Judgment is now pending in a landmark Appeal Court dispute that could reshape the way estate agents charge commission.
Three of the countrys senior judges, headed by Simon Brown LJ, have reserved judgment in a dispute over the rightful recipient of the introduction commission on the sale of Meadows Phase II retail park in Chelmsford, Essex.
The case centres on the criteria used to decide, in cases where more than one agent has been involved in the introduction of property, which one should be taken as having “caused” the ultimate sale.
Insurance giant Standard Life Assurance Company is challenging a High Court ruling that it must pay £135,000 commission to London estate agent Egan Lawson, in respect of an initial introduction by Egan Lawson to a buyer who eventually clinched the deal through a different agent.
Egan Lawson originally introduced Standard Life to the property 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 through Karen Queen of Richard Ellis.
A High Court judge held that Egan Lawson’s introduction was the effective cause of Standard Life’s purchase. However, Standard Life argues that an agent is not entitled to commission merely because his introduction is followed by a purchase. The company says the agent is only entitled to commission if his introduction is the effective cause of the purchase.
David Unwin QC for Standard Life told the court: “The only issue was – and the only issue in the appeal is – whether Egan Lawsons introduction was the “effective cause” of the purchase. If it was, as the judge held, then it is entitled to the commission. If not, which is the defendants case, it is accepted by the claimant it is not so entitled.”
He warned that if the High Court decision is allowed to stand, it could have far-reaching consequences for the property industry.
Mr Unwin said that the decision would “mean that an agent may be entitled to claim commission simply because material which he has provided is held on file and looked at, even though that material has not affected, let alone brought about, the decision to buy.”
Egan Lawson director Geoff Egan has described the legal dispute as “a landmark case for our industry” and a fight “for all small agents.”
Egan Lawson Ltd v Standard Life Assurance Company Court of Appeal (Simon Brown, Mummery and Latham LJJ) 1 November 2000.
PLS News 3/11/00
