England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE
HALLGARTEN Q.C

		Royal Courts of Justice Strand, London, WC2A 2LL
		26th February 2003

Mrs Justice Black

1. This is an appeal by Day Morris Associates, who are a firm of estate agents ("the agents"), against the dismissal by His Honour Judge Hallgarten QC of their claim against Mrs Carol Voyce for commission of £17,500 plus VAT in relation to the sale of a property owned jointly by herself and her husband, Mr Rodney Voyce. Also before Judge Hallgarten QC was a Part 20 claim by Mrs Voyce against Mr Voyce for an indemnity against any liability she may have to Day Morris. The Part 20 claim was resolved in Mrs Voyce's favour and Mr Voyce does not appeal that decision.

The facts

2. At the time of the events in question, Mr and Mrs Voyce were the joint owners of a property in London which had been their matrimonial home ("the house"). Their marriage had foundered and they were in the process of a divorce which was far from friendly. A focus of contention was what should be done with the house. Two possible options were the sale of the whole property or the sale of part with Mrs Voyce and her son continuing to occupy the upper floors. A material factor was the value of the property and on 5 May 2000, the District Judge dealing with the ancillary relief proceedings ordered that it was to be agreed if possible.
3. Accordingly, Mrs Voyce spoke to Mr Day of Day Morris. His advice was that the best way to find out the value of the property was to see what the market would pay. After the conversation, Mr Day wrote to Mrs Voyce on 28 June 2000 in these terms:

"Further to our telephone conversation yesterday, we write to confirm that our applicants …will be inspecting your property this evening at 7.30. We have mentioned that the property is not on the open market yet, but we'd expect to be quoting somewhere in the region of £700-£720,000 subject to contract.

Whilst writing we would like to confirm our agreement that should they purchase your property, then our fees will be calculated at the rate of 2.5% of the sale price plus VAT."

4. Nothing in fact came of that introduction. The Judge found that at this point the agents were aware there was no firm commitment on the part of Mrs Voyce to sell and took the risk of nothing resulting but covered themselves by indicating that if there was a deal, commission would be payable.
5. Day Morris' case before the Judge was that at some time between 28 June and 18 July 2000, the situation with Mrs Voyce changed and she gave them instructions to market the property. Mrs Voyce denied this. She said she continued informally to market the property and no more.
6. The Judge plainly had difficulty in determining what had in fact been agreed between the parties in July. But it was common ground that a letter dated 18 July 2000 was sent by Day Morris to Mrs Voyce, paragraph 1 of which reads as follows:

"We write to confirm and thank you for your kind instructions to sell your above mentioned property. We note that the price we are to quote is £700,000, subject to contract."

7. The letter contemplates a sole agency and sets out the claimant's terms of business as follows (so far as they are material to this appeal):

"You will be liable to pay remuneration to us at the rate of 2.5% + VAT if at any time unconditional contracts for the sale of the property are exchanged:-

1. With a purchaser introduced by us during the period of our sole agency or with whom we had negotiations about the property during that period: OR

2. [purchaser introduced by another agent]."

8. It asks Mrs Voyce to return to the agents a signed copy of the letter and to fill in and return an enclosed questionnaire so that they could prepare the property particulars.
9. Mrs Voyce said she regarded the letter as a standard letter, almost as junk mail, which she could and did choose to ignore. She certainly did not return a signed copy of it or fill in the questionnaire and she was never pressed to do so by the agents, nor was she asked to check and sign off a copy of the particulars that they prepared and sent to her later on. The Judge took the view that the agents had probably deliberately left things vague or fluid for fear of frightening Mrs Voyce off if they pushed her. He commented:

"It seems to me that any attempt to reel Mrs Voyce in might have resulted in her relinquishing what seems to have been only a lightly embedded hook."

10. The Judge's conclusion was that the terms of the 18 July 2000 letter were not the terms of any agreement between Mrs Voyce and Day Morris. He said:

"I am not satisfied that those terms were really understood as applying".

