Neutral Citation Number: [2011] EWHC 2946 (QB)
Case No: HQ11X00012
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 21/11/2011
Before :
HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.
(sitting as a Judge of the High Court)
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Between :
FOXTONS LIMITED Claimant
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(1) DESMOND O’REARDON
(2) DIANA O’REARDON
Defendants
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Andrew Davis (instructed by Foxtons Ltd. Legal Department) for the claimant
Sarah Lippold (instructed by Healys LLP) for the defendants
Hearing dates: 24, 25, 26 October 2011
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Approved Judgment I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this
Judgment and that copies of this version as handed down may be treated as authentic.
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Approved Judgment
Foxtons Ltd. v. O'Reardon
His Honour Judge Richard Seymour Q.C. :
Introduction
1. The claimant in this action, Foxtons Ltd. (“Foxtons”) carries on business as an estate
agent.
2. Until completion of the sale of the property to Ealing Land Ltd. (“Ealing”) on 13
June 2011 Mr. and Mrs. Desmond O’Reardon were the freehold owners of the
property known as and situate at 63, Christchurch Avenue, London NW6 (“the
Property”).
3. In 2007 Mr. and Mrs. O’Reardon retained Foxtons to seek prospective purchasers for
the Property.
4. The case for Foxtons in this action was that the retainer was agreed in writing in a
document (“the Standard Form”) in a standard form used by Foxtons which
comprised two A5 pages. The front sheet bore the name “Foxtons” and the legend
“Terms & Conditions”. It included space for the completion of the name of a
“Client”, space for the completion of the “Property Address” in relation to which
Foxtons was being instructed, and spaces for various other pieces of information to be
inserted. The copy of the Standard Form adduced in evidence was completed to show
the names of Mr. and Mrs. O’Reardon, the address of the Property as that in respect of
which Foxtons were to seek purchasers, an indication that Foxtons was being
instructed on a sole agency basis at a commission of 2.5% plus Value Added Tax, and
a note that the asking price in respect of the Property was to be £2,500,000. On the
face of the Standard Form it was signed by Mrs. O’Reardon “for and on behalf of
seller” and by Mr. Tim Jackson “for and on behalf of Foxtons”. Each signature was
dated 19 June 2007. It was not in dispute in this action that the Standard Form had,
indeed, been signed by Mrs. O’Reardon and by Mr. Jackson. Ultimately, I think, there
was no dispute that the date upon which at least Mrs. O’Reardon signed the Standard
Form was 19 June 2007, but, during the course of the evidence, certainly of Mr.
O’Reardon, there seemed to be a degree of equivocation upon the date. Mr. Jackson,
at the time employed by Foxtons as sales manager of the branch (“the Hampstead
Branch”) at 47, Heath Street, London NW3, but no longer employed by Foxtons at
the date of the trial, was called to give evidence on behalf of Foxtons. He was firm
that he had signed the Standard Form on 19 June 2007. The position of Mr. and Mrs.
O’Reardon was that Mr. Jackson did not sign in the presence of either of them, so
they took no stance on the date of his signature.
5. The second page of the Standard Form bore the name of Foxtons at the top, followed
by the words, “Terms and Conditions of Business, Fees and Expenses” (“the
Terms”). The Terms included the following provisions which were material to the
issues in this action:-
“Sole Agency
Where Foxtons acts on your behalf as your sole agents, you
will be liable to pay remuneration to us, in addition to any
other costs or charges agreed, if at any time unconditional
contracts for the sale of the property are exchanged:-
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Foxtons Ltd. v. O'Reardon
with a purchaser introduced by us during the period of our sole
agency or with whom we had negotiations about the property
during that period; or with a purchaser introduced by or
offering via another agent during that period. …
Fees payable
Foxtons fees are calculated as a percentage (%) of the sale
price achieved plus VAT at the prevailing rate. For all sole
agency instructions this percentage is at a rate of 2.5%. …
Time and Payment of Fees
All Foxtons fees become due and payable upon exchange of
contracts. However, and at the discretion of Foxtons, fees may
be paid out of completion monies. On your signing the enclosed
copy letter you are hereby authorising your lawyers to pay our
fees out of the sale proceeds.
Interest
We reserve the right to charge interest on any amounts still
outstanding twenty-eight (28) days after Foxtons fees are first
demanded. The prescribed rate of interest shall be 2% above
the HSBC base rate as at the date they are first demanded and
payable from that date. …
ENTIRE AGREEMENT AND VARIATIONS
Each party confirms that these conditions constitute the entire
agreement between the parties. Each party confirms that it has
not relied upon any representation not recorded in this
agreement inducing it to enter into this agreement. No
variation of this agreement will be valid unless confirmed in
writing by the Chief Operating Officer of Foxtons.”
6. On about 20 July 2007 Mr. Maurice Leonard, a gentleman introduced to the Property
through Foxtons, offered to pay the sum of £3,300,000 to purchase it. Mr. and Mrs.
O’Reardon accepted that offer, subject to contract.
7. By a contract (“the Contract”) in writing dated 1 August 2007 Mr. Leonard, Mr.
Andrew Kershaw and Mr. John Haughey agreed with Mr. and Mrs. O’Reardon to
purchase the Property unconditionally for the sum of £3,300,000. By clause 20 of the
Contract it was provided that:-
“Completion shall take place upon the Seller giving the Buyer
28 days notice of a Completion Date, such notice not to [be]
given before six months have elapsed from the date of this
contract. If no such notice is given by the Seller then the
Contract will complete in 12 months from the date hereof.”
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Foxtons Ltd. v. O'Reardon
8. Following the exchange of the parts of the Contract, under cover of a letter dated 2
August 2007 Foxtons despatched to Healys LLP (“Healys”), the solicitors acting on
behalf of Mr. and Mrs. O’Reardon in respect of the sale of the Property, an invoice
dated 1 August 2007 in the sum of £82,500 (that is, 2.5% of £3,300,000), plus Value
Added Tax at 17.5% of £14,437.50, making a total of £96,937.50. That sum was not
paid by or on behalf of Mr. and Mrs. O’Reardon, and was the sum claimed by
Foxtons in this action, together with interest. A formal demand for payment was
made by a letter dated 21 October 2008 written to Mr. and Mrs. O’Reardon by the
Legal Department of Foxtons. By that letter payment was demanded within seven
days.
9. The sale of the Property to Mr. Leonard, Mr. Kershaw and Mr. Haughey did not
proceed smoothly, and was ultimately aborted. Contracts for the sale of the Property
at a price of £1,800,000 were exchanged between Mr. and Mrs. O’Reardon and Ealing
on 10 March 2011.
10. This action was commenced by a claim form issued on 26 May 2009. A Defence was
served on 24 July 2009. That Defence made no reference to the matter which, by the
date of the trial, appeared to be the principal relevant disputed allegation of fact raised
in this action on behalf of Mr. and Mrs. O’Reardon. That matter was first raised in an
Amended Defence and Counterclaim dated 16 March 2010, served following an
unsuccessful attempt on the part of Foxtons to obtain summary judgment on the
claim. The critical allegation, added to paragraph 3 of the existing Defence, was:-
“It was a further express term of the contract, agreed orally,
that the purchaser to be introduced by the Claimant must be a
“cash buyer”, being a purchaser with sufficient funds readily
available to purchase the Property.”
11. That allegation was denied on behalf of Foxtons in a Reply and Defence to Amended
Defence and Counterclaim at paragraph 5. It has to be said that the contention that it
had been expressly agreed between Mr. and Mrs. O’Reardon and someone at Foxtons
that Foxtons would only introduce a “cash buyer” seemed, without more, improbable.
Given the asking price of £2,500,000, what one was being invited to postulate as
having been agreed was that only someone with that amount of ready cash was to be
introduced as a possible purchaser. It appeared unlikely that someone with assets
sufficient to fund a purchase at the level of the asking price would simply have that
amount lying in a bank account. Moreover, the suggested stipulation did not look as if
it was one which a mere estate agent could perform. An estate agent was not in a
position to insist upon full and frank disclosure of assets on the part of a prospective
purchaser. All the estate agent could do, at best, would be to enquire of the
prospective purchaser as to his or her asset position, and pass on what the estate agent
was told. How useful that would be, when the acid test of ability to purchase would
appear to be whether the prospective purchaser was prepared to enter into an
unconditional contract to buy, may be doubted.
12. Given the apparent significance of the allegation of an express term concerning a
“cash buyer”, it is convenient to consider the evidence adduced on that point next.
