Wells v Devani [2016] EWCA Civ 1106 (15 November 2016)

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Cite as: [2016] WLR(D) 604, [2016] EWCA Civ 1106, [2017] 2 WLR 1391, [2017] QB 959

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		Neutral Citation Number: [2016] EWCA Civ 1106
		Case No: B2/2015/0597

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
His Honour Judge Moloney QC
3YS52697

Royal Courts of Justice
Strand, London, WC2A 2LL

15/11/2016

B e f o r e :

LADY JUSTICE ARDEN
LORD JUSTICE LEWISON
and
LORD JUSTICE McCOMBE
____________________

Between:

	Mr Edward Martin Robert Wells	Appellant
	- and -
	Mr Mehul Devani	Respondent

____________________

Mr Andrew Butler (instructed by Stitt & Co) for the Appellant
Mr David Giles (instructed by Mr Mehul Devani) for the Respondent
Hearing date: 26 July 2016
____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Lewison:

Mr Edward Wells undertook a development of 14 flats in Hackney as a joint venture with a builder called Andrew White. The completed flats were being marketed by Shaw & Co, a local estate agency, under a contract for a sole agency with a commission of 3% (reduced to 2% on prompt payment). By the beginning of 2008 six of the flats had been sold, one was under offer, and the remaining seven were still on the market.

In late January 2008 Mr Wells mentioned his selling problem to Mr Nicholson, a neighbour in Andorra (where they both lived). Mr Nicholson told Mr Wells that he knew of a property investment company in London that might be interested in buying the remaining flats. Mr Wells said that he was happy for Mr Nicholson to make inquiries. On 28 and 29 January 2008 Mr Nicholson sent two e-mails. The first was to Ricky at Greene & Co, an investment company and the second was to Mr Devani. Mr Devani is an estate agent. The e-mail to Mr Devani of 29 January described the development, inquired whether it would be of interest to "Richard" and gave contact details. It concluded:

"Can you pass this on to Richard or to anyone else who may be interested."

Mr Devani replied on the same day:

"Thanks for this. It may well be of interest. I'll pass it on.

Please keep me informed of any other opportunities such as this as I always have people looking for all sorts."

Later that day Mr Devani telephoned Mr Wells in Andorra. There followed an exchange between them. Mr Devani gave Mr Wells his contact details, and Mr Wells faxed Mr Devani details of the development. The judge described the main issue of fact as whether, in the course of the telephone call, Mr Devani told Mr Wells that he was an estate agent and that his commission for the transaction would be 2% plus VAT, or whether on the contrary he did not say that he was an estate agent, and gave the impression that he was an investor. After a review of the evidence, and having heard the oral evidence of both Mr Wells and Mr Devani, the judge concluded that throughout the conversation Mr Devani considered himself to be proposing himself as an agent rather than a buyer and was looking to a commission from Mr Wells as the source of his profit; that he did not describe himself as a buyer or say anything intended to give the false impression that he was.

The critical question was whether in the course of the conversation Mr Wells and Mr Devani reached an agreement that was a legally binding contract. For that purpose it is necessary to examine the judge's findings of fact with some care.

The way that the judge described the issue at paragraph [1.3] of his judgment was as I have summarised it [4] above. At paragraph [2.18 c] the judge found that it was more likely than not that "[Mr Wells] asked [Mr Devani] about his fees, and that he did reply that his standard terms were 2% plus VAT". If we pause at that point, there is no finding that Mr Devani identified the sum to which the 2% would be applied, nor the circumstances in which the 2% would be payable, nor even that Mr Wells agreed to the 2%. At paragraph [4.3 b] The judge repeated that "[Mr Devani] did not inform [Mr Wells] (expressly) before the making of that contract of the circumstances under which he would be entitled to remuneration, but did tell him the manner in which it would be calculated". At paragraph [4.7] he referred to the "failure to define the commission-entitling event". The judge supplied the gaps in his findings by implying a term to the effect that payment would be due "on the introduction of a person who actually completed the purchase".

Within 30 minutes of the telephone call Mr Devani was in touch with Newlon Housing Association. He spoke to a Ms Ogbonna who said that she would drive by the building and let him know if Newlon were interested. On 1 February (which was a Friday) she called Mr Devani and asked him to arrange a viewing. Mr Devani sent Mr Wells a text message which he got that evening, although he did not reply to it until the following Monday, 4 February. Mr Devani and Mr Wells spoke on the telephone twice on that day. Those conversations led to a meeting at the flats at lunchtime. Those present were Ms Ogbonna and a colleague from Newlon, and Mr Wells and his co-venture partner. Mr Devani was going to attend but in the event did not. The meeting went well, and Newlon were interested. On the morning of the following day, Newlon agreed, subject to contract, to buy the remaining flats. Having told his solicitors, Mr Wells then telephoned Mr Devani. The contents of the call were disputed, but the judge does not appear to have resolved the conflict of evidence.

Thus far there was nothing in writing to record the terms of any agreement between Mr Wells and Mr Devani. However on 5 February (at 1406), and thus after Newlon's offer had been both made and accepted, Mr Devani sent Mr Wells an e-mail, the relevant parts of which read:

"Further to our conversation, I am delighted that [Newlon] has agreed to purchase all eight remaining flats…

As per our terms of business our fees are 2% + VAT and I look forward to receiving you [sic] solicitors details so that we can invoice them directly as per your instruction."

Very shortly afterwards Mr Wells provided Mr Devani with those details "as promised" by e-mail. Although Mr Wells' e-mail was not sent as a reply to Mr Devani's e-mail (i.e. it was not part of a string of e-mails) the judge found that before he sent it he had seen Mr Devani's e-mail of 1406. Although not expressly referred to in that e-mail (and not appearing in the e-mail as an attachment) it was common ground that Mr Devani's e-mail of 1406 did attach Mr Devani's terms of business.

The terms of business stated:

"I am required by section 18 of the Estate Agents Act 1979, as amended, to set out our terms of business, prior to you formerly [sic] instructing our company.

1. A commission of 2% + VAT (Multiple Agency) of the eventual sale price of the property.

2. The commission will be due on exchange of contracts with a purchaser, but payable from the proceeds of sale by your conveyance, with your written authority."

The terms of business also explained the meaning of "Multiple Agency", saying that the agents would be in competition with "other agents that you may instruct and the commission fee will be paid to and go wholly to the agent who secures the sale". In dealing with the question when the commission would become payable the terms of business said:

"You will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time:

(a) unconditional contracts for the sale of the property are exchanged with a purchaser first introduced to you by us at any time subsequent to the date of our instruction

(b) unconditional contracts for the sale of the property are exchanged with a purchaser introduced by us during the period of our multiple agency or with whom we had negotiations about that property during that period."

They also contained a warning in the following terms:

"Dual Fee Liability

If you have instructed another agent on a sole agency and/or sole selling rights you must check, whether by instructing us as your agent as well, you will be liable to pay both agents' fees once your property has been sold."

The sale to Newlon was completed in due course. In consequence Mr Devani claimed a commission of £42,000 plus VAT.

