County Homesearch Co (Thames & Chilterns) Ltd v Cowham

Purchase of property – Buyer’s agent – Contract – Appellant claiming property purchased by private agreement – Respondent seeking commission on sale under agency contract – County court holding respondent entitled to commission – Whether respondent being effective cause of sale – Whether effective cause principle applying – Appeal dismissedThe respondent was a buyer’s agent, which had been engaged by the appellant to assist him in purchasing a house. Following a meeting with the respondent’s representative (F), the appellant paid the required registration fee of £500 and signed a copy of the respondent’s terms and conditions. Clause 3 of the contract provided that, in addition to the registration fee, the respondent would charge a fee of either 1.5% of the purchase price or 15% of the negotiated saving between the asking price and the price actually paid for any property that the respondent had introduced on which contracts were exchanged during the continuance or within one year after the date of termination or expiry of the agreement. F prepared a list of properties that were likely to be of interest to the appellant, including the property that the latter eventually purchased, in January 2006, for £2.3m. On the basis of that introduction, the respondent sought payment of £40,537 including VAT by way of commission in accordance with clause 3. However, the appellant claimed that the property had been purchased by private negotiation with the vendors in which the respondent had taken no part so that it had not been the effective cause of the sale and was not entitled to a fee.The county court awarded the sum claimed: see [2007] PLSCS 261. The appellant appealed, contending that the recorder had been wrong in failing to imply into the contract the normal term that would be implied into any contract between a homeowner and an agent to sell the property, namely that the agent had to be at least an effective cause of the transaction. Held: The appeal was dismissed.The rationale for implying a term that the agent should be at least an effective cause of the transaction was mainly the need for the client to avoid the risk of having to pay two commissions. There were similarities between the normal estate agent’s contract and the purchasing agency contracts. However, differences might well be reflected in the terms of the purchasing agency contract. In particular, it was unlikely that a person who wanted to buy (as opposed to sell) a property would engage more than one purchasing agent on terms such as the present contract under which the client had to make a down payment and to pay the expenses and disbursements of the agent if the agreement expired without any transaction being achieved. If such differences were so reflected, a court might well conclude that the term, which was normally implied into a selling agency contract, would not be so readily implied into a purchasing agency contract: Millar Son & Co v Radford (1903) 19 TLR 575 applied; Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] 1 EGLR 18; (1987) 282 EG 1131 considered.The question of remained whether there was any inconsistency between the express terms of the contract and the term that the law would otherwise imply. The present contract did not prohibit the employment of a second agent but, in so far as its terms would inhibit any sensible person from doing so, the contract contemplated that there should be no other buyer’s agents. Thus, the rationale for the implication (that the principal should not have to pay twice) was absent. Further, the express terms of the contract were inconsistent with any implied requirement that the agent be the effective cause of the transaction. The mere fact that selling agency contracts might be analogous to purchasing agency contracts, and that the Estate Agents Act 1979 equated the two for the purposes of applying its legislative provisions, did not mean that the actual terms of any purchasing agency contract could be ignored. The fact that purchasing agency contracts could be closely analogous to selling agency contracts did not mean that any implication into an ordinary selling agency contract should be transported automatically into a purchasing agency contract without reference to the actual terms of that contract: Egan Lawson Ltd v Standard Life Assurance Co [2001] 1 EGLR 27; [2001] 08 EG 168 considered.Mark Warwick (instructed by Addleshaw Goddard LLP) appeared for the appellant; Hugh Sims (instructed by Michelmores, of Exeter) appeared for the respondent.Eileen O’Grady, barrister