John D Wood & Co (Residential and Agricultural Ltd) v Craze

This is an appeal from a decision of Master Foster, made at an oral hearing which took place on 3 July 2007. That hearing was of an application by the Defendant for summary dismissal of the Claimant’s claim or to strike out the claim. The Master dismissed the Defendant’s application with costs and refused permission to appeal. Leave to appeal was subsequently given by the single Judge.

The Claimant is a firm of estate agents. The claim is for the payment of commission for the attempted sale of the Defendant’s flat in Bolton Gardens, SW5. The Claimant contends that the terms of the agreement between the parties were those set out in its standard Fees and Terms of Business (‘standard terms”). The Defendant denies this, contending that the terms of the agreement were agreed orally between the parties and are evidenced in an email and letter written by the Claimant to him. It is not in dispute that the parties agreed that commission would be paid at the rate of 1.75% of the selling price plus VAT. The Claimant’s standard terms provided that the Defendant would be liable to pay commission if at any time unconditional contracts for sale were exchanged with a purchaser introduced by the Claimant. The Defendant contends that the oral agreement between the parties specified that commission became payable on completion of the contract of sale.

The events that led to the Claimant being instructed in the sale of the Defendant’s flat are fully set out in the witness statements of Ms Gemma Davies and Mr Tim Le Blanc-Smith of the Claimant. The Defendant has filed no witness evidence. Briefly summarised, the Claimant, which had had some previous dealings with the Defendant, was contacted by the Defendant who expressed interest in a property the Claimant was selling. He indicated that he was trying to sell his own flat through other agents. He offered to instruct the Claimant if it could secure an offer higher than that which he had already received. The Claimant firm had on its books a potential purchaser, Mr Christopher Budden. One of its staff contacted him and he came to view the flat. He agreed to buy the flat at a price (£1,505,000) that the Defendant was prepared to accept. These events occurred between mid-July and early August 2006.

On 20 July 2006, the Defendant completed a Seller’s Property Information Form in which he stated, inter alia, that he knew of no disputes or anything which might lead to a dispute about the flat or any neighbouring property and had had no complaints about anything he had done or not done as owner. In a Seller’s Leasehold Property Information Form, also completed on 20 July, the Defendant repeated that he had not received any complaints from any other occupier of the building about anything he had or had not done. He added:

“… but had complaint in 2001 from a tenant, but it was resolved”.

Both documents were sent to Mr Budden’s solicitors.

A query was raised by those solicitors about the 2001 complaint mentioned in the second document. On 26 July, after obtaining the Defendant’s instructions, the Defendant’s solicitors answered that query on his behalf:

“As stated in replies it [i.e. the complaint] was with regard to noise nuisance. The tenant below our client complained and an amicable agreement was reached in approximately May 2002 when our client purchased high quality underlay and insulating foam and huge rugs. The tenant inspected and there have been no complaints or objections received since”

The Claimant contends that this assertion was untrue and that, in fact, there was an ongoing and unresolved dispute about noise levels emanating from the flat, allegedly arising due to inadequate sound-proofing. There is correspondence covering the period from November 2003 to February 2005 which suggests that this is the case. However, this is not accepted by the Defendant who denies that he made any representations that he knew to be false.

On 6 September 2006, written contracts were exchanged and a 10% deposit was paid. Completion was due to take place on 21 September.

On 12 September 2006, in replies to requisitions, the Defendant stated that he confirmed there were no disputes or complaints affecting the flat. That document was sent to Mr Budden’s solicitors.

By 15 September, Mr Budden had been made aware of the history of problems relating to noise. He elected to rescind the contract on the ground of the Defendant’s misrepresentations and the sale did not proceed to completion. Nevertheless, relying on its standard terms, the Claimant presented an invoice for its commission in the sum of £30,946.56 to the Defendant. The Defendant refused to pay.

On 31 January 2007, the Claimant commenced proceedings against the Defendant. The Claimant put its case on four different bases (I shall refer to these as its ‘grounds of claim’):

A Defence was filed on 23 April 2007, denying liability. On 25 May 2007, the Defendant made an application for summary judgment pursuant to CPR 24.2 and, alternatively, pursuant to CPR 3.4(2)(a), for an order striking out the Particulars of Claim.

For the purposes of the hearing before the Master (and also before me), the Defendant conceded that:

At the hearing, the Defendant argued that, as a matter of law and construction of the agency agreement, the Claimant’s grounds of claim should be summarily dismissed or struck out.

It seems that, for some time, the hearing before the Master proceeded at cross purposes. The Master and Counsel for the Claimant, Mr Panton, were proceeding on the basis that the Master was being asked to determine the application by reference to the test set out at CPR 24.2(a) (1) and (b), namely that the Defendant’s application would succeed only if the Master was satisfied that the Claimant had no reasonable prospect of succeeding on the claim and that there was no other compelling reason why the case should be disposed of at a trial. Their understanding meant that, unless the Claimant was unable to overcome that relatively low hurdle in relation to any of its grounds of claim, the claim would proceed to trial on all issues. By contrast, Counsel for the Defendant, Mr Rolfe, believed that, since the points in dispute were matters of law and construction, the Master would be making a final determination of the issues.

