England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LUTON COUNTY COURT
MR RECORDER HOLLANDER QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		31/01/2008

Lord Justice Longmore:

Introduction

1. This is an appeal from the Luton County Court (Mr Recorder Hollander QC) about a buying agent's commission. In 2005 Mr and Mrs Cowham wanted to buy a house within a reasonable distance of Bushey in Hertfordshire where Mrs Cowham's parents lived. They saw an advertisement in Country Life placed by County Homesearch (Thames & Chiltern) Ltd ("County Homesearch") offering its services as a purchaser's agent to find a property and decided to avail themselves of those services. On 5^th July 2005 Mr Cowham met a director of County Homesearch by the name of Mr Le Neve Foster and, after paying him a registration fee of £500, signed a copy of its standard Terms and Conditions. The contract was to last for six months and a further year unless terminated by one month's notice by either party. By clause 2 County Homesearch undertook "to work with you to find a suitable property for you to purchase". Clause 3 was headed "FEES" and provided as follows:-

"We will be expending considerable time and effort on your behalf to find a suitable property for you.

Our Registration Fee is GB£500 (inclusive of VAT).

In addition our fees amount to the greater of either 1.5% of the purchase price or 15% of the negotiated saving between the asking price and the price you have agreed to pay for any property you exchange contracts to purchase an interest in or one month's rental in respect of any property you agree to rent, during the continuance or within one year after the date of termination or expiry of this agreement.

For the purposes of our Agreement, we shall be deemed to have introduced a property to you if you have either received the particulars of a property from ourselves directly or indirectly or from any of the firms of estate agents with whom we have regular contact or through agents or individuals whom you have instructed us to negotiate with on your behalf."

The Recorder described this clause as "very odd". That is, no doubt, partly because the clause does not make clear what the event is pursuant to which the fee of 1.5% of the purchase price becomes payable. There clearly has to be an exchange of contracts. But there must be some connection between that exchange and County Homesearch. Although the clause does not say so in terms, that connection must presumably be an introduction of some kind since the clause provides a series of possible events on the happening of which "we shall be deemed to have introduced a property to you".

The Facts

2. On or about 12^th July Mr Le Neve Foster discussed a considerable number of properties with Mr Cowham on the telephone and then delivered a list of those properties divided into two categories; (1) properties already seen by the client (2) properties the client might be interested in. This list included among others a property called "Hunter's Moon" (together with the negative comment "worth considering but seems expensive") and another house in which Mr and Mrs Cowham expressed an initial interest, Beel House. In August 2005 they decided however, not to proceed with Beel House. Mr Le Neve Foster then on 5^th August reminded the Cowhams about Hunter's Moon but they were not enthusiastic about it. In September 2005 Mr and Mrs Cowham visited another house, called Stivers, about which they had been told by Mr Le Neve Foster. They visited that house four times, on the last occasion in the company of a planning consultant, Mr Robert Clarke. Mr and Mrs Cowham had asked Mr Clarke to come along because they knew that they would wish to build an extension, if they bought Stivers, and that planning permission would be required. At a subsequent meeting at the Cowhams house on 11^th October (Mr Foster Le Neve not being present) Mr Clarke explained to them that Stivers would not work for what they wanted but, now that he appreciated what Mr and Mrs Cowham wanted to do, he said that it might be possible to do that at a property of which he knew called Hunter's Moon because he had once been consulted about the possibility of a similar scheme by the owners of that property, a Mr and Mrs Kaye. Mr Clarke volunteered to find out if Mr and Mrs Kaye were willing to sell. As he understood the position Hunter's Moon had once been on the market but had subsequently been withdrawn. It was in fact the case that, although the property had been on the market in 2003, instructions had later been withdrawn. The judge specifically found that at this stage the references previously made by Mr Le Neve Foster to Hunter's Moon had not made any impression on Mr Cowham's mind.
3. Mr Clarke was as good as his word. He contacted the Kayes, discovered that they would be willing to sell for the right price and put the two couples in touch. After two visits to Hunter's Moon Mr Cowham made an offer which was accepted, subject to contract, by the Kayes on 17^th October. Contracts were exchanged on 29^th November and completion occurred on 3^rd January 2006.
4. It seems that both the Cowhams and Mr Le Neve Foster were aware at an early stage in this history that the position under the contract with County Homesearch was likely to give rise to argument. Mr Cowham persuaded Mr Clarke to keep his interest in Hunter's Moon confidential from Mr Le Neve Foster. Mr Le Neve Foster nevertheless sensed there was something in the wind. He telephoned Mr Clarke asking for information but Mr Clarke was very guarded. He then e-mailed Mr Cowham on 21^st October drawing his attention to another property on the market (Lower Park House) which he did not think was suitable and added that he had been discussing Hunter's Moon with Mr Clarke and that Mr Cowham should have a look at it. (By this time of course, the Kayes had actually accepted the Cowham's offer). He also took the opportunity to refer to the list he had sent to Mr Cowham on 12^th July. He then on 10^th November sent a brochure of Lower Park House, observing that Hunter's Moon had been sold subject to contract and saying he was surprised that the Cowhams had not considered it.
5. This shadow boxing ceased when, after completion Mr Cowham e-mailed Mr Le Neve Foster on 20^th January 2006 saying that he and his wife had purchased Hunter's Moon "privately" and Mr Le Neve Foster replied on 16^th February asking for both an explanation of what had occurred and his fee.
6. The recorder's final finding, made after considerable argument on the matter, was that Mr Le Neve Foster mentioned Hunter's Moon three times to Mr Cowham, once on the telephone on 12^th July 2005, secondly in the list delivered to Mr Cowham on that day and thirdly in conversation on 5^th August.

