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Glentree Estates Ltd & Ors v Favermead Ltd

[2010] EWHC 1120 (Ch)

Case No: HC07C02681
Neutral Citation Number: [2010] EWHC 1120 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 20/05/2010

Before :

SIR EDWARD EVANS-LOMBE

(sitting as a Judge of the High Court)

Between :

(1) Glentree Estates Limited

(2) Beauchamp Estates Limited

(3) Savills L & P Limited (formerly FPD Savills Limited)

Claimants

- and -

Favermead Limited

Defendant

- and -

Bernard Charles Ecclestone

Third Party

Mr Robert Deacon (instructed by CKFT) for the Claimants

Mr John Wardell QC (instructed by Davenport Lyons) for the Defendant

Hearing dates: 11/3/10 – 18/3/10

Judgment

Sir Edward Evans-Lombe:

1.

In this case the Claimants are a group of three firms of well-known estate agents (“the Claimants”), of which the lead agent was the Third Claimant (“Savills”), for estate agent’s commission in respect of two sums of £235,000 and £1,175,000, each inclusive of VAT, following successive sales of a property at 18-19 Kensington Palace Gardens (“the Property”) first, by a company called Laneprime Limited (“Laneprime”) to a company called Corfiducia Anstalt (“Corfiducia”) for £50 million (giving rise to a commission claim of £235,000) and secondly, by Corfiducia to a company called Laken Properties Limited (“Laken”) for the sum of $105 million (giving rise to a commission claim of £1,175,000). Laneprime is a subsidiary of the Defendant, Favermead Limited (“Favermead”). Corfiducia is a Liechtenstein company which is the trustee of a trust, the SE Property Trust, of which the beneficiaries are the former wife and children of Mr Bernard Ecclestone, who is well known in relation to his interest in Formula 1 motor racing (“Mr Ecclestone”). Mr Ecclestone is not a trustee or, in any way, a beneficiary of the trust. Laken is a company either associated or controlled by Mr and Mrs Lakshmi Mittal (“the Mittals”). The Property was purchased by Laken pursuant to the second transaction as a home for the Mittals. Mr Ecclestone was joined as a Part 20/ Third Party to a claim for contribution by Favermead. After the close of the evidence I was informed that this contribution claim had been settled and, accordingly, no closing submissions were made on Mr Ecclestone’s behalf. Favermead has at all material times been owned and controlled by Professor Khalili, an expert and collector of Middle Eastern and oriental art. The Property consists of the unexpired period of a long lease from the Crown, having 96 years to run.

2.

The background facts of the case, though complex, are not, in any important respect, in issue between the parties and I will now set them out.

3.

The Property was purchased by Favermead in 1995 and, thereafter, it seems that a large sum of money was spent on its refurbishment. In 1997 a property consultant, Ms Adina Kohn (“Ms Kohn”), drew the Property to the attention of the Mittals, with whom she had an arrangement under which they had instructed her to search for an appropriate property as a residence for them. In the result, in February 1998 the Mittals offered £45 million to purchase the Property which offer was rejected, as was a subsequent offer the following year at a lower price.

4.

In March 2001 Professor Khalili entered into an arrangement with a Mr Dato Osman, another property consultant, that if he found a purchaser for the Property at a price of more than £85 million, he would be paid a commission of 4% of the purchase price and who, in turn, appointed a Miss Doris Beger as his sub-agent to find a purchaser for the Property. On 20th March 2001 she wrote to Mr Ecclestone sending him particulars of the Property. On 3rd April 2001 a meeting took place between Miss Beger, Mr Ecclestone and Professor Khalili concerning the Property.

5.

Meanwhile, on 24th January 2001 a meeting took place at Favermead’s offices, attended by Mr Hewlett of Savills, to discuss the appointment of the Claimants as joint sole agents of Favermead to promote the sale of the Property, but final terms for such an appointment were not agreed at this meeting. A further meeting took place on 6th February attended by representatives of all three Claimants with Professor Khalili. In a letter recording the meeting from Mr Hewlett of Savills to Mr McKeown of Favermead there was included a leaflet showing the “fees and terms of business” which the Claimants were putting forward to govern the relationship between them and Favermead. The letter records that “our fees have been agreed at a fixed sum of £1m exclusive of VAT and agreed marketing charges.” It continues “we propose that our agency runs for a period of 12 months after which termination of the agency can be terminated [sic] by either party giving not less than 28 days written notice”. On 19th March Mr Hewlett wrote to Professor Khalili confirming the “revised fee structure” discussed at the 5th March meeting. At the fourth paragraph of that letter he says:-

As part of our open and frank discussions, you have indicated that if you procure a purchaser who could be a social friend, etc. then you feel it is appropriate for us to charge a greatly reduced “handling fee” and if this were the case, I would suggest that the figure would be 50% of the fees that would have been payable to us, under normal arrangements.

6.

On 3rd April 2001 on Favermead-headed paper Professor Khalili wrote to Mr Hewlett at Savills’ address as follows:-

18/19 Kensington Palace Gardens, London W8

Thank you for your letter of 19th March 2001 setting out the fee structure regarding the sale of the above property.

I agree that I have appointed FPD Savills, Glentree Estates and Beauchamp Estates to act as my joint sole agents in respect of the above property with FPD Savills acting as the main co-ordinating agent.

I confirm that I will pay a fixed fee of £1m (excluding VAT), on completion of the sale of the property. The matter of the sub-division of the fee is a matter solely for agreement between the three agents.

The Terms of Business for Sales which accompanied your letter to me does not form part of our Agreement.

I will pay the agreed fee on the basis that one of you introduces an applicant, who subsequently purchases the property from us. (My emphasis added)

If I procure a purchaser through my own endeavours, then you will be entitled to a reduced fee of 20% of the £1m.

I am not bound to pay fees to you under any other circumstances.

The content of this letter is our sole agreement and shall remain fully confidential.

7.