It is not clear to me how the misunderstanding arose. However, once it was discovered, Mr Rolfe sought to persuade the Master to determine the issue finally. He referred him to the recent case of ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725. In that case, the Defendant had issued an application for summary judgment under CPR Part 24. One of the arguments raised by the Defendant on the hearing of the application concerned a short point of construction. Accordingly, the Judge invited the parties to agree that he should decide the point as a preliminary issue. The parties were unwilling so the Judge proceeded instead on the basis that he should apply the Part 24 test. He dismissed the Defendant’s application. The Defendant appealed. Giving the judgment of the Court of Appeal, Moore-Bick, LJ, said:

“In my view the Judge should have followed his original instinct. It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the Court is satisfied that it has before it all the evidence necessary for the proper determination of the question and the parties have had adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: If the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner this is determined, the better.”

He went on to reject the Claimant’s argument that further evidence was required to determine the issue.

Relying on that case, Mr Rolfe sought to persuade the Master that he should make a final determination of the points of law arising from the Claimant’s grounds of claim. He submitted that this could be done on the information then before the Master. He said that there was no requirement for any further evidence. There was the opportunity for full argument before the Master and it would, he submitted, be wasteful of costs for determination of the various legal issues to be postponed until trial.

For the Claimant, Mr Panton maintained that the hearing should proceed on the basis of a ‘conventional’ application for summary judgment. He submitted that it had never been suggested prior to the hearing that the Master should determine any questions of law and construction by way of preliminary issue. He argued that it would be inappropriate to do so, since determination of the relevant issues would not necessarily be determinative of the case as a whole. He pointed out that the Defendant did not accept that the Claimant’s standard terms governed the agreement between the parties. Thus, even if the Claimant succeeded on its first ground of claim, a Court would still have to determine whether the standard terms of agreement applied.

It seems that the Master did indeed proceed on the basis advocated by Mr Panton, although he did not, as I understand it, formally announce his intention to do so or his reasons for taking that course. During Mr Panton’s submissions to him, it became evident to him that the Master accepted his argument that the Claimant had a real prospect of succeeding in its claim on ground (i) and that neither summary judgment nor strike out was therefore appropriate in relation to that ground. Realising that the Master was going to rule in his favour on ground (i), Mr Panton did not address him in relation to the remaining grounds of claim, apparently assuming that all four grounds would proceed to trial together. This was despite the fact that the Defendant was contending for summary judgment/strike out in respect of all four grounds of claim and it was clearly open to the Master to deal with each ground separately.

The Master’s Ruling, when given, did not address the Defendant’s contention that he should make a final determination of the relevant issues. He gave no reason for his decision not to do so. He proceeded to rule that the arguments mounted by both the Claimant and the Defendant in relation to ground (i) had a real prospect of succeeding. He dismissed the Defendant’s application for summary judgment and strike out on ground (i).

The Master made no observation about the Claimant’s ground (ii). He stated that he had not reached a concluded view on ground (iii) (the alleged breach of implied terms). He said that he had concluded that ground (iv) (the claim for quantum meruit) could not possibly succeed. Nevertheless, he ruled that all grounds of claim (including the quantum meruit claim) should proceed to trial. Mr Panton suggested to me that the reason for the Master’s apparently illogical decision to allow ground (iv) to proceed may have been that he belatedly remembered that he had not heard the Claimant’s submissions in relation to that ground of claim.

The Defendant contended before me that the Master had erred by declining or failing to make a final determination of the issues and to grant the Defendant summary judgment on all the Claimant’s grounds of claim. He relied on ICI Chemicals & Polymers Ltd. He referred also to Aribasala v St James Homes (Grosvenor Dock) Limited [2007] EWHC 1694 (Ch), a case where a Deputy High Court Judge determined a point of law despite the fact that it would not be determinative of the action as a whole, and a trial or a further application would be necessary. He criticised the Master’s decision to permit ground (iv) (the quantum meruit claim) to proceed, despite the fact that he had concluded that it could not possibly succeed.

For the Claimant, Mr Panton repeated the arguments he had advanced before the Master. He argued that the Master was entitled to decline the Defendant’s invitation to determine the issues of law and construction and to proceed to decide the case in accordance with the test set out in CPR 24.

In my judgment, the Master should have “grasped the nettle” and decided the issues of law and construction that were canvassed before him in relation to all the grounds of claim. He had the material on which to decide those issues and he had heard argument on them from Counsel lasting half a day. There was no suggestion that the Claimants’s Counsel was in any way unprepared to argue the various points or that the Court did not have time to accommodate them. Nor was there any suggestion that the Court would have required further evidence in order for determination of the issues to take place.

