Foxtons Ltd v Puri

Contractual reference to the sale of a property may, in its commercial context, include a transfer of shares in a company whose only asset is that property. The court will interpret the agreement according to what the parties objectively contemplated, rather than applying the literal wording of a standard form in isolation.

An estate agent’s entitlement to commission depends on commercial causation. The fact that the ultimate purchaser was arranged through a newly formed vehicle, or was not yet in existence when the relevant introduction occurred, does not necessarily break the causal chain. Where the agent was instrumental in bringing about the transaction, commission may be payable.

Estate agents claimed commission under a January 2008 written agreement with the defendant concerning the sale of a property. The property was owned by an offshore company whose only asset it was, and both parties knew that structure when they contracted.

His Honour Judge Cowell held that the agreement covered a transaction effected by transferring the shares in the company and awarded commission of £188,000, together with interest and costs. The defendant sought permission to appeal, arguing that the agreement contemplated only a transfer of the property itself and that the agents had not introduced the ultimate purchaser because that purchaser was not then in existence.

Permission was refused on the papers by Moore-Bick LJ. The renewed application concerned the proper construction of the commission agreement and whether the introduction was the effective commercial cause of the purchase.

1. Disposition. The renewed application for permission to appeal was refused. The respondent was not represented.
2. Meaning of sale. The agreement was made against the known background that the property was the only asset of an offshore special purpose company. In that context, the parties must have contemplated that a sale could be achieved by transferring the company’s shares. Interpreting the standard-form wording as confined to a transfer of legal title would make no commercial sense. The first proposed ground therefore had no realistic prospect of success.
3. Introduction and causation. The ultimate purchaser was organised through persons who had been introduced through the estate agents. Although the causal chain might be regarded as broken in an intellectual sense, it was not broken in any commercial sense. The agents had been instrumental in the purchase occurring and were consequently entitled to their commission.
4. The order of His Honour Judge Cowell dated 18 March 2010 therefore disclosed no arguable error warranting permission to appeal.

• Court of Appeal (Civil Division): On 21 July 2010 Lord Justice Jacob refused the renewed application for permission to appeal.
• Central London Civil Justice Centre: His Honour Judge Cowell’s judgment and order dated 18 March 2010 awarded the estate agents £188,000 commission, interest and costs.
• Permission stage: Moore-Bick LJ had previously refused permission on the papers.