Wells v Devani

An estate-agent contract is not necessarily incomplete because the parties omitted expressly to identify the event triggering commission. The agreement must be assessed objectively from their words, conduct and context. Where the bargain is in substance to find a purchaser, the ordinary understanding is that commission becomes payable on completion from the sale proceeds, unless the parties agree otherwise.

A term may alternatively be implied where it is necessary for business efficacy or so obvious that it goes without saying, provided the parties intended legal relations. Under section 18(6) of the Estate Agents Act 1979, non-compliance with disclosure duties makes the contract unenforceable without a court order. Dismissal depends on prejudice and culpability considered together; any subsequent reduction or discharge must compensate for prejudice.

An estate agent claimed commission of 2% plus VAT after introducing a housing trust which purchased flats owned by the vendor. The parties’ initial telephone conversation established the agency and commission rate but did not expressly identify the event triggering payment. The agent also failed to provide the information required by section 18 of the Estate Agents Act 1979 in the prescribed time and written form.

The trial judge held that a binding contract existed and that commission became payable on completion. He permitted enforcement despite the statutory breach but reduced the commission by one-third. The Court of Appeal, by a majority, held that the omission of an express trigger left the bargain incomplete: [2016] EWCA Civ 1106; [2017] QB 959. It unanimously upheld the trial judge’s treatment of the statutory breach.

The central questions in Wells v Devani were whether the oral agreement was sufficiently complete and certain, and whether the statutory non-compliance required the commission claim to be dismissed or the liability discharged.

1. Disposition. The Supreme Court unanimously allowed the estate agent’s appeal and dismissed the vendor’s cross-appeal. The trial judge’s order permitting enforcement of the contract, subject to a one-third reduction of the commission to £32,900 inclusive of VAT, was restored. Lord Kitchin gave the principal judgment, with which Lord Wilson, Lord Sumption and Lord Carnwath agreed. Lord Briggs agreed with both the order and Lord Kitchin’s reasons.

2. Contractual interpretation. Whether a binding contract exists, and its terms, must be assessed objectively from the parties’ words and conduct. The parties intended legal relations and agreed that the agent would find a purchaser for a commission of 2% plus VAT. Although they did not discuss the precise trigger for payment, the natural and only sensible interpretation was that commission became payable on completion from the sale proceeds. The omission of an express trigger therefore did not make the bargain incomplete. The established reasoning in Fowler v Bratt [1950] KB 96, Midgley Estates v Hand [1952] 2 QB 432 and Dennis Reed Ltd v Goody [1950] 2 QB 277 was endorsed.

3. Implied term. Alternatively, a completion-based trigger could be implied. There is no general rule preventing implication of a term which makes an intended agreement sufficiently certain or complete. The term must be necessary for business efficacy or so obvious that it goes without saying; reasonableness alone is insufficient. The interpretation and implication exercises remain distinct, consistently with Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72. Scancarriers A/S v Aotearoa International Ltd [1985] 2 Lloyd’s Rep 419 was confined to its particular context. Any general and unqualified contrary reading of Little v Courage Ltd (1995) 70 P & CR 469 was rejected.

4. Statutory enforcement. The agent breached section 18 of the Estate Agents Act 1979 and regulations 3 and 4 of the Estate Agents (Provision of Information) Regulations 1991. The contract was therefore unenforceable without an order under section 18(6). Under paragraph (a), prejudice and culpability must be considered together and in the round when deciding whether dismissal is just. Exceptionally, culpability alone may be sufficiently serious to justify dismissal, but this case did not reach that level.

5. If the application is not dismissed, section 18(6)(b) permits reduction or discharge only to compensate for prejudice; culpability and wider considerations of justice have no role at that stage. The trial judge’s minor evaluative errors could not have affected his decision. An appellate court need not set aside and repeat a multifactorial evaluation merely because it identifies an immaterial error.

1. United Kingdom Supreme Court: In Wells v Devani [2019] UKSC 4, the court unanimously allowed the agent’s appeal, dismissed the vendor’s cross-appeal and restored the trial judge’s order.
2. Court of Appeal: By a majority, the court allowed the vendor’s appeal and held that no binding contract had been formed because the commission trigger was unspecified. It unanimously upheld the trial judge’s decision under section 18 of the Estate Agents Act 1979 and dismissed the agent’s cross-appeal against the fee reduction: [2016] EWCA Civ 1106; [2017] QB 959.
3. Central London County Court: HH Judge Moloney QC held that a binding oral contract existed, with commission due on completion following an effective introduction. He permitted enforcement despite statutory non-compliance but reduced the commission by one-third to £32,900 inclusive of VAT.