It may be that the Master’s decision not to deal with the issues was to some extent at least a consequence of the misunderstanding which had apparently occurred at the start of the hearing. It is impossible to say this with any certainty, since he did not record the reasons for his decision not to accede to the Defendant’s submissions on this point. However, the claim has a relatively modest value and it should have been clear that the interests of justice would be best served by issues of law and construction being determined at an early stage. By this means, it may have been possible to avoid altogether the further expense associated with a full hearing and repetition of the arguments that had already been addressed to him. At the very least, any future hearing would have been limited to determining only those issues that had not already been canvassed before the Master.

I therefore conclude that the Master erred in failing to deal with the legal issues and allow the appeal. I shall, therefore, proceed to determine the issues, as invited by the Defendant. As I have said, it is desirable that they should be resolved at the earliest opportunity.

The purpose of engaging the services of an estate agency to market a property is to achieve an advantageous sale of the property. Thus, it has been said that, in the absence of some other clear expression of intent, the intention of the estate agent and vendor when entering into an agreement concerning the sale of a property is likely to be that the commission stipulated for should be payable only in the event of an actual sale resulting: see Jenkins, LJ in Midgeley Estates Ltd v Hands [1952] 2 QB 432 at pages 435-6. Frequently, however, estate agents will frame their agreements so as to stipulate an event earlier than completion of the sale which, when it occurs, will trigger the entitlement to commission. In that event, the rights of the agent and the obligations of the vendor will depend upon the exact terms of the agreement in question and upon a true construction of those terms.

An estate agency agreement is not a contract of employment. Unless he is employed as a sole agent, an estate agent is under no duty to do anything or to carry out any service for the vendor. He need take no step to market the property. Unless specifically provided for in the estate agency agreement, no obligations are placed on the vendor, save for the liability to pay commission on the happening of a specific event. In the absence of any provision in the estate agency agreement, therefore, the vendor is free to dispose of the property himself or through other agents. Moreover, it is open to him to withdraw the property from sale at any time prior to exchange of contracts: Fowler v Bratt [1950] 2KB 96.

The Claimant’s standard terms provided that entitlement to commission arose upon exchange of contracts. Elsewhere in the document there is reference to the “unconditional exchange of contracts”.

Clause 5 of the standard terms provided that the vendor:

“…will be liable to pay to [the Claimant] one half of [its] remuneration…if a ready, willing and able purchaser is introduced by [the Claimant] in accordance with [the Defendant’s] instructions but [the Defendant] subsequently withdraws from the sale and unconditional contracts of sale are not exchanged, irrespective of the reasons therefor”.

The Claimant argues that, since the specified event (i.e. exchange of unconditional contracts) occurred, the entitlement to commission was triggered, despite the fact that the sale was not, in the event, completed.

The Defendant disputes that proposition, arguing that the true meaning of the provisions is that the obligation to pay commission arose if (and only if) the vendor entered into a contract which was enforceable by him. In this case, the contract was not enforceable because of the Defendant’s pre-contractual misrepresentations.

In support of the Defendant’s position, Mr Rolfe relied on principles distilled from the authorities. He submitted that, if a vendor enters into a contract for sale of a property and the contact is enforceable by the vendor, but the purchaser is unwilling to complete and the vendor chooses not to enforce, the commission is nevertheless payable. In those circumstances, the vendor has had the benefit of an enforceable contract but has chosen not to enforce it. The estate agent is therefore, entitled to his commission. Mr Rolfe relied on the case of Midgley Estates Ltd (see paragraph 26 above) as authority for this proposition.

Mr Rolfe submitted that, by contrast, if the vendor enters into a contract for the sale of his property and the contract is never at any time enforceable by the vendor, then no commission is payable. In support of this proposition, he referred to the case of Peter Long and Partners v Burns [1956] 1 WLR 1083. In that case, the estate agency agreement provided that commission should be payable upon the agents “introducing a person ready, willing and able to enter into a binding contract to purchase” the property. The purchaser signed a contract to purchase the property and paid a deposit. Before signing the contract, he had been told by representatives of the estate agents that a planning scheme then in prospect would affect the property only to a very limited extent. In fact, that information, which had been given to the estate agents by the vendor in response to an informal enquiry, was completely wrong. The planning scheme would result in demolition of the buildings on the relevant site. Upon discovering this, the purchaser resiled from the contract and the contract was eventually cancelled by agreement between the parties on payment of a sum of money by the purchaser to the vendor. The estate agents claimed their commission but the vendor refused to pay.