On the evening of 3rd April Mr Osman and Miss Beger introduced Mr Ecclestone to Professor Khalili, at which meeting Professor Khalili said that his price for a sale of the Property was £85 million. On 4th April Mr Ecclestone and his wife were shown around the Property by Professor Khalili. In the result this meeting matured into a contract for the purchase of the Property by Corfiducia as described at paragraph 13 of Professor Khalili’s witness statement as follows:-

“13.

I had a meeting with Mr Ecclestone in mid to late July 2001 and we shook hands on a deal that we had originally discussed in May namely that he would pay £50 million in consideration of a transfer of the head lease in the property to him upon the basis that if he was to sell it in five years we would share any profit made 50:50. This was attractive to Favermead, because we would recoup some of the company’s outlay on the property and make further money in the event of a re-sale of the property. This was likely because Mr Ecclestone was buying the property not as a family home but as an investment. During this period we also discussed other business opportunities.

8.

The contract for the sale of the Property pursuant to this arrangement is dated 17th September 2001 and made between Laneprime, a subsidiary of Favermead, to which the lease of the Property had been transferred, and Corfiducia, the trustee of a trust for the benefit of Mr Ecclestone’s wife Slavica and her children. The transaction was completed on 8th October and on that day the parties entered into a written agreement (“the Overage Agreement”) setting out the terms upon which the parties would share equally any profit over the £50 million purchase price at which the Property could be sold in the course of the next five years after the deduction of certain expenses.

9.

It is the Claimants’ case that this sale triggered an entitlement in them to recover commission of £200,000 plus VAT pursuant to the provisions of the 3rd April 2001 agreement dealing with the consequence of Favermead procuring a purchaser for the Property through its own endeavours.

10.

It seems that the Claimants were not directly informed of this sale but rumours of it leaked out into the market prompting enquiries by the Claimants. On 16th November Mr McKeown of Favermead sent a fax to Mr Hewlett confirming “that the property is still for sale at the asking price of £85 million.” This in turn caused the Claimants to circulate all likely interested agents with the same message that the Property was still for sale, including a letter to Knight Frank of 30th January 2002, agents later engaged by the Mittals.

11.

Meanwhile, on 9th October Mr Mullens, Corfiducia’s lawyer, wrote to Mr McKeown of Favermead indicating that he was confused about Professor Khalili’s agenda and continuing:-

The position of the trustees is that they anticipated that Dr. Khalili would continue marketing the property until 30th September but at that point of time active marketing would cease. There is an overage provision in the contract which takes care of the situation of a sale during the specified period.

The trustees, having purchased the property, need to take stock and control of what they have purchased. I would therefore appreciate receiving today all keys, parking badges etc. I understand Dr. Khalili’s emotional involvement with the property but that has now come to an end subject to his contractual interest in a future sale…

12.

This was the first of a series of communications by Mr Mullens for Corfiducia seeking to restrain Professor Khalili from continuing to look for purchasers for the Property and emphasising that the decision on any future sale was one for officers of Corfiducia alone.

13.

On 19th November 2001 a meeting took place between Mr Hewlett and Professor Khalili. The result of that meeting was recorded in a letter from Mr Hewlett to the Professor, the material passages of which read as follows:-

Further to our meeting this morning I write to confirm the outcome of our various discussions.

I understand from you that we are still instructed to continue to search and find a suitable purchaser for the above property. You informed me that Lovell White Durrant will be the solicitors should a purchaser be found.

Whilst writing I confirm that you have agreed to keep in place our agency agreement as per your letter 3rd April 2001 though I understand that this fee is now to be shared by three agents mentioned in the letter and a new fourth party. I am very grateful to you for this, as you have personally agreed to settle our fee should a buyer be found. This agreement also covers our fees should the clients of Clyde and Co purchase the house. I am sure that both Beauchamp Estates and Glentree will also be delighted to have this warranty from yourself.

In addition we discussed the offer received from Clyde and Co on the above property. You have stated to me that I should go back to them offering them a seven-day exclusive at £75 million subject to contract for the house and the contents. This price would be agreed on the following basis; £65 million for the house and £10 million for the extra contents non negotiable…

14.

The reference to Clyde and Co refers to an offer recently made by that firm of solicitors on behalf of a client to purchase the Property for £60 million. The reference to “extra contents” refers to valuable furniture left in the Property by Professor Khalili which was available for sale to a purchaser.

15.

It is Favermead’s case that this letter shows that at the meeting which it describes, and as Professor Khalili contends, it was agreed that the Claimants would waive any claim for commission arising from the sale of the Property to Corfiducia in exchange for the opportunity to continue as agents on the original terms but with a view to their being in a position to earn commission on an onward sale to a fresh purchaser. As the case was opened by Favermead it was contended that Favermead, through Mr Ecclestone, who in turn was authorised by Corfiducia to instruct Favermead to do so, had appointed the Claimants as joint sole agents for a sale on behalf of Corfiducia. That contention was not persisted in as a result of the settlement of the Third Party claim against Mr Ecclestone. As I understand it, it is not contended that the Claimants were ever duly appointed the agents of Corfiducia for the purposes of an onward sale of the Property.

16.

On 1st July 2003 Mr Mullens wrote to Professor Khalili against the background of a possible purchaser of Laneprime and thus the Property as follows:-

The trustees who I represent would seriously consider an offer to purchase at a net price of not less than £70 million sterling payable in full at completion. If Mr Juffrali is interested he should have his solicitors write to me.

For the avoidance of doubt you have no authority to negotiate on behalf of the trustees in relation to any possible transaction nor otherwise in relation to the property. Any inspection/viewing of the property should be made with the prior consent of myself and no other party.

17.

On 10th July Mr Mullens wrote to Professor Khalili:-

I refer to my letter of 1st July the trustees have asked me to confirm to you that they do not wish you to be involved in any arrangements relating to the Property. Would you kindly return to me the passes that you presently hold for the Property.

18.

These two letters provoked a protest in a letter from Professor Khalili to Mr Mullens in which he stated that “the last time I met Mr Ecclestone I was told to use my best endeavours to find a purchaser without delay: it has always been my intention to do everything I can to assist in selling the house.” Professor Khalili repeated his protest in a letter to Mr Ecclestone also dated 16th July. Mr Mullens’ response of 17th July was, effectively, to reject the protest.