The Hearing Below

7. Before Mr Recorder Hollander, Mr Cowham relied on Article 57 of Bowstead and Reynolds on Agency (18^th ed, 2006) which states:-

"Subject to any special terms or other indications in the contract of agency, where the remuneration of an agent is a commission on a transaction to be brought about, he is not entitled to such commission unless his services were the effective cause of the transaction being brought about".

Mr Cowham's contention was that Mr Le Neve Foster was never any (let alone the effective) cause of the purchase. The purchase was only brought about by Mr Clarke's contact with Mr and Mrs Kaye and exchange of contracts only occurred because of that contact.

8. The recorder held that:-

i) the provision of the list of 12^th July 2005 constituted an introduction of Hunter's Moon for the purpose of clause 3 of the contract with County Homesearch;

ii) commission was, on the face of it, payable unless a term could be implied that it was only payable if County Homesearch was the (or an) effective cause of the transaction;

iii) if such a term were to be implied, County Homesearch was not the (or an) effective cause of the transaction; but

iv) no such term could be implied in the present case because

a) it would be inconsistent with the express terms of the fourth sub-paragraph of clause 3; and

b) the rationale of the implied term was to avoid the principal having to pay commission to more than one agent if one such agent introduced a purchaser but another brought about the sale and purchase transaction. No such rationale existed in the present case because there was no risk that the Cowhams would employ another agent.

Submissions

9. Mr Warwick, for Mr and Mrs Cowham, did not challenge the recorder's findings of fact which I have set out above but did say that the recorder was wrong in failing to imply into the contract with County Homesearch the normal term which would, as he put it, be implied into any contract between a homeowner and an agent to sell the property namely that the agent must be at least an effective cause of the transaction. He elaborated this submission by saying:-

i) there was no difference in principle between a contract with an estate agent to procure a sale of a property (a selling agency contract) and a contract with an agent to procure the purchase of a property (a purchasing agency contract);

ii) the test for implication was not the traditional Moorcock test (necessary to give business efficiency to the contract) or the Shirlaw v Southern Foundries test (a mutual suppression of the officious bystander by the words "of course") but rather a test of whether the law required the implication; the law did require the implication in a selling agency contract and it would be illogical for the term not to be implied in a purchasing agency contract unless there was a clear indication that the term was to be excluded;

iii) there was no such clear exclusion of the term in the present case. The recorder was wrong to say that the proposed implied term was inconsistent with any of the express terms;

iv) Parliament has in the Estate Agents Act 1979 and in the regulations made thereunder treated selling agency contracts and purchase agency contracts as indistinguishable for the purpose of the statutory requirements of, inter alia, providing appropriate information to the client. This was a clear statutory steer that the contracts should be treated by the courts as properly analogous with each other;

v) in any event the case was governed by Regulation 7(2) of the Unfair Terms in Consumer Contracts Regulations 1999 (1999 SI No. 2083) ("the Regulations") which provided:-

"If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail…."

10. Mr Sims for County Homesearch contested each of these propositions and said that the recorder was right for the reasons he gave.