The estate agents brought an action for their commission by way of damages for breach of contract. That action failed. On appeal, the Court of Appeal held that, in the relevant context, a “binding contract” meant one which was legally enforceable by the vendor against the purchaser and that, since the contract had been rendered unenforceable by the vendor as a result of the innocent misrepresentation of the estate agents, no commission was payable. The estate agents had sought to argue that the vendor could not take advantage of the misrepresentation made by them to the purchaser since she herself had given the relevant information to the estate agents. In his judgment, Singleton, LJ, dismissed that argument on the basis, inter alia, that the making of such a representation to the purchaser without checking the information given by the vendor bordered on recklessness.

In his judgment, Romer, LJ, said at page 1094:

“…I have no doubt that the contract which [the purchaser] did sign was not a binding contract within the terms of the commission note. I agree … that “a binding contract” in this context is the same as a legally binding contract, and that means a contract binding on the purchaser and legally enforceable against the purchaser by the vendor. The contract which [the purchaser] signed was never legally enforceable against her by [the vendor] because of the innocent misrepresentation which was made to her by [the estate agents’ representative]. Moreover, the contract was voidable by [the purchaser], who could rescind it the moment that she discovered what the true facts were. Accordingly, it appears to me impossible to say that it was a binding contract within the meaning of that phrase as used in the commission note.

A voidable contract, when rescinded, is avoided ab initio ”.

Mr Rolfe submitted that fraudulent misrepresentation entitles the innocent party to rescind as of right. This is what Mr Budden did in this case. He further submitted that, as a result of the Defendant’s fraudulent misrepresentations, made before contracts were exchanged, Mr Budden had at all times been entitled to rescind the contract. That being so, he submitted, the Claimant never became entitled to commission. Mr Rolfe observed that the post-contractual misrepresentation had had no causative effect since, by the time it was made, the right to rescind had already arisen.

For the Claimant, Mr Panton made two points. First, he sought to distinguish the case of Peter Long and Partners from the present case on the basis that, in Peter Long and Partners, the Court at first instance and the Court of Appeal had to construe the phrase “binding contract”, whereas in the present case the term to be construed was “unconditional contract”. His argument was that an “unconditional” contract need not necessarily be enforceable. Secondly, Mr Panton submitted that since, in this case, the conduct which caused the sale to fall through was that of the Defendant, he should not be permitted to rely on the fact that the contract was unenforceable by reason of his own fraud.

As to his first point, Mr Panton argued that, in Peter Long and Partners, both the Court at first instance and the Court of Appeal had decided that, in order for a contract to be “binding”, it must be enforceable by the vendor. In the present case however, the phrase used was “unconditional contracts”. The contracts that were exchanged fulfilled this requirement. They were unconditional. They were not, as it turned out, “binding” or “enforceable”. That is, Mr Panton argued, nothing to the point, provided that they were “unconditional”.

Mr Rolfe argued that the interpretation urged by the Claimant was simplistic and flawed. He submitted that the term “contract” should be given its ordinary meaning. He pointed to the definitions of a “contract” that appear in Chitty on Contracts (29^th edition) at paragraph 1-001. There, a contract is defined as “a promise or set of promises which the law will enforce” or “an agreement giving rise to obligations which are enforced or recognised by law”. Thus, Mr Rolfe submitted, the use of the word ‘contract’ of itself implied an agreement that was enforceable. Mr Rolfe submitted that the requirement of ‘enforceability’ was emphasised and reinforced by the reference in the Claimant’s standard terms to “unconditional” contracts. Conditional contracts are by their nature unenforceable until such time as the condition is fulfilled. Thus, he said, it was clear that the exchange of ‘unconditional’ contracts was intended to mean the exchange of contracts that were enforceable.

Mr Rolfe argued that the parties could not have intended that commission would be payable upon exchange of contracts, regardless of whether those contracts were defective for some reason (e.g. because, due to an oversight by the Claimant, they were unenforceable as a matter of public policy). That would make no sense at all. The intention of the parties must, he said, have been that commission would be payable once binding and enforceable contracts had been exchanged, any conditions which had previously governed the contracts having been fulfilled.

As to his second point, Mr Panton submitted that, running through the authorities relating to estate agents’ commission was the theme of fault, (usually, as it happens, fault on the part of the estate agent). The issue of fault had been discussed in the case of Peter Long and Partners. He referred to the judgment of Morris LJ at page 1093:

“The Plaintiffs further submit there was an estoppel. They plead as follows in paragraph 3 of the reply: “If it is found that the said contract was not binding on [the purchaser] [the estate agents] will further say that [the vendor] having innocently misled [the estate agents’ representative] who upon [the vendor’s] said instructions innocently misled [the purchaser], [the vendor] is estopped from setting up her own misrepresentation, resulting in the rescission of her contract with [the purchaser], to defeat [the estate agents’] claim for commission.” But, in my judgment, this is not a case where the doctrine of estoppel can be relied upon. There was nothing to prevent [the purchaser] from proving that there had been an innocent misrepresentation and so from resiling from the contract. Upon proof that [the purchaser] did disaffirm the contract it was shown there had been no binding contract and so that commission had not been earned. There is no evidence, for no oral evidence was called, that had Mrs Pritchard known the true facts as to the road widening she might have purchased at a lower figure and so enabled [the estate agents] to earn some commission. There was no evidence to that effect.