19.

On 4th February 2004 Mr Abrahmsohn of Glentree, the First Claimant, wrote to Mrs Mittal drawing her attention to the Property and its availability for sale for a sum “in the region of £85 million”. It so happens that about this time the Mittals had been underbidders in the sale of another property in Kensington Palace Gardens in which they had been advised by Knight Frank and Rutley. On 26th February a Mr Roddy Craggs of Knight Frank phoned Mr Hewlett with a request to view the Property with a Mr Jaideep Singh from Knight Frank’s Indian department with a view to assessing its suitability for the Mittals. That viewing took place on 27th February. At paragraph 10 of his witness statement, Mr Jaideep Singh describes this viewing of the Property, which was attended by Mr Hewlett, Mr Craggs, Mr Mittal and Aditya, the Mittals’ son. Having described the difficulties of obtaining access, he continues:

Once in the property, we spent around an hour and a half with Jonathan showing us all round the property. Amongst other things he explained who lived in the neighbouring properties, the security for the property and the escape route as these would have been important to Mr Mittal in what might potentially be his principal London residence. He also explained all of the facilities at the property. While inspecting the property Mr Mittal and Aditya [Mr Mittal’s son] approached it in the same way any other potential purchaser would and remarked upon aspects of the property.

11.

Having completed the tour we ended up back in the main hall of the property. At this point Mr Mittal enquired of me whether the owner would accept an offer of £65 million. Jonathan immediately told Mr Mittal that in view of the asking price, any offer would have to begin with the number 7. The discussion continued outside the property. Mr Mittal asked me again whether £65 million might be accepted. They did not say that any further viewings would be necessary either for them or for any other members of the family.

12.

A couple of weeks later, Roddy heard from Jonathan that there were rumours that the property had been sold and he asked me to contact Mr Mittal to see what the position was. In fact I spoke to Aditya about this and he told me that they were about to exchange contracts on the acquisition either that day or the following morning and nothing further needed to be done. I was surprised about this as neither he nor Mr Mittal had been in touch with me about their offer. I then reported this to Roddy. As far as I recall Roddy asked me the following day or the day after to check with Aditya whether contracts had exchanged. When I contacted Aditya about this he confirmed they had and again I reported this to Roddy.

20.

Mr Craggs’ witness statement adds little to this save that at paragraph 9 he states that the fact that Mr Mittal attended the viewing of 4th March surprised him. This and his behaviour in the course of the viewing led him to the conclusion that Mr Mittal “would acquire [the property] if acceptable terms could be agreed.” Again, Mr Hewlett’s witness statement adds nothing to Mr Jaideep Singh’s description of what occurred on 4th March. On the same day Mr Hewlett reported the result of the inspection of the Property to Mr McKeown and Professor Khalili. Thereafter it is not in issue that neither the Claimants nor Knight Frank played any further part in arranging a sale of the Property by Corfiducia to the Mittals.

21.

On 31st March 2004 Corfiducia exchanged contracts with Laken, the Mittals’ company for the sale of the Property to Laken for US $105 million. The only direct evidence in these proceedings of the events after 4th March 2004 and leading up to that exchange of contracts on 31st March is to be found in the witness statement of a Mr MacDonald, an associate of Mr Ecclestone, and in Mr Ecclestone’s own witness statement at paragraph 55, repeating part of the contents of an affidavit sworn by him and in contemporaneous correspondence passing between Corfiducia, Mr Ecclestone, and the Mittals and their various advisers, produced on disclosure. From this it appears to be accepted that the following occurred: soon after 4th March a Mr Ashok Tandon appeared as representing a potential purchaser for the Property seeking an introduction to Mr Ecclestone and through him access to the Property in order to view it. Mr Tandon (otherwise known as “Mr Ash”) was acquainted with Mr Jaideep Singh who, at paragraph 13 of his witness statement, describes him as follows:-

“13.

I now know that another individual, Ashok Tandon, was claiming to have been responsible for the introduction of the property to Mr Mittal. I know Mr Tandon, again, socially. I know him to be a property developer. Mr Tandon was known to Mr Mittal since at least the mid-1990s and Mr Tandon’s nephew is married to Vanisha Mittal – it was their wedding that was being organised at the time of Mr Mittal’s viewing of the property.

22.

There is no direct evidence on the question but in the absence of such evidence I will proceed on the basis that Mr Tandon’s appearance on the scene was in the interest of the Mittals and their wish to purchase the Property at a price acceptable to them. Mr Tandon was initially introduced to Mr MacDonald by a mutual acquaintance as an agent representing a potential purchaser of the Property seeking access to Mr Ecclestone and the Property in order to view it. He did not initially disclose that the potential purchaser was the Mittals. That introduction having been effected, Mr Tandon viewed the Property, being shown round by Mr Ecclestone, and accompanied by Mr MacDonald. It then emerged that Mr Tandon was acting for the Mittals. Mr Ecclestone put him in touch with Mr Mullens to continue discussions with a view to agreeing a purchase price for the Property, Mr Ecclestone having made clear that he had no authority himself to agree anything and had no interest in the ultimate sale. After a period of negotiation, a price acceptable to the Mittals and Corfiducia of US $105 million emerged. In the course of the negotiations Corfiducia agreed to pay Mr Tandon a commission of 3% of the purchase price if those negotiations resulted in a completed contract for the sale of the Property. In due course the contract between Corfiducia and Laken was completed in June 2004 when a commission of £3.15 million was paid to Mr Tandon by Corfiducia.

23.

A sale at the sterling equivalent price of £57 million meant that there was no profit on resale to which the provisions of the Overage Agreement would attach to be shared between Corfiducia and Favermead. This result triggered litigation between Laneprime and Favermead as claimants and Corfiducia and Mr Ecclestone as defendants (“the Laneprime Proceedings”)in which it was, inter alia, being alleged that the true sale price of the Property by Corfiducia to the Mittals was £70 million. In those proceedings an injunction was obtained against Corfiducia but that injunction was later discharged. The potential liability of Favermead to the Claimants in this case for commission on the sale to the Mittals was being claimed in the Laneprime Proceedings as an expense under the Overage Agreement and thus to be shared between the parties to that agreement. Those proceedings are relevant to the issues with which I have to deal because Mr Mullens and Ms Cornelia Konrad gave relevant evidence which I have set out below.

