Barton and others (Respondents) v Morris and another in place of Gwyn-Jones (deceased) (Appellants)

LADY ROSE (with whom Lord Briggs and Lord Stephens agree):

1. A claimant who has performed a service for the defendant and wants now to be paid something for those efforts has to establish a legal entitlement to the money claimed. There are, broadly, two ways in which such an entitlement can be established. The first is where the parties are in a contractual relationship and the terms of their binding agreement define if and when the defendant will be bound to pay for the service. If there is no contract between them, the claimant may base a claim on the assertion that if the defendant does not pay, then the defendant will have been unjustly enriched at the claimant’s expense. It is the intersection of those two kinds of legal entitlement – and the scope of any overlap between them — that generates the issue that arises in this appeal.

1. The First Respondent, Mr Barton, performed a service for the Fourth Respondent, Foxpace Limited, by introducing to Foxpace a buyer who ultimately bought a property that Foxpace owned and was keen to sell. The buyer, Western UK (Acton) Limited (“Western”), paid Foxpace £6 million for that property. The judge at first instance, HHJ Pearce sitting as a High Court Judge, held that Mr Barton was not entitled to any payment: [2018] EWHC 2426 (Ch). There was no written agreement on which Mr Barton or Foxpace could rely, but the judge found that they had arrived at a binding oral agreement. According to that agreement, Mr Barton would be paid £1.2 million for making the introduction if Western bought the property for £6.5 million. Since the contract made no provision as to what would happen if the property was sold to Western for anything less than £6.5 million, there was no contractual obligation on Foxpace to pay anything to Mr Barton. As regards Mr Barton’s alternative claim in unjust enrichment, the judge relied on the principle he said emerged from the decision in MacDonald Dickens & Macklin v Costello [2012] QB 244. He held that that principle applied to preclude any claim for unjust enrichment because such a claim would undermine the contractual terms agreed between the parties.

1. The Court of Appeal allowed Mr Barton’s appeal: [2019] EWCA Civ 1999, [2020] 2 All ER (Comm) 652. The main judgment was given by Asplin LJ. Males LJ and Davis LJ agreed with her reasoning and gave short concurring judgments. They held that the silence of the contract as to what would happen if the sale to Western was for less than £6.5 million meant that the contract did not rule out a claim in unjust enrichment. They held, further, that Foxpace would be unjustly enriched if it took the benefit of the introduction without paying Mr Barton a reasonable fee. Asplin and Davis LJJ suggested that the same result might have been achieved by the implication of a term into the contract that a reasonable fee would be paid if Western bought the property for less than £6.5 million.

1. HHJ Pearce had helpfully assessed a reasonable fee as being £435,000 in case he was wrong about liability and the Court of Appeal held that Mr Barton was entitled to that amount.

1. In the appeal before this court, the appellants are the personal representatives of the estate of Timothy Gwyn Jones who was the sole director of Foxpace at the material time. As HHJ Pearce explained in the introduction to his judgment, the issue falls to be determined in the context of Foxpace’s insolvency. On 30 May 2017, Mr Gwyn Jones convened a meeting of the creditors of Foxpace at which he rejected Mr Barton’s proof of debt in the sum of £1.2 million for voting purposes in the Foxpace liquidation and recorded the debt owed as being £1. Mr Barton appealed against that rejection pursuant to rule 15.35 of the Insolvency (England and Wales) Rules 2016 (SI 2016/1024), raising the issue as to what, if any, debt was owed to him by Foxpace arising from the transaction. Foxpace Ltd was joined as a defendant to that claim. That is how the issue as to Mr Barton’s entitlement to some payment for the introduction of Western comes before this court. I shall refer to the appellant as Foxpace, even though they are formally the Fourth Respondent, since effectively they are the party which is challenging the existence of the liability which the Court of Appeal held was owed to Mr Barton.

1. There are three grounds of appeal. The first is that the Court of Appeal was wrong in law to hold that it was possible for Foxpace to have been unjustly enriched by Mr Barton’s performance of the agreement given the terms of the agreement as found by the judge. The second is that the Court of Appeal was wrong to assume that there was an unjust factor sufficient to entitle Mr Barton to relief on the basis of unjust enrichment. The third ground challenges the Court of Appeal’s alternative conclusion that Mr Barton might have been entitled to relief on the basis of an implied term. Foxpace does not challenge the judge’s quantification of the reasonable fee at £435,000.