What, then, is the legal basis of [the estate agents’] complaint? [The estate agents] may say that they wasted some time because they had some dealing with [the purchaser] which led to an abortive contract. But there is no claim against [the vendor] on that basis; nor do I see there could be. [The vendor] made no fraudulent misrepresentation to [the estate agents], and no sort of suggestion of that kind is or could be made. [The estate agents] do not suggest that [the vendor] gave any warranty to them of the truth of the representation which she made.”

Mr Panton submitted that Morris LJ was, in effect, leaving open the question of whether estoppel could arise if there had been fraudulent misrepresentation on the part of the vendor. He submitted that it could and should do so in this case.

Mr Rolfe argued that I was concerned with an issue of construction of an agreement, in which the concept of “fault” had no part to play. He submitted that the sole question for me was whether or not the event which had been identified as the trigger for entitlement to commission had occurred. If it had not, then commission was not payable, irrespective of considerations of fault.

It is clear from the authorities (in particular, Peter Long and Partners) that the Defendant’s misrepresentation had the effect of rendering the contract void ab initio and therefore unenforceable by the Defendant. Looking at the Claimant’s standard terms as a whole, and having regard to the intention of the parties, it seems to me that the exchange of “unconditional contracts” must be taken to mean the exchange of contracts that had no conditions unfulfilled and would be enforceable at law. The stage of “exchange of contracts” in a real property transaction is commonly understood to mean the point in the transaction when the contracts become binding and enforceable. A term whereby commission was payable in circumstances where a contract - although unconditional - was nevertheless in some way defective and could not therefore result in a successful completion would be unacceptable to a vendor and would make no sense at all. I accept Mr Rolfe’s submission that the interpretation that the Claimant seeks to put upon the term “unconditional contracts” does not accord with reality and cannot have represented the true intentions of the parties. I therefore accept that the event which would have triggered the entitlement to commission did not occur, so that no commission was payable.

I have considerable sympathy with the submissions made by Mr Panton to the effect that it would be unjust if the Defendant were to be permitted to escape payment of commission by relying upon his own fraud which rendered the contract unenforceable. Having said that, however, it seems to me that, when considering the construction of the standard terms, I must focus on the narrow question of whether the event specified therein as triggering the payment of commission has occurred. It is difficult to see how fault can determine the issue. The doctrine of estoppel can have no application. The Defendant made no fraudulent representations to the Claimant. He gave no warranty to the Claimant that what he said to Mr Budden’s solicitors was true.

In this connection, I note that, in Peter Lang and Partners, Romer LJ said at page 1095:

“A voidable contract, when rescinded, is avoided ab initio. Indeed, on the way [Counsel for the Claimant] framed his argument on this point … it would follow, I think, that estate agents would be entitled under this form of commission contract to claim their commission even on a contract for sale which had been induced by a fraudulent misrepresentation made by the vendor or by some agent on her behalf, and I cannot think that that is right”.

In my judgment, this ground of claim must fail.

In support of the Claimant’s ground (ii), Mr Panton submitted that the only reason that the sale of the flat was not completed was the Defendant’s fraudulent conduct. He submitted that the Defendant could not rely on his own lack of good faith (or breach of duty) to avoid his liability. He referred again to the theme of fault which, he said, ran through the cases on estate agents’ commission. It appeared that this ground was being advance as a free-standing head of claim although the arguments advanced were similar to those which had been deployed in relation to ground (i).

For the Defendant, Mr Rolfe submitted that this ground disclosed no cause of action. He observed that it was for the Claimant, who brings the case, to justify it. This, he said, it had not done.

This ground seems to me to disclose no separate cause of action. That being the case, it must fail.

The Claimant alleges a breach of implied terms. Mr Panton submitted that two terms were implied into its agreement with the Defendant, namely that :

Mr Panton contended that these implied terms would have represented the intention of the parties at the time and were necessary in order to give business efficacy to the agreement. He argued that, by failing to inform the Claimant about the unresolved disputes, the Defendant acted in breach of the implied term at (i) above. By the fraudulent misrepresentations made in the information given to Mr Budden’s solicitors, he was in breach of the implied term at (ii). These breaches, Mr Panton argued, gave rise to a right to damages.