The written terms were sent to Mr Wells after the introduction of Newlon was made and hence after the act of introduction of a person who ultimately completed the purchase which, on the basis of the contract found by the judge, amounted to performance of the contract. The judge held that Mr Wells and Mr Devani had made a legally binding contract in the course of the telephone call on 29 January. But he went on to hold (as is common ground) that Mr Devani had failed to comply with his obligations under the Estate Agents Act 1979. In consequence the judge reduced the amount recoverable by Mr Devani by one third. Mr Wells appeals against the finding of liability, and Mr Devani cross-appeals against the reduction in his fee.

By an application notice dated 30 November 2015 Mr Wells applied to amend the Appellant's Notice to introduce the contention that the judge had been wrong to find that an oral contract had been made. Although the application notice asked for a 30 minute hearing, in fact Briggs LJ refused permission on the papers on 31 December 2015. Mr Wells renewed the application under CPR Part 52.16 (6). The original application sought to challenge the judge's factual conclusions, and that was the basis on which Briggs LJ refused permission to amend. However, shortly before the hearing of the appeal a legal point was identified which arose on the judge's findings as made. We granted permission to amend at the outset of the appeal limited to the raising of the legal point (which had in fact been argued at trial). Our refusal of permission to amend to attack the judge's factual findings was a reflection of well-established principles on which an appeal court will not interfere with findings of fact made by a trial judge. I collected the authorities together in Fage UK Ltd v Chobani UK Ltd [2015] EWCA Civ 5, [2014] FSR 29 at [114].

Thus the first question is whether the judge was right to find that a binding oral contract had been made. The point that was argued before the judge was whether the oral agreement was sufficiently complete to amount to a binding contract. It was agreed that the parties did not discuss or agree on the event that would entitle Mr Devani to commission. The judge dealt with that at paragraph [2.2] of his judgment as follows:

"One preliminary point D makes is that even on C's case there was insufficient agreement on terms or certainty about terms to give rise to a legally binding contract. Even if C did mention a 2% commission, and even if D agreed to it, they did not discuss or reach express agreement on the precise event which would entitle him to that commission. Was it, for example, merely the introduction of someone "ready willing and able" to purchase, or was it necessary that the purchase should actually go through?

C's answer, which I consider well founded, is that in the absence of express agreement on such a question the law will imply the minimum term necessary to give business efficacy to the parties' intentions. In the context of estate agents' commissions, the term least onerous to the client, and the one which nobody would dispute if an officious bystander were to suggest it, is that payment is due on the introduction of a buyer who actually completes the purchase. "

That the judge based his decision on the implication of a term, rather than the interpretation of what the parties had actually said to each other is confirmed by a subsequent passage in his judgment. Thus at paragraph [4.7] he explained that the failure to define the commission-triggering event had not caused prejudice to Mr Wells "since … the Court has implied the term most favourable to him."

It is also to be noted, as Mr Butler for Mr Wells submitted, that the term implied by the judge did not correspond with Mr Devani's terms of business.

I do not consider that the judge's approach can be justified. It is of course the case that the court may imply terms into a concluded contract. But that assumes that there is a concluded contract into which terms can be implied. It is not legitimate, under the guise of implying terms, to make a contract for the parties. That is to put the cart before the horse. As Lord Roskill put it in the Privy Council case of Scancarriers A/S v Aotearoa International Ltd [1985] 2 Lloyd's Rep 419:

"… the first question must always be whether any legally binding contract has been made, for until that issue is decided a court cannot properly decide what extra terms, if any, must be implied into what is ex hypothesi a legally binding bargain, as being both necessary and reasonable to make that bargain work. It is not correct in principle, in order to determine whether there is a legally binding bargain, to add to those terms which alone the parties have expressed further implied terms upon which they have not expressly agreed and then by adding the express terms and the implied terms together thereby create what would not otherwise be a legally binding bargain."

In Little v Courage Ltd (1995) 70 P & CR 469 Millett LJ treated Lord Roskill's statement of principle as representing English law.

In my judgment the judge fell into the very trap that Lord Roskill identified. In Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 the House of Lords discussed at length the nature of an estate agency contract. At 119-120 Viscount Simon LC explained:

"There is, I think, considerable difficulty, and no little danger, in trying to formulate general propositions on such a subject, for contracts with commission agents do not follow a single pattern and the primary necessity in each instance is to ascertain with precision what are the express terms of the particular contract under discussion, and then to consider whether these express terms necessitate the addition, by implication, of other terms. … It may be useful to point out that contracts under which an agent may be occupied in endeavouring to dispose of the property of a principal fall into several obvious classes. There is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a person who makes an adequate offer, usually an offer of not less than the stipulated amount. If that is all that is needed in order to earn his reward, it is obvious that he is entitled to be paid when this has been done, whether his principal accepts the offer and carries through the bargain or not. No implied term is needed to secure this result. There is another class of case in which the property is put into the hands of the agent to dispose of for the owner, and the agent accepts the employment and, it may be, expends money and time in endeavouring to carry it out. Such a form of contract may well imply the term that the principal will not withdraw the authority he has given after the agent has incurred substantial outlay, or, at any rate, after he has succeeded in finding a possible purchaser. Each case turns on its own facts and the phrase "finding a purchaser" is itself not without ambiguity. … But there is a third class of case (to which the present instance belongs) where, by the express language of the contract, the agent is promised his commission only upon completion of the transaction which he is endeavouring to bring about between the offeror and his principal." (Emphasis added)

At 124 Lord Russell (with whom Lord Thankerton agreed) said:

"(2) No general rule can be laid down by which the rights of the agent or the liability of the principal under commission contracts are to be determined. In each case these must depend upon the exact terms of the contract in question, and upon the true construction of those terms. And (3) contracts by which owners of property, desiring to dispose of it, put it in the hands of agents on commission terms, are not (in default of specific provisions) contracts of employment in the ordinary meaning of those words. No obligation is imposed on the agent to do anything. The contracts are merely promises binding on the principal to pay a sum of money upon the happening of a specified event, which involves the rendering of some service by the agent." (Emphasis added)

From these passages it can be seen that the event giving rise to an estate agent's entitlement to commission is of critical importance and that there is a variety of events that could be specified. The different forms of commission agreements with estate agents are discussed in Bowstead & Reynolds on Agency (20^th ed) at paragraphs 7-017 to 7-021.

In my judgment therefore, unless the parties themselves specify the event, their bargain is incomplete. As Lord Roskill emphatically stated it is wrong in principle to turn an incomplete bargain into a legally binding contract by adding expressly agreed terms and implied terms together. In my judgment that is what the judge did in this case.

Can the judge's conclusion be sustained by a different route? Mr Giles, for Mr Devani, pointed to the judge's statement at the end of paragraph [2.18] in which the judge said:

"Where their account of a conversation with C and/or between themselves differs from C's evidence or is materially inconsistent with C's case, I prefer C's evidence and do not accept theirs."

Based on that general preference for the evidence of Mr Devani over that of Mr Wells the trail leads next to Mr Devani's witness statement. In paragraph 4 of that statement he said:

"I explained to Mr Wells that I had a good portfolio of clients who may be interested in purchasing the remainder of the flats. Mr Wells asked me how much my fee would be and I confirmed that my standard rate of commission was 2% of the sale price plus VAT. Mr Wells agreed this and said he would be grateful if I could speak to my clients as he would be in London on Monday… I told him I would speak to my investors and come back to him."

Mr Devani's statement stood as his evidence in chief, which he verified on oath. In the course of his cross-examination there were a number of pertinent passages:

"Q. There was no mention of standard terms and conditions on the phone on 29 January?