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Foxtons Ltd. v. O'Reardon
The evidence about a “cash buyer”
13. As I have noted, the position of Foxtons was that it had not been agreed that it would
only introduce as prospective purchasers of the Property a “cash buyer”.
14. The evidence of discussion about a “cash buyer” took the form of what Mrs.
O’Reardon asserted in two witness statements, and the evidence of Mr. O’Reardon.
There was no reference to a “cash buyer” in the Standard Form or in any document
contemporaneous with the signing of the Standard Form.
15. Given the importance of the point to her case, it was surprising that in her first witness
statement, dated 16 March 2010 and made in answer to the application for summary
judgment, Mrs. O’Reardon was not more specific in the account which she gave,
certainly as compared to what she said in her second witness statement, dated 15 July
2011 and prepared for the purposes of the trial. In her first witness statement Mrs.
O’Reardon really gave no detail at all. What she said was:-
“8. Accordingly, in June 2007 we decided to engage Foxtons
and instructed them to find us a cash buyer for the Property as
we wanted a straightforward sale without any complications.
This was extremely important to us and it was agreed that this
was an express term of the contract we entered into with
Foxtons. We did not simply instruct Foxtons to find us a buyer
(which we could have done ourselves) but rather a cash buyer,
which is one of the reasons that we agreed to pay such high
commission of 2.5%.
9. We informed Foxtons that we wanted to exchange contracts
quickly so that we had the comfort of knowing that I would be
left in a financially secure position to enable me to move out of
the Property if my husband did not survive his operation.
However, as a result of my husband‟s forthcoming transplant
and the unknown length of his hospital stay (if the operation
was successful), we needed some flexibility regarding the
completion date and a period of up to a year between the
exchange of contracts and completion. We would simply have
been incapable of undertaking a house move for a considerable
period of time after my husband‟s operation. This was made
absolutely clear to Foxtons and there is no doubt that they were
fully aware of our situation and needs.
10. As set out in paragraph 5 of Mr. Kataora‟s witness
statement, on 19 June 2007, I signed an agreement with
Foxtons for them to act as our estate agent in relation to the
marketing of the Property for sale and all associated services
(“the Agreement”). This was presented to us by Foxtons as a
standard contract with the only point of emphasis being that
commission was to be charged at a rate of 2.5% of the sale
price achieved plus VAT on a sole agency basis (details of
which were on the first page). Foxtons did not give us the time
or opportunity to read and digest the detail of the Agreement as
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Foxtons Ltd. v. O'Reardon
their representative was anxious to leave our house. In addition
the size of print was small which would have made it
impossible for either of us to read quickly. …”
16. The point about the print size was a little difficult to follow. The copy of the Terms
put in evidence as part of the Standard Form seemed to me to be perfectly legible.
17. In the second witness statement of Mrs. O’Reardon a considerably fuller account of
her dealings with Foxtons was set out. It included:-
“6. On or around 14 June 2007, Gary Reichman and another
representative from Foxtons attended 63 Christchurch Avenue,
London NW6 7BX (“the Property”) for a long meeting with us.
Mr. Reichman took the lead for Foxtons in our discussions.
7. … Mr. Reichman initially suggested a value of £1,800,000
for the Property but we told him and his colleague that we
expected them to sell the Property for more than this and asked
them to offer the Property for sale at £2,500,000.
8. We spent a considerable amount of time explaining to Mr.
Reichman and his colleague that we were selling the Property
because of my husband‟s illness, pending transplant and the
need for a healthier environment. The full seriousness of my
husband‟s medical condition was brought home to us after a
meeting at the Hammersmith Hospital and we were very
concerned about his possible convalescence in a house that had
increasingly become a burden for us. My husband was also
concerned that, if anything happened to him, I would be left on
my own to deal with the sale of the Property and all the
attendant ramifications. The fact that my husband was
critically ill is recorded in Foxtons‟ notes at C2.
9. We told Mr. Reichman and his colleague that we were
already under a lot of stress which was about to intensify as a
result of my husband‟s forthcoming transplant. We said that we
had decided to retain an estate agent to act on our behalf in
our best interest in managing a safe sale of our Property in
such a manner so as to minimise our stress. We told them that
we needed the sale to go through smoothly and to be as
straight-forward as possible. We also made it very clear that
we would only be interested in a buyer who was financially
viable. My husband stated categorically that we would not be
interested in a buyer who required planning permission as a
condition of the purchase. We spent some time explaining this
to ensure that Mr. Reichman and his colleague realised why we
needed Foxtons‟ help and were, in turn, willing to pay what we
considered to be a higher rate of commission (2.5% of the sale
price) for this service (compared with that being charged by
other agents at the time). Indeed, we were not prepared to pay
a commission fee of as much as £60,000 on a £2,500,000 sale
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Foxtons Ltd. v. O'Reardon
for an estate agent to simply arrange some viewings and make
some telephone calls. We, therefore, relied on Foxtons to look
after our interests in finding us a buyer who was in a financial
position to complete the sale and expected Foxtons to take all
reasonable steps to ensure that any prospective buyers with
whom we contracted met this condition.
10. As set out at paragraph 9 of my First Statement, I wanted a
period of up to a year between the exchange of contracts and
completion. The reason for this was that I could not see how I
would be able to manage finding a new property, packing and
moving by myself whilst holding down a full-time job, visiting
my husband in hospital (over several weeks) and looking after
him after his transplant. My husband, on the other hand,
suggested a quick sale with the option of renting the Property
from the new owners whilst we looked for somewhere to buy.
Foxtons (I believe it was Mr. Reichman) said that this was
highly unlikely and so we decided on the long-term completion
option. I now question whether this advice from Foxtons was
correct since Ealing Land Limited to whom we eventually sold
the Property were amenable to our renting the Property from
them for a while. Why Foxtons did not consider the rental
option to be viable is unclear but, in reliance on such advice,
we decided to purchase a new property. If Foxtons had advised
us that my husband‟s suggestion was viable, we may well have
decided to rent from our buyers for a while whilst looking for a
new property, in which case the losses we have suffered would
have been significantly reduced.
11. On or around 19 June 2007, Mr. Reichman came back to
the Property on his own with Foxtons‟ contract for us to sign.
Due to my husband‟s precarious condition, Mr. Reichman and
I agreed that I should sign the contract, which I did. As set out
at paragraph 10 of my First Statement, this was presented to us
by Mr. Reichman as being a standard contract and he did not
give us the time or opportunity to read and digest the terms and
conditions as he was anxious to leave for another appointment.
12. My husband refers at paragraph 5 of his witness statement
to his conversation with Mr. Reichman regarding the contract
with Foxtons and, in particular, the fact that we would not be
liable to pay any commission if the sale to a buyer introduced
by them fell through. I was at the front door at this point in time
(assuming that Mr. Reichman would follow me out) and so was
not present during this conversation which took place in the
kitchen area. However, once legal action was commenced
against us, we could not understand why Foxtons were
expecting to be paid commission since Mr. Reichman had led
my husband led [sic] to believe that the contract had a “no sale
no fee” clause in it.
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Foxtons Ltd. v. O'Reardon
13. I can confirm that we were not provided with a copy
(carbon copy imprint or otherwise) of the contract upon me
signing this as is asserted at paragraph 13 of Foxtons‟ Reply
dated 5 May 2011. Mr. Reichman said to us that he was not
authorised to sign the contract on behalf of Foxtons and so he
had to take it back to his office to arrange for it to be counter-
signed. I see now that the contract was signed and dated 19
June 2007 by Tim Jackson of Foxtons but, despite the fact that
Mr. Reichman said during his visit that a copy would be sent to
us, it never arrived. I do not understand why Foxtons refer to
us having been given a copy “to take away” as I signed the
contract at the Property.”
18. Mr. O’Reardon signed both of his wife’s witness statements to indicate that he agreed
with the contents of them. However, he also made a witness statement of his own
which he signed on 15 July 2011. For present purposes the interesting evidence in that
witness statement was paragraph 5:-
“As set out at paragraph 10 of Diana‟s First Statement and
paragraph 11 of Diana‟s Second Statement, on or around 19
June 2007, my wife signed the contract with Foxtons at the
Property. Just after she did so, I had a discussion with Gary
Reichman of Foxtons in the kitchen area. I specifically asked
Mr. Reichman whether we would still be liable to pay Foxtons
commission if a sale of the Property did not go through. Mr.
