John D Wood (Residential & Agricultural) Ltd v Craze

Estate agent – Agency contract – Commission payable by defendant vendor in event of unconditional exchange of contracts with purchaser introduced by claimant estate agent – Contracts exchanged – Purchaser rescinding contract for misrepresentation by defendant – Whether commission payable – Whether damages recoverable for breach of implied term in agency contract – Whether defendant should be awarded summary judgment – Appeal allowedThe defendant instructed the claimant estate agent to sell his flat. The claimant arranged a viewing by a potential purchaser who was already on its books. Following the viewing, the purchaser agreed to buy the property for £1.5m, which was accepted by the defendant. Contracts were subsequently exchanged, a 10% deposit was paid and a completion date was agreed. However, before the completion date the purchaser became aware of a history of noise problems with the flat. It decided to rescind the contract on the ground of misrepresentation by the defendant, who had indicated in pre-contract property information forms, and reiterated in replies to requisitions after exchange of contracts, that no disputes or complaints affected the flat and that the noise problem had been resolved. Completion did not take place. The claimant none the less presented an invoice for commission of £30,946, based upon 1.75% of the purchase price, plus VAT. The defendant disputed its liability to pay and the claimant brought proceedings.It submitted that, inter alia: (i) it had been instructed on its standard terms, which provided for a commission to be payable in the event of an unconditional exchange of contracts with a purchaser that it had introduced, even if the sale did not proceed to completion; and (ii) alternatively, it was entitled to damages for breach of an implied term in the agency agreement between itself and the defendant. The defendant applied to have the claim struck out or summarily dismissed. At the hearing he asked the master to make a final determination of the issues in the case on the basis that they turned on matters of law and construction of the agency agreement. The master declined to do so, applied the test in CPR 24 and allowed the claim to continue on the ground that it had a reasonable prospect of success. The defendant appealed.Held: The appeal was allowed. (1) The master should have grasped the nettle and decided the issues of law and construction that were canvassed before him in respect of all the grounds of claim. He had had the material before him upon which to decide those issues. It had not been suggested that counsel for the claimant had been unprepared to argue the various points, that the court had lacked the time or that any further evidence was required.(2) Construing the claimant’s standard terms as a whole, with regard to the intentions of the parties, an exchange of “unconditional contracts” meant an exchange of contracts that would be enforceable at law. A term that provided for commission to be payable in circumstances where a contract was defective and could not result in successful completion would be unacceptable to a vendor and would make no sense. The defendant’s misrepresentation had had the effect of rendering the sale contract void from the start and therefore unenforceable by him: Peter Long & Partners v Burns [1956] 1 WLR 1083 applied. Accordingly, the event that would have triggered the entitlement to commission had not occurred, and no commission was payable. Although it might be unjust for the defendant to escape payment of commission by relying upon his own fraud, the issue was determined not by fault but by the narrow question of whether the event triggering entitlement to commission had occurred. The doctrine of estoppel could not be applied; the defendant had made no fraudulent representations to the claimant, and he had not given the claimant a warranty that what he said to the purchaser’s solicitor was true. Nor was there any room for payment on a quantum meruit basis where the claimant’s standard terms provided for the circumstances in which remuneration was payable.(3) However, in order to give business efficacy to the agency contract, it was necessary to imply a term that the defendant would not make fraudulent representations such as would render any contract of sale unenforceable and thus prevent a sale: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 distinguished. By making pre-contractual fraudulent misrepresentations, the defendant had breached that term and the claimant was, prima facie, entitled to damages. Damages were to be assessed by reference to what, as a matter of evidence, would have happened had the defendant not made the representations but had instead disclosed the true position. In the light of that, the court would have to assess whether the claimant had suffered any loss as a result of the breach.Alastair Panton (instructed by Stockler Brunton) appeared for the claimant; Patrick Rolfe (instructed by Richard Pearlman & Co) appeared for the defendant.Sally Dobson, barrister