1. The facts

1. At the time of the agreement between Foxpace and Mr Barton, Foxpace owned a property known as Nash House in Northolt, London. Foxpace wished to sell Nash House but arrangements did not go smoothly. In December 2012, a company with which Mr Barton had strong links exchanged contracts for the purchase of Nash House for £6.3 million. The purchaser failed to complete despite having paid substantial sums to Foxpace in exchange for successive extensions of the period for completion. Foxpace rescinded the contract in May 2013. On 7 June 2013, Mr Barton exchanged contracts with Foxpace to buy Nash House himself for £5.9 million. Mr Barton paid an initial deposit but failed to make further payments as they fell due and Foxpace rescinded the agreement. The upshot of those two failed transactions was that deposits had been paid and costs incurred amounting in total to about £1.2 million, money which the parties treated as coming from Mr Barton. The judge accepted that Mr Barton “was about £1.2 million out of pocket across the two unsuccessful attempts to purchase Nash House”: para 64.

1. The discussions which led to the agreement about a commission for the sale ultimately to Western were conducted between Mr Barton on the one side and Mr Gwyn Jones, Mr Marcus Rooke who was Mr Gwyn Jones’ assistant and Mr Nicholas Morris a solicitor acting for Foxpace on the other side. Shortly after the failure of the second sale of the property, Mr Barton discussed with them a possible sub-purchaser for Nash House if Mr Barton bought the property himself for £5.7 million. There was then a month or so of correspondence between the solicitors of the potential purchaser, the solicitors for Foxpace and Mr Barton trying to finalise the arrangements.

1. In parallel with this correspondence, Mr Rooke was corresponding with Mr Javed Hussain acting for a different potential purchaser who was interested in buying Nash House for cash. Heads of terms for the sale of Nash House to a Mr Kherallah for a price of £6.3 million were prepared. Those discussions contemplated the payment of an introduction fee to Mr Hussain of £490,000. That alternative deal, of course, fell away when the property was bought by Western.

1. I will come in more detail later to the judge’s findings as to what was agreed between Mr Barton and Foxpace. Documents were drawn up for the sale of Nash House to Western for £6.55 million. However, towards the end of August 2013, it came to light that Nash House fell within an area safeguarded for the purpose of the construction of the HS2 rail link. Western wanted to make the contract conditional on the HS2 project not affecting the site, but Foxpace was not prepared to agree to that. It was therefore agreed that Western would purchase the property unconditionally for £6 million plus VAT. Contracts were exchanged on 10 September 2013 and the sale of Nash House was completed.

1. Mr Barton’s claim in contract

1. For present purposes there are three potential routes by which one could arrive at the conclusion that Foxpace is contractually bound to pay a fee to Mr Barton. The first is that it was an express term of the contract that he should be paid a fee in the events which have happened. The second is that a term should be implied into this particular contract in order to give effect to the unexpressed intention of the parties. The third is that there is a term implied by law as an incident of this kind of contract. I shall consider each of these in turn.

(a) The express terms of the contract

1. When dealing with an oral contract, the terms which the parties expressly agreed must be divined from the evidence before the judge. In Carmichael v National Power Plc [1999] 1 WLR 2042, Lord Hoffmann (with whom Lord Goff of Chieveley and Lord Jauncey of Tullichettle agreed) said at p 2049 that where the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct, the terms of the contract are a question of fact. In that case the House of Lords restored the decision of the Industrial Tribunal which had found that the parties had intended that their agreement should be partly contained in letters, partly in oral exchanges at the job interviews or elsewhere and partly left to evolve by conduct as time went on: p 2050.

1. In the present case, HHJ Pearce described the factual disputes as narrow in ambit but “deep in emotion”. As often happens, the judge was faced with oral evidence and submissions from both parties which were all directed at supporting factual positions which he ultimately rejected. The first factual issue for the judge to resolve was whether there was any concluded agreement at all or whether, as Mr Gwyn Jones strongly contended, any discussions were regarded as “subject to contract” and therefore not binding because they were never reduced to writing. The second factual issue was whether the agreement with Mr Barton had been that he would only receive the £1.2 million payment if Nash House sold for £6.5 million or whether, as Mr Barton asserted, the £1.2 million was payable to him regardless of the purchase price.

1. The judge’s difficulty in arriving at these crucial factual findings was that he was not able to accept very much of the evidence given by the witnesses at the trial, either in their witness statements or in oral testimony, and there was very little contemporaneous documentary evidence on which he could rely. The witnesses were unable to recollect what had been said in the critical conversations and he considered that their recollection might have been replaced by evidence of what the witness believed, or worse hoped, had been said: see para 22. Nonetheless, the judge had to come to some conclusion. Mr Rooke’s evidence was that he had had no discussion with Mr Barton about what would happen if the sale price was less than £6.5 million. The judge preferred that evidence to what was said by Mr Morris who recounted a conversation he said had taken place between himself and Mr Rooke in which Mr Rooke told him that the prospective deal involved the payment to Mr Barton of the £1.2 million “if, and only if” the price of £6.5 million or higher was achieved: para 116.

1. The judge described the competing versions of events put forward by the parties. Mr Barton’s version of the discussion would provide clear evidence of an agreement between him and Mr Rooke either in early discussions or in a later telephone discussion that Foxpace would pay him £1.2 million if Western bought Nash House. On Mr Rooke’s version of events, there was equally clear evidence of an agreement that Foxpace would pay Mr Barton the £1.2 million only if he introduced a purchaser who completed a purchase of Nash House for £6.5 million or possibly any higher sum. The judge said:

   1. This comes down to a simple question of fact. I accept that either version of events is possible, and neither wouId be illogical. The Respondent’s [Foxpaces’s] argument that the Appellant’s [Mr Barton’s] version is improbable (because Foxpace would be paying a flat percentage regardless of the purchase price) cannot be dismissed out of hand as being commercially ridiculous because there is evidence that Nash House was proving difficult to sell and Foxpace saw some urgency in completing the sale. On the other hand, the Appellant's criticism of the Respondent's argument, on the basis that it would make no sense for the Appellant to enter into an agreement in which he only obtained any fee if the price exceeded £6.5 million, at which point the whole fee became payable, supposes that Mr Barton fully thought through the implications of what he was discussing with Mr Rooke; if Mr Barton was confident that [Western] was a willing purchaser at £6.5 million then, given that Mr Barton had twice been involved on behalf of a buyer in the exchange of contracts for the purchase of Nash House, it is plausible that he simply did not anticipate anything coming to light prior to the exchange of contracts that might have caused [Western] to renegotiate the price, such that the only sale price Mr Barton contemplated was £6.5 million.”

1. The judge then set out his findings as to the terms of the contract. He rejected Foxpace’s case that all discussions had been ‘subject to contract’ and found that Mr Barton and Mr Rooke had concluded a binding agreement as to the payment of £1.2 million commission to Mr Barton. As to the circumstances in which that sum would become payable he said:

   1. For these reasons, I am satisfied that, following discussions between Mr Barton and Mr Rooke during the period 29 to 31 July 2013, the Appellant and Respondent entered into a contract pursuant to which Foxpace was liable to pay Mr Barton the sum of £1.2 million in the event that Nash House was sold to a purchaser introduced by Mr Barton for the sum of £6.5 million. Since the property was sold for £6 million, the claim based on the contract fails.”

1. It is therefore clear to me that the judge did not find that it was an express term of the agreement that Mr Barton would be paid a fee if the property was sold to Western for less than £6.5 million. The contract found by the judge was, thus, a straightforward, unilateral contract. Mr Barton was not under any obligation to make an introduction of a potential buyer to Foxpace in the sense that if, after he had concluded the agreement with Foxpace, he had decided for whatever reason not to disclose Western’s name to Foxpace, he would not have been in breach of any contractual obligation. But if he did make the introduction and if Foxpace did sell Nash House to Western for £6.5 million, then Foxpace would be in breach of the express terms of the agreement if they failed to pay him £1.2 million. That was the extent of the express agreement reached by the parties.

1. I have some sympathy with HHJ Pearce in considering that that was all he needed to say so far as the contractual claim was concerned and, further, that the express terms of the contract as he had found them to be also disposed of the unjust enrichment claim as I describe further below. He had found that the obligation accepted by Foxpace was an obligation to pay Mr Barton a specified sum, £1.2 million, on the happening of a particular occurrence namely the sale of Nash House for at least £6.5 million to someone whom Mr Barton had introduced to them. That necessarily meant that there was no contractual obligation on Foxpace to pay anything in any other circumstances. As Lord Hoffmann said in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988, para 17 when discussing the implication of terms into a written instrument:

   “The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.”

1. Whether the judge was right to jump in para 161 straight from that conclusion to the conclusion that “the claim based on the contract fails”, depends on whether there is any reason here not to draw “the … usual inference” that the absence of any express term entitling Mr Barton to payment in the events which have happened means that there is no entitlement to any payment.

(b) A term to be implied into this agreement

1. The other potential source of a contractual obligation on Foxpace to pay something to Mr Barton is an implied term. A term can be implied either because as a matter of fact it falls to be included in this particular contract to give effect to the unexpressed intention of the parties or because the contract is one of a class into which the law implies a term - certainly if the parties have not expressly provided otherwise and sometimes, as provided for in statute, even where they have. HHJ Pearce recorded at para 164 of his judgment that Mr Barton had not sought to argue that in the event that the judge found against him on the express terms of the contract, he was entitled to £1.2 million (or any other figure) by way of introducer’s fee pursuant to an implied term in the contract. The Court of Appeal dealt with the possible implication of a term after concluding that the claim in unjust enrichment could succeed. Asplin LJ concluded that a term might have been implied: para 41. Davis LJ went further and preferred to analyse the case as one where reasonable remuneration was payable as a matter of quantum meruit pursuant to an implied term rather than relying on unjust enrichment: para 75.

1. The leading authority on whether a term can be implied into a contract is Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2016] AC 742. Lord Neuberger of Abbotsbury (with whom Lord Sumption and Lord Hodge JJSC agreed) described at para 16 the “three classic statements, which have been frequently quoted in law books and judgments”, namely per Bowen LJ in The Moorcock (1889) 14 PD 64, 68, per Scrutton LJ in Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592, 605, and the judgment of MacKinnon LJ in Shirlaw v Southern Foundries(1926) Ltd [1939] 2 KB 206, 227. It was in the last of those that MacKinnon LJ famously stated that a term would only be implied into a contract “if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of course!'"

1. Lord Neuberger described the notion that a term will only be implied if it satisfies the test of business necessity as supported in a number of observations in the House of Lords: see the authorities cited in para 17 of his judgment. He approved the principles set out in two earlier cases: the judgment of the majority in the Privy Council case BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283, as extended by Lord Bingham MR’s approach in Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472 (“Philips”),at p 482. Lord Neuberger then set out his own comments on those principles. It is enough here to say that he concluded at para 24 by emphasising that there had been no dilution of the requirements which have to be satisfied before a term will be implied.

1. The relationship between the “it goes without saying” test and the “business efficacy” test was discussed by Lord Hoffmann in Belize. He said at para 21 that these two formulations are not to be treated as different or additional tests but as different ways of expressing the “one question” which is what the contract, seen as a whole against the relevant background, would reasonably be understood to mean. Lord Hoffmann said further that the reference to business efficacy underlines two additional factors; that the notional reader will take into account the practical consequences of deciding that the contract means one thing or the other and whether a particular construction would frustrate the apparent business purpose of the parties. The fact that the term is only implied if it is ‘necessary’ conveys that it is not enough for the court to consider that the implied term expresses what would have been reasonable for the parties to agree to. The court must be satisfied that it is what the contract actually means.

1. Asplin LJ thought that a term could be implied that Mr Barton would be paid a reasonable fee if Western bought Nash House for less than £6.5 million. She said that such a term would not contradict the express terms of the agreement, it was capable of clear expression, it was so obvious that it went without saying and was necessary to give the agreement business efficacy because the agreement lacked commercial coherence without it.

