Law report: 20 November 1997; Estate agent was not entitled to commission on sale

An estate agent who was engaged by a client to act with "sole selling rights", as defined in the Estate Agents (Provision of Information) Regulations 1991 made under s 18 of the Estate Agents Act 1979, was not entitled to commission on a sale made after the expiry of the agreement to a purchaser who had been introduced to the client during the period of the agreement, if he had neither effected the introduction nor negotiated with the buyer.

Michael Harwood t/a RSBS Group v Smith & ors; Court of Appeal (Lord Justice Hobhouse, Lord Justice Pill and Lord Justice Mummery) 14 November 1997

The Court of Appeal dismissed the plaintiff's appeal against a finding under Order 14A of the Rules of the Supreme Court that he was not entitled to a commission payment from the defendants.

The plaintiff, an estate agent, had been engaged by the defendants to act as their agent with sole selling rights for a minimum of six months in connection with the sale of a residential nursing home, at a fee of three and a half per cent of the agreed selling price of the property. During that time the defendants became dissatisfied with the plaintiff's services, and gave him written notice to terminate his agency at the end of the six-month period.

Before giving notice to the plaintiff, the defendants had seen a newspaper advertisment saying that a residential nursing home was wanted. They had responded to the advertisement, and negotiations had ensued between them and the advertisers. The plaintiff had at no stage been involved in those negotiations. Two days after the termination of the plaintiff's agency, the defendants sold the property to the buyers they had found.

The plaintiff commenced proceedings claiming from the defendants either a commission of three and a half per cent on the selling price of the property, or alternatively liquidated or other damages for alleged breach of contract. He applied for summary judgment under RSC Order 14, and appealed to the county court against the refusal of that application. It was agreed that the claim for commission depended upon a point of law which should be decided under Order 14A, and the alternative claim for breach of contract was stood over. The judge decided the Order 14A question against the plaintiff.

Brian Riley (Howe Roche & Waller, Stevenage) for the plaintiff; Antonia Morris (Chivers Walsh Smith, Bradford) for the defendants.

Lord Justice Hobhouse said that the point at issue was the construction of the contract between the plaintiff and the defendants. The definition of "sole selling rights" in the contract was taken from the Estate Agents (Provision of Information) Regulations 1991 made under section 18 of the Estate Agents Act 1979, and was in the following terms:

You will be liable to pay remuneration to us, in addition to any other costs or charges agreed, in each of the following circumstances: (a) if unconditional contracts for the sale of the property are exchanged in the period during which we have sole selling rights, even if the purchaser was not found by us but by another agent or by any other person including yourself; (b) if unconditional contracts for the sale of the property are exchanged after the expiry

of the period during which we have sole selling rights but to a purchaser who was introduced to you during that period or with whom we had negotiations about the property during that period.

Paragraph (b) appeared to cover two alternatives: either the individual had been introduced to the client by the agent, or the individual had been introduced to the client by somebody else, but the agent had negotiated with him on behalf of the client. That was the meaning of the paragraph which was arrived at on a consideration of how a client would reasonably understand the language used, which was the critical consideration.

The plaintiff's argument that the relevant words in pararaph (b) meant "introduced by anyone" could not, accordingly be accepted, and the appeal would be dismissed.

- Kate O'Hanlon, Barrister