Reichman took the signed contract out of his jacket pocket and
told me (in a jovial manner) that we were covered in that
eventuality by a particular paragraph in the terms and
conditions to which he pointed. I could not read it because the
print was too small which I told Mr. Reichman at the time. Mr.
Reichman said that it did not matter as I would be able to study
the paragraph when they returned the signed copy to us, which
they never did. Mr. Reichman did, however, confirm that we
would not have to pay commission to Foxtons if the deal fell
through. He then hurried out of the house taking the contract
with him and saying that it needed to be signed by someone at
the office. My wife was not present during this discussion as
she had already gone to the front door.”
19. The alleged conversation between Mr. Reichman and Mr. O’Reardon did not feature
as an alleged misrepresentation in this action, or anything like that. The significance
of paragraph 5 of Mr. O’Reardon’s witness statement was simply that, on its face, it
specifically confirmed that Mr. Reichman had attended at the Property on 19 June
2007, that he had obtained the signature of Mrs. O’Reardon to the Standard Form, and
that he had taken the Standard Form as so signed away to obtain a signature from
someone else on behalf of Foxtons.
20. It appeared that, in June 2007, Mr. Gary Reichman had, indeed, been employed by
Foxtons as a sales negotiator at the Hampstead Branch, from which the affairs of the
Property were dealt with. Mr. Reichman was not called to give evidence on behalf of
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Foxtons Ltd. v. O'Reardon
Foxtons. The suggestion was that he was currently based in the United States of
America.
21. However, that did not mean that evidence was not called on behalf of Foxtons which
directly contradicted the evidence of Mrs. O’Reardon and Mr. O’Reardon concerning
Mr. Reichman, an alleged visit by him and a “colleague” on about 14 June 2007, and
the circumstances in which the Standard Form was signed, not only by Mrs.
O’Reardon, but also on behalf of Foxtons.
22. Miss Nisha Ghei, who was formerly employed by Foxtons, gave evidence on its
behalf which, I think, was not seriously in dispute. She had worked for Foxtons as
what was called a Move Consultant. One of the functions which she performed in that
role was answering the telephone to someone who rang up with a view to considering
engaging the services of Foxtons. Foxtons operated a number of electronic systems,
and by reference to the information contained in one of those she was able to say that
at 16:37 hours on 13 June 2007 Mr. O’Reardon telephoned and, as a result of her
conversation with him, Miss Ghei did two things. She made, using the access which
she had to his electronic diary, an appointment for Mr. Jackson to call at the Property
at 17:00 hours on 19 June 2007. She also sent Mr. Jackson an e-mail at 20:01 on 13
June 2007. In the e-mail she wrote:-
“Hi Tim, Canvassing response 13/07/2007 re: demand for
property. This has been sought after for it‟s [sic] development
potential. Didn‟t give me much indication as to why he is
thinking of moving or why [sic]. Property is on 0.3 acres of
land. 8 bed. Detached house. 2 bath. 4 receptions. Kitchen.
Over 3 floors. Garden. Plenty of parking available. When:
don‟t know. Why: again don‟t‟ know. Access: vendor will be
there to let you in. Price: has been offered well over £1.2 mil.
Decision maker: YES. Sales valuation booked with Tim Jackson
for 19/06/2007 at 17:00. Thanks, Nisha.”
23. Miss Sarah Lippold, who appeared on behalf of Mr. and Mrs. O’Reardon, did not
suggest to Miss Ghei that her account of her involvement in making the arrangements
of which she spoke was in any way inaccurate. Miss Lippold simply put to her, and
she accepted, that the arrangements which she had made could have been altered
subsequently. Another record of which a copy was put in evidence indicated that in
fact the appointment had not been changed. That record was called “Valuation
Appointment History” and noted only the appointment originally made by Miss Ghei.
24. Mr. Jackson prepared a witness statement for the purposes of this action, having had
the opportunity, he told me, of refreshing his memory from the records maintained by
Foxtons. In his witness statement Mr. Jackson said, so far as is presently material:-
“2. I first met Mrs. Diana O‟Reardon in June 2007. She had
asked Foxtons to appraise her property at 63 Christchurch
Avenue, NW6 7BL, owned jointly with her husband Desmond,
for sale. I had not taken the first call directly but someone [in
fact Miss Ghei] at Head Office had received a response to a
canvassing letter and I was given that lead along with basic
details. As I recall, these were that here was a large property in
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Foxtons Ltd. v. O'Reardon
NW6 that, owing to its plot size and location, could be right for
a developer. I set up an appointment [Mr. Jackson accepted in
cross-examination that in fact it was Miss Ghei who had set it
up] and met with Mrs. O‟Reardon a few days later. This
meeting took place at the property. I understand it is alleged
that she did not get enough time to consider the contract in
detail but she did not say that she wanted to do that before
signing it. However, I always made a point of talking my clients
through the key points of the terms and conditions including the
term length, sole and multiple agency rate and Mrs. O‟Reardon
showed no reticence in signing them and I felt clear that all
her questions had been addressed before I left the appointment.
Neither did Mrs. O‟Reardon call me after the appointment to
discuss any aspect of the agreement in particular.
3. She told me that Mr. O‟Reardon was seriously ill and I
understood this to be one of the reasons for the sale. As far as I
can recall, I did not meet Mr. O‟Reardon either then or
subsequently. She wanted a purchaser who could move quickly
but equally she was not in a rush and I think I recall that she
actually did want a period of time before completion took place
to find a smaller property. I remember that she said the sale of
the property would help with her pension fund (or words to that
effect). She volunteered that she had already received a private
offer for the property from a developer at £1.8M. At the time
the market was still rising so obviously she wanted as much for
the property as she could get but I got the impression she had
no real idea what it was worth. I advised we could market it for
£2.5M. I am absolutely clear that Mrs. O‟Reardon did not say
that what she wanted was a „cash‟ buyer. I am quite certain of
that because I advised her that in view of its potential, the
property was likely to prove particularly attractive to a
developer and that the sort of price we were now talking about
would only come from a developer, not from an owner
occupier. In my experience developers rarely paid entirely in
cash for this sort of purchase. If she had asked me to find a
cash buyer I would have told her the best price would be from a
developer and they would be unlikely to pay cash.
4. It was the nature of my role that I did not keep this
instruction to myself. As a manager, negotiators the property
details [sic]. Each of them began to look for suitable buyers. I
remember taking my senior negotiators on a view-check of the
property with Mrs. O‟Reardon‟s permission so that they
understood what they were selling. I felt clear that Mrs.
O‟Reardon had accepted that in order to get the highest price a
developer would buy the property and so it was that developers
were sought out and began to come forward. As I recall, we
ended up with a few asking price offers.”
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Foxtons Ltd. v. O'Reardon
25. In cross-examination Mr. Jackson told me that he had not changed the appointment
which Miss Ghei had made for him to visit the Property. It was put to him that Mrs.
O’Reardon signed the Standard Form in the presence of Mr. Reichman and that Mr.
Reichman brought it back to the office for Mr. Jackson to sign. Mr. Jackson denied
that. He also denied the suggestion that he had not met Mrs. O’Reardon before she
signed the Standard Form. Mr. Jackson said in cross-examination that there were no
visits to the Property by anyone from Foxtons, and in particular not by Mr. Reichman,
prior to the signature of the Standard Form. He explained that the normal procedure at
Foxtons, followed in this case, was for a visit to be made by a sales manager,
following a contact made by a potential client, so that a valuation of the property
could be carried out and a document in the form of the Standard Form could be
completed, if Foxtons was to be instructed. The next step was for the sales manager,
in all probability (at least in his case) the next morning, to inform the sales negotiators
about the new instruction. Until that happened, Mr. Jackson said, Mr. Reichman
would not have known anything about the Property or Mr. or Mrs. O’Reardon.
26. Mr. Nikit Pankhania was employed by Foxtons as a sales negotiator in 2007 and
remained so employed at the date of the trial. He was called to give evidence on
behalf of Foxtons. The principal contribution which Mr. Pankhania made to the
evidence was to confirm what Mr. Jackson said about the sales negotiators at Foxtons
only being told about the instructions concerning the Property after Mr. Jackson had
visited and obtained the signature of Mrs. O’Reardon to the Standard Form. In his
witness statement Mr. Pankhania said:-
“2. Shortly after he had met with the vendor of 63 Christchurch
Avenue („the property‟), the then sales manager, Tim Jackson
told a number of negotiators at our office about this property.