A. It was orally 2%. When he asked me "What are your fees"? I said, "My standard fees are 2%". Apart from that, that was it at that point."

Later it was put to him that the detail of how and when the commission was supposed to become due was not discussed on 29 January.

"Q. That comes in your terms and conditions on the 5^th?

A. Yes, sir, you're absolutely right. But what was discussed here's 2%. If I find – in my head, I find a purchaser who agrees to buy the property, that's when the fee is due to me."

A little later came this exchange:

"Q. You've said that in your head … you knew that you intended to cause the purchase, to cause Mr Wells to pay you commission, but that you were going to detail that in the terms and conditions to him later. That wasn't discussed on the telephone on the 29^th?

A. Just the fee, just the rate was discussed."

The argument that Mr Giles advanced was that we should find that the judge implicitly held that (a) Mr Devani told Mr Wells in terms that his fee would be 2% of the sale price plus VAT; (b) Mr Wells agreed to that and (c) understood in context a fee of 2% of the sale price meant that the fee would become due only on completion of a sale to a person introduced by Mr Devani. He further submitted that whether this was described as a question of implication or a question of interpretation was a matter of indifference.

It did appear that at one point in the development of the law questions of interpretation and implication were viewed as an indivisible process: Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988. However, that development has since been disavowed by the Supreme Court. In Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] UKSC 72, [2016] AC 742 at [26] Lord Neuberger said:

"I accept that both (i) construing the words which the parties have used in their contract and (ii) implying terms into the contract, involve determining the scope and meaning of the contract. However, Lord Hoffmann's analysis in the Belize Telecom case could obscure the fact that construing the words used and implying additional words are different processes governed by different rules." (Emphasis added)

One of the rules governing the implication of terms is, as Lord Roskill said, that there must first be a concluded contract before terms can be implied. At [28] Lord Neuberger continued:

"In most, possibly all, disputes about whether a term should be implied into a contract, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered. Until one has decided what the parties have expressly agreed, it is difficult to see how one can set about deciding whether a term should be implied and if so what term."

I would not, therefore, accept Mr Giles' submission that the judge was in fact interpreting what the parties said. It is clear from his judgment that he was not. That, however, does not answer the question whether we would be justified in filling in gaps in the judge's findings of fact, and then adopting the interpretation of Mr Devani's words as written in his witness statement that Mr Giles commends.

There are, in my judgment, several difficulties in that approach. First, it is not the way in which the case was put at trial. The case pleaded in paragraph 7 of the Particulars of Claim was that the terms of the contract were contained in Mr Devani's written terms of business under which commission was due on exchange of contracts. So the case now advanced is inconsistent with the pleaded case. Moreover, as is clear both from the way that the judge described the issue at paragraph [1.3] of his judgment and from the way in which the judge dealt with the argument about the implied term in paragraph [2.2], that was the only way in which it was argued that the agreement between Mr Wells and Mr Devani amounted to a complete contract. Second, Mr Devani did not in his oral answers repeat the phrase that had been written in his witness statement. All questions about introductions were, as he confirmed in cross-examination, "in [his] head". Moreover what was in his head was the thought that his commission would be due when he found a purchaser "who agrees" to buy the property, not necessarily one who completes the purchase. That formulation is consistent with the written terms of business that Mr Devani subsequently sent to Mr Wells, and inconsistent with the contract as found by the judge. What terms were actually agreed by the parties during their telephone conversation on 29 January is a pure question of primary fact, dependent on what the parties said to each other during that conversation. It is clear from the transcript that the judge had Mr Devani's witness statement open before him during the latter's cross-examination, and yet in his careful reserved judgment the judge did not make the finding of fact that we are now invited to make. Third, I do not consider that the judge's general observation that where the evidence of Mr Wells and Mr Devani conflicted he preferred that of Mr Devani can be read as an endorsement of every single word in Mr Devani's witness statement, especially since the particular phrase now relied on was not put to Mr Wells during his own cross-examination. Fourth, the approach that Mr Giles urges treats the interpretation of Mr Devani's witness statement as if it were itself a written contract. But a written contract is the agreed record of the contract terms, rather than the evidence of one party. Fifth, this court's function is to review the judge's decision, not to make findings of primary fact. I do not, therefore, feel able to make the finding of fact that Mr Giles invites us to make, with the consequence that I do not consider that the suggested interpretation of Mr Devani's witness statement leads to the legal conclusion that Mr Giles advocates.

I have had the privilege of reading Arden LJ's judgment in draft but I do not agree with her conclusion.

The question is whether the agreement was complete. I entirely accept that an agreement may be complete even though it is not worked out in meticulous detail. Lord Clarke put it thus in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH [2010] UKSC 14, [2010] 1 WLR 753 at [45]:

"The general principles are not in doubt. Whether there was a binding contract between the parties and if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement."

The question, then, is whether the express identification of the trigger event upon which commission becomes payable is something which the law requires as essential for the formation of legally binding relations. In my judgment it does. The trigger event determines what the agent has to do in order to earn his commission. The trigger event cannot, in my judgment, be decided by reference to the standard of reasonableness. Nor, for the reasons stated in Luxor (Eastbourne) Ltd v Cooper (both in the extracts I have cited and in the passage from the speech of Lord Wright which Arden LJ cites), is this a case in which the law provides a default rule. I do not consider that it makes a difference that the contract is a unilateral contract. A unilateral contract, in this sense, is an offer which is capable of acceptance to as to produce a bilateral contract. The acceptance of an offer must be in accordance with its terms. But if the offer does not specify what would amount to acceptance, I do not consider that it is capable of acceptance so as to result in a binding bilateral contract. It makes no difference whether this is considered in the context of acceptance of an offer, or performance of a unilateral contract. As Professor Burrows puts it in the extract cited by Arden LJ, an offer ceases to be revocable when the offeror starts to perform "the requested act". If no act is requested, there is nothing to accept. Nor do I consider that the fact that the judge accepted Mr Devani's case provides the answer. Mr Devani's case as pleaded was that he made a contract on his standard terms of business; but in fact the judge rejected that case. So the judge's general description does not provide an answer to the question: what did the parties actually say to each other?

If one is to interpret a contract, the first question (where the contract is oral) must be: what words were spoken? The judge made a clear finding of fact that nothing was said about the trigger event. Thus in my judgment this route entails the interpretation of words that, on the judge's findings, were never spoken. As Mr Devani said in cross-examination they were, at best, "in [his] head". Nor did that phrase appear in Mr Devani's witness statement, so that even at its highest there is no evidence that the phrase was ever uttered. Moreover, although Arden LJ treats the judge as having found "that Mr Devani agreed to find a purchaser for Mr Wells' property" those are not words that either party used; and, as Viscount Simon said in Luxor v Cooper, the phrase "find a purchaser" itself is not without ambiguity.

I do not, therefore, feel able to accept Arden LJ's route to sustaining the judge's conclusion. I might add that the case was not argued in this way, either before the judge or before us on the appeal. Thus Mr Butler has had no opportunity to advance any arguments which might undermine that route. I would not be willing to adopt Arden LJ's analysis without giving him the opportunity to gainsay it.

I would hold, therefore, that there was no concluded contract between the parties before the introduction of Newlon to the property or, indeed, before Newlon made its offer to purchase. It was not suggested that a contract was made at any other time.