11. However he found that Mrs Voyce did agree with Mr Day a marketing decision which went beyond the one-off introduction at the end of June. It is not always easy to determine from the judgment what view the Judge took of the facts, and in particular what he found this arrangement was between the parties, but he said:

"I do not think that [the letter of 18 July] was sent without Mrs Voyce having agreed broadly to what was set out in the first paragraph, always subject to the agents accepting the circumstance that there was a high risk that instructions would be withdrawn."

and

"the agents regarded the exercise as essentially an extension of that undertaken in late May"

and

"I believe it was always implicit that, in the event of a sale by Mrs Voyce to a purchaser introduced by the agents, commission would be payable, and whether under the 18^th July letter or the 28^th June letter, it matters not."

12. The property was advertised by the agents in the press. Amongst those who came to view was Miss Janet Lee who looked round at the beginning of September 2000 and, through the agents, offered to purchase the house.
13. On 26^th October 2000, Mr Voyce visited Day Morris' office. It was an unusual feature of the case that although the property was in the joint names of himself and his wife, up to then the agents had dealt only with Mrs Voyce and there was no suggestion before the Judge that Mr Voyce had entered into any contractual relationship with them, nor was any claim made by the agents against him directly for their commission.
14. By the time of his visit on 26^th October 2000, Mr Voyce was suspicious about his wife's conduct in relation to the property and sought to find out what he could from the agents, but the Judge found that Mrs Voyce gave no authority or power to Mr Voyce on 26^th October or thereafter to have any further dealings in relation to the property on her behalf.
15. Mr Claydon of the agents' staff went through everything with Mr Voyce. He was told about Janet Lee. Mr Claydon told Mr Voyce he would be happy to go back to Miss Lee to see what her best and final offer was. Mr Voyce agreed to that course. When asked, Miss Lee bid £690,000 which was not accepted by the Voyces.
16. In the next few days, there was a conversation between Mr Claydon and Mr Rutter, Mrs Voyce's solicitor, which arose because Mr Claydon had received a witness summons to attend the ancillary relief hearing. The Judge accepted Mr Rutter's note of this conversation as reasonably accurate. It noted Mr Claydon as having said:

"The property had never been put formally on the market and she had never signed any contract. To some extent it was tentative, in the hope of getting the business."

17. It appears from a slightly ambiguous passage in the judgment that the Judge deliberated as to what to make of these comments by Mr Claydon to Mr Rutter and concluded:

"as to the question of whether Mr Claydon was telling the truth, the answer, I think, is that he was probably telling a half-truth. He was in a difficult position, and it seems to me that he was embarrassed by the situation, with a witness summons hanging over his head, and thus was anxious to play down the role that the claimant had been conducting."

18. Later in the judgment he expressed his view that what Mr Claydon revealed in his conversation with Mr Rutter was that the claimant regarded the post-June 2000 exercise in relation to the house as essentially an extension of that undertaken in late June.
19. On 30^th October 2000, a consent order was made in the ancillary relief proceedings. It provided that by 15^th January 2001, Mr Voyce was to pay his wife a lump sum of £337,500 plus a figure to cover the stamp duty in relation to whatever new home Mrs Voyce purchased. The former matrimonial home was to be put on the market for sale and Mr Voyce was to have sole conduct of the sale. The net proceeds would be paid to him provided he had paid the required lump sum to Mrs Voyce. Alternatively, if the property was not sold, Mrs Voyce would transfer her interest in the house to Mr Voyce upon payment by him of the lump sum.
20. The Judge's analysis of the effect of the consent order was that thereafter Mrs Voyce had no role in the disposal of the house beyond what he described as "a ministerial role of being obliged to co operate with Mr Voyce". He found that she was obliged to comply with whatever Mr Voyce required by way of relinquishing her interest in the property either to him or to a third party. I observe, however, that this did not mean that Mrs Voyce had no choice about whether there was a sale. She made her decision about this, including, it seems to me, a decision to leave the choice of purchaser to Mr Voyce, when she entered into the consent order ceding control to him.
21. At the end of October/beginning of November 2000, Mrs Voyce told the agents that Mr Voyce was going to re-mortgage the property and they should stop marketing it immediately, which they did.
22. However Mr Voyce did not re-mortgage the property. He tracked down Miss Lee and dealt with her directly although he knew, of course, that she had originally been introduced by the agents. She repeated her offer of £690,000. This time Mr Voyce accepted it and, in due course, the property was transferred by Mr and Mrs Voyce to her. Thus Mrs Voyce in every sense was a party to the sale of the house.
23. When Day Morris learned from another source that Miss Lee was buying the property, they invoiced Mrs Voyce for commission. When she refused to pay, they issued proceedings against her upon the basis of a contract or, in the alternative, claiming by way of quantum meruit. I will come below to the reasons why they failed in the county court

The grounds of appeal

24. Day Morris' complaints concerning the judge's dismissal of their claim fall into two categories: a procedural complaint and a substantive challenge to his decision.

The procedural complaint

25. Day Morris submit that the basis upon which the Judge dismissed their claim was not pleaded and had not been canvassed in argument by any party and that for the Judge to found his judgment upon it without giving the parties the opportunity to address him about it was a serious procedural error or other irregularity which rendered his decision unjust and therefore liable to be overturned on appeal under CPR Part 52.11(3)(b)without it being necessary to show that the decision itself was wrong.
26. In argument before us, Mr Charlton QC for the agents made it clear that they did not, in fact, seek to have the matter remitted for a fresh hearing because of the irregularity and accepted that matters could be argued fully on the appeal. He did, however, submit that it meant that the court could and should go beyond the normal ambit of an appeal and re-evaluate the facts. As it happened, even without the argument about a procedural irregularity, we would have had to look closely at the facts because of the uncertainties about the Judge's findings; but in the event there was no real argument against this by Mr Warwick responding to the appeal. The parties were therefore allowed more than the usual latitude in addressing us about the facts, although it is fair to say that the argument focussed on the legal implications of the facts rather than taking the form of a fundamental challenge to the factual findings the Judge made, with the obvious exception of the Judge's finding that Mrs Voyce had not agreed to the terms of 18^th July 2000 letter but had formed an alternative agreement with the agents as to commission.

The substantive ground

27. Day Morris submit that the Judge's conclusion that the circumstances of the case did not entitle them to commission was wrong.
28. The judgment does not contain a step by step analysis of the relationship between the parties in contractual terms. The stages in the Judge's reasoning appear to have been these:

(a) He did not consider that a contract had been formed on the terms set out in the letter of 18th July 2000.

(b) However, it was implicit that in the event of a sale to a purchaser introduced by the agents, commission would be payable.

(c) This state of affairs may have arisen either from the 28^th June letter or the 18^th July letter: he did not think it mattered which.

(d) It was subject to the proviso that the sale that would trigger the commission was a sale "by" Mrs Voyce. By this, the Judge meant that the sale was "within Mrs Voyce's power" and one in relation to which she had a choice.

29. The Judge said:

"In my view, commission could only be attracted in relation to a sale in which the claimant [there is some doubt as to whether the Judge may in fact have meant to say Mrs Voyce rather than the claimant here but this is far from clear] retained a genuine involvement. In my view, once the 30^th October court order was agreed, there was no longer a relevant causative connection between the claimant's introduction and Mr Voyce's sale to Miss Lee. The choice of the purchaser was entirely out of Mrs Voyce's hands. As a matter of analysis, it seems to me that the position is not really different from what would have been the case had Mr Voyce sold to X at arm's length and X had within a short period resold to Miss Lee. That is an obvious example of the causative link being broken and, in my view, that extreme example illustrates the true position here; namely, that there can be no claim for commission in relation to a sale to a purchaser when Mrs Voyce was left with no choice in the matter at all."

30. Slightly later, the Judge summarises by saying:

"I decide the matter against the agents on the narrow ground that at the time that the sale was effected, it was something which was no longer within Mrs Voyce's power; the choice of purchaser was entirely Mr Voyce's."

Contract on terms of 18 July letter?

