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When is an introduction not an introduction?
Philip Alexander Smith T/A Alexander Watson v Jeffrey Marks
To summarise the facts, Philip Alexander Smith the Claimant (trading as Alexander Watson estate agents) sought payment of commission in connection with the sale of a flat in Pinner (“Flat 15”). Mr Marks, together with his wife entered into an agreement with Alexander Watson to market the property with an expectation of achieving a sale price in the region of £250,000. Prospective purchasers viewed the flat on 14 August 2008 together with an adjoining flat also marketed by Alexander Watson. The prospective purchasers viewed Flat 15 again on 18 September and withdrew an offer that they had made on the adjoining flat.
Unbeknown to the Claimant, the purchasers then approached another firm of estate agents, Baker Pearce, to make their formal offer and negotiate further terms.
The matter then proceeded to an exchange of contracts and completed in the usual way. All parties appear to have been in agreement that the retainer was on a multiple agency basis. Alexander Watson rendered an invoice for their commission as initial introducer following an admission by the Defendant that he was liable for the same. However on taking subsequent advice, this admission was retracted.
The Defendant gave evidence that at no time did he have any contact with Alexander Watson in relation to agreeing the terms of a sale to the purchasers. The signed retainer between the Claimant and Defendant provided that, “if you decide to appoint another agent you will be liable to pay commission to us in addition to any other costs or charges agreed if at any time unconditional contracts are exchanged with a buyer, introduced by us, or with whom we had negotiations about the property during the period of this agreement”.
The defence relied upon the case of Foxtons Limited v Pelkey Bicknel & Another (2008) EWCA Civ 419 on the basis that the wording of the above referenced clause was very similar to the one utilised in this case regarding the construction of the words ‘a purchaser introduced by us’. The conclusion of District Judge Wicks was that for the Claimant to be entitled to a commission under the terms of ‘having introduced a purchaser’, the Claimant had to show that they had introduced the person as the eventual purchaser (ie they had introduced the purchaser to the purchase and not just the property).
The case turned on this point. The Defence asserted that Baker Pearce had in fact introduced the purchaser to the purchase and not the Claimant because, on submission, the purchasers had approached Baker Pearce having “felt strung along by Alexander Watson” in respect of an unsubstantiated grievance in respect of the adjoining flat. In the alternative the defence argued that no actual ‘negotiations’ took place until Baker Pearce became involved.
The Claimant’s Counsel counterargued that there was no breakdown in communications since the purchasers never lost interest in the property. The purchaser viewed the property on 15 August and 18 September through Alexander Watson, with Baker Pearce not becoming involved until 21 October and hence the Claimants were the ‘effective cause of the transaction’. Counsel on behalf of the Claimant also asserted that ‘introductions’ in this situation also mean negotiations, talks, viewings and correspondence. Claimant’s Counsel sought to rely upon the case of Lordsgate Properties Limited v Balcombe (1985) EGLR 20 wherein it was decided that it is possible to have a situation where two agents are entitled to be paid commission arising from one transaction where both agents were instrumental in the sale or where two agents were appointed but on different terms both of which were subsequently fulfilled, although the Court prefers to find one agent to be the ‘effective cause’ of the sale.
District Judge Wicks held that although the Claimant did make the purchasers aware of both flats, the Claimant did not in fact ‘introduce’ them to the purchase and that they were not instrumental in ‘clinching the deal’. Despite the fact that the Claimant had undertaken viewings with the purchaser, had entered into correspondence with them and the purchasers had shown an interest in the property via the Claimants, this was held not amount to ‘actual negotiations’. The fact of the Defendant moving to another estate agents was found to be sufficient to evidence a breakdown in communication between the parties. The Claimant was held to not be entitled to any commission and order to pay the Defendant’s costs in the matter, consequently resulting in a total loss of approximately £27,000.
So where does this leave estate agents? What is the future for multiple agency arrangements? The fact that the judgement will be unsatisfactory from an estate agent’s perspective is undoubtable because it does little to lend clarity to the meaning of ‘introducer’ or ‘negotiations’ in these scenarios. This decision can only deter estate agents from entering into multiple agency arrangement, although it is unlikely that any have the luxury of turning such business away until subsequent case law clarifies the position.
THE AGENT’S VIEW
“We introduced the buyers to the development, they wrote to us stating how they loved both fl ats and were trying to make a decision between them. They then chose one of them, but after becoming fed up waiting for grant of probate they came back to us – not the other agent – to arrange a further visit with builders to re-investigate the possibilities of the other fl at. Clearly, there was no break down of communication as they were able to organise this visit. They withdrew from the sale of the fi rst fl at the next day – and shortly after went to Baker Pearce to make their offer.
If I was not both the introducer and cause of this sale, then I do not know what my job is, This has been an extremely expensive case for us; the total cost, including our ‘lost’ fee, was £27,000. It was also very disappointing to fi nd that the courts side with the consumer.”