Berezovsky & Anor v Edmiston & Company Ltd & Anor

A broker may establish entitlement to commission under the effective cause test even if the eventual buyer does not negotiate through the introducing broker. The question is whether the broker’s acts brought about the relationship between buyer and seller and materially caused the sale. An introduction may remain the dominant cause despite later negotiations or assistance by the seller, builder or another intermediary. The assessment is fact-sensitive. Where a commission agent is engaged under a contract providing for payment on the occurrence of a specified event, a quantum meruit claim is generally unavailable. A sub-broker has no directly enforceable contractual claim against the seller without evidence that the principal broker contracted on the seller’s behalf or that the seller knowingly accepted the sub-broker’s involvement.

The claimants sought declarations concerning commission allegedly payable after the sale of the super yacht Darius. Edmiston & Company counterclaimed for commission, asserting that its introduction of the Al Futtaim family was the effective cause of the sale. Merle Wood & Associates, which had acted as sub-broker, also sought commission directly from the claimants in contract or on a quantum meruit.

The principal issues were whether Edmiston & Company was the effective cause of the sale and, if so, the reasonable commission payable. The court also determined whether MWA had a directly enforceable right against the claimants.

1. Effective cause. The court rejected the submission that a broker who introduces the eventual buyer must also conduct at least part of the ensuing negotiations. The established test asks whether the broker’s acts really brought about the relationship of buyer and seller. Its application depends on the facts of the individual case.
2. Edmiston & Company, acting through MWA and Captain Wrigley, introduced the Al Futtaim family to the Darius. That introduction generated the strong interest which led to the visit to the shipyard, the subsequent dealings with the builder and the negotiations resulting in the sale. The builder’s later assistance did not break the chain of causation or constitute an intervening cause of greater potency.
3. The court also took account of Captain Wrigley’s recommendation. His undisclosed commission arrangement did not require the court to disregard its causal effect, particularly as the case did not involve illegality and rescission of the purchase was virtually inconceivable.
4. Commission. The court accepted that Mr Edmiston had indicated a willingness to accept 2.5% if a net price of €300 million were achieved. That did not imply a lower rate if the net price fell below that figure. Having regard to the actual sale price and the comparable evidence, the appropriate commission was 3% of €240 million, namely €7.2 million.
5. MWA’s claim. There was no evidence that Edmiston & Company contracted with MWA on the claimants’ behalf, or that the claimants knowingly accepted MWA’s involvement. No contract therefore arose between MWA and the claimants. A quantum meruit was also unavailable because the contractual arrangements allocated the risk by reference to commission payable on the occurrence of the relevant event.
6. Judgment was entered for Edmiston & Company against both claimants in the sum of €7.2 million. The claimants’ claims against Edmiston & Company were dismissed. The claimants obtained a declaration of non-liability to MWA, and MWA’s counterclaim was dismissed.