ALL OR NOTHING? THE £1.2 MILLION QUESTION
Neil Vickery discusses the recent Supreme Court case of Barton v Morris  UKSC 3 which looked at the question of whether a commission was due where the only terms explicitly agreed for its payment had not been met.
Mr Barton had twice been involved in contracts to buy a property in Northolt from its owner Foxpace. Both contracts had failed to complete and Mr Barton had forfeited deposits of nearly £1.2 million.
Mr Barton subsequently orally agreed with Foxpace, that Foxpace would pay him £1.2 million in the event that the property was sold for at least £6.5 million to a purchaser introduced by Mr Barton. This fee was acknowledged to be very considerably more than a usual fee for effecting such an introduction.
The property sold to a purchaser introduced by Mr Barton, but for only £6 million.
Was Mr Barton entitled to any payment? No, said the Judge. Yes, said the Court of Appeal. No said the Supreme Court by 3 to 2. Mr Barton thus won the judicial numbers’ game by 5 to 4, but lost the case.
There were two possible routes to victory for Mr Barton: contract or unjust enrichment.
The contractual route failed. Although there was no explicit agreement as to what should happen if there was a sale at less than £6.5 million, the majority concluded that on a proper construction, an agreement to pay £1.2 million for a sale at £6.5 million or above also meant that it was agreed that there should be no remuneration payable if the sale was below that figure. Thus there was no scope for an implied term. The majority in any event went on to reject such an argument. A term that reasonable (or some other) remuneration should be payable in the event of sale at less than £6.5 million was neither so obvious that it went without saying, nor was it necessary for business efficacy. Nor was this a contract (such as those between landlord and tenant or employer and employee) into which a term should be implied by law.
Unjust enrichment also failed. Such a claim required a claimant to prove (in the absence of any defence established by the defendant, such as change of position) that the defendant had been enriched, unjustly, and at the claimant’s expense. It was common ground that Foxpace had been enriched at Mr Barton’s expense (by having a purchaser introduced for no fee) and that there was no defence available to Foxpace. But was the enrichment unjust? No, according to the majority. The alleged unjustness was said to be founded on a failure of “basis” that is, that the basis on which Mr Barton had provided his services, viz. that the property would be sold for at least £6.5 million and he would be paid £1.2 million, had failed to materialise. The majority did not consider that such a basis had been established and thus there could be no failure of basis. In any event on the majority’s construction of the agreement the contract excluded any unjust enrichment claim since the parties were found to have agreed that no payment would be due for a sale below £6.5 million.
Lord Leggatt and Lord Burrows, dissenting, thought that a term as to reasonable remuneration should be implied by law and was not excluded by the express terms of the contract. On their analysis an agreement to pay £1.2 million if a sale at £6.5 million was achieved, did not mean that no remuneration would be paid if the sale was for less. The parties had simply made no provision for that eventuality, which allowed a term to be implied by law to fill the void. Lord Burrows (a well-known academic expert on unjust enrichment) would also have allowed the unjust enrichment claim if there was no implied term.
The decision contains an interesting discussion of the law as to the implication of contractual terms and the scope of unjust enrichment. Ultimately the case turned on the majority’s view that by agreeing to be paid an unusually large fee for a sale at £6.5 million or above, Mr Barton had also agreed to receive nothing if the sale was for less. While that conclusion is at least debatable (as 5 senior judges found it to be ) it is a salutary reminder that it is safer to deal explicitly with all eventualities in a contract than leave it to lawyers’ arguments.
The full judgment can be found here.
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