Butler-Sloss LJ, Morritt LJ, Phillips LJ
Estate agents – Sole selling rights agreement – Whether letting of property constituting sale within meaning of agreement – Whether estate agents entitled to commission
The defendant owned freehold premises in Harrogate comprising a news agency and a cafe with an upstairs flat. In 1992 he met an estate agent from the plaintiff firm. His initial intention was to sell the freehold, but was subsequently changed to letting for a term of 21 years. On May 20 1992 the defendant signed the plaintiff’s sole selling rights agreement in its standard form which gave the plaintiff six months as sole agent and required written notice to terminate the agreement. Clause 3 of the agreement dealt with the quantifying of fees as required by section 18(2)(b) of the Estate Agents Act 1979. Clause 6 stated that the vendor would be liable to pay remuneration in each of the following circumstances “. . . if unconditional contracts for the sale of the property are exchanged in the period during which we have sole selling rights, even if the purchaser was not found by us but by any other person, including yourself; if unconditional contracts for the sale of the property are exchanged after the expiry of the period during which we have sole selling rights but to a purchaser who was introduced to you during that period from any source whatsoever or with whom you had negotiations about the property during that period.”
By February 1993 the plaintiff had failed to find a purchaser. No written termination notice was given. On February 19 1993 the defendant let his premises on a 12-year lease at £1,400 pa to a tenant who was not introduced by the plaintiff. No premium was paid for the lease and the tenant paid £1,300 for fixtures and fittings and £1,700 for stock. The plaintiff successfully claimed from the defendant £3,525, but the judge granted leave to appeal and a stay of execution. The defendant contended that, properly construed, the terms of the agreement did not entitle the plaintiff to commission because there had been no sale made to a purchaser within the meaning of clauses 3 and 6 of the agreement since the lease granted to the tenant by the defendant was not a lease which had a capital value.
Estate agents – Sole selling rights agreement – Whether letting of property constituting sale within meaning of agreement – Whether estate agents entitled to commission The defendant owned freehold premises in Harrogate comprising a news agency and a cafe with an upstairs flat. In 1992 he met an estate agent from the plaintiff firm. His initial intention was to sell the freehold, but was subsequently changed to letting for a term of 21 years. On May 20 1992 the defendant signed the plaintiff’s sole selling rights agreement in its standard form which gave the plaintiff six months as sole agent and required written notice to terminate the agreement. Clause 3 of the agreement dealt with the quantifying of fees as required by section 18(2)(b) of the Estate Agents Act 1979. Clause 6 stated that the vendor would be liable to pay remuneration in each of the following circumstances ". . . if unconditional contracts for the sale of the property are exchanged in the period during which we have sole selling rights, even if the purchaser was not found by us but by any other person, including yourself; if unconditional contracts for the sale of the property are exchanged after the expiry of the period during which we have sole selling rights but to a purchaser who was introduced to you during that period from any source whatsoever or with whom you had negotiations about the property during that period."
By February 1993 the plaintiff had failed to find a purchaser. No written termination notice was given. On February 19 1993 the defendant let his premises on a 12-year lease at £1,400 pa to a tenant who was not introduced by the plaintiff. No premium was paid for the lease and the tenant paid £1,300 for fixtures and fittings and £1,700 for stock. The plaintiff successfully claimed from the defendant £3,525, but the judge granted leave to appeal and a stay of execution. The defendant contended that, properly construed, the terms of the agreement did not entitle the plaintiff to commission because there had been no sale made to a purchaser within the meaning of clauses 3 and 6 of the agreement since the lease granted to the tenant by the defendant was not a lease which had a capital value.
Held The appeal was allowed.
1. The first sentence of clause 3 and the whole of clause 6 were to be read together against the background of: (a) the dispositions made by the defendant; (b) the discussions between the plaintiffs and the defendant; and (c) the 1979 Act and the Estate Agents Act (Unfair Practices) No 2 Order 1991, regulations made thereunder. The discussions between the parties had taken place with a view to selling, but the defendant had in fact let his property, and had in effect included the goodwill of the business in the lease. There had been no premium and the only payment, apart from rent, was for the fixtures and fittings and stock. In order for there to have been a sale of a leasehold there had to be a premium paid, and it had not been shown by the plaintiff that the lease had any such capital value.
2. Although there had been a sale of the business assets there had been no sale of the property and the plaintiffs were not entitled to commission under the agreement. The primary circumstances in which fees were to become payable under clause 6 of the agreement had not been clearly defined as required by the 1979 Act and the regulations made thereunder.
Ian Holtum, who did not appear below, (instructed by Mitchells, of York) appeared for the appellant; Timothy Capstick (instructed by Parker Bird & Co, of Huddersfied) appeared for the respondent.
