Egan Lawson Ltd v Standard Life Assurance Co

Claimant introducing property to defendant – Defendant subsequently purchasing property – Defendant refusing to pay commission – Whether claimant’s introduction of property was “effective cause” of purchase by defendant – Whether effective cause was subsequent introduction by other estate agency – Judge awarding claimant commission – Defendant’s appeal allowed In August 1997 the claimant, a London firm of chartered surveyors specialising in commercial property investment, learned of the proposed sale of phase II of The Meadows Shopping Centre, Chelmsford, prior to the sale becoming public knowledge. L, of the claimant, telephoned S, of the defendant, and informed him of the proposed sale. S asked for more information, and accordingly L sent a letter to S on the same day, enclosing his initial appraisal at £13.28m and background material in the form of extracts from an acquisition report, relating to the previous sale of the property, and copy from a relevant publication. The following day, L wrote to S again, enclosing photographs that he had taken of the site and pointing out: “There is a lot of goodwill between us and [the vendor of the property] and for a short period we have the opportunity to make a pre-emptive offer.” S visited the property, took photographs, and put a price upon it of £11m. However, after further conversation, S wrote to L in September 1997 informing him that the property was not of interest to the defendant, since it felt “the yield price to be far too keen”. In mid-October 1997 the property was officially put on the market. In November 1997, Q, of Richard Ellis, telephoned B, of the defendant, in relation to the property and informed him that the vendor might entertain a bid lower than the asking price. The following day Q faxed details of the property to B with information relating to growth rates, valuations and bids. Later that month, on the instruction of the defendant, Q sent a letter to the vendor’s agent submitting an offer of £11.5m. The defendant confirmed that Q’s fee would be 1% of the purchase price payable in the event of completion. Completion took place in December 1997 and Richard Ellis was duly paid commission of £135,125. In March 1998 the claimant submitted an invoice to the defendant for 1% of the purchase price, upon the basis that it had made a valid introduction. The invoice was not paid and the claimant issued proceedings. The judge held that there was a real chain of causation from the introduction of the property to the defendant by the claimant to the agreement to buy just ten weeks later. He concluded that L’s introduction was the effective cause of the sale of the property and that, accordingly, the claimant was entitled to the sum claimed. The defendant appealed. Held: The appeal was allowed. 1. The issue of whether an estate agent’s introduction of a purchaser to the vendor was the “effective cause” of the transaction that ultimately took place had to be resolved by an examination of the facts as a whole: see John D Wood & Co v Dantata [1987] 2 EGLR 23 and Peter Yates & Co v Bullock [1990] 2 EGLR 24. In a case where only one estate agent was appointed by the vendor, the solution was simple: his introduction of the purchaser was usually treated as carrying with it the effective cause of sale. In the case of two estate agents appointed by the vendor, each with competing claims to commission for an introduction of the eventual purchaser, the issue was more difficult. To resolve the rival claims to commission, it was necessary to consider the causal link between the introductions and the ultimate transaction. In deciding which introduction was the effective cause of the sale, it was relevant to ask what would have happened if the second agent had never come to it, and whether the appearance of the second agent broke the chain of causation. 2. In the instant case, the matter had progressed through three distinct phases: (i) August and September 1997, when the claimant introduced the property to the defendant, although, after discussion, the matter was not followed up by either party; (ii) October 1997, when the property was put on the market and no steps were taken by the defendant to follow up the introduction of the property; and (iii) November and December 1997, when the possible acquisition of the property was activated by Q, upon the basis that the vendor would accept a lower offer, resulting in the purchase of the property by the defendant. The introduction by Q at that last stage was the “effective cause” of the purchase. Had she not made the introduction at that stage, the defendant would probably never have acquired the property. Accordingly, on the facts as a whole, the introduction by the claimant was not the effective cause of the purchase by the defendant. Michael Driscoll QC and Francis Bacon (instructed by Portner & Jaskel) appeared for the claimant; David Unwin QC and Alastair Walton (instructed by Herbert Smith) appeared for the defendant. Thomas Elliott, barrister