Glentree Estates Ltd and others v Favermead Ltd

Estate agents – Sole agency contract – Sale to party introduced to defendant vendor prior to claimants’ appointment as sole agents – Defendant retaining claimants to seek purchaser for resale – Whether claimants entitled to commission on first sale or resale – Whether waiving entitlement in connection with first sale – Claim dismissedThe defendant, a company owned and controlled by K, owned a property in Kensington, London. In 1998, the defendant rejected an offer from M to purchase the property for £45m. In April 2001, it appointed the claimants, three firms of estate agents, as sole agents to sell the property. The appointment was set out in a letter, by which K agreed to pay a fixed fee of £1m plus VAT for the claimants’ services in the event that one of them “introduces an applicant, who subsequently purchases the property” and a reduced fee of 20% of that sum “if I procure a purchaser through my own endeavours”.On the same day, K met a prospective purchaser, E, who had already received particulars of the property from a property consultant. The meeting resulted in a contract for sale by a subsidiary of the defendant, for £50m, to CA, a company owned by a trust of which E’s wife and children were the beneficiaries. The sale was completed in October 2001, together with an overage agreement under which the parties would have equal shares in any profit, over the £50m purchase price and after the deduction of certain expenses, on a resale of the property within five years. At a meeting in November 2001, the outcome of which was recorded in a letter, K agreed to continue the claimants’ agency agreement to find a suitable purchaser for such a resale.In February 2004, the first claimant wrote to M concerning the property and M viewed it. Thereafter, the claimants informed K of M’s interest but played no further part in proceedings. M purchased the property through L Ltd, a company in its ownership, for US $105m (around £57m); the sale was completed in June 2004.The claimants claimed commission fees on both sales of £235,000 and £1.175m respectively. The defendant contended that, inter alia: (i) they were not entitled to the payment of fees under the terms of appointment set out in the April 2001 letter; and (ii) in any event, any right to fees on the first sale had been waived by the agreement in November 2001 concerning the claimants’ participation in the proposed resale.Held: The claim was dismissed. (1) The first sale to CA had triggered the right to recover £200,000 plus VAT as commission under the terms of appointment set out in the April 2001 letter. The reference in that letter to K procuring a “purchaser” through his own endeavours was to be construed as meaning a purchaser who entered into a binding contract to purchase. Since the contract for the first sale post-dated the claimants’ appointment as sole agents, that sale triggered the entitlement to commission, notwithstanding that the property consultant had contacted E, and drawn the defendant’s attention to a possible sale to CA, prior to the claimants’ appointment. However, the claimants had waived their entitlement to commission on the first sale on entering into a new agency contract in respect of the proposed resale. That conclusion flowed either from a construction of the express terms of the letter by which the November 2001 arrangement was evidenced or by clear implication of a term into it. Consideration flowed from both sides under that arrangement. (2) The claimants were not entitled to commission on the second sale. A term was to be implied into the terms of appointment that the claimants should be the effective cause of the sale if they were to qualify for their commission. The relevant words of the terms of appointment, providing for the payment of commission where the agent “introduces an applicant, who subsequently purchases” were not inconsistent with the implication of the term, given the strength of that implication in selling agency contracts. The claimants were not the first agents to have introduced M to the property; by 2004, M had already inspected and made a bid for it, which its then owner had rejected. The claimants were not the sole agents of the vendor, CA, but had been appointed by the defendant, controlled by K. K would not have accepted the eventual sale price of £57m because that would have meant that the defendant would not benefit from the overage agreement that it had entered into as a significant part of the consideration for the earlier sale to CA at a cash price of £50m. Accordingly, the claimants had failed to establish that they were the effective cause of the sale by CA to L Ltd. Therefore, they were not entitled to commission on that sale: Foxtons Ltd v Bicknell [2008] EWCA Civ 419; [2008] 2 EGLR 23; [2008] 24 EG 142 and The County Homesearch Co (Thames & Chilterns) Ltd v Cowham [2008] EWCA Civ 26; [2008] 1 EGLR 24; [2008] 15 EG 178 applied; Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] 1 EGLR 18; (1987) 282 EG 1131 and Burney v London Mews Co Ltd [2003] EWCA Civ 766 distinguished.Robert Deacon (instructed by CKFT) appeared for the claimants; John Wardell QC (instructed by Davenport Lyons) appeared for the defendant.Sally Dobson, barrister