Alongside myself, Gary Reichmann [sic], RJ Peach, Justin
Chilton were told about this property and what could be done
with it, namely that it had development potential. Tim did not
say at any point that the vendor required a cash purchase only
and certainly the terms and conditions the vendors had signed
had not been endorsed so as to make this an express
requirement. If this had been a stipulation then it would have
been recorded on BOS against the property details either on
the viewing card, or in the viewing arrangements section on the
instruction card.
3. Shortly after that we as a group viewed the property (we call
this a „viewcheck‟) when we met with the vendor Mrs.
O‟Reardon. I remember being told that Mr. O‟Reardon was
very ill; we were given medical hand-wash which we applied
before we went in to the property. We did actually meet Mr.
O‟Reardon at the property in one of the rooms upstairs. We
exchanged pleasantries and did not really talk much as he was
notably unwell and short of energy. We shook hands and
looked around. She showed us around the house and the
garden. The whole appointment must have lasted no more than
about 15-20 minutes with quite some of that time being spent in
the garden (this was not an appointment where we sat down
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Foxtons Ltd. v. O'Reardon
with cups of tea or anything like that). There was not much
dialogue between us but I asked my standard questions which
were where they were moving to; what sort of delay in
completion she had in mind, and why they were moving. She
thought about a year would be a sufficient delay. She didn‟t
know at that point where they were moving to (although the
delay was because of her husband‟s illness and I gather it was
to allow sufficient time for him to become well enough to
manage the move or for a related reason) but the last answer
was that the sale was needed to pay for Mr. Reardon‟s [sic]
ongoing healthcare. We touched on possible figures: she asked
me whether we could really get that much for the property – I
cannot recall precisely what figure we mentioned but I do
remember we were optimistic about achieving that level which,
to the best of my recollection was £2.5M. At the end of the
appointment we thanked her for her time and it was left that we
would call her with possible buyers. In fact, I then sat in my car
and made some calls whilst outside the property. These were to
developers to whom the property was suited and would be the
best buyers of this type of property; a simple owner occupier
sale was unlikely to produce as high an offer price.
4. I am absolutely certain that Mrs. O‟Reardon did not mention
anything whatsoever about requiring a cash buyer only.”
27. It was obvious, from the evidence which I have rehearsed, that the contrast between
the accounts of Mrs. O’Reardon and Mr. O’Reardon, on the one hand, and those of
Mr. Jackson and Mr. Pankhania, on the other, was stark. The two different accounts
could not be reconciled. If Mr. Jackson and Mr. Pankhania were correct in what they
said there was just no possibility of Mr. Reichman having visited the Property before
the visit of Mr. Jackson. It appeared to be being contended that it was one of the
things which Mr. Reichman said on the occasion of his alleged visit on or about 14
June 2007 that amounted to the agreement of the express term relied upon.
28. I was impressed by Mr. Jackson as a witness. He seemed to me to give his evidence
carefully, and what he said was supported by such few relevant contemporaneous
documents as there were, as well as by the evidence of Miss Ghei and that of Mr.
Pankhania. As I have noted, the evidence of Miss Ghei was not really challenged. Mr.
Pankhania was cross-examined at some length, but he, too, impressed me as a careful
and accurate witness.
29. It was plain from their evidence that both Mr. and Mrs. O’Reardon have encountered
many misfortunes in the last four or five years. The ill-health of both Mr. O’Reardon
and Mrs. O’Reardon has been a major feature. The difficulties over the disposal of the
Property have been another. There have been many things for them each to ponder
upon and to mull over, perhaps in order to obtain a better understanding of all the
adverse occurrences which have befallen them. In the witness box Mr. O’Reardon
was obviously emotional, and gave his evidence at considerable volume. In particular,
he seemed to feel that he and his wife had been let down by Foxtons, whom he had
expected to deal with all aspects of the sale of the Property, including, it appeared,
instructing solicitors to act in the sale on behalf of Mr. and Mrs. O’Reardon. It was a
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Foxtons Ltd. v. O'Reardon
feature of the evidence of both Mrs. O’Reardon and Mr. O’Reardon that the alleged
first meeting they had with anyone from Foxtons, which was said to be the occasion
of the visit of Mr. Reichman and an unnamed colleague, was pushed during cross-
examination even further back in time than 14 June 2007 – so far as Mrs. O’Reardon
was concerned to as early as perhaps 5 June 2007, whilst Mr. O’Reardon plumped for
7 June 2007. This mobility of dates seemed to have been prompted by trying to
reconstruct a time-frame in which two to three weeks of activity could be fitted in
before 22 June 2007, the date upon which they each contended that the offer of
£3,300,000 for the Property had been made. Unhappily I have reached the firm
conclusion that the evidence of both Mrs. O’Reardon and Mr. O’Reardon of their
dealings with Foxtons is just not reliable. However it comes about, the plain fact is
that how they each say they remember their dealings with Foxtons just cannot be
correct. A few examples will suffice to illustrate the point. In her cross-examination
Mrs. O’Reardon told me that she thought that her first meeting with Mr. Reichman
might have been as early as 5 June 2007, but the evidence of Miss Ghei, unchallenged
on this point, was that it was only on 13 June 2007 that Mr. O’Reardon telephoned to
make the initial contact with Foxtons. Surprisingly, given that the evidence of Miss
Ghei was not challenged on the point, in her cross-examination Mrs. O’Reardon
suggested that it was not her husband who had telephoned Foxtons, but Foxtons
which had telephoned him, presumably as some sort of cold call. How Foxtons might
have obtained the telephone number of Mr. and Mrs. O’Reardon, or known that they
were interested in seeking purchasers for the Property, was not explained. Again, as
Mrs. O’Reardon said she remembered things, the involvement of Foxtons in the
matter of the Property lasted no more than two and a half or three weeks. Moreover
she considered that it came to an end, effectively, with a bidding process on 22 June
2007 in which Mr. Leonard was successful. What logically was involved, if this were
correct, was a considerable amount of work being undertaken by Foxtons in advance
of the signature by Mrs. O’Reardon of the Standard Form on 19 June 2007, a date the
accuracy of which she did not dispute, or the bidding process being instigated and
brought to fruition within three working days, an analysis for which she did not
contend. Fatal to either version, however, was the fact that the Foxtons’ computerised
log of viewings of the Property, in which the date and time at which a viewing
appointment was made was entered automatically at the time the appointment was
made, showed that the first appointment, to view at 12:30 hours on 20 June 2007, was
made at 19:20 hours on 19 June 2007, and the last, by Mr. Leonard to view at 9:00
hours on 25 July 2007, was made at 16:46 hours on 24 July 2007. The offer from Mr.
Leonard seems to have been made on 20 July 2007, for in an e-mail to Mrs.
O’Reardon sent at 16:38 hours on that day Mr. Jackson wrote:-
“Dear Diana,
It was good talking to you earlier.
Further to our conversation, my recommendation [concerning
which solicitors to instruct] would be to use Raj Bhandari or
Emma Grubner.
Great news on the offer of 3.3 million and we look forward to
getting this through for you.”
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Foxtons Ltd. v. O'Reardon
30. In the result I prefer the evidence adduced on behalf of Foxtons to that of Mrs.
O’Reardon and Mr. O’Reardon. It follows that I am not satisfied that the alleged
express term pleaded at paragraph 3 of the Amended Defence and Counterclaim was
actually agreed between Foxtons and Mr. and Mrs. O’Reardon. It is thus immaterial
whether, had it been agreed, it had been breached in the circumstances of the present
case.
The entire agreement clause
31. An issue raised at paragraph 8 of the Amended Defence and Counterclaim was
whether the entire agreement clause included within the Terms was unfair within
meaning of Unfair Terms in Consumer Contracts Regulations 1999 Reg. 5(1). That
point was only relevant in the event that I found that the express term pleaded at
paragraph 3 of the Amended Defence and Counterclaim had in fact been agreed. In
the circumstances it is not necessary to consider it.
Alleged misrepresentation
32. An aspect of the complaints of Mr. and Mrs. O’Reardon against Foxtons in relation to
Mr. Leonard was what was added by amendment to paragraph 5.2 of the Defence in
the Amended Defence and Counterclaim, namely:-
“The First Defendant requested information about Mr.
Leonard‟s position and was informed by the Claimant that Mr.
Leonard “had money to invest” alternatively “had capital to
invest”, which in the context of the Agreement the First
Defendant took to mean that Mr. Leonard was a “cash buyer”.
