COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR JUSTICE FIELD
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE JACKSON
LORD JUSTICE TOMLINSON
| (1) BORIS BEREZOVSKY
(2) PETERSHAM HOLDINGS LIMITED
|- and -
|EDMISTON & COMPANY LIMITED
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Mr Luke Parsons QC and Mr Craig Ulyatt (instructed by Enyo Law LLP) for the Appellant
Hearing dates : Thursday 31st March 2011
Crown Copyright ©
Lord Justice Jackson :
Part 1. Introduction,
Part 2. The Facts,
Part 3. The Present Proceedings,
Part 4. The Appeal to the Court of Appeal,
Part 5. What Commission are the Brokers Entitled to Receive?
Part 6. The Appeal in Relation to Interest,
Part 7. Conclusion.
"Will do my best! If he bites can we agree on 3million commission for me? Will be in front of him as soon as I can get him alone."
It seems that for those who work in the world of super yachts, life has its compensations.
"The finding that Mr Edmiston agreed to accept a 2.5% commission if a net sale price of 300 million were achieved is a finding of fact made on the court's assessment of the credibility of Mr Cotlick and Mr Edmiston. In my opinion Edmiston & Co have no real prospect of success in appealing this finding."
"I think, therefore, that if there was no definite agreement in this case it comes so near to it that when considering what would be a reasonable sum I cannot really do otherwise than take the figure the parties themselves were talking about, and the only figure they were talking about, which is the figure of five per cent."
Accordingly Devlin J assessed the commission at 5%. It can be seen from the report that the only authority cited was Way v Latilla, in which Devlin J (when at the Bar) had appeared as junior counsel for the respondents.
i) YachtZoo and Royal Oceanic were engaged by Mr Berezovsky to market Darius at agreed commission rates of 3% and 2.5%.
ii) MWA were paid a commission of 2.5% in respect of the sale in June 2009 of Ecstasea, an 86 m Feadship yacht at a price of approximately 100 million.
iii) A commission of 4% was paid in respect of the sale of Pelorus, the sister ship of Darius, sold in October 2003 for US $150 million.
iv) The commission agreed by Edmiston in respect of the Princess Mariana and Moon Goddess was 4% of the gross price.
v) In his email of 17th September 2008 to Mr Cotlick, Jamie Edmiston (Mr Edmiston's son) claimed a commission of 5% on top of the 2.5% he assumed was being claimed by Mr Luerssen.
vi) Mr Edmiston claimed commission on the Darius sale at the rate of 5% in a letter dated 16th October 2008 to Mr Berezovsky.
vii) In US proceedings brought by MWA against Petersham and Mr Berezovsky, the claim was for a commission of 70% of 5% of the gross sale price of Darius, "as is industry standard".
"62. It is common ground that Mr Edmiston said nothing at the meeting on 15 July 2008 about accepting a commission lower than 2.5% if the net price were below 300 million. In my opinion, it was not implicit that Mr Edmiston was agreeing to accept a lower commission in these circumstances. On the contrary, I think the reasonable expectation of those present would be that the rate of commission would go up if the net price were appreciably lower than 300 million, since at the end of the day a broker is interested in his actual return on a transaction.
63. The significance of Mr Edmiston's expressed readiness to accept 2.5% if a net price of 300 million were achieved is that this is a strong indicator that a reasonable commission on a gross price of 240 million will be around 2.5%. With this in mind, and having regard to: (a) the fact that the ultimate sale price was 240 million rather than 350 million; and (b) the matters noted in (i) to (vii) in paragraph 61 above, I conclude that the appropriate rate of commission to award in this case is 3% of 240 million, namely 7.2 million."
" since at the end of the day a broker is interested in his actual return on a transaction."
"..if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'oh, of course!' "
Imagine that such a bystander had crept into the meeting on 15th July and said: "Suppose the yacht is sold for less than the 300 million predicted by Mr Edmiston. Will the rate of commission rise above 2.5%?" It is inconceivable, in my view, that the parties would have testily suppressed him with the words "oh, of course!" The unfortunate bystander may possibly have stirred up a hornets' nest, with Mr Edmiston arguing for more commission and Mr Berezovsky and Mr Cotlick arguing for less. Whether the parties would have arrived at any answer to the bystander's audacious question, I do not know. If they had eventually reached agreement, there is no basis for saying that this would have been either above or below 2.5%.
"Paragraph 29 is noted. The terms of the Sub-Brokerage Agreement are of no relevance to Edmiston's position in the present proceedings and, in particular, to Edmiston's entitlement to commission in respect of the sale of Project Darius. Without prejudice to the foregoing, the Sub-Brokerage Agreement was entered into on or about 6th June 2008, when Edmiston provided information to Merle Wood in relation to Project Darius and requested assistance in seeking a purchaser. It was an implied term of the Sub-Brokerage Agreement that, if Merle Wood introduced the ultimate purchaser to Project Darius and was the or an effective cause of the sale, Merle Wood would, in accordance with standard market practice, receive a proportion of such commission as was due to and received by Edmiston."
The 70/30 split is not expressly mentioned in this paragraph, but it is clear from Mr Edmiston's evidence that 70/30 was the normal split when Edmiston and MWA collaborated, with one of them acting as sub-broker.
Lord Justice Tomlinson:
"He [Mr Edmiston] mentioned he would expect 2.5% and mentioned that it was reasonable. I think that means an agreement."
However, as Mr Parsons pointed out, it is not difficult to infer an agreement to market the vessel on this basis from the indication found to have been given by Mr Edmiston to the effect that he was agreeable to do so, followed by his proceeding to market the vessel without further discussion or ado. That is entirely consistent with what the judge said in his consequential ruling on 30 July 2010 as set out by Jackson LJ at paragraph 33 above. Since the judge described his finding as a finding of fact made on the court's assessment of the credibility of Mr Cotlick and Mr Edmiston, the judge had evidently rejected Mr Edmiston's evidence to the effect that it was inconceivable that he could have expressed a readiness to accept a commission of as low as 2.5%. However that still leaves open to debate whether the 2.5% rate should be regarded as concessionary.
Lord Justice Laws: