Barton v Morris (2023) – No finders keepers with this finder’s fee

Barton & Others V Morris & Another (in place of Gwyn Jones [deceased]) [2023] UKSC 3

Introduction

The judgment in the case of Barton v Morris was handed down by the Supreme Court on January 25^th, 2023. The main issue the court was asked to answer was: When a seller of the property agrees to pay a specific fee to a person who has introduced a buyer, when the property sells for less than the agreed amount, is the agreement still valid? The Supreme Court (by a three to two majority) decided that the loss is to lie where it falls, and the person who introduced the buyer would be entitled to nothing. This case’s significance lies mainly in its effect on unjust enrichment claims and the scope of terms in contracts. Additionally, despite this area of law being a well-trodden path,  there were still conflicting opinions among different judges in various courts. 

Facts of the case

• Foxpace Ltd, a real estate company, was the owner of ‘Nash House’ in London, and they wanted to sell it.

•  Mr Barton had previously tried to purchase ‘Nash House’ on two separate occasions and during these attempts lost approximately £1.2 million through a combination of lost deposits and general administrative costs.

• However, Mr Barton then found an interested buyer with a price of £6.5 million. Mr Barton proposed that Foxpace pay him a finder’s fee of £1.2 million, using his previously incurred costs as justification for the figure.

High Court

• It was viewed by HHJ Pearce in the High Court that Foxpace and Mr Barton entered into an oral agreement that if the property sold for £6.5 million by a buyer that Mr Barton introduced then he would be owed £1.2 million.

• The buyer initially offered £6.5 million, However, due to implications with the HS2 rail link, the price was then negotiated down to a settled price of £6 million.

• After the sale, Mr Barton requested his £1.2 million fee, but Foxpace refused and offered a £400,000 goodwill payment – which was rejected by Mr Barton.

• The trial judge found there was no obligation for Foxpace to pay Mr Barton because the purchase price was less than the £6.5 million – so the contract was silent.

• Mr Barton attempted to argue that there was an implied contractual term, but this was dismissed by the court.

• The judge found that Foxpace were enriched by an estimated £435,000 at the expense of Mr Barton but believed it was not unjust as the terms of the contract would be undermined. Therefore, his claim failed.

Court of Appeal

• It then fell to the Court of Appeal where they unanimously allowed the appeal and subsequently decided that Mr Barton was entitled to the £435,000. The justification for this was that the trial judge was incorrect to decide that a claim of unjust enrichment would undermine the terms of the contract. This was because the terms of the contract between the parties were silent on whether the property’s purchase price would be less than the price agreed.

• Another of the trial judges believed that Mr Barton was owed £435,000 due to an implied term argument.

Supreme Court

• The case was then referred to the Supreme Court where Lady Rose gave the leading judgment, with Lord Briggs and Lord Stephens agreeing.

• The appeal was accepted for two reasons:

• The claim of unjust enrichment is not valid as there is no ‘failure of basis’, where a benefit has been conferred on a joint understanding that the recipient’s right to retain it is conditional.

• There was no implied term set out in the contract that Mr Barton would be paid a reasonable fee if the purchase price was less than expected either at common law or under s15 of the Supply of Goods and Services Act 1982.

Application

Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 sets out the test which was used to determine whether a term could be implied on the basis of business efficacy, or if it was too obvious to ignore. Lady Rose stated that if there was to be an implied term found between Mr Barton and Foxpace, this would contradict their contract’s express terms. Set out in the agreement was Mr Barton would be paid £1.2 million if ‘Nash House’ sold for £6.5 million, and this would only occur if the contractually agreed trigger for payment occurred.

Lady Rose then went on to dismiss Mr Barton’s argument that an implied term was necessary to give business efficacy to the contract because:

• An implied term that Foxpace would not negotiate a lower sale price which in turn would mean they can avoid paying the £1.2 million fee would be all they needed to do to avoid the result of Mr Barton losing his fee due to the sale being less than £6.5 million.

• There is nothing unlawful or uncommercial about a party agreeing to receive a higher payment to meet a condition, therefore taking the risk that he will receive nothing if the condition is not met.

• It would be uncommercial if the agreement was set out where Foxpace have agreed to pay Mr Barton an inflated fee if the property sells for £6.5 million and a reasonable fee if the sale price reduces.

The argument that section 15 of the Supply of Goods and Services Act 1982 is applicable, thereby creating a term which entitles Mr Barton to a reasonable fee, was then dismissed by Lady Rose. Her reasoning was that the consideration for the introduction was determined by the contract. It is also doubtful whether this is a “relevant contract” within the meaning of section 15 SGSA, since section 12(1) defines this as meaning a contract under which the supplier agrees to carry out a service. Here Mr Barton did not come under a contractual obligation to provide the introduction to Foxpace, as this was a unilateral contract by which his making of the introduction was what brought the contract into existence.

Mr Barton attempted to rely on Devani v Wells [2019] UKSC 4 and Firth v Hylane Ltd [1959] EWCA Civ J0211-3 (vLex), two cases which held that when there was an implied term, there will be a reasonable fee paid to the estate agent for introducing a purchaser to the seller. Lady Rose then dismissed this chain of reasoning because:

(1) Mr Barton was not an estate agent.

(2) The transaction he found himself in was a one-off.

(3) The agreed £1.2 million fee was not calculated based on the efforts or costs of an estate agent but rather on Mr Barton trying to recover his losses.

Lastly, Mr Barton’s claim of unjust enrichment, due to there being a common assumption by both parties that ‘Nash House’ would sell for £6.5 million, was dismissed by Lady Rose. This was because the parties did not have a conversation about what would happen if the property were to sell for less than £6.5 million and there was no mention in the contract. 

Conclusion

Despite the facts of the case being simple the majority and minority’s decisions are completely different. This is shown with both Lord Leggat and Lord Burrows (the dissenting minority) arguing that a term is to be implied at common law, and that Mr Barton was entitled to reasonable remuneration, despite the sale of ‘Nash House’ being less than the original proposed price, due to the type of contract they had entered into. Furthermore, Lord Burrows also stated that Mr Barton’s unjust enrichment claim was legitimate and would have filled the gap in the contract. The minority took the view that the silence in Mr Barton and Foxpace’s contract should not have been taken as such, whereas the majority viewed that the silence indeed should be taken as clear silence. Although the Supreme Court did arrive at a decision, it is clear that there is substantial uncertainty and difference in judicial opinion.

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