Mr Rolfe submitted that there was no justification for implying the terms set out at (i) and (ii) above. He relied on the case of Luxor (Eastbourne) Ltd v Cooper [1941] AC 108. In that case, the vendor company had instructed agents to sell properties on its behalf and had agreed to pay commission on completion of the sale. The sale was agreed with a prospective purchaser introduced by the agents. Before the sale was completed, the vendor company withdrew from the sale because of an objection by one of its directors. The vendor company subsequently sold the property to another purchaser which had not been introduced by the agents. The agents claimed their commission. When the vendor company refused to pay, the agents brought proceedings, alleging the existence of an implied term that the vendor company would do nothing to prevent the satisfactory completion of the transaction so as to deprive the agents of the agreed commission. The breach pleaded was the failure to complete the sale and the disposal of the property to another purchaser.

Mr Rolfe relied on the remarks of Viscount Simon LC at page 120:

“… in contracts made with commission agents there is no justification for introducing an implied term unless it is necessary to do so for the purpose of giving to the contract the business effect which both parties to it intended it should have”.

He relied also on the dicta of Lord Russell at page 125:

“As to the claim for damages, this rests upon the implication of some provision in the commission contract, the exact terms of which were variously stated in the course of argument, the object always being to bind the principal not to refuse to complete the sale to the client whom the agent has introduced.

I can find no safe ground on which to base the introduction of any such implied term. Implied terms, as we all know, can only be justified under the compulsion of some necessity. No such compulsion or necessity exists in the case under consideration. The agent is promised a commission if he introduces a purchaser at a specified or minimum price. The owner is desirous of selling. The chances are largely in favour of the deal going through, if a purchaser introduced. The agent takes the risk in the hope of a substantial remuneration for comparatively small exertion … There is no lack of business efficacy in such a contract, even though the principal is free to refuse to sell to the agent’s client.”

At 128, Lord Russell said:

“…in my opinion there is no necessity in these contracts for any implication; and the legal position can be stated thus:- If according to the true construction of the contract the event has happened upon the happening of which the agent has acquired a vested right to the commission … then no act or omission by the principal or anyone else can deprive the agent of that right; but until that event has happened, the agent cannot complain if the principal refuses to proceed with, or carry to completion, the transaction with the agent’s client”.

Mr Rolfe emphasised that a term should be implied only for reasons of “necessity”. He submitted that no such reason existed in this case. He pointed out that Clause 5 of the Claimant’s standard terms (see paragraph 29 of this judgment) rendered the Defendant liable to pay half the Claimant’s commission if he were to withdraw from a sale to a ready, willing and able purchaser introduced by the Claimant, with the result that unconditional contracts were not exchanged. He submitted that this demonstrated that, where the Claimant intended to place an obligation on a vendor at a stage earlier than the happening of the event which would usually trigger an entitlement to commission, it was open to it to do so by way of an express term. He submitted that the Court should therefore be very reluctant to imply any further terms that were not expressed in the agency agreement. He said that the implication of terms could be justified only in exceptional circumstances; no such exceptional circumstances were present here. This, he says, is illustrated by the fact that the terms of the Claimant’s agreement with the Defendant were the Claimant’s “standard” terms.

As to the specific implied terms relied upon, Mr Rolfe submitted in relation to (i) that it would be unreasonable for such an obligation to rest on a vendor. The eliciting of information about “matters relevant to the marketing of the flat” and to “latent defects” was a matter for the Claimant, which was an expert in the field. It was inappropriate – and certainly unnecessary – for responsibility for these matters to rest on the vendor. It could not be assumed that such a term would have represented the intention of the parties.

As to implied term (ii), Mr Rolfe contended that it was drafted far too widely. It was, he said, predicated on a misunderstanding of what a vendor is obliged to do under an estate agency agreement. It presupposed that the vendor is obliged to co-operate in bringing about the sale whereas in fact he is not. Indeed, there is no obligation on him to proceed to a sale of the property.

Mr Rolfe submitted that the cases drew a clear distinction between the obligations of a vendor before and after a binding contract has been made between the vendor and a prospective purchaser introduced by the agent. In Luxor, Lord Russell observed at page 126:

“The position will no doubt be different if the matter has proceeded to the stage of a binding contract having been made between the principal and the agent’s client. In that case, it can be said with truth that the “purchaser” has been introduced by the agents; in other words the event has happened upon the occurrence of which a right to the promised commission has become vested in the agent. From that moment no act or omission by the principal can deprive that agent of that vested right”.

Lord Wright expressed a similar view at page 142:

“…if the negotiations between the vendor and the purchaser have been duly concluded and a binding executory agreement has been achieved, different considerations may arise. The vendor is then no longer free to dispose of his property. Though the sale is not completed the property in equity has passed from him to the purchaser. If he refuses to complete he would be guilty of a breach of agreement vis-à-vis the purchaser. I think, as at present advised, that it ought then to be held that he is also in breach of his contract with the commission agent, that is, of some term which can properly be implied. But that question and possibly some other questions do not arise in this case and may be reserved.”

