Wells v Devani

For an estate-agent commission agreement to be binding, the parties must agree the event that triggers entitlement to commission. A court cannot create a contract by implying that event into an otherwise incomplete bargain. Interpretation of the parties’ words comes before implication of additional terms. Where statutory information duties are breached under Estate Agents Act 1979, the contract is unenforceable unless the court orders enforcement. In deciding whether to dismiss the claim, prejudice and culpability must be considered together and in the round. Any reduction after enforcement may compensate only for prejudice. The appeal was allowed because no binding contract had been made, and the cross-appeal was dismissed.

Mr Wells marketed flats through Shaw & Co and contacted Mr Devani, an estate agent, about finding a purchaser. The trial judge found that they orally agreed a 2% plus VAT commission but did not agree the event triggering payment. He implied a term that commission was due when an introduced purchaser completed the purchase, held the contract enforceable subject to the Estate Agents Act 1979, and reduced the fee by one third.

Mr Wells appealed liability. Mr Devani cross-appealed the reduction and costs. The central issues were whether the oral arrangement was complete and how statutory non-compliance affected enforcement.

1. Disposition. The majority, comprising Lewison LJ and McCombe LJ, allowed the appeal because no concluded contract existed before Newlon was introduced or made its offer. The cross-appeal was dismissed.
2. Contract formation. The event triggering an estate agent’s entitlement to commission is essential. Commission agreements vary, and the entitlement depends on the event specified by the parties: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108. The court cannot use implication of terms to turn an incomplete bargain into a contract: Scancarriers A/S v Aotearoa International Ltd [1985] 2 Lloyd’s Rep 419; Little v Courage Ltd (1995) 70 P & CR 469. The judge had found that the triggering event was not discussed. His implied term therefore created, rather than completed, the bargain.
3. Interpretation and implication. Construction of express words and implication of additional terms are distinct processes. Construction must be completed before implication is considered: Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] UKSC 72. The court rejected an attempt to supplement the trial judge’s findings by treating a witness statement as the contractual record.
4. Statutory alternative. Lewison LJ held that the agent’s failure to comply with section 18 of the Estate Agents Act 1979 made the contract unenforceable without an enforcement order. On the alternative statutory analysis, prejudice and culpability under section 18(6)(a) had to be considered together and in the round. Under section 18(6)(b), reduction was confined to compensation for prejudice. The trial judge’s value judgment permitting enforcement, reducing the fee by one third, and reducing costs was not shown to be wrong.
5. Dissent. Arden LJ considered that the judge had found an agreement for Mr Devani to find a purchaser for 2% plus VAT. She regarded the trigger as a matter of interpretation and considered that completion supplied the relevant event. She would have dismissed the appeal, while agreeing with Lewison LJ on section 18.

1. Court of Appeal (Civil Division): By a majority, allowed Mr Wells’s appeal on contract formation and dismissed Mr Devani’s cross-appeal on the statutory reduction and costs. Arden LJ would have dismissed the appeal.
2. Central London County Court: His Honour Judge Moloney QC held that a binding oral contract had been made, implied a term making commission payable on completion by an introduced purchaser, permitted enforcement subject to the Estate Agents Act 1979, and reduced the fee by one third.