24.

More material are proceedings to restrain the presentation of a winding up petition by the Claimants against Favermead consequent on the service by the Claimants of a statutory demand on Favermead for the sum of £1 million, being the amount shown in an invoice from Savills to Favermead for £1 million commission exclusive of VAT due under the 19th November 2001 Agreement on the sale to the Mittals. The statutory demand was served on 16th November. Amongst the papers are two other invoices, one for £1 million plus VAT headed draft invoice, the other for £200,000 plus VAT, both dated 23rd July 2004, the latter in respect of “the agreed reduced fee of £200,000 for commission due pursuant to instruction dated 3rd April 2001 on the sale through your own endeavours to Corfiducia Anstalt for £50 million plus overage entitlement on resale.” There is an issue as to whether either of the two invoices dated 23rd July were ever sent. In the result, Favermead’s application to restrain presentation of the petition succeeded before Mr Justice Patten on 2nd March 2005.

The outstanding issues

25.

As their written closing submissions show, counsel for the Claimants and Favermead are in substantial agreement as to the outstanding issues which I have to decide. These are:

1.1

Did the sale by Favermead of Laneprime to Corfiducia trigger a right to recover commission of £200,000 plus VAT under the agreement of 3rd April 2001?

1.2

If so, was any right to that commission waived as a result of the meeting of 19th November 2001?

1.3

If it was, is there any basis for recovering it now?

2.1

Was it a term of the agreement that the Claimants had to be the effective cause of the sale by Corfiducia to Laken?

2.2

If so, were the Claimants the effective cause of the sale to Laken?

2.3

If so, does the fact that they used sub-agents disentitle them to their fee?

2.4

Does the fact that the price was below £70 million give rise to a separate defence to the claim for commission on the sale to Laken?

26.

I will deal with each of these questions in turn.

1.1

Did the sale to Corfiducia trigger a right to recover £200,000 plus VAT commission?

27.

I am clearly of the view that it did. It was submitted by Mr Wardell for Favermead that the words “if I procure a purchaser”, in the first paragraph on the second page of the letter of 3rd April 2001 from Professor Khalili to Mr Hewlett, mean “if, as a result of my own endeavours, I have had introduced to me a purchaser….” The result of this construction means that because Doris Beger contacted Mr Ecclestone to inform him of the availability of the Property and set up a meeting between Mr Ecclestone and Professor Khalili before 3rd April 2001, thus drawing Favermead’s attention to the possibility of a sale to Corfiducia before the terms of the agency agreement between Favermead and the Claimants were finally agreed, the sale to Corfiducia which followed does not constitute a purchase within the word “purchaser” in the paragraph. In my judgment the word purchaser is not to be so construed. It seems to me that those words are to be construed as if they meant “if I procure a purchaser who enters into a binding contract to purchase”. Such construction means that since the contract between Laneprime and Corfiducia post dated 3rd April 2001, Corfiducia is constituted a purchaser within the paragraph.

1.2

Was any right to that commission waived as a result of the meeting of 19th November 2001?

28.

It seems to me that this question can also be dealt with quickly. It is clear that the arrangement made between Professor Khalili and Mr Hewlett on 19th November 2001, recorded in Mr Hewlett’s letter to Professor Khalili of that date, must have involved the making of a fresh agency contract between Favermead and the Claimants. They were faced with a changed situation from that which existed at the time the letter of 3rd April was written, defining the terms of the original agency agreement. The Property now belonged to Corfiducia. Accordingly, payment of commission could not be triggered by a purchase of the Property from Favermead as envisaged in the last paragraph on the first page of the letter which envisages commission becoming payable on the introduction of an applicant who subsequently purchases the Property from us” i.e. from Favermead. Thus the parties’ discussion, either expressly or by clear implication, must have taken place on the basis that the letter of 3rd April was to be treated as amended so that the final paragraph on the first page applied to any subsequent purchase from Corfiducia. Treating the letter of 3rd April as so amended, it is also clear that the fees prescribed by the third paragraph on the first page and the first paragraph on the second page were intended to be alternatives and not cumulative. In any event, it is counterintuitive that an agent should expect to receive commission twice on successive dispositions of the same property by his principal.

29.

For these reasons, either as a matter of construction of the letter of 3rd April expressly imported into the new arrangement as evidenced by the letter of 19th November, or, as a matter of implication of a term into that letter or what was plainly the arrangement between the parties at the meeting, the Claimants must be taken to have accepted that the new arrangement involved them waiving any claim to commission arising from the sale by Favermead to Corfiducia of the Property.

1.3

If it was, is there any basis for recovering the commission now?

30.

There was plainly consideration flowing from both sides to the new arrangement agreed on 19th November. I prefer the construction solution applying the principles of construction set out in the speech of Lord Hoffmann in the ICS case [1998] 1WLR 896. If that approach is correct, on entering into the new arrangement on 19th November, the Claimants bound themselves not to claim commission in respect of the sale by Favermead to Corfiducia. It would seem that this claim was something of an afterthought. It was not included as a debt in the Claimants’ Statutory Demand served on Favermead on 16th November 2004.

2.1

Was it a term of the agreement that the Claimants had to be the effective cause of the sale to Laken?

31.

As varied, in the way that I have concluded above, the material words of the agency agreement to which this question must be directed are an undertaking to pay a fee if one of the Claimants “introduces an applicant who subsequently purchases the property from Corfiducia.”

32.

At Article 57 of Bowstead and Reynolds on Agency, the 18th edition, there is a general statement that:-

Where the remuneration of an agent is a commission on a contract to be brought about, he is not entitled to such commission unless his services were the effective cause of the transaction being brought about.

33.

