J U D G M E N T

Tuesday, 19th April 2005

1. LORD JUSTICE MAY: The first and second defendants in this appeal come from Finland. The second defendant is the first defendant's mother. The claimants are London estate agents.

2. In January of 2000 the second defendant wanted to sell her property at 10 Waterside Point, 2 Anhalt Road, SW11. Her son, as her agent, engaged Foxtons to act for her as estate agents. The parties entered into a sole agency agreement on Foxtons terms and conditions. The property did not sell straight away.

3. In May 2000 the defendants instructed additional agents. Their agreement with Foxtons was varied to a multiple agency agreement with an increased rate of commission. In 2001 Foxtons introduced a purchaser, Mr Saeed Vafaian, who offered £860,000 for the property. This offer was accepted. On 25th June 2001 he and the second defendant exchanged contracts and he paid a deposit of £86,000, but Mr Vafaian did not complete the purchase. The second defendant gave notice to complete which he failed to do.

4. On 30th August 2001 the second defendant rescinded the contract and forfeited the deposit. The property was sold subsequently to another purchaser for £843,000. The other purchaser was introduced by a different agent.

5. In these proceedings Foxtons claim their 3 per cent commission on £860,000, saying that, in accordance with their terms and conditions, the commission became payable on exchange of contracts; and that occurred.

6. The defendants defended the claim. On 10th June 2004 Mr Recorder Hamlin dismissed the claim, holding that under the terms and conditions commission only became payable if the contract for sale was completed, which it was not. This is Foxtons' appeal against the Recorder's decision for which he himself gave permission.

7. The defendants, by a respondent's notice, seek to uphold the decision for additional reasons which failed before the Recorder. They also say that the Recorder was wrong to find that the first defendant would have been liable in addition to his mother. He was only her agent, as Foxtons accepted they knew.

8. The original sole agency was effected by means of Foxtons' letter of 8th February 2000 written to the first defendant. Under the heading "Fees", the letter referred to Foxtons' enclosed terms of business which they stated should be read in conjunction with the letter. The sole agency fees were to be 2.25 per cent of the "achieved sale price", plus VAT. The letter asked the first defendant to sign an enclosed copy of it, thereby confirming his acceptance of Foxtons' terms and conditions. The first defendant did this. He did not, in signing the letter, say that he was signing as agent only.

9. The terms and conditions included the following. Under the heading "Sole Agency":

"Where Foxtons act on your behalf as your sole agents, you will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time unconditional contracts for the sale of the property are exchanged:

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 with a purchaser introduced by another agent during that period."

10. Under the heading "Multiple Agency":

"Where Foxtons are instructed along with other agents, you will be liable to pay renumeration to us, in addition to any other costs or charges agreed, if at any time unconditional contracts for the sale of the property are exchanged:

With a purchaser introduced by us; or with a purchaser to whose attention we brought the availability of the property."

11. Under the heading "Fees Payable":

"Foxtons fees are calculated as a percentage (%) of the sale price achieved plus VAT at the prevailing rate."

12. Under the heading "Responsibility of Fees":

"The responsibility for the payment of fees remains with the party(ies) to whom the letter overleaf is addressed."

13. Under the heading "Time and Payment of Fees":

"All Foxtons fees become payable upon exchange of contracts. Without prejudice to the foregoing provision, and at the discretion of Foxtons, fees may be paid out of completion monies. On your signing the enclosed copy letter you are hereby authorising your lawyers to pay our fees out of the sales proceeds."

In subsequent parts of the terms there is use of the expression, "prospective purchaser."

14. The change from sole agency to multiple agency was effected in a conversation confirmed in Foxtons' letter of 4th May 2000 to the first defendant. This said that he had now instructed Foxtons on a multiple agency basis at a rate of 3 per cent of "the achieved sale price" plus VAT.

15. In my view this plainly effected a variation of the existing contract which otherwise remained in being on the existing terms. The existing contract itself contained, as I have indicated, a term relating to multiple agency. The Recorder was correct to reject the submission resurrected in the respondent's notice, and by Mr Mendoza orally, that the original contract came to an end entirely and that there was a new contract on the bare terms of the letter. This seems to me to be quite unarguable. The parties were quite obviously adjusting an existing contract.

16. At common law, an estate agent's commission is normally payable upon completion of the sale, but that does not prevent parties from agreeing that it should be payable upon a different event. The question depends on the construction of the particular contract (see Midgley Estates v Hand[1952] QB 432, especially the judgment of Jenkins LJ at page 435 to 436).