31. Day Morris complain that the Judge did not give sufficient grounds for rejecting the argument that there was a contract on the terms contained in the letter of 18^th July and that, in fact, there were no sufficient grounds. They submit that the proper finding would have been that Mrs Voyce accepted those terms by conduct.
32. The agents are certainly correct in saying that the Judge does not analyse this argument (which is clearly set out in their Amended Particulars of Claim) in his judgment. It required analysis and has been aired again before us.
33. On Day Morris' analysis, the letter of 18^th July would have to constitute an offer by them to Mrs Voyce. I do not see how, for example, it could be seen as a record of terms already agreed between the parties or as an acceptance of Mrs Voyce's offer to instruct them to market the property. Section 18 Estate Agents Act 1979, with which it is clear from the letter the agents were familiar, requires that before a client enters into a contract with the agent under which the agent will engage in estate agency work on the client's behalf, the agent has to give the client written information about his terms of business. Day Morris were purporting to do this in the 18^th July letter which could only therefore be a pre-contract document.
34. It is common ground that Mrs Voyce did not signify her express acceptance of the offer in the 18 July letter by returning a signed copy or in any other way and that the agents did nothing whatever to follow it up. They argue however that she accepted its terms by subsequently allowing them to produce particulars of the property which were given to prospective purchasers and to advertise it, by giving them a set of keys and by allowing them to show a considerable number of people round. I would immediately exclude the handing over of the keys from this list of conduct on factual grounds because the evidence of Miss Luck, a negotiator at Day Morris, in her statement is that she had them prior to 18^th July 2000. I do not therefore see how the agents can legitimately rely on Mrs Voyce giving them the keys as an acceptance of the terms in the 18^th July letter. The most they could properly say about the keys, in my view, is that Mrs Voyce did not retrieve them.
35. A contractual acceptance has to be a final and unqualified expression of assent to the terms of the offer. Conduct will only amount to an acceptance if it is clear that the offeree did the act in question with the intention of accepting the offer. But the test as to whether there has been such agreement is an objective one. It follows that conduct which demonstrates an apparent intention to accept can be sufficient, despite uncommunicated mental reservations on the part of the offeree. However, it seems to me that for that situation to arise, the conduct in question must be clearly referable to the offer and, in the absence of knowledge of the offeree's reservations, not reasonably capable of being interpreted as anything other than acceptance. Where the offeror knows that the offeree continues to have significant mental reservations about his offer - for example an unwillingness to accept certain terms of the offer or a determination to insist upon the incorporation into the contract of certain counter-proposals of his own - I doubt that a contract could be brought into existence by conduct.
36. I can accept without difficulty that, in the right circumstances, the conduct to which Day Morris point could amount to acceptance. The issue is whether it does in this particular case. The submission that it is clear that Mrs Voyce's actions were done with the intention of accepting the terms of the 18^th July letter must be seen

a) against the background of the dealings that there had been between Mrs Voyce and the agents prior to the letter being sent

and

b) in the light of the precise nature of the terms that were being offered.

37. Care must be taken in evaluating the contractual situation in July 2000 not to impute to the parties information that only came into existence later on, or too much foresight about how matters would develop over the next few months. The issue of whether a contract was formed by conduct must be judged at the time of that conduct.
38. I would isolate the following factors from the background as particularly relevant:

i) It was an unusual feature that the agents were dealing with only one of two joint owners of the property and were doing so in the context of divorce proceedings.

ii) It was understood that Mrs Voyce was undecided about whether to sell the property or whether her husband would buy her out, and it was the agents' suggestion that until she decided she could invite potential purchasers to view on the basis that it might come on to the market in due course.

iii) Mrs Voyce was still undecided about what would happen to the property at the time the 18^th July letter was sent as can be seen from the Judge's finding that even at the beginning of September 2000 there was no question of there being a final decision to sell.

iv) The agents were deliberately keeping things fluid for fear of frightening Mrs Voyce off.

v) On the other hand, although the Judge was not satisfied that the terms of the July letter were "really understood as applying", he concluded that things changed between the introduction of the couple at the end of June on the terms of the letter of 28^th June and the 18^th July with Mrs Voyce agreeing a marketing decision with Mr Day which went beyond that one-off introduction. Further, he concluded that she must have given instructions to sell the property as recorded in the first paragraph of the 18^th July letter.