In Peter Long and Partners, Morris LJ referred to Luxor (and to the case of Fowler, in which similar views had been expressed by Denning LJ). He concluded that, in Peter Long and Partners, the vendor had done nothing after exchange of contracts to deprive the estate agents of their commission. Mr Rolfe submitted that it would not be right to imply into the agreement a term obliging the Defendant to act in a particular way at a time before contracts had been exchanged.

Mr Rolfe also relied on the case of Blake & Co. v Sohn [1969] 3 All ER123, a decision of Nield, J. In that case, the vendors had falsely represented to the estate agents that they had been in undisputed exclusive possession of part of the land to be sold for a period 20 years and thus were in a position to prove title for the land. In fact, there was a long running dispute about title to the land. Contracts were exchanged but the sale could not be completed because of the vendors’ inability to complete the purchase. The purchaser successfully sued for rescission of the contract, whereupon the estate agents sued for their commission or damages. The estate agents contended, inter alia, that there was an implied term in the agreement between themselves and the vendors to the effect that the vendors had and would make out a good title to the property. Nield J, rejected that contention, finding that there was no justification for implying such a term. It should be noted that, although the representation as to undisputed possession was described by him in his judgment as “false”, it appears that he accepted that it did not amount to fraud.

The authorities (in particular Luxor), make clear that the Courts must be slow to imply any additional terms into an estate agency agreement. In Luxor, the House of Lords refused to imply a term that the vendor would do nothing to prevent satisfactory completion of the sale so as to deprive the estate agents of the agreed commission. In Blake, Nield J, refused to imply a term that the vendors had and would make out a good title. In these cases, the respective Courts decided in effect that the parties would have had no common intention that such terms should be implied, and that the terms were not necessary in order to achieve business efficacy.

It is important to note, however, that the Courts were not saying that terms could never be implied into an estate agency agreement. In Luxor at page 137, Lord Wright said:

“There have been several general statements by high authorities on the power of the Court to imply particular terms in contracts. It is agreed on all sides that the presumption is against the adding to contracts of terms which the parties have not expressed.

The general presumption is that the parties have expressed every material term which they intended should govern their agreement, whether oral or in writing. But it is well recognized that there may be cases where obviously some term must be implied if the intention of the parties is not to be defeated, some term of which it can be predicated that “it goes without saying” some term not expressed but necessary to give to the transaction such business efficacy as the parties must have intended …”.

In the present case, it is conceded for the purposes of this appeal that the Defendant made pre-contractual fraudulent misrepresentations and that it was as a result of those misrepresentations that the contract for sale was rescinded. This is a very different situation from that in Luxor. Once the fraudulent representations were made, any contract entered into with the purchaser introduced by the Claimant was bound to be unenforceable. Thus, the Claimant was not running an ordinary commercial risk that the Defendant might withdraw the property from sale or sell it through other agents. Rather, its efforts to sell the property were doomed to fail from the start. Had the Defendant been frank about the problems which he had experienced, a sale might well have been possible to the same or another purchaser, albeit at a lower price and/or after sound proofing work had been carried out on the flat. As it was, the Defendant’s fraud rendered a sale impossible.

The purpose of the agreement between the Claimant and the Defendant was to sell the Defendant’s flat. It can be assumed that, at the time the agreement was entered into, that was the common intention of the parties. If that intention were not to be defeated, it seems to me that it is necessary to imply into the agreement a term that the Defendant would not make fraudulent representations such as would render any contract of sale of the property unenforceable and thus prevent a sale. An implied term to this effect would meet the “officious bystander” test. If the parties had been asked at the time of reaching the agreement whether such a term was to be implied, they would surely have responded, “Of course”. Had such a term appeared amongst the Claimant’s standard terms, it is in my view inconceivable that it would have caused the Defendant to refuse to enter into the agreement.

I consider that, in order to deal with the special circumstances of fraud on the part of the Defendant, it was necessary in order to achieve business efficacy to imply into the parties’ agreement a term that the Defendant would not make fraudulent representations such as would render any contract of sale of the property unenforceable and thus prevent a sale. I find that, in making pre-contractual fraudulent misrepresentations, as for these purposes it is conceded that he did, the Defendant was in breach of that implied term and the Claimant is, therefore, prima facie entitled to damages in respect of that breach.

That deals with the Claimant’s proposed implied term (ii). Implied term (i) is drawn extremely widely and cannot be assumed to have represented the intention of the parties. Nor is it in my judgment required in order to achieve business efficacy. I do not accept that it should be implied into the parties’ agreement.

The Claimant claims damages for loss of the chance of earning commission by sale of the flat to Mr Budden (at a lower price or at the same price after appropriate sound proofing work had been carried out) or to another purchaser. In order to succeed, the Claimant would have to demonstrate that there had been a real or substantial chance of gaining commission by a successful sale. It is contended that the Claimant would be able, on the evidence, to do so. The flat was an attractive one and was situated in a prestigious area. It was, the Claimant says, eminently saleable.