The Defendants accepted the recommendation of the Claimant
that Mr. Leonard‟s bid should be accepted and entered into the
contract to sell the Property to the Buyers on that basis.”
33. In the Counterclaim part of the statement of case, at paragraphs 23 to 25 inclusive,
were set out what were alleged to follow from the alleged misrepresentation:-
“23. Further or alternatively, if which is denied there is no
express term of the contract requiring the Claimant to
introduce a “cash buyer”, the representation made by the
Claimant to the First Defendant that Mr. Leonard “had money
to invest” alternatively “had capital to invest”, which
amounted to an implied representation that Mr. Leonard was a
“cash buyer” was an untrue misrepresentation.
24. The Defendants entered into the contract to sell the
Property to the Buyers on the basis of the misrepresentation
made by the Claimant.
25. If the Claimant is entitled to remuneration on the basis of
the Defendants entering into the contract to sell the Property to
the Buyers, the Defendants are entitled to an indemnity by
reason of the misrepresentation made.”
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Foxtons Ltd. v. O'Reardon
34. In her written skeleton argument Miss Lippold contended that the indemnity to which
Mr. and Mrs. O’Reardon was entitled was “in respect of any sums due under the
Agreement”, meaning the agreement between Foxtons and Mr. and Mrs. O’Reardon.
35. The case in misrepresentation, as it seemed to me, was fraught with difficulty.
36. Logically the first obstacle to be overcome was proving that the statement complained
of had been made. If it had been, the next question was whether it should be
understood in the sense in which it was contended on behalf of Mr. and Mrs.
O’Reardon that they understood it. The next issue would be whether the evidence
indicated that Mr. and Mrs. O’Reardon had relied upon the statement or statements
complained of in entering into the Contract. If so, the question would arise whether
Mr. and Mrs. O’Reardon were able to complain as against Foxtons that they had
entered into a contract with third parties. The last question was whether, assuming
everything else in their favour, Mr. and Mrs. O’Reardon were entitled to an indemnity
from Foxtons in respect of their liability to Foxtons. Each of these points appeared to
me to present insuperable obstacles to a claim by Mr. and Mrs. O’Reardon.
37. Mrs. O’Reardon had at least said, at paragraph 14 of her first witness statement,
“Foxtons told us that Mr. Leonard was a man living in Maida Vale who had the
money/capital to invest in property”. She went on:-
“Since his offer was £100,000 higher than the other offers,
Foxtons recommended that we proceed to sell the Property to
him. We relied on Foxtons‟ representation that Mr. Leonard
met our criteria, i.e. that he was a cash buyer, in deciding to
accept his offer.”
38. At paragraph 14 of her second witness statement Mrs. O’Reardon said that she had
not been present on the occasion upon which anything had been said about Mr.
Leonard living in Maida Vale and having money to invest in property. She did not say
much in her second witness statement about reliance on the alleged statement or
statements. Her evidence seemed to go no further than this, in paragraph 16:-
“As set out in paragraph 12 of my First Statement, we agreed
to a sealed bidding process at Foxtons‟ suggestion. I received a
telephone call from Foxtons (I believe this was Mr. Reichman)
on the evening of Friday 22 June 2007 informing me that there
had been 3 (or 4) bids of £3,200,000 and one bid of
£3,300,000. We were not told who the 3 (or 4) other bidders
were or provided with any details of their financial
circumstances.”
39. In re-examination Mrs. O’Reardon told me that she did not recall being told that Mr.
Leonard was the highest bidder and she could not remember how she had obtained
that information. It appears that by the date of the Contract she was aware that Mr.
Leonard, Mr. Kershaw and Mr. Haughey were to purchase, but how and when she
obtained that information was obscure.
40. Mr. O’Reardon dealt with the information allegedly provided concerning Mr. Leonard
at paragraph 4 of his witness statement:-
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Foxtons Ltd. v. O'Reardon
“After our first meeting with Mr. Reichman and his colleague
on or around 14 June 2007 (see paragraphs 6 – 10 of Diana‟s
Second Statement) and before the contract was signed on or
around 19 June 2007, various representatives from Foxtons
brought several potential buyers round to view the Property. I
was due to go into hospital for my transplant and my wife and I
were under a great deal of emotional stress. My wife was at
work during these visits and, although I was at home, Foxtons
did not actually introduce these people to me. Maurice Leonard
was one of the first people to view the Property and attended on
his own – when Mr. Reichman was on the premises. Mr.
Leonard then visited a second time with Andrew Kershaw. I did
not know, at the time, who these people were. Mr Reichman
told me by telephone that Foxtons had received offers of
£2,500,000 and above although I was not told who these were
from. I felt that Mr. Reichman was recommending Mr. Leonard
(the only name that he ever mentioned) over and above other
interested buyers since he said that Mr. Leonard was a man
living in Maida Vale who had the money to invest in property
and dismissed the others as being “just property developers”.
At this time we were not aware that Mr. Leonard required
planning permission to finance the purchase of the Property.”
41. Given the difficulties which I have mentioned which I have in accepting the evidence
of Mr. and Mrs. O’Reardon on their dealings with Foxtons, I am not satisfied that
anyone on behalf of Foxtons actually said to Mr. O’Reardon that Mr. Leonard had
money or capital to invest.
42. If that had been said, in my judgment it was not capable of meaning that Mr. Leonard
was a cash buyer. It meant no more than that Mr. Leonard was interested in
purchasing property as an investment.
43. On the evidence it did not appear that Mr. or Mrs. O’Reardon relied upon whatever
they contended had been said about Mr. Leonard in deciding to enter into the
Contract, because, according to Mrs. O’Reardon, they did not know, at the time they
decided to accept the highest bid, who the highest bidder was.
44. In any event, as it seemed to me, no cause of action in misrepresentation arises against
a third party who makes a representation which is false and thereby induces the
representee to enter into a contract with a third party. A cause of action under
Misrepresentation Act 1967 can, I think, only arise as against the other party to the
contract into which the representee was induced to enter. A stranger to a contract can
be liable for making a misrepresentation inducing the contract, but only if he has
acted fraudulently, or, in a case in which a duty of care of the type recognised in
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465 is held to exist, for
negligence. There was a counterclaim against Foxtons based on alleged negligence,
and to that I shall come.
45. Moreover, it appeared to me that the remedy sought in respect of the alleged
misrepresentation or misrepresentations, an indemnity against the liability of Mr. and
Mrs. O’Reardon to Foxtons, was not one which the law could contemplate. The
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Foxtons Ltd. v. O'Reardon
necessity for the remedy only arose on the hypothesis that Mr. and Mrs. O’Reardon
were in fact liable to Foxtons. If they were in fact liable, there was no justification for
the granting of an indemnity. If Mr. and Mrs. O’Reardon had a proper reason for not
paying the sum claimed by Foxtons in this action, the necessity for an indemnity did
not arise.
Implied term of care and skill and duty of care in tort
46. It is convenient next to consider the counterclaims of Mr. and Mrs. O’Reardon based
on the allegations that it was an implied term of the Standard Form, by virtue of the
provisions of Supply of Goods and Services Act 1982 s.13, that Foxtons would supply
its service with reasonable skill and care, and that it owed Mr. and Mrs. O’Reardon a
duty of care to like effect, each of which obligation it was said had been breached. In
fact it appeared from the Amended Defence and Counterclaim that these allegations
were also related to the complaint that Mr. Leonard was not a “cash buyer”. The
relevant allegations were set out in paragraphs 18 and 19:-
“18. It was an implied term of the Agreement that the
Claimants would exercise reasonable skill and care when
finding a purchaser for the Property. Alternatively the
Claimant owed the Defendants a concurrent duty of care.
19. The Claimant has breached the said implied term and/or
was negligent. Further or alternatively the Claimant has
breached the express term to provide a “cash purchaser”.
PARTICULARS
19.1 In failing to enquire and/or to ensure that Mr. Leonard
had the necessary finance in place to complete the purchase.
19.2 In failing to enquire and/or ascertain that the purchase
was conditional upon Mr. Leonard obtaining planning
permission.
19.3 In recommending Mr. Leonard to the Defendants as a
purchaser when he was unable to complete the purchase.
19.4 In failing to inform other potential purchasers that the
Defendants required a period of twelve months between
exchange and completion and thus depriving the Defendants of
the possibility of increased offers from these other than Mr.
Leonard.”