In Foxtons Limited v Pelkey Bicknell & another [2008] EWCA Civ 419, Lord Neuberger, sitting as an additional judge of the Court of Appeal but giving the lead judgment in that case, at paragraph 20 of the report, having drawn attention to the large number of decided cases in this area, many of them recent and in the Court of Appeal, summarised their effect as follows:-

“20.

…More generally the judgments in those cases establish the following propositions. First, the term identified in Article 57 of Bowstead is “very readily” implied, especially in a residential consumer context, unless the provisions of the particular contract or the facts of the particular case negative it… . Secondly, the main reason for implying the term is to minimise the risk of a seller having to pay two commissions… . Thirdly, it is not entirely clear whether the test is “an effective cause” or “the effective cause”… . Fourthly, whether an agent was the effective cause is a question whose resolution turns very much on the facts of the particular case… . Fifthly, while two commissions are to be avoided, there will be cases where the terms of the relevant contracts and the facts compel such a result… . Sixthly, where the term is implied, the burden is on the agent seeking the commission to establish that he was the effective cause… .

34.

No purpose is served by summarising the facts of the Foxtons case which are substantially different from those of the present case.

35.

The actual route used by the courts to find that the parties to an agency agreement are bound by a provision having the effect of Article 57 has varied from case to case depending on the surrounding circumstances of the relevant agency agreement and its terms. In some cases the court imports such a provision by a process of implication and in others by a process of construction of the terms of the agreement. As Lord Neuberger points out in the Foxtons case [at para. 18], “where there is an argument whether or not such a term is to be implied, the issue should be resolved by reference to the normal rules relating to implication of terms.” See Viscount Simon in Luxor (Eastborne) v Cooper [1941] AC 108 at 119.

36.

As the first proposition of law at paragraph 20 of his judgment in the Foxtons case, Lord Neuberger states that such a term will not be implied where “the provisions of the particular contract or the facts of the particular case negative it”. He cites Cooper & Company v FairviewEstates (Investments) Limited, Court of Appeal, 13th March 1987 as an example of a case where such a provision was not implied because to do so would be inconsistent with the background facts of the case, and County Homesearch Company (Thames and Chilterns) Limited v Cowham, also the Court of Appeal, [2008] EWCA Civ 26 as an example of a case where such a provision was not implied because of inconsistency with the contractual terms used by the parties in what was, in that case, a property search agency agreement.

37.

It is Mr Deacon’s submission for the Claimants that the use of the words “introduces an applicant who subsequently purchases” are inconsistent with a requirement that the Claimants should do more than simply provide Corfiducia with the names and contact details of possible purchasers of the Property. To assist this argument, Mr Deacon also relies on the submission that the background facts of the present case indicate that Favermead’s self-imposed role was simply to find “applicants” looking to purchase the Property to feed to Corfiducia and it was to assist in that task that Favermead engaged the services of the Claimants. Mr Deacon placed particular reliance on the decision of the Court of Appeal in the Cooper case. That case involved agents engaged by a developer to obtain for it a tenant of an office building the construction of which it was in the process of completing. The material clause of the agency agreement was:-

We confirm that we are pleased to offer a full-scale letting fee to your company 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.

The agent gave the developer the name and particulars of a company who the agent knew was interested in finding office accommodation. Subsequently, the potential tenant changed its mind about new premises. Subsequently again, the potential tenant had another change of mind and, through other staff who knew nothing about the initial approach to the developer, engaged agents to find them office accommodation. Those agents found the developer’s premises, and a lease to the original potential tenant was completed. Coopers, the original agents, were entirely unaware that this had taken place and played no part in negotiating the lease. Their claim for commission on the introduction of the tenant was resisted on the ground that in the circumstances they were not the effective cause of the tenancy. The Court of Appeal rejected this argument and accepted that, in the case of a developer, the court should be substantially less ready to infer the implied term because what a developer requires is not so much the agent’s assistance in concluding a sale to a potential tenant found by the agent, but simply the agent’s assistance in obtaining the names and contact particulars of potential tenants. It was for such introductions that the developer was prepared to pay the commission when one of the potential tenants introduced agreed to take a lease. The developer was quite capable of converting any introduction into an agreed lease having the necessary staff and expertise. In such a case there was no necessity to imply a term as to effective cause. Cooper’s claim for commission succeeded.

38.

The Cooper case was cited in the County Homesearch Company case by Lord Justice Longmore giving the lead judgment as “one of the few cases where the implication was displaced.” He went on at paragraph 18 to conclude that, although a finding of the judge was sufficient to displace the rationale for the implication that a principal should not be required to pay commission twice,:-

Whether that would be enough on its own [to displace the implication] 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.

39.

However, in that case there were further unusual provisions in the agency contract in question which were sufficiently inconsistent with the suggested implied term to lead him to the conclusion that it should not be implied.

40.

At paragraph 10 of his judgment dealing with Favermead’s application to set aside the Claimants’ Statutory Demand, Patten J said, commenting on the Cooper case:

I read that decision as embodying the acceptance by the Court of Appeal of the general proposition put forward by counsel for the developer that in the absence of some factors which point in clear terms to the contrary, it will be appropriate to imply into an agency contract a requirement that the agent should be the effective cause.

41.

I am unable to equate the position of Favermead with that of the developer in the Cooper case. Corfiducia were the trustees of the SE Property Trust which initially set out to purchase the Property as a home for the Ecclestone family. It was only after the decision to purchase had been made that Mrs Ecclestone decided that she did not wish to live there, and thus the nature of the transaction changed from “residential consumer” to become a transaction of investment with a view to future profit. It seems clear, however, that when the Claimants were entrusted with the task of finding a purchaser for the Property, as a result of the arrangement at the meeting of 19th November 2001, the hoped for purchaser was expected to be a “residential consumer” such as referred to byLord Neuberger in his first proposition. Indeed, there are indications from the evidence that the Crown, as landlord, were in a position to insist, and might have insisted, on a sale to such a purchaser. See also paragraph 3 of Cornelia Konrad’s affidavit in the Laneprime proceedings of 26th May 2004

42.