I would allow the appeal on that ground.

Having found that there was an oral contract in the terms described the judge went on to consider whether the oral contract between Mr Wells and Mr Devani was enforceable and, if so, to what extent. The issue arises because of section 18 of the Estate Agents Act 1979. Permission for Mr Wells to appeal on the questions arising under section 18 was granted by Sir Robin Jacob on 18 March 2015. Because Arden LJ takes the view that there was a concluded contract I must go on to consider whether it has been shown that the judge was wrong in his treatment of the issues arising under that Act. That also requires consideration of the cross-appeal which, on the view that I take on the question of contract, would not arise.

Section 18 provides:

"(1) Subject to subsection (2) below, before any person (in this section referred to as "the client") enters into a contract with another (in this section referred to as "the agent") under which the agent will engage in estate agency work on behalf of the client, the agent shall give the client—

(a) the information specified in subsection (2) below; and

(b) any additional information which may be prescribed under subsection (4) below.

(2) The following is the information to be given under subsection (1)(a) above—

(a) particulars of the circumstances in which the client will become liable to pay remuneration to the agent for carrying out estate agency work;

(b) particulars of the amount of the agent's remuneration for carrying out estate agency work or, if that amount is not ascertainable at the time the information is given, particulars of the manner in which the remuneration will be calculated;

(c) particulars of any payments which do not form part of the agent's remuneration for carrying out estate agency work or a contract or pre-contract deposit but which, under the contract referred to in subsection (1) above, will or may in certain circumstances be payable by the client to the agent or any other person and particulars of the circumstances in which any such payments will become payable; and

(d) particulars of the amount of any payment falling within paragraph (c) above or, if that amount is not ascertainable at the time the information is given, an estimate of that amount together with particulars of the manner in which it will be calculated."

Section 18 (4) gives the Secretary of State power to make regulations prescribing additional information. In exercise of this power the Secretary of State made the Estate Agents (Provision of Information) Regulations 1991 (SI 1991/859). Regulation 3 (1) provides;

"The time when an estate agent shall give the information specified in section 18(2) of the Act … is the time when communication commences between the estate agent and the client or as soon as is reasonably practicable thereafter provided it is a time before the client is committed to any liability towards the estate agent."

Regulation 4 provides that the information must be given in writing.

Section 18 continues:

"(5) If any person—

(a) fails to comply with the obligation under subsection (1) above with respect to a contract or with any provision of regulations under subsection (4) above relating to that obligation, or

(b) …,

the contract … shall not be enforceable by him except pursuant to an order of the court under subsection (6) below.

(6) If, in a case where subsection (5) above applies in relation to a contract…, the agent concerned makes an application to the court for the enforcement of the contract…,—

(a) the court shall dismiss the application if, but only if, it considers it just to do so having regard to prejudice caused to the client by the agent's failure to comply with his obligation and the degree of culpability for the failure; and

(b) where the court does not dismiss the application, it may nevertheless order that any sum payable by the client under the contract … shall be reduced or discharged so as to compensate the client for prejudice suffered as a result of the agent's failure to comply with his obligation."

Section 18 and the regulations were plainly intended to be a form of consumer protection. Their purpose is to attempt to ensure that the person instructing the estate agent knows precisely what his liabilities to the estate agent are before he is legally committed: Harwood v Smith [1998] 1 EGLR 5.

In this case Mr Wells did not know precisely what his liabilities were before he was legally committed, not only because no terms had been communicated to him in writing, but also because the terms that had been orally agreed did not include the critical point that identified the triggering event for liability to pay commission. Clearly, then, Mr Devani failed to comply with his statutory obligations.

In those circumstances, the default position is that the contract is unenforceable. It is only enforceable if the court makes an order to that effect. Thus under the legislative scheme an estate agent who fails to comply with his obligations must make an application to the court if he wishes to recover any commission. Under section 18 (6) (a) the court must dismiss the application if, but only if, it considers it just to do so having regard to prejudice caused to the client by the agent's failure to comply with his obligation and the degree of culpability for the failure.

On the question of culpability the judge said:

"As to culpability, [Mr Devani] points out that the whole matter proceeded very rapidly. The effective period of delay is less than a week, the job needed to be done urgently, and the position was complicated by the client travelling abroad during that period. It was not the usual case of a seller coming into the office where documents could be read and signed over the desk. While this is true, this is only partial mitigation: [Mr Devani] could just as easily have sent his terms by email on the 29^th as on the 5^th and could have waited until they were accepted by email before proceeding. I have no hesitation in characterising his failure as culpable."

The judge dealt with the question of prejudice as follows:

"The failure to define the commission-entitling event during the conversation on the 29^th was not prejudicial to [Mr Wells] per se, since as explained … the Court has implied the term most favourable to him (in other words if [Mr Devani] had explained to [Mr Wells] orally that he would only get commission if he effected an introduction that led directly to an actual sale, I have no doubt that [Mr Wells] would have accepted that, just as he accepted the 2% fee itself.) But the failure to provide written terms before entering into the contract as required by s 18 (1) was prejudicial, since I accept that if [Mr Devani] had given [Mr Wells] the opportunity to read and accept those terms before entering the contract then it is likely that [Mr Wells] would have consulted his joint venture partner … and/or his solicitor before agreeing and that the problem of Shaws' penalty clause would have been discussed between them. They might nevertheless have decided to go ahead with [Mr Devani] but they lost the opportunity to give full and informed consideration."

He then added:

"In assessing prejudice to [Mr Wells] and justice overall, it is also necessary to bear in mind that in fact [Mr Devani] did a good job for [Mr Wells]. He procured a sale of all the flats to a reliable purchaser at an acceptable price and with the utmost speed. (While [Mr Wells] might have been able to contact Newlon that weekend without [Mr Devani's] help, [Mr White's] previous inability to do so gives rise to no confidence that that would have happened or what the outcome would have been.) In the events which have occurred, [Mr Wells] has so far evaded paying commission to any agent at all. It is a matter of speculation whether [Mr Wells] will ever be called on to pay Shaws its commission, or what the outcome of such a claim would be."

He expressed his final conclusion as follows:

"Doing the best I can, the just course balancing all the above factors is:

a. to grant [Mr Devani] relief and permit him to enforce his contract;

b. but to compensate [Mr Wells] for the prejudice he has sustained as a result of [Mr Devani's] breach of statutory requirements by making an appropriately substantial reduction to [Mr Devani's] fee. That reduction will be of one-third of the fee, so that his claim is reduced to £32,900 inc. VAT."

What is the importance that the court must ascribe to the two factors singled out for mention in section 18 (6) (a)? As the original skeleton argument for Mr Wells engagingly put it:

"Where specific factors are mentioned in a statute requiring a judicial assessment or exercise of discretion, it may mean a number of different things – for example that they are merely dining at the table among a wide range of other factors, or that they are the guests of honour, or on occasion that they are the only invitees."

The argument for Mr Wells is that they are the only invitees. In other words in deciding whether it is just to dismiss the application, the only relevant factors are prejudice caused by the failure to comply and the degree of culpability of the failure.

What amounts to prejudice and culpability was discussed by this court in Great Estates Group Ltd v Digby [2011] EWCA Civ 1120, [2011] 3 EGLR 101. That was a case in which the client was potentially exposed to double liability to two estate agents. The client had in fact paid £60,000 to one agent, and was facing a claim for £59,000 from the second agent, whose terms of business had not warned him that he might expose himself to double liability. Although the court was divided on the question whether the Act should influence the interpretation of the contract in that case, they were unanimous on the approach to the enforcement of a non-compliant contract.