47. The latter allegation of breach was not the subject of any evidence or cross-
examination at trial and need not be further considered. The other allegations of
breach were essentially but a reprise of the complaint that Mr. Leonard was not a
“cash buyer”. Paragraph 19.1, in complaining that Foxtons had failed “… to …
ensure that Mr. Leonard had the necessary finance in place to complete the
purchase”, appeared to suggest that Foxtons should have warranted or guaranteed to
Mr. and Mrs. O’Reardon that Mr. Leonard had the necessary funds, but Miss Lippold
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Foxtons Ltd. v. O'Reardon
eschewed any such contention in her closing submissions. Paragraph 19.2 literally
complained of something which it was common ground had not happened – the
purchase by Mr. Leonard and his business partners had not been conditional upon Mr.
Leonard obtaining planning permission. The allegation in paragraph 19.3 was simply
a restatement, with the benefit of hindsight, of the fact that Mr. Leonard was not a
“cash buyer”, associated with an implicit suggestion that Foxtons should have
known, or discovered, that that was going to prove to be the case.
48. The simple answer to the counterclaims based on the alleged breaches of the implied
term contended for and the duty of care was that there was a complete mismatch
between the duty in fact owed by Foxtons and the alleged breaches.
49. By Supply of Goods and Services Act 1982 s.13 it is provided that:-
“In a contract for the supply of a service where the supplier is
acting in the course of a business, there is an implied term that
the supplier will carry out the service with reasonable care and
skill.”
50. That form of words tells one nothing about what the service is that has to be carried
out with reasonable care and skill. I do not think that it was in dispute that the effect
of Supply of Goods and Services Act 1982 s.13 was that the statutory term was
implied into the Standard Form, although Mr. Andrew Davis, who appeared on behalf
of Foxtons, did emphasise that, in fact, Foxtons did not actually commit itself to doing
anything by the Standard Form – it was merely entitled to a payment upon achieving
the specified result, an exchange of unconditional contracts. The live issue was
whether the proper performance of the service which Foxtons undertook by the
Standard Form to provide extended to making enquiries as to whether Mr. Leonard
was able, financially, to complete a purchase of the Property and whether he needed a
loan for that purpose which he could only obtain conditional upon receiving a grant of
planning permission. Absent express agreement to make such enquiries, in my
judgment the making of such investigations is outwith the scope of the services
provided by an estate agent. The basic service of an estate agent is simply to advertise
property for sale and to introduce prospective purchasers to the intending vendor. As I
have not been persuaded that the express term contended for at paragraph 3 of the
Amended Defence and Counterclaim was a term of the agreement between Foxtons
and Mr. and Mrs. O’Reardon, it follows that they cannot succeed on the basis of the
much more general term implied by Supply of Goods and Services Act 1982 s.13.
51. I can see no justification for imposing upon Foxtons a duty of care in tort to make the
enquiries which they had not contracted to undertake.
Alleged unfair contract terms
52. The other points raised in the Amended Defence and Counterclaim did not depend
directly upon any version of the “cash buyer” issue. I have already noted that it is
unnecessary for me to consider the question whether the entire agreement clause in
the Standard Form was unfair within the meaning of Unfair Terms in Consumer
Contracts Regulations 1999 Reg. 5(1). However, it was contended on behalf of Mr.
and Mrs. O’Reardon that the provision in the Standard Form that commission became
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Foxtons Ltd. v. O'Reardon
payable to Foxtons on exchange of unconditional contracts was also unfair for the
purposes of that provision.
53. Unfair Terms in Consumer Contracts Regulations 1999 Reg. 5(1) is in these terms:-
“(1) A contractual term which has not been individually
negotiated shall be regarded as unfair if, contrary to the
requirement of good faith, it causes a significant imbalance in
the parties‟ rights and obligations arising under the contract,
to the detriment of the consumer.”
54. The effect of a contract term being found to be unfair is stated in Unfair Terms in
Consumer Contracts Regulations 1999 Reg. 8(1):-
“An unfair term in a contract concluded with a consumer by a
seller or supplier shall not be binding on the consumer.”
55. The allegations relevant to the contention that the provision for payment of
commission upon exchange of unconditional contracts were set out at paragraphs 9
and 10 of the Amended Defence and Counterclaim. Omitting paragraph 10.6, which
was said only to relate to the entire agreement clause, what was pleaded was:-
“9. Further or alternatively, the term of the Agreement that
purports to give rise to a requirement to pay remuneration
before the sale has been completed is unfair within the meaning
of regulation 5(1) of the Unfair Terms in Consumer Contracts
Regulations 1999 and so is not binding upon the Defendants.
10. The following factors (which are not exhaustive) are
relevant to the question of fairness:
10.1 The terms and conditions of the Agreement were not
explained to the Defendants and the Defendants were not given
a full opportunity to read the Agreement (due to time and due
to the size of the type of the Agreement) before the Defendants
were required to sign the same;
10.2 The Defendants were not provided with a copy of the
Agreement after signing the same;
10.3 The Claimant was aware of the vulnerability of the
Defendants and the position they were in due to the ill health of
the First Defendant;
10.4 The term that purports to give rise to a requirement to pay
remuneration before the sale is not an industry standard;
10.5 The Claimant was aware that the Defendants may require
up to a year between exchange of contracts and completion
which would mean that they would be without funds to pay
remuneration to the Claimant upon exchange of contracts;”
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Foxtons Ltd. v. O'Reardon
56. In answer to the contention that the provision for payment of the commission of
Foxtons on exchange of unconditional contracts was unfair Mr. Davis submitted, first,
that reliance upon the alleged unfairness of the term was excluded by the provisions
of Unfair Terms in Consumer Contracts Regulations 1999 Reg. 6(2). That provision
states:-
“In so far as it is in plain intelligible language, the assessment
of fairness of a term shall not relate –
(a) to the definition of the main subject matter of the contract,
or
(b) to the adequacy of the price or remuneration, as against the
goods or services supplied in exchange.”
57. Miss Lippold countered that that provision was concerned only, so far as was
presently relevant, with the adequacy of the remuneration payable to Foxtons, not
with the time at which it was payable. I think that the submission that Reg. 6(2)(b)
was concerned only with the adequacy of the remuneration, not with the time for
payment, was sound. However, Mr. Davis’s submission based on Reg. 6(1) was
different. He relied upon paragraph (a). He contended that the main subject matter of
the contract in the Standard Form was that which Foxtons, not contractually bound to
do anything at all, had to see happen in order to be entitled to any remuneration,
namely a purchaser introduced who exchanged unconditional contracts to purchase
the Property. I accept that submission. Consequently it was not really necessary to
consider further the question of the fairness of the provision that Foxtons’
remuneration should be payable on exchange of unconditional contracts.
58. Since Mr. Davis made additional submissions concerning the question of alleged
unfairness, it is, nonetheless, appropriate to consider those contentions.
59. Mr. Davis’s second point focused on the assertion pleaded at paragraph 10.4 of the
Amended Defence and Counterclaim. In fact no evidence was led before me to
support the assertion that a requirement to pay estate agent’s commission before
completion of a sale, for I think that was in fact the contention, despite the actual
terms of paragraph 10.4, was “not an industry standard”. Per contra, submitted Mr.
Davis. The definition of the expression “sole agency” in Estate Agents (Provision of
Information) Regulations 1991 Schedule 1 demonstrated that it was an entirely usual
type of provision. The relevant definition is:-
“You will be liable to pay remuneration to us, in addition to
any other costs or charges agreed, if at any time unconditional
contracts for the sale of the property are exchanged –
with a purchaser introduced by us during the period of our sole
agency or with whom we had negotiations about the property
during that period; or
with a purchaser introduced by another agent during that
period. ”
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Foxtons Ltd. v. O'Reardon
60. It seems to me that there is no serious scope for argument that the provision in the
Standard Form for payment of the remuneration of Foxtons on exchange of
unconditional contracts for the purchase of the Property was unfair. By the time of
exchange there was nothing further for Foxtons to do by way of providing services to
Mr. and Mrs. O’Reardon. It had contracted to seek a purchaser for the Property on
terms that it would not be entitled to any remuneration unless and until there was an
exchange of unconditional contracts. Thus by the time entitlement to remuneration
arose Foxtons had performed all it had agreed to undertake. Why was it unfair, in
those circumstances, for Foxtons to expect to be paid? Once an exchange of
unconditional contracts had taken place, one’s ordinary expectation would be that, in
due course, completion would take place. However, if, for any reason, that did not
take place, that was not a matter over which Foxtons had any control, but Mr. and
Mrs. O’Reardon would be in a position, if they so chose, to seek to enforce the
contract, or to rescind it and seek damages.