17. In my judgment the construction of this contract is quite plain. For a multiple agency Foxtons' remuneration was payable "if at any time unconditional contracts for the sale of the property are exchanged... with a purchaser introduced by us", and "all Foxtons fees become payable upon exchange of contracts". There is no ambiguity in either of these expressions. In the context, "purchaser" means the person who has contracted unconditionally to purchase. Completing the purchase is not necessary for Foxtons to be entitled to their fees.

18. The "achieved sale price" in the two letters plainly means the price stipulated in the contract. I accept that in other circumstances this expression taken alone could refer to a price achieved on completion, but this cannot be so when the expression "sale price achieved" also appears in the terms and conditions under the heading "fees payable" and in the context of the terms and conditions and the letter taken as a whole.

19. The Recorder dismissed Foxtons' claim because he persuaded himself that the word "purchaser" meant a person who completes the sale and purchase. He got this idea, not from the terms of the contract, but from the definition of "purchaser" in The Estate Agents (Provision of Information) Regulations 1991, SI 1991/859. These regulations are made under section 18(4) of the Estate Agents Act 1979. Section 18 requires estate agents to give their clients certain information before the client enters into a contract with the agent. This includes, by section 18(2), particulars of the circumstances in which the client will become liable to pay renumeration to the agent and the amount of the renumeration or the manner in which it will be calculated. The Secretary of State may make regulations requiring further information to be provided.

20. The 1991 Regulations prescribe additional information. This includes explanation about the intention and effect of the terms "sole selling rights", "sole agency" and "ready willing and able purchaser." Foxtons' terms used the term "sole agency" in relation to the initial engagement in this case. Their terms, which I have quoted, complied with the requirements of the Regulations. The Regulations define "purchaser" as "a person to whom an interest in land is transferred or in whose favour it is created."

21. The Recorder himself noted that this would, on the face of it, apply to the making of a contract to purchase since this would create an equitable interest, but he also noted that "interest in land" means, in the Regulations, any of the interests referred to in section 2 of the 1979 Act which, for present purposes, is limited to a legal estate in fee simple absolute in possession, or a lease.

22. The schedule to the Regulations requires the terms "sole agency" to be explained in these terms:

"SOLE AGENCY

"You will be liable to pay renumeration to us... if at any time [unconditional contracts for the sale of the property are exchanged]

with a purchaser introduced by us..."

23. This shows that the word "purchaser" in the Regulations is not there limited to a person to whom a fee simple absolute in possession is actually transferred, but also, as is natural in common parlance, to a person who contracts unconditionally to purchase the fee simple.

24. Although Foxtons' terms did not use the expression "ready, willing and able purchaser", I note that the Regulations require explanation of this expression as a person who is "prepared and is able to [exchange unconditional contracts for the purchase of your property]". This again shows that the eventual willingness and ability to complete is not necessarily comprised in the word "purchaser" as used in the Regulations.

25. The Recorder considered that because the definition of "sole agency" in Foxtons' terms was derived from the 1991 Regulations, the word "purchaser" should have the meaning provided for in the Regulations. I disagree. The Regulations are not there to provide obligatory definitions for expressions used in estate agents' terms. They are there to require terms to be explained to the client. It is to be supposed that the defendants here will never have seen the Regulations.

26. I do not see how the Regulations can affect the proper meaning of the contract which the parties made, but, if they did, the meaning of "sole agency" in the Regulations makes it quite clear that the entitlement to renumeration, if those words are used, would arise if an unconditional contract for the sale of the property is exchanged and that "purchaser" is used in an anticipatory sense.

27. The suggestion in the respondent's notice, that the terms were unusual and were not sufficiently drawn to the defendant's attention, is entirely unpersuasive. The letter of 8th February 2000 explicitly drew attention to the terms which were themselves clear. The first defendant signed a copy of the letter as an acknowledgment.

28. As to the point that the first defendant should not be liable because he was agent to the disclosed principal, this would, of course, normally be the position in law. But there is no principle of law which says that parties may not contract on the explicit basis that the agent also is liable, and this is what the parties here did. The terms of business explicitly state that the responsibility for payment of fees remains with the party "to whom the letter overleaf is addressed"; that was the first defendant. He did not sign the letter as "agent only". There are many other examples where disclosed agents nevertheless contract upon terms of personal liability.

29. For all those reasons I would allow this appeal.

30. LORD JUSTICE RIX: I agree.

31. LORD JUSTICE JACOB: I also agree.

ORDER: appeal allowed, judgment for the claimant for £30,315 inclusive of VAT plus interest to be agreed between parties and given as a figure to court; appellant/claimant's costs of appeal and below to be agreed or determined by detailed assessment; defendants to repay the amount paid as interim costs below within 28 days; leave to appeal refused.