Barton and others v Morris and another in place of Gwyn Jones

The court confirmed that where parties have agreed an express contingent payment, the absence of any express provision for a different contingency will generally mean no contractual entitlement arises in that contingency; rather than allowing unjust enrichment to rewrite the bargain, a court will imply only the minimum term necessary to give business efficacy, and will not award restitution where that would subvert the parties' express allocation of risk. Where appropriate, however, the law still recognises an implied default obligation to pay a reasonable charge for a requested successful introduction as a standard incident of such contracts, unless the express terms clearly negate it.

The High Court found that the parties had concluded an oral contract under which the claimant would be paid £1.2m only if the purchaser he introduced bought the property at £6.5m; the property instead sold for £6m, so the judge rejected both contract and unjust enrichment claims and assessed a hypothetical reasonable sum. The Court of Appeal allowed the claimant’s appeal and awarded a reasonable sum by way of unjust enrichment (or implied term). On further appeal to the Supreme Court the majority held that the express terms, as found, excluded a claim in unjust enrichment and that a term implying a reasonable fee could not be read into the agreement except to the minimum degree needed to prevent manipulation of price; accordingly the Court of Appeal’s order was set aside. The appeal arose from the liquidation context of Foxpace Ltd's insolvency proceedings, and the central issue was whether an unjust enrichment claim or an implied contractual term could bypass the parties’ express allocation of risk when the agreed contingency did not occur.

Disposition: (1) Appeal allowed; the order of the Court of Appeal dated 21 November 2019 is set aside.

1. Overall approach. Where parties have fixed by express term the circumstances in which payment is to be made, courts should be cautious about using unjust enrichment to rewrite those express allocations of risk. Unjust enrichment will not ordinarily be available to undermine a binding contractual allocation.

2. Contractual analysis. The judge’s factual findings established an express unilateral contractual obligation: payment of £1.2m if the purchaser introduced by the claimant bought Nash House for at least £6.5m. The absence of any express provision for sales at lower prices ordinarily leads to the inference that no entitlement arises in those circumstances unless (i) a term can be implied in fact (the officious bystander/business efficacy tests) or (ii) a legal incident of that class of contract requires a default rule.

3. Implication of terms in fact. The threshold for implying a term in fact remains strict following Marks and Spencer v BNP Paribas: the court will imply only what is necessary for business efficacy and what is so obvious that it goes without saying. On the facts the court concluded it was not possible to imply a term that the claimant would receive a reasonable fee where the sale occurred for less than the specified £6.5m: the evidence did not support what the parties would unhesitatingly have agreed and many commercial answers were plausible.

4. Terms implied by law / estate agent-type contracts. The court reviewed the line of estate agent and introducer cases and recognised that in some ordinary commission/introduction relationships the law implies a default obligation to pay a reasonable charge for a successful introduction. That default may operate as a legal incident of that class of contract or be reflected in statute (Supply of Goods and Services Act 1982 s.15). However, that default does not require courts to imply, on the facts of every case, a term inconsistent with the parties’ express bargain.

5. Unjust enrichment / failure of basis. The law of unjust enrichment requires (1) enrichment, (2) enrichment at the claimant’s expense, (3) an unjust factor (commonly described as failure of basis/failure of counter-performance), and (4) absence of a defence. There is a clear limit to allowing restitution where the parties have expressly allocated risk by contract: restitution should not be used to subvert the parties’ bargain. On this appeal the majority concluded that allowing unjust enrichment to provide relief would rewrite the contract and undermine the parties’ allocation of risk; hence the unjust enrichment claim failed.

6. Remedies and guidance. Courts should (a) prefer a narrowly tailored implication of a term necessary to prevent abuse (eg preventing a seller from manipulating price to defeat an agreed entitlement), (b) not infer broader implied rights of payment where the contract, as found, is a complete statement of the circumstances in which payment becomes due, and (c) treat statutory or common-law default rules as relevant but not overriding where they conflict with the parties’ express allocation.

7. Practical outcome. The trial judge’s finding that the contract made payment conditional on a sale at £6.5m was upheld as determinative. The Court of Appeal’s award based on unjust enrichment (or on an implied term) was set aside; the claimant’s contractual and restitutionary claims therefore failed on the facts as found.

8. Dissenting views summarised. Several dissenting judgments would have reached a different outcome: they considered that (i) an implied default obligation (by law) to pay reasonable remuneration for a successful introduction applied, or (ii) if not, unjust enrichment on the basis of failure of basis would have provided restitution, and that the express bargain did not exclude those default rules. Those dissents emphasised commercial expectations and the statutory/ common-law background (including s.15 of the 1982 Act and Devani v Wells) in favour of awarding a reasonable sum.

9. Orders. Appeal allowed (majority). The order of the Court of Appeal is set aside. Costs and remittal directions were left to be determined in accordance with the court’s usual practice (not elaborated in the judgment).

• Supreme Court – Appeal from the Court of Appeal allowed; judgment given 25 January 2023. [2023] UKSC 3
• Court of Appeal (Civil Division) – Appeal allowed; main judgment of Asplin LJ; [2019] EWCA Civ 1999; reported at [2020] 2 All ER (Comm) 652.
• High Court (Chancery Division) – First instance trial; HHJ Pearce found the oral contract payable only if sale at £6.5m and rejected unjust enrichment claim: [2018] EWHC 2426 (Ch).