39. When it comes to examining the terms offered in the 18^th July letter, it is just as important to look carefully at what the agents were not inviting Mrs Voyce to agree to as at what they were. A contract on the terms set out in the letter would not oblige Mrs Voyce to sell; liability for commission would only be incurred in the event of an unconditional exchange of contracts which was a step which at that time she, as one of the joint owners of the property, could have vetoed. It would not entitle the agents to seek reimbursement of their advertising fees or other expenses because it is expressly provided that the commission charge is inclusive of all fees and expenses and nothing is said about a liability for wasted expenditure in the event that Mrs Voyce decided not to go ahead. Putting it another way, what the agents were offering was to take the risk that it would all come to nought (for example, because they did not find a purchaser or because Mrs Voyce did not want to sell or because contracts were exchanged with someone with whom they had never had any dealings) and in that case they would have wasted their time and money and Mrs Voyce would have lost nothing. I think that the Judge was therefore correct in his view that the letter simply spelled out in slightly greater detail what was already set out in the agents' letter of 28^th June.
40. What, therefore, is the argument against Mrs Voyce having accepted the letter of 18^th July by her conduct? As advanced by Mrs Voyce before the Judge, it seems to have turned upon her assertion that she never intended to put the property formally on the market and never asked the agents to do so and that such steps as the agents took were pursuant to her desire to obtain a valuation of it. The Judge's findings present a considerable obstacle to this argument in that he found that the 18^th July letter would not have been sent without Mrs Voyce having agreed broadly to what was set out in the first paragraph which refers to her "kind instructions to sell". This must, in my view, amount to an acceptance by the Judge of the broad thrust of what the agents were saying about the change of tack between the end of June and the 18^th July letter. When that is put with the finding that Mrs Voyce must have contemplated commission would be payable in the event that a decision was made to sell, the only point that is left for Mrs Voyce to advance is that although the substance of the terms set out in the letter appears to be in line with what she was agreeing, there was an important qualification or refinement that was omitted. What the Judge seems to have taken to be the understanding between the parties (and what it seems Mrs Voyce now adopts as her argument despite the fact that it was not canvassed below) is that commission would only be payable if, putting it very broadly and colloquially, she sold the house. Given that she did sell the house in that she voluntarily ceded control of the sale to her husband by virtue of the consent order and, as a joint owner, was a necessary party to the transfer of the property to Miss Lee, the postulated understanding has to be further refined. It would not be sufficient for Mrs Voyce's purposes if it was an understanding that commission would be payable only if she had a choice as to whether to sell or not. Once again, this would be met with the argument that she did have such a choice and exercised it in favour of sale when she agreed to the terms of the consent order which provided that the property would be marketed. To begin to protect Mrs Voyce against liability in the circumstances that have arisen, the understanding would have to be that commission would only be payable if she chose the purchaser. I do not think that it was open to the Judge to find that this contractual refinement was even in Mrs Voyce's contemplation that summer, let alone conveyed to the agents specifically as a reservation on her part. She was, as the Judge found, confused and undecided but the evidence pointed overwhelmingly to her hesitating about committing herself irrevocably to selling, rather than about the choice of the identity of the purchaser if she agreed to a sale or about issues as to who controlled the sale.
41. Mr Warwick argues that attention has to be given to the view that the agents took of the situation between themselves and Mrs Voyce. I accept this. He submits that they did not consider there to be a contractual relationship between them on the terms of the 18^th July letter. This submission is founded upon the conversation between Mr Rutter and Mr Claydon towards the end of October 2000. On the Judge's finding, Mr Claydon said then that the property had never been put formally on the market and that to some extent the agents had been acting tentatively in the hope of getting the business. On consideration I do not think that this was a true indicator that the agents themselves did not consider Mrs Voyce to have accepted the terms of their 18th July letter. Amongst my reasons for this are:

i) It seems to me that part of the difficulty in this case has arisen from the considerable debate that there was over whether the property was or was not "formally" on the market and whether the agents were "formally instructed". These terms do not in themselves tell one anything about the contractual arrangement between the parties although they may, I suppose, contain a pointer towards its possible elements. As the Judge observed, the fact that a property has only been on the market "informally" does not mean that there will not be commission to pay if a sale eventuates. Whether there is or is not depends on the terms actually agreed between the agent and the client. Mr Claydon saying that the property had never formally been put on the market did not therefore reveal a lot, if anything, about the agents' view of the terms of their engagement.

