Great Estates Group Ltd v Digby

Sale of property – Estate agent — Sole agency agreement – Parties entering into sole agency agreement for six weeks – Respondent vendor selling property to buyer not introduced by appellant – Whether appellant entitled to damages for loss of commission – Whether appellant satisfying statutory obligations under Estate Agents Act 1979 — Appeal dismissed[2011] PLSCS 244In August 2007, the appellant estate agent entered into a sole agency agreement with the respondent vendor for six weeks. On the day the agreement was signed, the appellant introduced three potential purchasers to the respondent, one of whom offered the asking price. However, later that month, the respondent exchanged contracts with another purchaser who made a higher bid. A different estate agent became involved who received the commission on the sale. The appellant claimed damages against the respondent for loss of opportunity to receive 2% commission, amounting to £60,000, under the sole agency agreement.The county court held that the appellant had not complied with the requirements of section 18 of the Estate Agency Act 1979 and the Estate Agents (Provision of Information) Regulations 1991, regarding the provision of information about remuneration to prospective clients, because it had failed to explain to the respondent that he would be liable to pay a commission if contracts were exchanged with a purchaser introduced by another agent during the sole agency period. Accordingly, the judge held that the agreement was unenforceable. He went on to hold that even if the agreement had been enforceable, the respondent was not in breach since he had sold to a private buyer who had not been introduced to him by an agent; the other agent had become involved only after the offer had been accepted when the buyer requested the respondent to engage the other agent to handle the sale.The appellant appealed. The court was asked to determine whether: (i) on its proper construction, the respondent was in breach of the sole agency agreement; and (ii) the appellant had satisfied its obligations under section 18 of the 1979 Act. Held: The appeal was dismissed. (1) The expression “sole agency” was not defined in the agreement in terms of exclusivity, but rather in terms of the client’s obligation to pay the sole agency fees. The statutory requirements obliged the agent to inform its client what “sole agency” meant and as to the ramifications of their contracts. The contract contemplated that, even under a sole agency contract, offers might come forward through enquiries or discussions that were not made via the agent. The obligation on the client to inform the agent of such enquiries or discussions was to enable the agent to ensure that it played a role in any ensuing negotiations. The sole agency clause provided that the agent would earn its commission not only if it had introduced the purchaser, but also if it had negotiations about the property with the purchaser during the agreed period.The purpose of section 18 and of the 1991 Regulations was to ensure that the party instructing the estate agent should understand its liabilities to the agent. Part of the mischief to which the Act and the regulations were directed was the use by estate agents of expressions such as “sole agency” and “sole selling rights”, which had no defined meaning and whose implications the client would not understand: Harwood (t/a RSBS Group) v Smith [1998] 1 EGLR 5; [1998] 11 EG 178 considered.(2) The sole agency contract in the instant case omitted the last phrase of the explanation “or with a purchaser introduced by another agent during that period” prescribed by the 1991 Regulations. The appellant had also breached section 18(1)(a) and (2)(a) in failing to provide the respondent with adequate particulars of the circumstances in which he would become liable to pay remuneration. Remuneration, within section 18, could include damages in lieu of commission. Since the primary responsibility of the agent that earned the commission was the introduction of a willing purchaser, it was the agreement to carry out the services of an estate agent, rather than any particular work itself, which entitled the agent to “remuneration”. The scheme would break down if “remuneration” did not cover the situation where damages in lieu of commission was payable for breaching an obligation not to deal with another agent. The appellant had breached section 18(1)(b) and 18(4)(a) of the Act and regulation 5(1) of the 1991 Regulations in failing to set out either the scheduled information or such other information as was required by the proviso to that regulation so as accurately to describe the liability of the client to pay remuneration in accordance with the provisions of his contract: Solicitors Estate Agency (Glasgow) Ltd v MacIver 1990 SCLR 595, 1993 SLT 23 considered.Duncan Henderson (instructed by the Blyth Liggins, of Leamington Spa) appeared for the appellant; Oliver Assersohn (instructed by Volks Hedley) appeared for the respondent.Eileen O’Grady, barrister