For the Defendant, Mr Rolfe submitted that, even if there had been a breach of an implied term, the Claimant would have suffered no loss. There had been no obligation on the Defendant to proceed to a sale to a purchaser introduced by the Claimant. The decision whether or not to do so would have rested entirely with him. That being the case, Mr Rolfe relied on the principle that, where a defendant has an option of performing a contract in alternative ways, damages for breach by him must be assessed on the assumption that he will perform the contract in the way most beneficial to himself.

It seems to me that this case is distinguishable from the line of cases relied on by the Defendant. In this case, the issue is not whether there were alternative ways of performing the contract. The issue is rather what would have happened if the Defendant had not made the misrepresentations but had instead disclosed the true position. The Court would have to consider issues such as how likely it is that the Defendant would have agreed to the steps necessary to enable a sale to be effected (the lowering of the price, and/or remedial work to the flat), whether he would have left the flat with the Claimant to sell and whether, if he had done so, it is likely that the property would in fact have been sold. The Court would have to consider the price at which the property would have sold and what discount should be made to reflect the possibility that the Defendant might have elected to sell the property through another agent, or even not to sell at all. All these are matters for evidence. On the basis of the evidence, a judge might conclude that there was no loss at all. If he concluded that there was, he would have to go on to assess the value of that loss. The outcome cannot be predicted at this stage. However, I cannot, on the information before me, say that there would be no loss at all.

Finally, the Claimant claims damages on a quantum meruit basis, asserting that it should be compensated for work carried out in arranging the exchange of contracts for the Defendant. In this regard, Mr Panton relied on the case of Prickett v Badger (1856) 1 CNS 296. I note, however, that, in Luxor, doubt was expressed as to whether that case remained good law.

Mr Rolfe submitted that a claim for quantum meruit was contrary to principle. He relied on a passage from Bowstead & Reynolds on Agency (18^th Edition) at 7-024, where the authors state:

“Where the contract expressly provides for remuneration on the happening of an event, any such implication [i.e. of a contractual term that a reasonable sum on a quantum meruit is payable] would be contrary to this expressed term and so could not be made”.

He submitted that this was precisely the situation here. He referred also to the observations of Lord Russell in Luxor at page 125:

“As to the claim on a quantum meruit, I do not see how this can be justified in the face of the expressed provision for remuneration which the contact contains. This must necessarily exclude such a claim, unless it can (upon the facts of a particular claim) be based upon a contract subsequent to the original contract and arising from some conduct on the part of the principal”.

Since the Claimant’s standard terms provided for the circumstances in which remuneration was payable, there could be no valid claim for quantum meruit. No subsequent contract was pleaded or relied upon.

The principles relied on by Mr Rolfe are clear. I agree with the view of the Master that this ground of claim must inevitably fail.

It follows from the findings I have made that I resolve all issues of law and construction in the Defendant’s favour save for ground (iii). I find that there should be implied into the parties’ agreement a term that the Defendant would not make fraudulent representations such as would render any contract of sale for the property unenforceable. If (as has been conceded for these purposes) the Defendant made pre-contractual fraudulent misrepresentations, he was in breach of that implied term. I find, as a matter of law, that the Claimant may be entitled to damages as a result of that breach, if proved. Whether or not damages are payable will be a matter for the trial judge after hearing evidence on the point.

A week after the hearing of this appeal, at a time when my judgment was partially written, I received notice from Mr Panton of a proposed application to amend the Particulars of Claim. A draft amended statement of case was received shortly afterwards. This document contained a contention, made for the first time, that the Defendant owed the Claimant a duty of care, which he had breached, that he would not negligently or fraudulently make false representations as to disputes with his neighbours which could prevent the sale of the property. It also pleaded a breach of Clause 5 of the Claimant’s standard terms (as to which see paragraph 29 of this judgment), as a consequence of which the Claimant was entitled to half of its commission. Mr Panton submitted that these were not new grounds of claim. Rather, he said, they were points that had been fully aired at the hearing, but not previously pleaded.

I invited comments from Counsel to the Defendant on the proposed amendment. Mr Rolfe did not accept that the matters had been fully argued at the hearing. They were not pleaded and thus had not been addressed in any detail. He said that, if the application to amend were to be entertained, it would have to be made formally and the Defendant must be permitted to oppose it. This would necessitate a further hearing. Mr Rolfe suggested that it would be undesirable for the Court to entertain such an application to amend after oral submissions had been completed and when the Court was exercising an appellate function.

I considered that it would be inappropriate for me to entertain an application to amend the Particulars of Claim at such a late stage in the proceedings. I was not satisfied that I had heard proper argument on either of the two proposed new grounds of claim. I therefore indicated that I would not consider the application before producing this judgment. It will be a matter for the Claimant whether it wishes to pursue the application in the future.