This case presents the unusual feature that the actual selling agency contract in question was not between the owner of the property to be sold and the agent, but between a party, Favermead, which had, through the Overage Agreement, an investment interest in a successful sale which would render it a profit pursuant to the terms of that agreement. It does not seem to me that that fact alters the essential domestic nature of the transaction. Corfiducia had set out to buy a house to be lived in by the Ecclestone family and when that purpose failed, placed the house back on the market and sold it to the Mittals who intended it to provide a home for their family. There is no evidence that Corfiducia’s activities were in any way similar to those of the developer in the Cooper case.

43.

Bearing in mind what Lord Justice Longmore says about “the strength of the implication in selling agency contracts”, in my judgment the use of the word “applicant” in the relevant paragraph of the 3rd April letter is not sufficient to require the conclusion that the agent’s task was simply to provide the names of potential purchasers and no more. It seems to me that the words “an applicant who subsequently purchases” are to be construed as no different in meaning from “purchaser”. In any event, the use of those words is certainly not necessarily inconsistent with an implied term that the agent, to qualify for his commission, must be the effective cause of the purchase.

44.

In his judgment in the Foxtons case at paragraph 22, Lord Neuberger says this:-

“22.

It seems to me that there are two possible readings of the expression “a purchaser” in the phrase “a purchaser introduced by us”. The first, which is favoured by Foxtons and was adopted by the judge, is that the expression means “a person who at some time in the future becomes a purchaser”. The alternative reading, advanced on behalf of Mrs Bicknell, is that the expression means “a person who becomes a purchaser as a result of our introduction”. The first reading means that the expression extends to someone who, at some future time, happens to purchase the property, even though his purchase, or even his interest which gives rise to the purchase, owes nothing whatever to Foxtons. The latter, as Mr Clive Jones for Mrs Bicknell, says, involves requiring Foxtons to have introduced the person to the purchase rather than to the property.

23.

Both interpretations are perfectly defensible, as a matter of pure language (and it may well strike many people that as a matter of first impression, the former reading is perhaps the more natural). However I have reached the conclusion that the latter construction is correct… .

45.

Lord Neuberger then gives those reasons under five headings which, for the sake of brevity, I will not here set out. He then deals with the contrary view of certain textbook writers and an expert witness and continues at paragraph 36:-

“36.

These arguments even if taken together do not appear to me to call into question the conclusion that I have reached, namely, that, in order to be entitled to a commission under the terms for having introduced a purchaser, Foxtons had to show that they introduced the person concerned as the (eventual) purchaser, or, to put the point in Nourse LJ’s words [in John D. Woodale v Dantata [1987] 2 EGLR], that they introduced the purchaser to the purchase, and not merely to the property.

37.

In these circumstances, it appears to follow that there can be no question of implying into the terms a requirement that Foxtons must have been the, or an, effective cause of the purchase in question. It might well be said that this is an additional reason justifying my conclusion: it leaves no room for the argument as to whether a provision, and if so precisely what provision, is to be implied into the terms.

46.

These latter two paragraphs show that Lord Neuberger was adopting the construction route as opposed to the implication route so as to place upon the agent an obligation to demonstrate that he had been the effective cause of the purchase in question in order to qualify for commission. In my judgment the words “on the basis that one of you introduces an applicant who subsequently purchases the property…” fall to be similarly construed.

2.3

Were the Claimants the effective cause of the sale to the Mittals?

47.

This is a question of fact in which the burden of proof rests on the Claimants; see Lord Neuberger’s sixth proposition.

48.

I have already described the background facts of the case but it is, perhaps, helpful to again set out what appear to me to be the principal events relevant to this issue. The Property was first introduced to the Mittals by Mrs Kohn in a letter of 27th November 1997 when it was not being actively marketed. Following this introduction, the Mittals inspected the Property twice. In May 1998 they made an offer of £45 million for the Property which was rejected. As a result of rumours, following the sale of the Property to Corfiducia in October 2001, that the Property was no longer on the market, in January 2002 Savills sent letters denying that this was the case to the principal agents who were operators in the high value part of the London property market. These included the letter to Knight Frank of 30th January 2002 telling them that the Property was still on the market. This action was prompted by a telephone call from Mr McKeown of Favermead described in Mr Hewlett’s witness statement paragraph 28.2. Ms Kohn reminded the Mittals that the Property was still on the market in a letter of 28th May 2003 in which she also drew attention to several other properties which she thought might be worthy of their consideration. The Property was included in a list of other properties sent by the First Claimant to Mrs Mittal for her consideration showing that the Property was on the market for £85 million. On 26th February 2004 Mr Craggs of Knight Frank telephoned Mr Hewlett following the Mittals’ unsuccessful bid for another property in Kensington Palace Gardens, asking to view the Property to assess its suitability for them, which was followed on 27th February by his visit to the Property accompanied by Mr Jaideep Singh when they were shown round by Mr Hewlett. There then followed the events of 4th March 2004 which comprised the visit of Mr Mittal and his son to view the Property, a description of which I have already set out at some length. This was the last relevant event in which the Claimants played any active part. The position at the close of the inspection was that Mr Mittal had made an enquiry as to whether Corfiducia would accept £65 million for the Property and had been told by Mr Hewlett on instructions that he must at least bid £70 million. In a defence filed by the Mittals in answer to a claim by Mrs Kohn for commission on their purchase of the Property, it is pleaded that Mr Mittal considered a price of £60-65 million for the Property to be too high.

49.

The scene then shifts to the negotiations between the Mittals and Corfiducia by means, initially, of their being put in contact with Mr Ecclestone, in which negotiations it appears that a leading role was played by Mr Ashok Tandon who, in due course, was paid a substantial commission by Corfiducia. I confess to being puzzled by the precise role which Mr Tandon played in the events leading up to the exchange of contracts between Corfiducia and Laken. At paragraph 21.4 of the Mittals’ defence to Mrs Kohn’s claim, the following appears:-

Thereafter, between 4th and 11th March 2004 Mr Mittal met Mr Ashok Tandon, a family friend and distant relative of his, socially. Mr Mittal discussed with Mr Ashok Tandon 18/19 [the Property] and Mr Mittal understood from that discussion that Mr Ashok Tandon was an agent acting for the owner of 18/19 and personally knew Mr Bernie Ecclestone who was involved with 18/19. Mr Ashok Tandon said that he believed he could arrange a meeting between Mr Mittal and Mr Ecclestone at which a price could potentially be discussed.

