London estate agent Egan Lawson Ltd will have to pay back £147,445 to a client following a landmark Court of Appeal ruling this morning that it was not entitled to commission on the sale of a retail park in Chelmsford, Essex.
The court allowed an appeal by insurance giant Standard Life Assurance Co against an earlier High Court ruling ordering it to pay £135,000 commission to Egan Lawson for an introduction to a buyer who eventually clinched the deal through a different agent.
Egan Lawson originally introduced Standard Life to the property, the Meadows Phase II retail park in Chelmsford, for a proposed sale price of £13m. Standard Life turned down that deal, but later purchased the property for £11.5m in a deal that it says was brokered by Richard Ellis agent Karen Queen.
The case centred on the principles governing when an introducing agent is entitled to commission. David Unwin QC, for Standard Life, warned that the High Court decision could have far-reaching effects on the property industry if allowed to stand.
He argued that an agent could not claim commission merely because its introduction was followed by a purchase. He contended that commission was only due if the introduction was the effective cause of the purchase, and maintained that the judge had been wrong to find that this was true of Egan Lawsons introduction.
Ruling in favour of Standard Life, Mummery LJ said today that the case was one of “winners and losers, all or nothing”. He said neither side had proposed a solution under which commission could be apportioned between them.
On his view of the facts, Karen Queen of Richard Ellis had been the “effective cause” of the purchase of the property. “The probabilities are that, if she had not made the introduction at this stage, Standard Life would never have acquired the property. Her introduction was the starting point for, and led to, the decision of Standard Life to purchase the property for its Main Fund,” he said.
By then, he said, Egan Lawson was off the scene and played no direct part in the events. “In my judgment, the introduction of Standard Life to the property by Egan Lawson was not, on a proper analysis of the facts as a whole, the effective cause of the purchase of the property by Standard Life”.
Standard Life Assurance Co v Egan Lawson Ltd Court of Appeal (Simon Brown, Mummery and Latham LJJ) 21 November 2000
David Unwin QC and Alastair Walton (instructed by Herbert Smith) appeared for the appellant; Michael Driscoll QC and Francis Bacon (instructed by Portner & Jaskel) appeared for the respondent.
PLS News 21/11/00
