Ananhall Advisory & Consultancy Services Ltd v Adler

Introductory agreement – Commission – Respondent introducing property to appellant – Contracts exchanged on sale of building – Appellant failing to complete owing to unresolved situation with leases in building – Whether respondent entitled to commission – Whether implied term that appellant would not willingly impede the sale so as to prevent the payment of commission – Whether fraudulent misrepresentation on part of respondent with regard to unresolved lease situation – Appeal allowed in partIn March 2005, the appellant and the respondent entered into an introductory agreement for the payment of commission in respect of a contract for the sale of a property. The property in question was an eight-storey office block, several floors of which were let to the same tenant under eight leases for terms expiring in 2017, subject to tenant’s break clauses. The respondent initially sought to purchase the property. It made an offer of £3.6m, which was accepted by the vendor subject to contract, but the respondent was unable to fund the purchase. The appellant, an experienced commercial property dealer, agreed to take over the contract. The terms of the introductory agreement were set out in a letter written by the appellant and provided for the respondent’s remuneration for the deal. This was to be 1% of the purchase price in the event of a completed transaction, together with a further £75,000 if the respondent succeeded in negotiations with the tenant for the waiver of the break clauses; that sum was likewise payable if, prior to a satisfactory outcome, the appellant withdrew its instructions for the respondent to negotiate in that regard.Contracts were exchanged on a sale for £3.6m, with completion to take place in May 2005. The respondent secured an offer by the tenant to waive four of the break clauses, but the appellant did not consider this to be satisfactory. It did not complete and the vendor rescinded the contract and forfeited the deposit.The respondent brought a claim to recover sums under the introductory agreement. Allowing the claim, the judge found that although there had been no completion in the ordinary conveyancing sense, such as to entitle the respondent to commission, the appellant had breached an implied term that it would not willingly impede the sale so as to prevent the payment of commission. On that ground, he upheld a claim for £36,000. He further found that the appellant’s conduct amounted to the “pulling” of its instructions such that a further £75,000 was payable. He rejected a counter-claim by the appellant for fraudulent misrepresentation. The appellant appealed.Held: The appeal was allowed in part (1) The introductory agreement did not contain an implied term whereby the appellant would not willingly impede the sale so as to prevent the respondent from earning commission. The test for implying a term was not whether it was reasonable but whether it was necessary to give effect to the parties’ obvious but unspoken intentions or for the contract to work as the parties must be taken to have intended it to work; in other words, to give business efficacy to the contract. In applying that test it was necessary to concentrate on the particular words and circumstances of the individual contract: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 applied. The appellant’s promise of payment was expressly conditional on the appellant or his company completing the transaction. His letter offered no assurance that this would necessarily happen. This was unsurprising given the uncertain circumstances in which the appellant had been asked to step in at short notice and to take over the purchase before knowing the tenant’s response to the proposal that it should waive the break clauses in its leases. The appellant was therefore having to gamble on a matter that was critical to the yield value of the property.There might be cases in which, once a binding executory contract had been made between a principal and a third party, it could not have been contemplated that the principal might break that contract without breaking its contract with the agent. However, that would depend on the language of the contract and the circumstances in which it had been made. In the instant case, both the language and the circumstances of the introductory agreement militated against any assumption that the respondent could rely on the appellant to complete the transaction or that it would be entitled to payment of commission if he did not: Alpha Trading Ltd v Dunnshaw-Patten Ltd [1981] 1 QB 290 (applying obiter dicta of Lord Wright in Luxor) not followed.(2) There was no basis for finding that the respondent had represented to the appellant that it had cause to believe that the tenant would agree to waive the break clauses in the leases. Hence, there was no valid ground for disturbing the judge’s finding on misrepresentation.Clive Freedman QC (instructed by Lopian Wagner, of Manchester) appeared for the appellant; Michael Booth QC (instructed by Goodge Law) appeared for the respondent.Sally Dobson, barrister