Lloyd LJ pointed out that there were two statutory questions: (1) was it just to dismiss the application to enforce having regard to culpability and prejudice and (2) if not, should the court reduce the fee to compensate for prejudice? At [77] he said:

"Thus, on the preliminary question of dismissal, it is relevant to have regard to both prejudice to the client and culpability of the agent. On the second question, compensation for prejudice to the client is what may lead to a reduction or extinction (discharge) of the liability that would otherwise have been enforced."

Lloyd LJ first considered the question of culpability. He held that culpability meant more than responsibility, because the estate agent would always be responsible for the failure to comply, and the Act did not impose an absolute liability. But it was for the agent to explain why that failure had occurred. At [83] Lloyd LJ said:

"It cannot be necessary for the client to prove that he would have acted otherwise but for the failure to comply with the Act or the regulations. That he might well have so acted … is sufficient to show prejudice."

At [86] Lloyd LJ turned to the question of discretion. He first held that the agent was to some extent culpable but that:

"was not sufficient to justify dismissing the application to enforce altogether, under section 18(6)(a), but that the degree of prejudice might justify either dismissing the claim under section 18(6)(a) or reducing or discharging the sum payable by way of damages under section 18(6)(b)."

It seems to me to be implicit in the way that Lloyd LJ put the point that culpability on its own might be so serious as to justify dismissing the agent's application, irrespective of the extent of prejudice suffered by the client. That way of looking at the case would coincide with the view of the sheriff principal in Solicitors Estate Agency (Glasgow) Ltd v MacIver 1992 SC 315. That was a case in which, in effect, the agent's terms of business concealed a modest secret profit from the client. However, it was found as a fact that the client was not significantly prejudiced. The sheriff principal, reversing the sheriff, said:

"In my respectful opinion, the breach of the pursuers' obligation under sec. 18 (2) (d) which he found to be established, and in relation to which he took the undisclosed commission into account, would in itself have justified the court in dismissing the application for relief in terms of sec. 18 (6) (a). …Having regard to the fact that the taking, at the defender's expense, of the undisclosed profit on advertising charges was a policy deliberately adopted by the pursuers, I am driven to the view that the degree of culpability was so high that it would not be just that this contract should be enforced."

The Inner House of the Court of Session reversed the sheriff principal; not on the ground that his own exercise of discretion had been wrong, but on the ground that he had not been entitled to interfere with the original exercise of discretion by the sheriff.

On the other hand, although it is not entirely clear, Lloyd LJ appears to me to have considered the question of culpability and prejudice sequentially. Reverting to [86] he said:

"If the point arose, I would hold that the agent was to some extent culpable – largely because of his inadequate explanation of how his document got into the form in which it stood, and what precautions he took as regards compliance with his statutory obligations, of which he was aware. I would agree with the recorder that the client had suffered prejudice. I would hold that the degree of culpability was not sufficient to justify dismissing the application to enforce altogether, under section 18(6)(a), but that the degree of prejudice might justify either dismissing the claim under section 18(6)(a) or reducing or discharging the sum payable by way of damages under section 18(6)(b)."

In Great Estates Lloyd LJ then moved on to the question whether the application should be dismissed on the ground of prejudice. At [87] he said:

"Logically it is necessary to decide first whether it is just to dismiss the claim on the ground of prejudice, since only if it is not dismissed does the question of reducing or discharging the amount by way of compensation under section 18(6)(b) arise. In some cases it may be clear that the prejudice is not enough to justify either dismissing the claim or discharging the liability altogether. In such a case the question is whether and if so by how much should it be reduced under section 18(6)(b)."

What can be seen from the approach that Lloyd LJ adopted is that culpability and prejudice were the only factors that he considered. Moreover, he appears to have considered them separately rather than cumulatively. Thus, having concluded that the degree of culpability was insufficient to justify dismissing the claim, his consideration of prejudice proceeded without reference to his earlier conclusion that there had been a degree of culpability. If Lloyd LJ meant to say that culpability and prejudice had to be considered sequentially and separately in answering the question posed by section 18 (6) (a), then I would respectfully disagree. In my judgment both factors must be considered together and in the round. A failure to comply may be all the more culpable because of the prejudice that it had caused the client, whereas a failure that caused no prejudice might not be culpable at all. In this case the judge had "no hesitation" in finding Mr Devani culpable, although he did not describe the degree of culpability that he ascribed to the failure to comply.

In my judgment the judge was therefore right at [4.5] to say (at least on the question raised under section 18 (6) (a)) that he had to consider "the inter-related questions of culpability, prejudice and justice."

Lloyd LJ also pointed out at [89]:

"Under section 18(6)(b) prejudice to the Defendant is all that is relevant, and the issue is by how much (if at all) the client should be compensated for the prejudice." (Emphasis added)

Under section 18 (6) (a) the ultimate question is whether it is just to dismiss the estate agent's claim to enforce the contract, having regard to prejudice to the client as a result of the failure to comply and the degree of culpability. By contrast, once the court moves on to section 18 (6) (b) not only does culpability fall away, but also the question of justice does too. Instead of the mandatory instruction to dismiss the claim if it is just to do so, the court is given a discretion to reduce the fee, but only for the purpose of compensating the client for prejudice.

In my judgment the judge's treatment of culpability mischaracterised the effect of speed. Far from being a mitigating factor, it was in my judgment an aggravating factor. The effect of the speed at which events happened was not merely that Mr Wells did not know the extent of his liability before the contract was made, but that he did not know the extent of his liability until after the triggering event that crystallised it. Mr Butler submitted with some force that in other cases in which estate agents have been permitted to enforce their contracts under the Act they had made genuine attempts to comply with the Act but the paperwork was, for one reason or another non-compliant. In this case by contrast Mr Devani made no attempt to comply at all, despite being aware of his statutory obligations under the Act.

The main prejudice caused to Mr Wells was likewise that of uncertainty. In essence Mr Wells did not know the event that would crystallise his liability until the judge decided, after contested litigation, that there was an implied term that completed what would otherwise have been an incomplete bargain. It is also to be noted that the judge did not hold that the triggering event upon which commission became payable was that set out in Mr Devani's terms of business, so even the late supply of those terms did not accurately reflect the contract that the judge found to have been made.

The further prejudice to Mr Wells was his exposure to a claim by Shaw & Co to the 3% commission due under the terms of the sole agency agreement on the sale of the properties to a person introduced by another agent. The judge brushed this aside on the ground that it was speculative. This was despite his finding that if Mr Wells had had the terms before being contractually bound it was likely that he would have consulted his solicitor and that they would have discussed the implications of the clause. Although the judge said that Mr Wells might have gone ahead anyway, "might" is a slender foundation upon which to downplay the prejudice.

He went on to say that it was a matter of speculation whether Mr Wells would be called upon to pay Shaws' commission and that it was equally a matter of speculation what the outcome of such a claim would be. I do not consider that this was a satisfactory treatment of the potential liability. It may have been a matter of conjecture whether Shaw & Co would call upon Mr Wells to pay the penalty commission, but if they had done within the limitation period I find it hard to see how Mr Wells could have resisted the claim. If the risk had materialised Mr Wells would have been in the position of having to pay Shaws a sum which exceeded the commission claimed by Mr Devani. Moreover, if as the judge found, Mr Wells and his solicitor would have discussed that potential liability it is hard to see how Mr Wells would have taken the risk without first going back to Shaws.