The nature of the terms usually implied into selling agency contracts

11. There can be little doubt that a term to the effect that is set out in Article 57 of Bowstead and Reynolds is to be implied unless the contract indicates otherwise. The contract in the present case does provide for "commission on a transaction to be brought about" namely an exchange of contracts to purchase a property. Bowstead makes no distinction in the Article between a selling agent and a purchasing agent. One might therefore expect that the agent had to be an effective cause of the transaction being brought about before he could recover his commission, unless there is some contrary indication in the contract itself.
12. Before one goes straight to the question whether there is a contrary indication in this case, it is worth pausing to consider the rationale of such an implied term. There is not a lot of guidance in the cases. In the case which is generally regarded as the starting point of the modern law, Millar Son & Co v Radford (1903) 19 TLR 575, Sir Richard Henn Collins MR merely said that it was "necessary" to show that the agent's introduction was an "efficient" (namely effective) cause in bringing about the transaction. It is not clear, in the shortly reported case, whether the Master of the Rolls was using the word "necessary" as a reflection of The Moorcock test for the implication of a term or was using the word to indicate that such a term was to be implied as a matter of law in the same way that a charterparty contains an implied warranty of seaworthiness and a contract for the sale of goods, before 1893, contained an implied term that the goods were to be fit for their purpose and/or of merchantable quality. Since 1996 Bowstead has offered the rationalisation of McPherson J in the Queensland case of Doyle v Mount Kidston Mining and Exploration Property Ltd [1984] 2 Qd. R. 386, 392 that

"… it would have been quite artificial to suppose that the parties intended that the agent should earn his commission simply by finding an individual who, independently of any further action by the agent, later agreed to buy the subject property."

Professor Reynolds adds (18^th ed.) page 278:-

"Where the contract is in such terms as "you are employed to find a purchaser of the property", the above result flows as a result of a constructional implication."

Mr Warwick relied on the similarity of that expression to the obligation in clause 2 of the present contract under which County Homesearch "undertake … to work with you to find a suitable property for you to purchase". This must mean, he said, that a term will normally be implied (as a matter of law) into a purchasing agency contract unless the contract has terms which indicate the contrary as is stated in terms in the wording of Article 57.

13. It is instructive to consider one of the few cases where the implication was displaced, Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] E.G.L.R. 18. That was a case where a well-known developer was looking for a tenant of an office block and the agreement with his selling agent was to pay

"… a full scale letting fee … should you introduce a tenant by whom you are unable to be retained and with whom we have not been in previous communication and who subsequently completes a lease."

There was an introduction but, after a number of months, a lease was completed by a company in respect of whose introduction the personnel in Fairview had no recollection, the tenant having been procured by other means. The agent was not therefore an effective cause of the completion of the lease but the fee was nevertheless held to be payable (or, as it happens, double the fee due to a variation of the agreement). One of the reasons why this court refused to imply the usual term was that an introduction was all that Fairview wanted; they had their own employers and lawyers who could do all the subsequent work and no further work after the introduction was expected of the agent. Woolf LJ thought that one of the main rationales for the implied term was to avoid the possibility of the client paying commission to more than one agent each of whom might be said to have "introduced" a purchaser or lessee but only one of whom could be said to be the effective cause of the transaction. He said at page 19:-

"In a case where there are no express qualifications to be fulfilled other than that a purchaser should be introduced by the estate agent, then the need to imply a term as to effective cause can be readily appreciated, since otherwise if the vendor engages more than one agent there will be no way in which he can avoid being faced with an obligation to meet the claim for commission of more than one agent who each introduced the tenant. However, in this case there is virtually no danger of this happening because of the words "with whom we have not been in previous communication"…."

14. The present day rationale for the implication of a term that the agent should be at least an effective cause of the transaction is thus (mainly at any rate) the need for the client to avoid the risk of having to pay two sets of commission. This is consistent with the older authorities in which the agent was claiming a second commission when his principal, who had already paid a commission for the procuring of a tenant, was asked to pay a second commission on the purchase of the property by the tenant at a later date, see the decision of the House of Lords in Toulmin v Millar (1887) 58 L.T. 96 per Lord Watson and Millar v Radford itself in 1903.
15. It is common knowledge that persons desiring to sell their property do often, as Woolf LJ said, engage more than one agent. But for my part, I doubt if it is very common for a person who desires to buy a property (as opposed to sell a property) to engage more than one purchasing agent, at any rate if the first engagement is on some such terms as the present contract. In the first place, under the contract with which we are concerned, the client has to pay £500 down and in the second place he has to pay the expenses and disbursements of the agent if the agreement expires without any transaction having been achieved. Thirdly any work done by a second agent would be bound largely to duplicate the first since sellers put their houses on the market in a semi-public manner whereas buyers of houses have no similar semi-public market and have to be sought out.

