In Barton v Morris [2023] UKSC 3, handed down on 25 January, the Supreme Court considered whether any commission was due where the specified condition for payment was not met.
The facts
The facts as found were as follows:
The claim arose from the sale of a property. Mr Barton and Foxplace orally agreed that Mr Barton would be paid £1.2m if a purchaser introduced by Mr Barton bought a property owned by Foxplace for £6.5m. They did not discuss or contemplate what would happen if the property was purchased for less than £6.5m.
The £1.2m fee reflected the amount which Mr Barton was out of pocket as a result of deposits forfeit from two previous failed attempts he and an associate company had made to purchase the property.
The purchaser Mr Barton introduced in fact bought the property for £6m. The lower price arose due to potential issues regarding the property which came to light during the sales process rather than any attempt to prevent Mr Barton receiving commission.
As the sale price had been lower than £6.5m, Foxpace refused to pay Mr Barton £1.2m.
Mr Barton brought proceedings seeking a reasonable fee. Foxplace refused, arguing that they were not legally liable to pay him any sum for his services in introducing the purchaser.
First instance and Court of Appeal
The judge at first instance held that no claim lay. There was no express contractual obligation to pay and no implied term as to reasonable remuneration was alleged. The claim in unjust enrichment based on free acceptance failed as there was a valid subsisting contract and to permit an unjust enrichment claim would undermine the contractual allocation of risk. The judge further held that if he was wrong about the unjust enrichment claim he would have awarded restitution of £435k, being his assessment of the market value of the services.
The Court of Appeal allowed Mr Barton’s appeal. It held that a claim in unjust enrichment was not ruled out by the contract as it was silent as to what would happen if the sale was for less than £6.5m. In the alternative it held that Mr Barton might have been entitled to relief on the basis of an implied term. It awarded £435k.
Supreme Court
The Supreme Court was split 3-2, with the majority finding in favour of Foxplace. The result was Mr Barton did not recover any fee.
Implied term?
The majority of the Supreme Court held that no term would be implied as a matter of fact or law.
The majority held that it was not clear that Foxpace would have agreed to pay Mr Barton a reasonable fee in the event that the property was sold for less than £6.5m, nor was such a term necessary to give business efficacy to the contract. Mr Barton was not an estate agent nor did he make the introduction in the course of an introduction business. Although the contract was made in a commercial context in which people do not act gratuitously, Mr Barton took the risk that if he did not find a buyer at £6.5m he would not recoup the sums he had forfeit in the course of the earlier failed transactions: – see at [40] and [76] per Lady Rose with whom Lords Briggs and Stephens agreed.
The minority arrived at the opposite conclusion. Lords Leggatt and Burrows (each delivering separate judgments) held that Mr Barton had a prima facie contractual right to reasonable remuneration. They held that this was by way of a term implied by law. They held that this was not ousted by the express terms of the contract: – Lord Leggatt at [111]; Lord Burrows at [205] & [225].
Unjust enrichment
Foxpace accepted that it had been enriched at Mr Barton’s expense and that there was no defence available to it. The appeal therefore turned on the question of whether the enrichment was unjust, the factor being relied upon being that there was a failure of basis – [77] & [78] per Lady Rose.
Mr Barton’s position was that the basis had failed as there was a common assumption that the purchaser would buy the property for £6.5m. The parties simply did not consider a lower price, it was a factor outside either party’s complete control and when the purchase at £6.5m failed to materialize their shared assumption and hence the basis for their agreement failed: – [85].
The majority held that permitting the claim in unjust enrichment would undermine the contract between the parties:
“When parties stipulate in their contract the circumstances that must occur in order to impose a legal obligation on one party to pay, they necessarily exclude any obligation to pay in the absence of those circumstances; both any obligation to pay under the contract and any obligation to pay to avoid an enrichment they have received from the counterparty from being unjust. The “silence” of the contract as to what obligations arise on the happening of the particular event means that no obligations arise as Lord Hoffmann made clear in Belize cited earlier. This excludes not only an implied contractual term but a claim in unjust enrichment.”
Lord Leggatt also held that the case was not about unjust enrichment but about implied terms: – [124].
Lord Burrows held that the subsisting contractual right to payment of remuneration by way of term implied at law ruled out the possibility of an unjust enrichment claim; a contract can be a justifying ground nullifying what would otherwise be a right to restitution: – [226].
Lord Burrows noted, however, that had he decided that there was no implied reasonable remuneration term, he would have reached the same conclusion by an unjust enrichment analysis. Mr Barton rendered the beneficial services to Foxpace on the basis, objectively shared with Foxpace, that he would be paid £1.2m for those services if the property was sold to the purchaser for £6.5m. That basis failed to materialise when the sale to the purchaser was for a price lower than £6.5m so that Mr Barton was not entitled to, and was not paid, the promised £1.2m. Accordingly Foxpace would have been unjustly enriched by being able to keep the benefit of the introduction without paying the market rate for it: – [236].
Further thoughts
In terms of the contractual claims, although the majority found against Mr Barton, it appears that there might have been a different result if Mr Barton had been an estate agent or otherwise in the business of property introduction rather than this being a one-off transaction. In such circumstances it appears that the majority would also have been more willing to find that a term would be implied by law into the relationship: – see at [68] – [76].
The majority also indicated that the result might well have been different had Foxplace deliberately sold at a lesser price than that it could obtain in order to deny Mr Barton his commission: – [31].
In affirming recent Court of Appeal decisions in other cases, this Supreme Court decision provides a further confirmation of the general principle that where services are provided pursuant to a binding contract then a claim in unjust enrichment will not lie where the contractual condition for payment has not been met.
The result in this case will likely divide practitioners, as it did the judges. It provides a good example of the fact that decisions on contractual construction are often unpredictable as different (eminent) judges can take opposing views as to the meaning of the words used.
In the proceedings as a whole 4 judges (first instance and 3 in the Supreme Court) found in favour of Foxplace whereas 5 had found in favour of Mr Barton (all 3 Court of Appeal judges and 2 in the Supreme Court). Unfortunately for Mr Barton, 3 of the 4 judges in Foxplace’s favour formed the majority of the Supreme Court. The litigation will no doubt have been an expensive rollercoaster for all involved.
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David Lascelles is a barrister specialising in commercial and corporate disputes. He has acted in numerous commission claims including in relation to the sale of high-value commercial and residential properties.
David is one of only 3 junior barristers ranked both for commercial and for company litigation within the top 3 bands in the 2023 UK editions of both Chambers & Partners and Legal 500. In 2022, he was also shortlisted for Commercial Junior of the Year at the Legal 500 Bar awards.