That said, I consider that the judge was entitled to take into account the fact that Shaws had in fact made no claim (and it must not be overlooked that the judge was dealing with the case after the expiry of the limitation period). Whether it is just to enforce the contract is not, in my judgment, to be decided by reference only to considerations frozen in time at the date when the contract was made or performed.

In considering whether it was just to dismiss Mr Devani's claim to enforce the contract the judge took into account the fact that he had done "a good job" for Mr Wells. Mr Butler said that this was an irrelevant factor. An estate agent will always have done the job, otherwise there would be no question of the commission having become due under the contract. Although there is some force in this point, it does not follow that if the estate agent has done a particularly good job that is irrelevant at least on the question whether it is just to dismiss the claim to enforce the contract. The estate agent might have secured an offer after a lengthy period of time, or he might have secured an offer at less than the asking price which the client felt constrained to accept. Here by contrast, Mr Devani secured a quick offer at the asking price. I do not consider that that fact was irrelevant.

In deciding whether it was just to dismiss Mr Devani's claim the judge was making a value judgment (an expression I prefer to "exercising a discretion"). It is, moreover, a value judgment based on a number of factors, measured against an imprecise standard. It is exactly the case in which an appeal court should be particularly wary of disturbing the conclusion of the trial judge. Although I have made some criticisms of the way in which the judge approached the question, and although I am far from sure that I would have reached the same conclusion as the judge, I cannot go so far as to say that his value judgment was wrong.

When the judge came to section 18 (6) (b) he was exercising a true discretion ("the court may"). His decision can only be faulted on the grounds that vitiate a judicial exercise of discretion. This is where the cross-appeal comes in. Mr Giles argued that the judge had no justification for reducing Mr Devani's commission at all, because Mr Wells had not in fact been exposed to double liability to pay both Mr Devani and Shaws. However, section 18 (6) (b) enables the court to reduce a fee to compensate a client for "prejudice". That is a far broader expression than "financial loss". As I have said, one of the aspects of prejudice that Mr Wells suffered was the uncertainty of what the contract was, as well as the risk of exposure to liability to pay double commission, even if as events turned out the latter risk did not materialise. In my judgment those factors were sufficient to justify the judge in making the reduction in the fee that he did.

The final ground of cross-appeal is an appeal against the judge's decision on costs. Although Mr Devani succeeded in enforcing the contract, he was only permitted to do so in a reduced amount. The judge reduced the costs he awarded to Mr Devani because of Mr Devalni's culpability under the Act, which had necessitated an application to the court; in the course of which the court was required to consider questions of culpability, prejudice and justice. The judge took the view that costs attributable to those factors, which only had to be considered because of Mr Devani's failure to comply with his statutory obligations, justified a reduction in costs of 30%. In my judgment that was well within the scope of the discretion that a judge is required to exercise when considering the question of costs. I would reject this ground of cross-appeal.

Had I been of the view that Mr Wells and Mr Devani entered into a binding contract in the course of their telephone conversation on 29 January I would have dismissed the appeal. As it is, I would allow the appeal on the ground that there was no binding contract, and dismiss the cross-appeal.

Lord Justice McCombe:

I find myself in the unenviable position of having to consider which of the judgments of Arden and Lewison LJJ I prefer in resolution of this appeal. I have seen both judgments in draft.

In the end, I find myself in agreement with Lewison LJ that the appeal should be allowed, essentially for the reasons given by him, and (if necessary) that the cross-appeal should be dismissed. I do not need to say more about the cross-appeal as to the outcome of which both my Lady and my Lord are in agreement. However, in view of the difference between them as to the outcome of the appeal and, as Lewison LJ and I differ from the finding of the learned Judge below, I must add a few words of my own.

The judge found that these parties intended to reach and did reach a legally binding agreement. I would not and do not disagree with the judge's finding of fact that they intended to make an agreement then and there for Mr Devani to act as Mr Wells' agent on the sale of the residual flats in the block. However, for me the question is whether what they are found to have agreed upon amounted to a completed agreement capable of constituting a binding contract. I answer that question in the negative.

The intention was that Mr Devani would be Mr Wells' agent in seeking out a purchaser of the flats in question. He was to be remunerated by commission, but in my judgment on the facts as found they did not agree as to the circumstances in which he would be entitled to that commission. To that extent, the agreement was incomplete. As illustrated by the passage from the speech of Viscount Simon LC (quoted by Lewison LJ at paragraph 21 above) and by the passage in Bowstead (quoted at paragraph 23), commission agents' contracts are infinitely variable in nature and it does not seem to me that a "contract" of this type, that does not specify with sufficient clarity the event triggering entitlement to commission, is complete. I do not consider that the omission can be cured by a process of implication of terms, even a term which is considered (in retrospect) to be the most favourable to the party against whom it is sought to enforce the supposed contract: see the Scancarriers case (supra).

On considering the particular facts of the Scancarriers case, I do not think that the principle derived from it, succinctly extracted in paragraph 102 of Arden LJ's judgment, can be seen to be inapplicable here. I remain of the view that the judge, with respect to him, purported to create (by implication of a term) a complete contract out of an incomplete one.

The preference of Mr Devani's evidence to that of Mr Wells and Mr Nicholson adds nothing, in my view. There was nothing in Mr Devani's evidence to supply the missing term. It seems to me clear that the judge rested his conclusion as to the completion of the bargain by a process of implication and not by any reference to Mr Devani's oral evidence or the interpretation of contractual terms to be derived from it. As Lewison LJ points out, it appears that the discussion between Mr Devani and Mr Wells did not involve the words "find a purchaser" and they would be, in any event, inconsistent with the written terms which Mr Devani belatedly supplied as being the terms of the agreement which he considered he had made.

I do not think that it is permissible to add to the learned judge's findings of fact by adding to them various isolated aspects of Mr Devani's evidence to supply the relevant omissions. While the judge said that he preferred the evidence of Mr Devani to that of Mr Wells, that was a finding as to relative credibility; it was not a finding that every word said by Mr Devani spoken (and some unspoken) constituted the agreement between the parties. I cannot better what Lewison LJ has said on this point in paragraph 34 above, with which I agree.

Finally, I do not consider that the identification of the "trigger" for commission payment can be categorised as "detail" in a contract such as this, so that there was sufficient here to constitute a binding contract. I do not agree with what Arden LJ says in paragraphs 110 and 111 below. It does not seem to me to be enough to say that the last possible "trigger" date that the parties could reasonably have agreed was the date of completion of the purchase. The issue is what date they did agree: the evidence did not establish any such date at all.

For these reasons, in agreement with Lewison LJ, I would allow the appeal.

Lady Justice Arden:

I am most grateful to Lewison LJ for his judgment. I agree with him on the issues under section 18 of the Estate Agents Act 1979, but not on the important question whether the judge was wrong to hold that the 29 January agreement was sufficiently complete to amount to a binding contract. In my judgment, the judge was right to hold that the agreement was enforceable for the reasons given below.