Similarity of selling agency contracts and purchasing agency contracts

16. There are undoubted similarities between the normal estate agent's contract and purchasing agency contracts but for the reasons given in the last paragraph there are also likely to be differences which may well be reflected in the terms of the purchase agency contract. If they are so reflected it may well be that a court will conclude that the term, normally to be implied into selling agency contract, will not be so readily implied into a purchasing agency contract. The question, however, still is whether there is any inconsistency between the express terms and the term which the law would otherwise imply. This was, I think, the approach of the recorder who said both that the fourth sub-paragraph of clause 3 was inconsistent with the proposed implication and that the contract contemplated that there be no other buyer's agents so that the rationale for the effective cause implication was missing.

Conclusion on Implied Term

17. I have already given some reasons for agreeing with the second strand of the recorder's reasoning. The contract did not prohibit the employment of a second agent but, insofar as its terms would inhibit any sensible person from doing so, it is fair to say that the contract contemplated that there should be no other buyer's agents. The rationale for the implication (that the principal should not have to pay twice) is, therefore, absent.
18. Whether that would be enough on its own is perhaps doubtful since the strength of the implication in the selling agency contracts has to be acknowledged and the two kinds of contracts are certainly very similar.
19. But I also agree with the recorder that the express terms of the contract are in-consistent with any implied requirement that the agent be an effective cause of the transaction. In the first place clause 2 imposes an obligation to work with the client to find a property without requiring that the agent should be an effective cause of the transaction. More importantly, however, the fourth sub-paragraph of clause 3 is, as the recorder said, inconsistent with the implied term. That is because of the concept of a "deemed" introduction; if the contract goes to the trouble of defining the concept of the requisite introduction by reference to matters which would otherwise not constitute an introduction at all (e.g. the receipt of particulars from an agency other than County Homesearch itself), it must follow that there may be cases where commission is due following a situation where there is no true introduction by County Homesearch at all. If even the limited causation inherent in an introduction is unnecessary, it makes no sense to say that nevertheless there must be an effective cause before the agent can recover his commission. The deeming provision would then be written out of the contract. The recorder did not spell this out in so many words but I have little doubt that it was this he had in mind when he said that the implied term was "flatly inconsistent" with clause 3. I agree with him.
20. For these reasons and subject to the Regulations, I do not consider that a term as to effective cause can (or ought to be) implied into the contract made between the Cowhams and County Homesearch. The mere fact that selling agency contracts can be said to be analogous to purchasing agency contracts and, indeed, that the Estate Agents Act 1979 equates the two for the purposes of applying the legislative provisions contained in that statute does not mean that we can ignore the actual terms of any purchasing agency contract. Although we were referred to dicta of Simon Brown LJ in Egan Lawson Ltd v Standard Life Assurance Co [2001] 1 E.G.L.R 27, 31 to the effect that there can be situations where purchasing agency contracts are "closely analogous" to selling agency contracts, I do not think he meant to suggest that any implication into an ordinary selling agency contracts had to be automatically transported into a purchasing agency contract without reference to the actual terms of that contract.

The Regulations

21. I have already set out Regulation 7(2). Mr Warwick had some difficulty in identifying the written term in relation to which there was a doubt about its meaning. He first identified clause 3 but, read as a whole, there is no doubt about its meaning. He then identified clause 2 but that clause specifies the agent's obligation not the client's obligation to pay. He then said that the contract as a whole did not indicate clearly enough that the implied term was not to apply. This exposed his difficulty in relying on Regulation 7(2). There has to be a written term as to which there is a doubt. The fact that it may be arguable whether a term should be implied (a fact I take for granted since permission to appeal has been given) does not mean that there is a doubt about the meaning of a written term.

Conclusion

22. For these reasons I would dismiss this appeal.

Lord Justice Richards:

23. I agree.

Master of the Rolls:

24. I also agree.