1. As to the first point, I respectfully disagree. To hold that Foxpace are contractually bound to pay Mr Barton an unspecified sum if Western buy Nash House for less than £6.5 million does contradict the express terms of the contract under which Foxpace is obliged to pay him £1.2 million if Nash House sells for at least £6.5 million. The Court of Appeal placed great emphasis on the findings of the judge as regards the discussion between Mr Morris and Mr Rooke described in para 116 of HHJ Pearce’s judgment where the judge rejected Mr Morris’ evidence that Mr Rooke had told him (Mr Morris) that Mr Barton had agreed that he would be paid the fee ‘if, and only if’ the property sold for £6.5 million. They regarded the rejection of that evidence, taken together with the judge’s conclusion that the parties had not discussed the possibility of the sale being for a lower sum, as meaning that it would not contradict the express terms of the contract to imply an obligation to pay something in other circumstances. As Davis LJ put it, the contract was not “you will only get remuneration if you introduce a purchaser at a price of £6.5 million”, rather it was “you will be entitled to £1.2 million if you introduce a purchaser at £6.5 million”(para 69).

1. In my judgment, however, there is no material difference between those two descriptions of the contract. Whether or not the words “if, and only if” were used by the parties in their negotiations, the effect of the contract as found by the judge was indeed that Mr Barton was only entitled to be paid if the event that they agreed would be the trigger for that payment occurred. To imply a term that Foxpace is liable to pay a commission in any other circumstance goes directly against what the judge found the parties had agreed.

1. As to the need to give the contract business efficacy, the Court of Appeal were concerned that if the agreement was limited to the express terms found by the judge, it created the situation in which only a small reduction in the purchase price would deprive Mr Barton of a fee altogether. Asplin LJ referred to the judge as having described this result as "bizarre" (para 141) and she and Males LJ agreed with him (paras 41, 56-57).

1. The context in which the judge had described the arrangement as “bizarre” was not in the course of considering whether to imply a term for reasons of business efficacy since, as I have said, that was not an argument pursued by Mr Barton at first instance. He made the comment when rejecting Mr Morris’ evidence as to the “if, and only if” conversation he had had with Mr Rooke. The judge also recorded at para 119 that, towards the end of his cross-examination, Mr Morris said that he recalled Mr Rooke saying that Mr Barton would receive nothing if the price received was less than £6.5 million. Mr Morris had said in the witness box that “this did not strike him as strange”. The judge rejected that evidence as unconvincing for reasons he explained at para 141. He was, first, “highly surprised” that Mr Morris could remember the detail of his conversation with Mr Rooke five years earlier. Further, he said:

   “If, as Mr Morris asserts, he had been told that it was clear that nothing was payable if the sale price was less than £6.5 million, I would have expected Mr Morris not simply to consider this to be ‘strange’ - it would be bizarre to think that Mr Barton would knowingly have entered into a contract on the terms that Mr Morris claims were repeated to him, since he would obviously open himself up to a small reduction in the sale price that deprived him of any introduction fee at all.”

1. At the hearing before us, counsel for both parties accepted that the concern expressed by the judge and shared by the Court of Appeal was not a proper basis on which to imply a term that Mr Barton should be paid a reasonable fee if Nash House was sold for less than £6.5 million. In Alpha Trading Ltd v Dunnshaw-Patten Ltd [1981] QB 290, the plaintiff had introduced a buyer to the defendants for the purchase of 10,000 tonnes of cement at $49.50 per tonne, c & f to a port in Iran. The plaintiff and defendant entered into an agency contract for the payment of a commission fee on the sale of the cement at the rate of $1.50 per tonne. The defendants then failed to perform the contract with the buyer and refused to pay the plaintiff the commission. The Court of Appeal upheld the decision of Mocatta J that it was right to imply a term into the contract of agency to the effect that the defendants would not fail to perform their contract with the buyer so as to deprive the plaintiffs of their remuneration under the agency contract. Brandon LJ applied the ‘officious bystander’ test to hold that it was right for the court to imply such a term: p 304E-G. Templeman LJ made the same point at p 306B:

   “In my judgment, it is necessary to imply a term which prevents a vendor, in these circumstances, from playing a dirty trick on the agent with impunity after making use of the services provided by that agent in order to secure the very position and safety of the vendor. It is necessary to imply a term which prevents the vendor from acting unreasonably to the possible gain of the vendor and the loss of the agent. In my judgment, the term proper to be implied in the present circumstances is that the vendors will not deprive the agents of their commission by committing a breach of the contract between the vendors and the purchaser which releases the purchaser from its obligation to pay the purchase price.”