50.

Mr Mullens did not give evidence before me but he did give evidence in the Laneprime Proceedings by a series of affidavits from the second of which the following is an extract, starting at paragraph 3:-

“3.

I confirm that I was personally involved in the negotiations relating to the Sale and Purchase Agreement as a whole, in the sense that I not only had negotiations relating to the sale and purchase price but also in relation to the proposed Overage Agreement. I further confirm that I am not aware of any other arrangements which exist between the Defendant and the Purchaser or any other party associated in any sense with either of them including any related or ancillary transaction, including any transaction involving the Defendant, its ownership or control, and any transaction involving a beneficiary of the SE Property Trust, Bernard Ecclestone or any person or body corporate related or associated with any of them pursuant to which any other consideration for the purchase of the Property is passing.

4.

I also confirm that, at no time, was I informed that Mr Mittal had intimated that his “opening figure” was £65 million until I was provided with a copy of the letter dated 6 May 2004 from FPD Savills to Lovells and to David Conway & Co, which is exhibit “DPC1” of the Affidavit of David Peter Conway in this matter.

5.

I find it difficult to understand how this could ever have been the case.

6.

During the middle of the week ended Saturday 13 March, Mr Ecclestone telephoned me and indicated that he had been approached by a Mr Ash concerning the possible sale of the Property and asked if I would telephone him. He gave me Mr Ash’s mobile telephone number. In fact Mr Ash phoned me later that day and I explained to him that the Property was owned by trustees and that only the trustees could agree to a sale. I believe I said to him on this occasion that I thought that the trustees would also seek the approval of Mrs Ecclestone in view of the nature of the asset. He told me that Mr Mittal was interested in buying the property and that he had a mandate for £50 million. I told him that I though there was no way that the trustees would consider an offer at this level and that he was wasting his time. I think that it was on this occasion that I said to Mr Ash that I thought that the trustees were looking for not less than £60 million but that, because of currency issues connected with the purchase of the property, an offer in US dollars would probably be more appropriate.

7.

On 11 March Mr Ash asked me what sort of offer he might make on behalf of Mr Mittal to the Defendant. I repeated the reference to £60 million. He then said that he thought that an offer would be forthcoming in the low £50 million range. I said to him that perhaps he should consider making an offer of the order of £55 million (it might have been £54 million) and that I would pass such an offer to the trustees.

8.

I decided to speak to Mrs Ecclestone about a possible sale at £55 m. She told me that she did not want to sell at such a price. I said I would report this conversation to Cornelia Konrad of the Defendant which I did.

9.

I reported the interest to Cornelia Konrad and to her adviser, Mrs Ecclestone’s Swiss lawyer, on the same day. I received clear instructions from Cornelia Konrad that an offer at £55 million would not be acceptable. Cornelia Konrad said she would ask Mrs Ecclestone’s Swiss lawyer to contact Mrs Ecclestone concerning the proposed sale, to ask her whether she had a view as to the price at which the Defendant might consider selling the Property.

10.

Mr Ash telephoned me the following day to make an offer of £53 million which I rejected.

11.

Emmanuele Argand, Mrs Ecclestone’s Swiss lawyer, subsequently telephoned me and confirmed that she had spoken to Mrs Ecclestone who had confirmed that she would be unhappy if the Property was sold for less than £60 million.

12.

I had reason to speak to Mrs Ecclestone on the same day and I asked her her feelings about the proposed sale. It was absolutely clear to me that she was not happy about a sale below £60 million. In this conversation, I explained to her that both the trustees and herself would be making a substantial currency gain in connection with a sale around £60 million.

13.

The currency gain was significantly in excess of the actual gain that would accrue on a sale at £60 million.

14.

I was then telephoned by Mr Ecclestone on, I believe, 17 March 2004 who said that he had Mr Ash and Mr Mittal Junior with him. Mr Ash came on the telephone to me and tried to insinuate that Mr Ecclestone had shaken hands on a sale of the property at £53 million. I said that he knew full well that Mr Ecclestone had no authority to sell the Property and that if he had shaken hands with Mr Ecclestone, he had shaken the wrong hand. Mr Mittal Junior was put on the telephone to me and said pretty much the same thing.

15.

Later during the day, Mr Mittal Senior telephoned me and said pretty much the same thing to which my answer was the same.

16.

I believe it was the following day that Mr Ash telephoned me again to make an offer at £57 million. I had absolutely clear-cut instructions and I had already consulted with Mrs Ecclestone and her Swiss lawyers. I rejected the offer out of hand.

17.

I subsequently reported this to the Defendant and to the Swiss lawyers and I believe also to Mrs Ecclestone. I thought this would be the end of the matter and that we would hear no more from the Mittals.

18.

I think it was later on the same day that Mr Ecclestone telephoned me to say that his wife was proposing to meet the Mittals and could I attend the meeting. I said it would be very difficult because I was outside the United Kingdom. He expressed surprise. I think I told him, at this stage, that I was away skiing with my wife. I had had non-stop interruptions on a number of issues, not only this matter, since I had been away and there was no way I was attending any meeting.

19.

I spoke to Mrs Ecclestone later in the week and she confirmed that she had attended a meeting and had told the Mittals and Mr Ash in no uncertain terms that she would not consent to a sale of the Property unless it was of the order of £60 million.

20.

I subsequently heard nothing from Mr Ash until Thursday 25 March when he telephoned me with an offer of $105 million. I said I would have to take instructions and that I would get back to him as quickly as possible.

21.

I immediately checked the sterling/dollar rate and saw that the dollar was strengthening and that the offer represented a figure just under £60 million. I immediately tried to telephone Cornelia Konrad who was unavailable and I accordingly telephoned the Swiss lawyers to get a view from them and I asked them to contact the Defendant to confirm the offer.

22.