The major differences between Lewison LJ and myself stem from our different view on the findings of the judge, the interpretation of the agreement and the effect of Scancarriers.

Since writing my judgment I have also had the privilege of reading the judgment of McCombe LJ, and my points of departure from his judgment will sufficiently appear from my respectful points of disagreement with Lewison LJ.

The findings of the judge

Lewison LJ concludes in his judgment that the judge made no finding that on 29 January 2008 Mr Wells and Mr Devani agreed that Mr Devani should be entitled to commission of 2% plus VAT if he found a purchaser for Mr Wells. In my judgment, the judge did make this finding for the following reasons.

The judge summarised his findings as to whether there was a contract for commission on the sale to Newlon in paragraph 2.18 of his judgment. This is not set out in full above so I will now set out:

"2.18 Taking all the above considerations together, my conclusions about the 29 January conversation are:

a. that throughout that conversation C considered himself to be proposing himself as an agent not a buyer, and was looking to a commission from D as his source of profit;

b. that he did not describe himself as a buyer or investor or say anything intended to give the false impression that he was;

c. that, though it is possible that C was silent on the subject of fees and that D did wrongly believe him to be an investor because of his references to Mr Nicholson, it is on the balance of probability more likely that, as C says, D did ask him about his fees and he did reply that his standard terms were 2% + VAT; and

d. that D and AW have, since about 8 February 2008, sought to take advantage of the absence of a written agreement with C to deprive both him and Shaws of their commissions, and have tailored much of their evidence, in particular about their telephone conversations with each other and C, to reinforce that case.

Where [the] account [of Mr Wells or his business partner Mr White] of a conversation with Mr Devani and/or between themselves differs from Mr [Devani's] evidence or is materially inconsistent with [Mr Devani's] case, I prefer [Mr Devani's] evidence and do not accept theirs."

Accordingly, the judge accepted not just Mr Devani's evidence but also (having heard all the evidence) Mr Devani's case as to what was said on 29 January 2008. He was clearly referring not to Mr Devani's pleaded case but his case as he had summarised it, together with Mr Wells' case, at paragraph 2.4 of his judgment:

"On C's case, D knew at all times that C was an estate agent seeking to introduce a third party purchaser in return for a fee from D; but D is now reneging on that deal by taking advantage of the lack of documentation and pretending that he always believed C himself to be a prospective purchaser. On D's case C never said that he was an agent or acting for a fee; he never claimed to be an investor or allowed D to think he was, and only put forward a claim for a fee after the sale had been agreed."

The judge's findings at paragraph 2.18 read in the context of the case mean that the judge found that if Mr Devani introduced a third party purchaser he would be entitled to a commission of 2% plus VAT, or as it is sometimes put in the vernacular, that Mr Devani agreed to find a purchaser for Mr Wells' property. That was the corollary of his being an estate agent.

In due course, Mr Devani found a purchaser: Newlon.

Question of law or question of fact

This is a minor point. I respectfully differ from Lewison LJ when he says that what terms were actually agreed by the parties during the 29 January telephone conversation was "a pure question of primary fact" (paragraph 34 above). An agreement may be made by words or conduct. Whether something is actually agreed is a question of law and a question of inference from or evaluation of the primary facts.

Need to find the meaning of the agreement of 29 January 2009 on the judge's findings

The next step is to interpret the parties' agreement of 29 January 2009 on the basis of the judge's findings, as I have found them to be.

Luxor v Cooper decides that an estate agent is not entitled to claim commission for his work as such but only when the event occurs upon which commission is to be paid (see, for example point (2) in the passage from the speech of Lord Russell cited in paragraph 22 above). This will be a matter of the proper interpretation of the contract (see per Viscount Simon LC in the passage above cited by Lewison LJ). Where the terms are clear, the courts will give effect to them but if they are ambiguous the courts will normally interpret the words so that commission is not payable unless the event stipulated by the parties has occurred (see Midgely Estates v Hand [1952] 2 QB 432, 435-6 per Jenkins LJ). That interpretation has been given where, as here, the agent has agreed to find a purchaser: Jones v Lowe [1945] KB 73. The judge should, therefore, have interpreted the agreement and not implied a term. However, the outcome would in my judgment have been the same.

Luxor was cited on this appeal but the two further cases to which I have just referred were not, so I shall proceed to the next stage as my Lords have done on the basis that the issue is whether the judge's route of an implied term would have failed because of Scancarriers. In my judgment, this is not the effect of Scancarriers because the contract became a binding contract at the latest when the contract for the sale of the property with Newlon was completed.

Agreement on 29 January was a unilateral contract

The next question is whether as a matter of law the conversation on 29 January gave rise to a unilateral contract. The judge recognised that it did, and on this appeal the parties have not suggested that it was a bilateral contract. Mr Giles in his submissions also recognised that this was possible and "that it gave rise to conceptual difficulties" but rather than expanding on what those difficulties might be he submitted that the end result was the same. There was, if not initially, then at some stage a binding contract between the parties for the payment of commission.

We did not therefore have authorities on the nature of a unilateral contract. It is not suggested that a contract with an estate agent is not properly so analysed, because the estate agent is not bound to find a purchaser but if he does so he will be entitled to commission. In the same way, a conditional option to renew a lease is a unilateral contract and the lessor is not bound to renew the lease until the lessee has complied with those conditions (Little v Courage). So a unilateral contract can develop into a bilateral contract. Just to expand on that point, though different principles may apply to estate agency (see Treitel on the Law of Contract, edited by Edwin Peel, 14^th ed (2015) para.2-056), the following passage from Restatement of the English Law of Contract, Burrows, (2016) provides some general background:

"Although there has been some doubt about this, only principled interpretation of recent cases (and that adopted in s7(14)) is that there is an acceptance of the offer of a unilateral contract, so that the offer cannot be revoked, once the offeree starts to perform the requested act: see Errington v Errington [1952] 1KB 290, CA; Daulia Ltd v Four Mill Bank Nominess Ltd [1978] Ch 231, 239; Soulsbury v Soulsbury [2007] EWCA Civ 969, [2008] Fam 1, CA. Some may argue that the straightforward analysis strains the concept of consideration (see s 8) because it involves saying that the consideration for the promise is starting, rather than completing performance. If one is troubled by that (but one can surely say that the offeror starts to be benefited when performance starts) there is an alternative more complicated two-contract analysis, which in practice leads to the same result. According to this alternative, there is a subsidiary unilateral contract whereby the offeror promises not to revoke the offer of the main unilateral contract once the offeree has started to perform."

I need not decide exactly when Mr Wells became bound by contract to pay Mr Devani's commission but that must have been at the latest when he (Mr Wells) agreed to sell to Newlon and Newlon completed the purchase. Mr Devani had by then introduced a purchaser. The agreement at that stage ceased to be unilateral. After that time Mr Wells could no longer withdraw from his deal with Mr Devani. There was then no longer a unilateral contract but a bilateral contract.

Scancarriers does not prevent the implication of a term in this case

Lewison LJ holds, and I agree, that the passage which he cites at paragraph 19 of his judgment from the speech of Lord Roskill in Scancarriers is authority for the proposition that "it is not legitimate, under the guise of implying terms, to make a contract for the parties." He further holds, and I respectfully disagree, that, because the parties did not agree the trigger event, there was never an agreement which was binding in law, and that this follows from Scancarriers. The answer lies in the sequence of events.