61. The issue raised at paragraph 10.1 of the Amended Defence and Counterclaim, if true,
appeared to me to be largely irrelevant to the issue of the fairness, or not, of the
provision for payment of the remuneration of Foxtons on exchange of unconditional
contracts. Mr. and Mrs. O’Reardon plainly appreciated that Foxtons would have to be
paid for its services, in the event that it rendered services of value. They did not
suppose that Foxtons would not charge. The only possible scope for debate was when
Foxtons’ commission would be due. The common sense answer to that issue was
when Foxtons had done all that it had agreed to do, in other words on exchange of
unconditional contracts. The only other suggested time was on completion of the sale.
The Terms did provide that Foxtons had a discretion to delay seeking payment until
completion. A point was taken on that discretion, to which I shall come next.
However, in terms of fairness the issue was whether it was unfair for Foxtons not to
afford to Mr. and Mrs. O’Reardon the benefit of Foxtons agreeing in advance and in a
binding fashion, in effect to exercise that discretion in their favour by delaying the
date of payment until completion. To make such provision would have been wholly to
the advantage of Mr. and Mrs. O’Reardon. There was nothing in it for Foxtons if
payment was delayed until completion. Rather, it could be said, such delay was unfair
to Foxtons. It had completed what it contracted to do, but was being kept out of its
money. Not only that, but Foxtons would be compelled to bear the risks, whatever
they were, that, notwithstanding that it had done what it agreed to do, completion
might not take place and it would be left with no remuneration at all.
62. A further wrinkle in the contentions advanced on behalf of Mr. and Mrs. O’Reardon
was what was to follow in the event that I concluded that the provision for payment of
the remuneration of Foxtons on exchange of unconditional contracts for the sale and
purchase of the Property was unfair. The effect of Unfair Terms in Consumer
Contracts Regulations 1999 Reg. 8(1) was that that term ceased to be binding on Mr.
and Mrs. O’Reardon. Did that mean that no time ever arrived at which Mr. and Mrs.
O’Reardon had to pay Foxtons, so that, in effect, they did not have to pay at all? Miss
Lippold did not adopt such an extreme position. Her initial stance was that Mr. and
Mrs. O’Reardon were liable to pay, but only after completion of an actual sale by Mr.
and Mrs. O’Reardon of the Property, in the present case to Ealing on 13 June 2011. I
am afraid that the logic of that submission was elusive. Foxtons had no involvement
in achieving that sale. The court had no power to re-write the provision in the Terms
as to the time for payment of Foxtons’ commission. Miss Lippold’s ultimate position
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Foxtons Ltd. v. O'Reardon
was that, the actual term as to time for payment having been determined not to be
binding upon Mr. and Mrs. O’Reardon, there was no term as to time for payment, and
so it was necessary to imply a term. The appropriate term, she submitted, was that
payment should be due within a reasonable time. That submission begged the
question, a reasonable time from what? Mr. Davis submitted that the effect of the
Terms, on proper construction, was that the remuneration of Foxtons was payable
only upon the happening of an event, exchange of unconditional contracts, and even if
one struck out the express term as to time for payment, the answer remained the same.
I accept that submission.
63. It seems to me that it may be helpful to say that I was not impressed by any of the
points pleaded in paragraph 10 of the Amended Defence and Counterclaim in support
of the allegations of unfairness. I have already commented upon the allegations at
paragraph 10.1 and expressed the view that the Terms as printed on the Standard
Form were perfectly legible. I have also commented upon what was pleaded at
paragraph 10.4. I cannot see how the fact, if it were a fact, that Mr. and Mrs.
O’Reardon were not provided with a copy of the Standard Form after Mrs. O’Reardon
had signed it could impact upon the fairness or otherwise of any of the Terms. It could
only be relevant to their awareness of what the Terms, whether fair or unfair, were.
Again the alleged vulnerability of Mr. and Mrs. O’Reardon and the ill-health of Mr.
O’Reardon, could not, of themselves, impact upon the question whether the provision
for payment of Foxtons’ remuneration on exchange of unconditional contracts was
unfair. There was just no link between the term said to have been unfair and any
vulnerability or ill-health. If Mr. and Mrs. O’Reardon wished to delay completion of
the sale of the Property for reasons of their own, it was up to them, as it seems to me,
with the assistance of their conveyancing solicitors, to make appropriate provision in
the contract of sale for payment of a deposit by the purchasers in an amount sufficient
to enable Foxtons to be paid, and which Mr. and Mrs. O’Reardon were to be free to
use in advance of completion, if they did not otherwise have the means to pay
Foxtons. In fact the evidence was unclear as to what resources Mr. and Mrs.
O’Reardon had available other than the asset represented by the Property. As matters
unfolded, they were certainly able to purchase another property, at 17, Barn Hill,
Wembley. How precisely that purchase was funded did not emerge, although it did
appear that in order to be able to complete the purchase it was necessary for Mr. and
Mrs. O’Reardon to obtain a bridging loan. Whether a deposit was paid on exchange of
contracts to purchase 17, Barn Hill, and, if so, of what amount, was not investigated in
evidence. At a later point Mrs. O’Reardon was able to borrow amounts totalling
£95,500 from her sister.
Discretion to delay demanding payment
64. At paragraphs 11 and 12 of the Amended Defence and Counterclaim was pleaded the
case of Mr. and Mrs. O’Reardon concerning the discretion of Foxtons regarding
demanding payment of its remuneration. Omitting allegations struck through, what
was pleaded was:-
“11. In the further alternative if, which is denied, the Claimant
is entitled to its commission; on its proper construction, or
alternatively by way of implication, the Claimant must act
reasonably when it exercises its discretion to defer payment of
its commission until completion.
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Foxtons Ltd. v. O'Reardon
12. In the circumstances, the purported demand by the
Claimant was unreasonable and as a consequence of no effect.”
65. No particular alleged circumstances were specifically pleaded as amounting to an
unreasonable exercise of its discretion on the part of Foxtons.
66. Logically two questions arise. Did Foxtons have an unfettered discretion to determine
whether its fees could be paid out of completion monies? If not, did it exercise its
discretion in the present case reasonably?
67. In some circumstances, for example in relation to the question of whether a bonus
should be paid to an employee, the law may consider that what might appear to be an
unfettered discretion in fact must be exercised reasonably. Usually, to fall within that
category, the discretion must be one in relation to which the other contracting party
has some sort of legitimate expectation. The present was, I think, such a case. The
only relevant issue was the timing of the discharge of the liability of Mr. and Mrs.
O’Reardon to pay Foxtons. The Terms were clear: payment was due on exchange of
unconditional contracts. The Terms could have provided for payment to be due only
on completion, but they did not. However, there was no reason for the Terms to
mention at all a discretion on the part of Foxtons to permit its fees to be paid out of
completion monies unless it was to create some expectation on the part of the other
party to the contract that, in each case, Foxtons would consider whether to exercise
that discretion. Foxtons could, without making any mention whatever in the Terms of
a discretion, simply, as a matter of practice, not have submitted an invoice in any
particular case until completion. Thus once it was clear, as it seemed to me that it was
clear, from the Terms that Foxtons should consider whether to exercise its discretion
in the case of Mr. and Mrs. O’Reardon, I think that it followed, as a matter of
construction, that Foxtons would act reasonably in deciding whether to exercise its
discretion.
68. In fact it was plain on the evidence led before me that Foxtons actually exercised its
discretion in favour of deferring the liability of Mr. and Mrs. O’Reardon to pay its
remuneration until completion. In a letter dated 25 July 2007 to Healys Mr.
Reichman, on behalf of Foxtons, wrote, so far as is presently material:-
“We have pleasure in enclosing our sales memorandum
relating to the proposed sale of the above property and a copy
of our Terms and Conditions of business, as signed by our
mutual client. Please note that in signing these Terms and
Conditions our client has authorised you to pay our
commission account out of the completion monies. We would be
grateful if, prior to exchange of contracts, you would confirm
that you have been instructed accordingly.”
69. In the letter dated 2 August 2007 addressed to Healys Mr. Reichman wrote:-
“We were pleased to learn recently that contracts for the sale
of the above property have now been exchanged and
accordingly have pleasure in enclosing our account.”