About an hour later, I was telephoned by either Cornelia Konrad or the Swiss lawyers (I cannot recall by whom) to confirm that an offer at this level would be acceptable, subject to exchange of contracts taking place within the next 2/3 days.

51.

At paragraph 9 of Mr Mullens’ third affidavit in the Laneprime Proceedings, Mr Mullens says:-

From his discussions, Mr Ecclestone had become convinced that Mr Tandon would be able to persuade his client to agree a price very quickly so there would be nothing to delay the sale. I was aware that he had told Mrs Ecclestone that.

52.

This is said in the context of a description of Mr Mullens’ instructions to Corfiducia’s solicitors to prepare a sale contract in anticipation of a price being agreed for the sale of the Property. The “client” referred to here must have been Mr Mittal.

53.

Miss Cornelia Konrad, the chief executive of Corfiducia, swore evidence in the Laneprime Proceedings. At paragraph 10 of that affidavit she says:-

“10.

Mr Ashok Tandon introduced the Mittal family to the defendant as a prospective purchaser. His fee is included in the draft overage calculation as an introduction fee. His involvement in the negotiations relating to the sale price was entirely on behalf of the purchaser.

54.

The same impression was given to Miss Turnbull of Lovells, the solicitors acting for Corfiducia in the sale, who gave evidence in the Laneprime Proceedings and who in a letter of 26th March 2004 to the Mittals’ solicitors said, “My clients remain concerned about the different agents who accompanied your client to the property. They do not see this as an area where they should be exposed to risk where the only connection would seem to be with the buyer rather than the seller”.

55.

It is a fact that the impact of Mr Tandon appears to have been to substantially reduce the purchase price of the Property from the amount that Professor Khalili would have been prepared to sell it for at the time of Mr Mittal’s visit to the Property on 4th March 2004 and a reduction of the price of £60 million which Mrs Ecclestone was insisting upon in the course of the negotiations which followed after that visit.

56.

Mr Deacon drew my attention to a passage at paragraph 23 of the Mittals’ defence in the Laneprime Proceedings where it is pleaded that [the Mittals’] interest in 18/19 leading to the eventual purchase of the Lease, was generated initially by Mr Singh’s conversation with Mr Mittal in early March 2004 and fostered thereafter by the visits made by the Defendants to 18/19 and the communications with Mr Ashok Tandon.”

57.

Mr Deacon placed considerable reliance on this issue on the decision of the Court of Appeal in Burney v The London Mews Company [2003] EWCA Civ 766. In that case sole agents earned commission if contracts were exchanged and completed with a purchaser introduced by them during the period of the sole agency - “If at any time unconditional contracts for the sale of the property are exchanged (and subsequently completed) with a purchaser introduced by us during the period of our sole agency…”. The agents prepared particulars which they sent to other agents. The other agents put the particulars on their own notepaper and gave them to an individual who approached the vendor direct and subsequently purchased. The original agents were held entitled to their commission. At paragraph 30 of the leading judgment in the case Lord Justice Waller says:-

London Mews [the agents instructed by the owner] were appointed sole agents by the vendor to sell Mr Burney’s property. They prepared particulars and they advertised the property. If London Mews had handed those particulars, with their name on them, or if an employee of theirs had handed those particulars to any person, and that person then purchased the property, that handing of the particulars by London Mews themselves, or by an employee of theirs, would, as it seems to me, have amounted to an introduction by London Mews of the person to who those particulars had been handed to the transaction if a sale resulted.

58.

It is Mr Deacon’s submission that the facts of the present case closely resemble the facts of the Burney case. He submits that, as in the Burney case, sole agents instructed by the vendor obtained the interest of a purchaser for the property to be sold but the purchaser, instead of dealing with the transaction in the normal way through the sole agent, approached the vendor directly and negotiated a price and a contract. It follows, so he submits, that the result here should be the same as in the Burney case and the events of 4th March 2004 should be treated as an introduction by Savills, and thus the Claimants, of the Mittals as purchasers.

59.

I am unable to accept the factual similarity for which Mr Deacon contends. Mr Hewlett of Savills was not the first agent to have introduced the Mittals to the Property. By 4th March 2004 they had already inspected the Property at least twice and made a bid for it from its then owner which was rejected. They came to be at the inspection on 4th March because of their own agent’s knowledge, possibly from Savills’ letter of two years earlier, that the Property was available for sale and they had recently failed in a bid for a neighbouring property. The Claimants were not the sole agents of the vendor, Corfiducia. They were not appointed by Corfiducia at all but Corfiducia needed to be persuaded to sell the Property at a price acceptable to the Mittals. The Claimants’ agency agreement was with Favermead controlled by Professor Khalili. It is clear from the Laneprime proceedings and from the instructions that he gave on 4th March to Mr Hewlett that Professor Khalili would never have accepted a price worth £57 million for the Property. To do so would have meant that Favermead benefited not at all from the Overage Agreement which it entered into as a significant part of the consideration for the sale by Laneprime to Corfiducia at a cash price of £50 million. I make no findings as to the role played by Mr Tandon after the 4th March events. In particular, I do not find that he was thereafter acting as agent for Corfiducia and that he received the commission payment of 3% of the purchase price on the sale to the Mittals in that capacity. But I do conclude that the Claimants have failed to discharge the burden of proof which rests upon them to establish that they were the effective cause of the sale by Corfiducia to the Mittals’ nominee company Laken.

60.

That is sufficient to dispose of this case making it unnecessary for me to deal with points 2.3 and 2.4 listed above at paragraph 25. But in case the matter goes further, I will deal with them briefly by saying that I am not prepared to find on the evidence before me that Knight Frank were appointed subagents by Savills at any relevant time or that the agency contract resulting from the meeting between Professor Khalili and Mr Hewlett on 19th November 2001 contained a term that the payment of commission to the Claimants was at any stage conditional on their introducing a buyer at a price of £70 million or more. Thus both these suggested defences of Favermead had the Claimants been otherwise successful would, in my judgment, have failed.

61.

In the result, however, this action must be dismissed.

Glentree Estates Ltd & Ors v Favermead Ltd

[2010] EWHC 1120 (Ch)

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