In Scancarriers, all the shipper had done was to give a "quote" for the promotional freight rates that would apply for the carriage of the customer's goods. It had not made any contract with the freight forwarder. The Court of Appeal of New Zealand ("CANZ") had implied a term imposing a contractual obligation on the shipper so that a contract came into existence between the parties. Cooke P held that the test for implying a term as a matter of necessity was in his judgment passed in that case as follows:

"if the obvious inference [were] drawn that it was impliedly agreed that, during the period for which the promotional rate was expressly agreed to be held, the shipping company would not arbitrarily refuse the customer space at that rate. ([1985] 1 NZLR 513)"

That was tantamount to writing a contract for the parties. Courts have no right to make contracts for parties. So it comes as no surprise that the Privy Council held that this result was not open to the CANZ. There was in Scancarriers no obligation at all on either party before the court implied a term.

Thus, in Little v Courage, Millett LJ summarised the effect of Scancarriers in these terms:

"5. It is in general impossible to imply terms (that is to say terms which impose legal obligations) into a unilateral contract. This would be to imply a contractual obligation on a person who ex hypothesi is not yet a party to any contract and therefore not yet subject to any contractual obligations on the ground that it is necessary in order to bring a contract into existence. This is wrong in principle: See Aotearoa International v. Scancarriers."

Thus Scancarriers applies to contracts which are unilateral. This view is shared by Treitel, The Law of Contract at paras 2-051 and 6-038. (Treitel cites Little v Courage which in turn refers to Scancarriers). This work also provides further support for Mr Devani's case, but those points were not argued and thus play no part in my reasoning. Because Scancarriers applies to unilateral contracts, it is distinguishable from this case, and inapplicable to it. The parties' contract in this case started out as unilateral but became bilateral: see paragraph 100 above. The courts regularly imply terms in appropriate cases where parties have made an agreement where one matter has not been expressed (see Chitty on Contracts, vol 1, 32 ed (2015), chapter 2, section 6 (Incomplete Agreements), especially at para 2-120 (Agreement Complete Despite Lack of Detail)).

As an aside, it would not be in Mr Wells' interests in this case to argue that his agreement with Mr Devani, if it was a contract of agency, only became binding when the purchaser completed his purchase since by then he had received Mr Devani's conditions and Scancarriers would not constitute any obstacle to the implication of a term.

As I have said in my judgment the proper course for the judge was to interpret the contract as he had found it to be. I shall now perform that step.

Trigger event: when did Mr Devani become entitled to his commission?

The next legal question however is: what was the trigger event for the payment of commission? It did not necessarily have to be the moment that Mr Wells agreed to sell to Newlon. After all, the agreement with Newlon was not binding until there was a legal exchange of contracts and even then Newlon might not complete. As the passages cited by Lewison LJ from Luxor (Eastbourne) Ltd v Cooper make clear, the question as to the meaning of the contract which had been made was a question of interpretation. The same point is additionally made by Lord Wright in the same case who expanded on this point thus:

"…what is in question in all these cases is the interpretation of a particular contract. I deprecate in general the attempt to enunciate decisions on the construction of agreements as if they embodied rules of law. To some extent decisions on one contract may help by way of analogy and illustration in the decision of another contract. But however similar the contracts may appear, the decision as to each must depend on the consideration of the language of the particular contract, read in the light of the material circumstances of the parties in view of which the contract is made."

The trigger event must therefore be resolved by interpreting the contract. The judge took the view that at the very least the commission became payable when the purchaser completed the purchase. That was the last possible date the parties could reasonably have agreed, and it is difficult to see how he could be in error on this. It was in line with the authorities to which I have referred at paragraph 97 above. That was the moment, therefore, from which Mr Devani became entitled to his commission.

As I have already indicated, when the parties agreed (as the judge found) that Mr Devani should be an estate agent for the sale of flats, it followed that Mr Devani became entitled to commission if he succeeded in finding a purchaser who bought the property. I have regard to the context of the parties' discussions and to the fact that Shaws had been unable to find a purchaser and the flats were, as Mr Giles put it, "sticking" (not selling). What must be interpreted in the case of an oral contract is not restricted to what the parties agreed in express words. What matters is what they actually agreed. The judge did not have to find that the parties expressly said that Mr Devani was to find a purchaser if in the context of their communications that is what they actually meant.

Scope of the parties' submissions

Scancarriers was not raised in either the court below or in the skeleton arguments which the parties originally filed for this appeal. This Court raised it with the parties some four days before the hearing (and I am grateful for the written submissions that the parties provided). As part of his argument before us in response to the new "point of law" as he called it, Mr Giles made the submission on interpretation that Lewison LJ has set out at paragraph 30, above. Because this was part of his response to a point raised by the Court, it was not before the judge. Mr Devani had not established his pleaded case at trial but the judge had found for him on the basis of an implied term.

It is clear from paragraph 30 above that Mr Giles submitted that the contract meant 2% on sale proceeds in the context of what the parties were saying. He then asked: what would that mean? He answered his own question by saying that it meant that Mr Devani had to find a purchaser who completed his purchase, and that this was the implied term found by the judge. He would not therefore earn any commission if someone else introduced the purchaser. McCombe LJ asked whether the term that he should find a purchaser should be implied as a matter of construction and Mr Giles' answer, as Lewison LJ indicates in paragraph 30 above, was that the same answer could be reached either by interpretation or implied term.

So Mr Butler heard the argument that the event entitling Mr Devani to commission was the introduction of a purchaser who completed the purchase. He submitted in reply that to construe the terms as to commission as a commission payable on completion of a sale was more than the words used could bear.

Lewison LJ raises the question whether Mr Butler had the opportunity to deal with the point that the agreement was one, as I would hold it to be, to introduce a purchaser. He did not, I accept, have the precise route that I have adopted but it is to the same effect as the judge's implied term.

Had any new point been material to this Court's disposition of this appeal, no doubt the parties could and would have been given an opportunity to make submissions on it if they wished to do so.

Estate Agents Act 1979, section 18

I agree with the judgment of Lewison LJ on whether the judge made any reviewable error in his application of section 18 of the Estate Agents Act 1979.

Conclusion

For the reasons given above, I would dismiss this appeal. In the circumstances it is unnecessary for me to deal with the question of costs.

I would summarise my reasons as follows:

i) In paragraph 2.18 of his judgment, the judge found that there was a contract between Mr Devani and Mr Wells whereby Mr Devani would act as agent for the introduction of a purchaser for Mr Wells' property and that if, as he did, he achieved that, he would be entitled to commission of 2% plus VAT. There was no other purpose for this agency other than the introduction of a purchaser for Mr Wells' unsold property.

ii) Mr Devani introduced the purchaser and the purchaser completed the purchase. The agreement then became binding on both parties, if it had not done so previously.

iii) The only question was the event on which the agreed commission should be payable. As a matter of interpretation, that was the completion of the purchase by the purchaser introduced by Mr Devani.

iv) The contract was enforceable subject to section 18 of the Estate Agents Act 1979. The judge's decision on the application of section 18 was open to him and thus not reviewable in this Court.

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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Wells v Devani [2016] EWCA Civ 1106 (15 November 2016) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2016/1106.html Cite as: [2016] WLR(D) 604, [2016] EWCA Civ 1106, [2017] 2 WLR 1391, [2017] QB 959