems to me that merely seeking property is
not enough, because if that is a part of the agreement they have to seek and
negotiate the tenancy or lease of the property.
In the present
case the plaintiffs undoubtedly did the seeking. They undoubtedly did some
negotiating, because in my judgment to ring up the retained agent and get a bit
of information from him as to what the true position is–all sorts of things can
be said in confidence over the telephone, whether there are other interested
purchasers about, how long
doing some negotiating for the tenancy of a lease. The fact that they got no
further instructions in my judgment does not mean that they had not carried out
their part of the bargain. They were ready and willing to negotiate further,
and whether they would have been successful or not I do not know. But it is
said that as they did not in fact negotiate the lease of the property and only
made tentative inquiries scale 24(a) does not apply. As I have said, I think
that they did do some negotiating, but did it result in the tenancy? The answer to that can only be one: no, it
did not. What resulted in the tenancy was the negotiation done by Lintott, and
therefore in my judgment paragraph 24 of the scales does not apply. It is the
plaintiffs’ own fault for putting it into the agreement in this form.
Are they then
entitled to nothing? No, I do not think
that that would be either fair or right. It seems to me that, once the
defendants went behind their back and never gave them an opportunity to go on,
the proper approach to this is to say that the work which they had in fact done
was, as far as they were concerned, abortive under this part of the scale and
they are entitled to a fee on a quantum meruit basis.
I have had
very little evidence about that, but I do not think I can do better than follow
the judgment of Judge Laughton-Scott QC, sitting as a judge of the High Court,
who was faced with a similar problem, though not in any way identical, in Reiff
Diner & Co v Catalytic International Incorporated (1978) 246 EG
743, [1978] 1 EGLR 16. I need not refer to the facts of that case, but there
again the learned judge found that the scale fee was inappropriate in the
agreement in that case, just as I have found it inappropriate in the present
case, and he awarded quantum meruit on the basis of giving the plaintiffs a
quarter of their scale fee under paragraph 24. It seems to me a bit illogical
to look at paragraph 24 other than as a help in this matter, and I am proposing
to assess the fee, fair and square, including VAT and everything else in a
fixed sum, and I am proposing to award the plaintiffs the sum of £1,500.
