Wells (Respondent) v Devani (Appellant)

Cite as:[2019] UKSC 4
Hand-down Date:February 13, 2019

Hilary Term [2019] UKSC 4 On appeal from: [2016] EWCA Civ 1106


Wells (Respondent) v Devani (Appellant) before

Lord Wilson Lord Sumption Lord Carnwath Lord Briggs Lord Kitchin JUDGMENT GIVEN ON 13 February 2019 Heard on 11 October 2018 Appellant Respondent Andrew Warnock QC

Andrew Butler QC Edward Blakeney (Instructed by Wedlake Bell LLP) David Giles

Laura Giachardi (Instructed under the Bar Council's Direct Access Rules)

LORD KITCHIN: (with whom Lord Wilson, Lord Sumption and Lord Carnwath agree)

  1. In this case an estate agent claims that commission became payable to him by the vendor of a number flats on the completion of the sale of those flats to a purchaser which he had introduced to the vendor. It gives rise to two issues. The first, raised on appeal by the agent, concerns the agreement between the agent and the vendor and whether it was complete and enforceable by the agent despite there being no express identification of the event which would trigger the obligation to pay the commission. The second, raised on a cross-appeal by the vendor, concerns the application of section 18 of the Estate Agents Act 1979 and whether, by reason of the agent's failure to comply with the requirements imposed by the Act, the trial judge ought to have dismissed the claim or discharged the vendor's liability to pay the commission.

    The facts

  2. In 2007, the defendant, Mr Wells, a retired stockbroker's office administrator, completed the development of a block of flats in Hackney under the terms of a joint venture agreement with Mr White, a builder. By the beginning of 2008 six of the flats had been sold, one was under offer and seven were still on the market. They were being marketed by a local agency, Shaw & Co, under a contract for a sole agency and a commission of 1.75%, or 3% if the properties were sold through another agent.

  3. In late January 2008, Mr Wells mentioned to Mr Nicholson, a neighbour in Andorra, where they both lived, that he was having difficulty selling the remaining flats. Mr Nicholson told Mr Wells that he knew of a property investment company in London that might be interested in purchasing the flats and Mr Wells responded that he would be happy for Mr Nicholson to make some enquiries.

  4. On 29 January 2008, Mr Nicholson sent an email to the claimant, Mr Devani, who was trading as an estate agent in Kilburn, informing him of the flats and that seven remained unsold. He also gave him Mr Wells' and Mr White's telephone numbers and explained that Mr Wells would be coming to London very soon.

  5. Later that day Mr Devani acknowledged receipt of Mr Nicholson's email, thanked him and told him that the information he had been given might well be of interest. He also made a telephone call to Mr Wells in Andorra. The parties at trial

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    gave strikingly different accounts about what was said in the course of this telephone conversation. It was Mr Devani's evidence that he told Mr Wells that he was an estate agent and that his commission terms would be 2% plus VAT. Mr Wells maintained that Mr Devani made no mention of any commission and gave the impression he was an investor looking to buy on his own account.

  6. The judge, HH Judge Moloney QC, preferred the evidence of Mr Devani. He found that Mr Devani thought throughout that he was acting as an agent, that he did not describe himself as a buyer or say anything intended to create the impression that he was, and that Mr Wells asked him about fees and he replied that his standard terms were 2% plus VAT. He also found that since February 2008 Mr Wells and Mr White had sought to take advantage of the absence of a written agreement with Mr Devani to deprive him and Shaw & Co of their commissions, and that they had tailored much of their evidence to reinforce their case.

  7. Shortly after this telephone conversation, Mr Devani made contact with Newlon Housing Trust which expressed some interest in purchasing the remaining flats. A meeting at the flats was arranged and attended by a representative of Newlon, Mr Wells and Mr White. On 5 February 2008, Newlon agreed to purchase the flats for £2.1m. Mr Wells thereupon telephoned Mr Devani to inform him of the sale and later that day Mr Devani sent to Mr Wells an email in which he expressed delight that Newlon had agreed to purchase the flats and continued:

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

  8. He attached to that email the terms of business which provided in relevant part:

    "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.

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

    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."

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  9. The transaction proceeded to completion and Mr Devani then claimed his commission. Mr Wells refused to pay and so Mr Devani issued these proceedings in the Central London County Court.

    The trial

  10. Apart from the factual issues which the judge resolved in Mr Devani's favour, Mr Wells disputed Mr Devani's entitlement to any commission on two grounds which are material to this appeal. Mr Wells contended first, that he had never entered into a binding contract to engage Mr Devani as his agent because the terms of any agreement between them were too uncertain; and secondly, that Mr Devani's failure to comply with section 18 of the Estate Agents Act 1979 rendered any agreement unenforceable or that any sum payable to Mr Devani by Mr Wells should be discharged or reduced in light of the prejudice Mr Wells had suffered.

  11. The judge dealt with the first ground in concise terms. He accepted that Mr Devani only submitted his written terms to Mr Wells after he had introduced Newlon and that his claim therefore depended on what had been agreed on 29 January 2008. He also recognised that Mr Devani did not reach any express agreement with Mr Wells as to the precise event which would entitle Mr Devani to his commission. Nevertheless, he held that, in the absence of any such express agreement, the law would imply the minimum term necessary to give business efficacy to the parties' intentions. Here, the judge continued, the least onerous term for Mr Wells, and the one which nobody would have disputed had it been suggested by a bystander, was that payment of the specified commission was due on the completion of the purchase of the properties by any party which Mr Devani had introduced to Mr Wells. Accordingly, he held that there was at the material time an oral contract between Mr Devani and Mr Wells entitling Mr Devani to a payment of 2% plus VAT if Mr Devani effected an introduction between Mr Wells and a prospective purchaser of the flats and that such introduction led to their sale.

  12. The judge turned next to the submissions founded upon section 18 of the 1979 Act. He found that Mr Devani had failed to comply with his obligations under the Act in that he did not expressly inform Mr Wells before their agreement of the circumstances under which he would be entitled to commission, and he did not provide Mr Wells with that information in writing until 5 February 2008. He also found that these failures were culpable but that having regard to the degree of that culpability and the prejudice Mr Wells had suffered, it would be just to permit Mr Devani to enforce the agreement but to compensate Mr Wells for that prejudice by reducing the fee he was required to pay by one-third.

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    The appeal to the Court of Appeal

  13. The Court of Appeal ([2017] QB 959), by a majority, allowed Mr Wells' appeal on the issue of whether there was ever a binding contract. Lewison LJ considered the judge's approach could not be justified. His reasoning ran as follows. First, a court can imply terms into a contract, but this assumes there is a concluded contract into which the terms can be implied. It is not legitimate, under the guise of implying terms, to make a contract for the parties. This is to put the cart before the horse. Secondly, the trigger event giving rise to an estate agent's entitlement to commission is of critical importance and a variety of events can be specified. The identification of the trigger event is therefore essential to the formation of legally binding relations. Thirdly, it follows that, unless the parties specify that event, their bargain is incomplete, and 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 his view, that is what the judge did in this case. What was more, it was not possible or permissible to support the judge's conclusion in any other way.

  14. McCombe LJ agreed that the appeal should be allowed, essentially for the reasons given by Lewison LJ. He did not disagree with the judge's finding that the parties intended to reach and did reach an agreement. For him the question was whether what they had agreed amounted to a binding contract. In his view, it did not, for an agreement which did not specify the event which triggered the entitlement to commission was not complete.

  15. Arden LJ, dissenting, considered that the bargain between the parties was initially a unilateral contract but that it became a bilateral contract at the latest when Newlon, having been introduced to Mr Wells by Mr Devani, completed the purchase of the flats. As a matter of interpretation of the whole contract, the commission became payable on completion. She acknowledged that the judge had arrived at his conclusion by implying a term, but this was of no matter because the outcome was the same.

  16. As for section 18 of the 1979 Act, the Court of Appeal...

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