ii) It seems to me that Mr Charlton QC's analysis of the ambiguous passage of the judgment in which the Judge deals with Mr Claydon's comments is correct. The Judge (who appears to have heard oral evidence from Mr Claydon) seems not to have seen Mr Claydon's comments to Mr Rutter as a wholly accurate description of how the agents saw the position between themselves and Mrs Voyce. He thought that Mr Claydon told only a half truth to Mr Rutter about the arrangements in relation to the property because he was anxious to play down the role the agents had been conducting. On that finding, the note is in no way fatal to the agents' case that a contract had been made on the 18^th July letter. Equally, I do not consider that the Judge's later finding that what Mr Claydon said revealed that the agents regarded the exercise as essentially an extension of that undertaken in late May (by which he must have meant late June) presented an obstacle either when it is recalled that the Judge also found that the 18^th July letter simply spelled out in slightly greater detail what was already set out in the agents' letter of 28^th June, .

iii) There was another piece of evidence, contained in a letter written on 14^th September 2000 by Mr Meek of Day Morris to Mr Rutter which was material to the issue of how the agents themselves saw things. Mr Meek was writing in connection with a request that he value the property for the ancillary relief proceedings. He had been asked about a valuation fee and said in his letter: "We would only charge [a] fee should our agency instructions be withdrawn without a commission being realised by us.". The Judge accepted that Mr Meek was giving a truthful account so far as he could and it therefore follows that Mr Meek, at least, saw his firm as having agency instructions.

42. In all the circumstances, I accept the submission of the agents that what was established on the evidence before the Judge was that the terms of the 18^th July letter had been accepted by Mrs Voyce by conduct. I do not consider that the Judge's rejection of that argument was supportable. It was not open to him on the evidence, in my view, to construct a reservation of the type that he did, to the effect that Mrs Voyce had to have had control of the sale before commission would be payable. The conclusion he should have drawn from the facts as he found them was that Mrs Voyce's acquiescence in the process of marketing the property after 18^th July signified her acceptance of the terms of the 18^th July letter.
43. It follows that commission is payable to the agents in relation to the sale by Miss Lee, no other point being taken either as to liability or amount. In law, the payment is due from Mrs Voyce but in fact the cost will be Mr Voyce's in view of the Judge's decision that he must indemnify her.

The alternative submissions

44. In the circumstances, it is not necessary for me to deal with the other points that arose on the appeal.
45. I do not propose to say anything further at all about the issue of whether a quantum meruit might have arisen in the circumstances of this case if there had been no contract between Mrs Voyce and the agents. I was not satisfied that the argument on this point was really sufficient to enable us to determine it and in particular to evaluate the implications for such a claim of s 18 Estate Agents Act 1979.
46. As to the argument that a contract would be inferred from the dealings between the parties even if the terms of the 18^th July letter did not apply, this seemed to me to face difficulties that may well have proved insuperable. Part of the problem would have been identifying the terms with sufficient certainty. If one were able to isolate a contract, a potential obstacle of at least as much significance would have been the requirements of s 18 Estate Agents Act 1979 for the provision of sufficient written information by the agents, in default of which the agents would have been reliant upon the court exercising indulgence under s 18(6) of that Act.

Lord Justice Sedley :

47. I agree.
48. For the reasons given by Mrs Justice Black, Day Morris' appeal will be allowed, the Judge's order in relation to the claim between themselves and Mrs Voyce set aside and an order substituted for the payment by her of £17,500 plus VAT as their commission.

Order: Appeal allowed.

Judge's order to be set aside and substituted for a judgment debt of £17,000 plus VAT as claimant's estate agents fees (total of £19,975.00).

Counsel to provide agreed minute of order.

Leave to appeal to the House of Lords refused.

(Order does not form part of the approve judgment)