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Foxtons Ltd. v. O'Reardon
70. The account enclosed was that dated 1 August 2007. It was not itself addressed to
anyone, but it identified the “Vendor” as Mr. O’Reardon and gave his address as the
address of the Property. Given that under the Terms Foxtons was only entitled to be
paid by “your lawyers”, rather than by Mr. and Mrs. O’Reardon, “out of the sale
proceeds”, given the terms of Mr. Reichman’s letter to Healys dated 25 July 2007,
and given that the account enclosed with the letter dated 2 August 2007 was not
actually addressed to Mr. or Mrs. O’Reardon, it seems to me to be plain that, by the
letter dated 2 August 2007 and the account enclosed therewith, Foxtons was
confirming the exercise of its discretion to defer demanding payment of its
remuneration until completion of the sale of the Property.
71. Thus, in the event, the allegation that Foxtons had failed to exercise reasonably its
discretion to defer demanding payment of its remuneration from Mr. and Mrs.
O’Reardon failed because, on the evidence, it did in fact exercise that discretion in
their favour in the first instance.
72. The real questions in relation to the discretion actually appeared to be different ones,
and ones which were not pleaded on behalf of Mr. and Mrs. O’Reardon. They were
whether, having elected to defer demanding payment of its remuneration until
completion, Foxtons could thereafter change its mind and demand payment in
advance of completion; if so, whether Foxtons had to act reasonably in deciding to
change its mind; and, again if so, whether Foxtons had in fact acted reasonably in
deciding to change its mind. These issues were rather hinted at in the plea on behalf of
Foxtons at paragraph 14 b of the Reply and Defence to Amended Defence and
Counterclaim:-
“In any event, the Claimant avers that it has acted reasonably.
Contracts were exchanged on 1 August 2007, and these
proceedings were not instituted until May 2009, some 21
months after the Claimant‟s entitlement to remuneration
arose;”
73. In her written skeleton argument Miss Lippold dealt with the substance of the
complaint about the exercise of discretion in this way:-
“36. The clause relating to the timing of payment of
remuneration under the Agreement as set out at paragraph 30
above contained a discretionary element allowing the Claimant
to postpone the time of payment until completion.
37. By necessary implication, the Claimant had to exercise
such a discretion reasonably.
38. The Defendant [sic] contends that the discretion to extend
the demand of payment to 21st October 2008, rather than to
eventual completion, was not reasonable in all the
circumstances, given the following:
(i) The Claimant was aware of the serious ill-health of the First
Defendant and the delay which this could cause to the
completion of the contract;
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Foxtons Ltd. v. O'Reardon
(ii) Had the Claimant made enquiries of Mr. Leonard (which
the Defendant [sic] asserts it should have done), the Claimant
would have been made aware that completion could be delayed
or even prevented by Mr. Leonard requiring planning
permission as a pre-condition of obtaining a mortgage;
(iii) The Defendant [sic] repeats its assertion that Mr.
Reichman informed the First Defendant that monies would not
be payable if the sale did not complete;
(iv) The Claimant sent a letter to the Defendants‟ solicitors
dated 25th
July 2007 which confirms that, “in signing these
Terms and Conditions our client has authorised you to pay our
commission account out of the completion monies”. In the
circumstances where the Defendants were not provided with a
copy of the Agreement, the clear implication of this letter is that
monies would not be payable until completion.”
74. Mr. Davis, in his written skeleton argument, dealt with the point briefly:-
“39. The basis for this clause is unclear. The Claimant‟s case is
there are no grounds for such discretion.
40. It cannot be argued that the Claimant ought to defer
payment to completion of a transaction that does not take
place. Further, one suspects that the Defendants intend to
argue that such „reasonableness‟ is actually intended as a
reference to the Claimant knowing the Defendants‟ personal
circumstances: that would be unworkable.
41. If there is such a requirement, the Claimant has in any
event been reasonable: an invoice was sent on exchange … and
not chased in writing until October 2008 …”
75. It was not suggested on behalf of Mr. and Mrs. O’Reardon that Foxtons, having
elected to defer claiming its remuneration until completion, could not thereafter
change its mind. The focus of attention was upon whether the change of mind was
itself reasonable. The ill-health of Mr. O’Reardon was actually irrelevant to the
question whether completion of the Contract would take place or not. The real
problem was that Mr. Leonard and his business partners who joined in the Contract as
purchasers were unable or unwilling to raise the funds necessary for completion to
take place, and sought, on a number of occasions, to renegotiate the terms of the
Contract. Rather than seeking to enforce the Contract, or to rescind it, Mr. and Mrs.
O’Reardon participated in the process of discussion and renegotiation over a long
period, which only came to an end when they entered into a contract to sell the
Property to Ealing. Thus the substance of the matter is that, having originally elected
to exercise its discretion to defer demanding payment of its remuneration until
completion of the sale of the Property to Mr. Leonard and his associates, and having
waited for some 14½ months after the date of the Contract for that to happen, Foxtons
chose to send the letter dated 21 October 2008 to Mr. and Mrs. O’Reardon demanding
payment of its remuneration within seven days. I find it impossible to see that that
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Foxtons Ltd. v. O'Reardon
decision was unreasonable. By that stage the long stop date for completion of the sale
had long passed. It was unclear whether completion would ever take place. Foxtons’
remuneration was linked to completion of the transaction which it had introduced, not
to completion of any other transaction. Essentially, if Foxtons did not pursue Mr. and
Mrs. O’Reardon for payment in October 2008, there was no reason to suppose that it
would ever get paid.
Interest
76. The remaining live issue in this action was interest.
77. In the Particulars of Claim, issued in Central London County Court, no reference was
made to the term as to interest included in the Terms. Instead there was a prayer for
“Interest pursuant to section 69 of the County Courts Act 1984 at the rate of 8% per
annum”.
78. At paragraph 14 of the Amended Defence and Counterclaim it was pleaded on behalf
of Mr. and Mrs. O’Reardon that:-
“The Claimant‟s claim for interest as pleaded at paragraph 6 is
denied. If the Claimant is entitled to interest, which is at the
court‟s discretion in any event, the Defendants will aver that
any interest awarded should only run from 28 days following
formal demand. Further or alternatively, the rate of interest
should be confined to that specified in the Agreement, namely
2% above the HSBC base rate.”
79. By the conclusion of the trial it was common ground that the entitlement, if any, of
Foxtons to interest on the sums claimed as its remuneration and Value Added Tax
thereon, depended upon the Terms. Two issues arose. The first was when were
“Foxtons fees … first demanded”. Mr. Davis contended that it was by the account
dated 1 August 2007 sent with Mr. Reichman’s letter dated 2 August 2007 to Healys.
Miss Lippold, on the other hand, submitted that the first demand was that by the letter
dated 21 October 2008. The second issue, which may, in the end, not have been in
dispute, was whether the words, “2% above the HSBC base rate as at the date they
are first demanded” meant 2% above the HSBC base rate on 1 August 2007, or 21
October 2008, as the case might be; or 2% above the HSBC base rate from time to
time from whatever was the appropriate starting date to the date of judgment.
80. In my judgment the words “Foxtons fees are first demanded”, as a description of a
date, meant, as a matter of construction, the date as at which Foxtons asserted as
against Mr. and Mrs. O’Reardon that the fees had to be paid, not the date as at which
Mr. and Mrs. O’Reardon or their solicitors were first notified of the amount which
would eventually be payable. As against Foxtons only Mr. and Mrs. O’Reardon, and
not Healys, were liable to pay its remuneration. A notification to Healys of how much
Foxtons would like to receive out of the completion monies was not a demand made
of Mr. and Mrs. O’Reardon for immediate payment. The first, and, indeed, it seems
the only, demand made by Foxtons of Mr. and Mrs. O’Reardon prior to the
commencement of this action was by the letter dated 21 October 2008. Interest
therefore is payable as from 18 November 2008.
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Foxtons Ltd. v. O'Reardon
81. As to the rate of interest, it is plain, as it seems to me, as a matter of construction of
the relevant term, that that was 2% above the base rate of HSBC as at 21 October
2008, not 2% above the base rate of HSBC from time to time since 18 November
2008.
Conclusion
82. For the reasons which I have given, there will be judgment for Foxtons against Mr.
and Mrs. O’Reardon in the sum of £96,937.50, together with interest at 2% above the
base rate of HSBC as at 21 October 2008, such interest to be calculated from 18
November 2008 until the date of judgment.