UK Supreme Court rules whether commission is due despite the failure to meet the express condition required to trigger the obligation

UK Supreme Court rules whether commission is due despite the failure to meet the express condition required to trigger the obligation

The UK Supreme Court examined the question of whether an obligation to pay a commission had arisen in Barton v Morris and another, in place of Gwyn-Jones [2023] UKSC 3, despite the failure to meet the express condition required to trigger the obligation.

Lady Rose's leading judgment in the case contains significant clarifications on the law related to implied contractual terms. The ruling offers guidance on the situations in which contractual terms existing between parties can act as a defence against an unjust enrichment claim. This judgment is relevant to those engaging in conditional commitments across all industries.

The facts

Philip Barton, the initial party who responded, requested a payment of £1.2 million that he believed was owed to him from the sale of a property belonging to Foxpace Ltd (Foxpace), who is the fourth respondent. Foxpace is currently undergoing liquidation, and the sole director and shareholder of Foxpace is Timothy Gwyn Jones.

There was an understanding between Barton and Foxpace wherein Barton would assist in finding a potential purchaser for Nash House. As per their verbal agreement, Barton was entitled to receive a payment of £1.2 million only if the property was purchased for at least £6.5 million by a party introduced by him.

Later, Barton introduced Foxpace to Western UK Acton Ltd (Western) as a potential purchaser for Nash House. Contracts were then prepared for the sale of Nash House to Western for £6.55 million. However, during the sale process, it was revealed that Nash House was situated in an area designated for the HS2 rail link construction. Subsequently, negotiations took place between the parties, which ultimately led to an agreement to reduce the purchase price to £6 million.

As the verbal agreement between Foxpace and Barton did not address what would happen if Nash House was sold for less than £6.5 million, Foxpace argued that there was no obligation to pay Barton. Consequently, Barton initiated legal action to claim the reasonable value of his services. He argued that an implied contractual term existed between the parties. Alternatively, he based his claim on the concept of unjust enrichment, even though a valid and binding contract already existed, and sought reasonable compensation.

First instance and Court of Appeal

Initially, the Court ruled that Barton was not entitled to the commission or any other form of compensation, as the explicit condition for the payment of £1.2 million in the commission had not been fulfilled.

The Court of Appeal allowed Barton's appeal and ruled that he was entitled to a reasonable fee for his services, even though the express condition for the £1.2 million commission payment had not been met. The Court of Appeal held that the absence of provisions in the contract on what would happen if the sale price to Western was less than £6.5 million did not preclude a claim of unjust enrichment. It also concluded that Foxpace would be unjustly enriched if it benefited from Barton's introduction without paying him a reasonable fee.

Additionally, the Court implied a term into the contract that a reasonable fee would be paid if Western purchased the property for less than £6.5 million. Therefore, the Court of Appeal awarded Barton £435,000, which it assessed as a "reasonable" fee under the circumstances. However, the decision was subsequently appealed to the Supreme Court.

Supreme Court decision

Contract

The Supreme Court has found that an introducer of business was not entitled to any remuneration for a valuable introduction outside of circumstances expressly provided for in the contract.

The Supreme Court, with a majority comprising Lady Rose, Lord Briggs, and Lord Stephens, held that the correct interpretation of the oral agreement was that the commission of £1.2 million would only be payable if the purchase price for Nash House was at least £6.5 million. Imputing a term that commission would be payable in the event of a lower purchase price would be inconsistent with this express term. Therefore, it was not possible to imply a term in the contract that the commission was payable in such circumstances.

Unjust enrichment

As a result of the Supreme Court's finding on the terms of the oral agreement, Barton was unsuccessful in establishing a basis for a remedy under unjust enrichment. The Court ruled that Foxpace was not obliged to pay a commission to Barton when a sale for less than £6.5 million was achieved since this would conflict with the terms of the oral agreement between the parties. Therefore, the Supreme Court did not uphold the decision of the Court of Appeal and dismissed Barton's claim.

Since Barton was unable to establish any implied term providing for the payment of commission for a sale at less than £6.5 million, the oral agreement between the parties dictated that no reward would be given for a sale below that amount. Therefore, in this case, there was no unjust enrichment. Foxpace derived a benefit from being introduced to a buyer for Nash House without having to pay a commission, but this was not unjust since it was the result provided for by the terms of the oral agreement. The Court emphasised that the law of unjust enrichment does not alter the terms of a contract.