1. Lawton LJ agreed with both judgments. He said that the implication of the term relied on by the plaintiff was necessary to give business efficacy to the contract because, as he put it at p 308: “The life of an agent in commerce is a precarious one. He is like the groom who takes a horse to the water-trough. He may get his principal to the negotiating table but when he gets him there he can do nothing to make him sign, any more than the groom can make a horse drink.”

1. Similarly, in the present case it might well be necessary to imply into the agreement between Mr Barton and Foxpace a term that Foxpace would not, in effect, play a dirty trick by agreeing a reduced price with Western so as to avoid the liability to pay the £1.2 million to Mr Barton. Such a term might well meet the test set out in Marks and Spencer and Belize because the contract must be reasonably understood as meaning that.

1. But such a term would be all that is necessary to avoid the pitfall which concerned the judge and the Court of Appeal. It is not necessary to go further and imply a term that Mr Barton is entitled to a reasonable fee if the sale went through for less than £6.5 million. It has always been clear that when the court implies a term to give a contract business efficacy, it must imply the least onerous term needed to achieve that goal: see The Moorcock per Lord Esher MR, p 67 and Bowen LJ at p 69.

1. The judge in the present case expressly absolved Foxpace from any such price manipulation. It was clear that the reduction in price to £6 million was genuinely the result of the HS2 problem that arose and not of any desire to deprive Mr Barton of his commission: see para 188.

1. I also respectfully disagree with Males LJ’s observation that the contract as found by the judge would be bizarre because it meant that Foxpace would have been better off if the property was sold to a purchaser introduced by Mr Barton for any price less than the £6.5 million but more than £5.3 million. As Mr Barton explained in his witness statements, the point of the agreement for him was that, as a result of the two failed transactions, Foxpace had already received £1.2 million of Mr Barton’s money in forfeited deposits and payments for the extension of the completion dates. He pointed out in his first witness statement that the initial purchase price discussed between him and Mr Rooke in July 2017 was £5.7 million which “reflected [Foxpace’s] recognition that I should have the chance to recoup my outlay, by allowing me to continue with my efforts to seek finance to develop the Property or to seek an onward sale”. He says in his second witness statement that when he was negotiating with Foxpace for the purchase of Nash House for himself, he made it clear “that a reduction in the purchase price would be necessary in order for me to try and recoup the monies that I had loaned to Stonebridge in respect of its aborted purchase of Nash House”. The negotiations between the parties show that they were not treating it as bizarre that the forfeited £1.2 million might in some circumstances be treated by Foxpace as part of the overall consideration they were content to receive for the sale of Nash House.

1. Further, even without that factor, an agreement whereby someone contracts for a higher than normal payment on the fulfilment of a condition and is prepared to take the commensurate risk of getting nothing if the condition is not fulfilled is not a bizarre or uncommercial contract. In the well-known case of Cutter v Powell (1795) 6 Term Rep 320, 101 ER 573, the master of a ship bound from Jamaica to Liverpool promised to pay Mr Cutter 30 guineas “provided he proceeds, continues and does his duty as second mate” for the journey. Mr Cutter did his duty as second mate on the ship but died before it arrived at Liverpool. The usual wages of a second mate for such a voyage would have been about £8. Cutter’s widow claimed a proportionate part of the wage as a quantum meruit for work done. The widow’s claim was not based on the agreement because there was no express contract covering the circumstances that had happened. The claim was therefore based on a quantum meruit for work and labour done. In answer, the defendant argued “nothing can be more clearly established than that where there is an express contract between the parties, they cannot resort to an implied one”. In his judgment, Lord Kenyon CJ emphasised that if Cutter had continued to do his duty for the whole voyage, the 30 guineas he would have earned would have been nearly four times as much as the normal wage:

   “Therefore if there had been no contract between these parties, all that the intestate could have recovered on a quantum meruit for the voyage would have been eight pounds; whereas here the defendant contracted to pay thirty guineas provided the mate continued to do his duty as mate during the whole voyage, in which case the latter would have received nearly four times as much as if he were paid for the number of months he served. He stipulated to receive the larger sum ifthe whole duty were performed, and nothing unless the whole of that duty were performed: it was a kind of insurance.” (p 576)

1. The other members of the Court agreed. Grose J said (pp 576 – 577):

   “And when we recollect how large a price was to be given in the event of the mate continuing on board during the whole voyage instead of the small sum which is usually given per month, it may fairly be considered that the parties themselves understood that if the whole duty were performed, the mate was to receive the whole sum, and that he was not to receive any thing unless he did continue on board during the whole voyage. That seems to me to be the situation in which the mate chose to put himself; and as the condition was not complied with, his representative cannot now recover any thing.”

1. That is what Mr Barton bargained for here. What would be strange, in my judgment, would be for Foxpace to agree to what would become a one-way bet for Mr Barton; that he should receive a fee of almost three times the reasonable fee if the sale price were £6.5 million or more and still receive the full reasonable fee of £435,000 if the sale price were something less than that. I do not see what benefit there would be for them in concluding such an agreement.

1. I bear in mind also the observation of Lord Bingham MR in Philips [1995] EMLR 472, 481-482 that it is difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully drafted contract but have omitted to make provision for the matter in issue:

   “… it may well be doubtful whether the omission was the result of the parties' oversight or of their deliberate decision; if the parties appreciate that they are unlikely to agree on what is to happen in a certain not impossible eventuality, they may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur."

1. Although one could not describe the contract between Mr Barton and Foxpace as being carefully drafted, that warning is apposite here because, given the surrounding circumstances of the case, the fact that they did not refer to the possibility of the sale being for less than £6.5 million does not mean that one can be confident that they would have agreed what should happen in that event. HHJ Pearce said at para 198 of his judgment:

   “The court cannot make any safe assumption as to what [Foxpace] would have agreed to if the possibility of a reduced sale price had been contemplated at the time of negotiating the contract. Foxpace might still have been willing to pay £1.2 million to Mr Barton (on the ground that this would have furthered a relationship between the two which might have been to Foxpace's advantage); it might have agreed to a reduction of the £1.2 million, perhaps pro rata or even by the sum of £500,000 to cushion it from the effect of the reduced sale price; it might only have been willing to offer 7.25% as a reasonable value of the service being proffered; it might even have been unwilling to offer any sum (though I accept that this is unlikely).”

1. I am therefore satisfied that it is not possible to imply a term into this agreement to the effect that Mr Barton will be paid a reasonable fee if the sale was for less than £6.5 million. It is not possible to say that there is any particular fee to which the parties would clearly have agreed, or which is so obvious that it goes without saying and it is not necessary to imply such a term to give the agreement business efficacy or coherence.

(b) A term implied as a matter of law: the principles

1. Terms can be included in a contract by the operation of law in different ways. The most obvious is a statutory interpolation of a term into an agreement of a particular kind. At the hearing, the possible application of section 15 of the Supply of Goods and Services Act 1982 (as amended by the Consumer Rights Act 2015 section 100(5)) was discussed. This was not a point addressed by the parties either before HHJ Pearce or in the Court of Appeal but was raised by Mr Barton in his written case for this appeal. Section 15 provides that where under a “relevant contract” for the supply of a service, the consideration for the service is not determined by the contract, there is an implied term that the party contracting with the supplier will pay a reasonable charge. However, it seems clear that this section does not apply here since the consideration for the introduction was determined by the contract. It is also doubtful whether this is a “relevant contract” within the meaning of section 15, since section 12(1) defines this as meaning a contract under which the supplier agrees to carry out a service. Here Mr Barton did not come under a contractual obligation to provide the introduction to Foxpace, this was a unilateral contract by which his making of the introduction was what brought the contract into existence.

1. Mr Pomfret, appearing on behalf of Mr Barton, did not rely on section 15 directly but argued that the provision reflects the common law position that a term will be implied where services are provided and there is no agreement as to remuneration. The authority relied on by Mr Pomfret as demonstrating the common law position is Way v Latilla [1937] 3 ALL ER 759. In that case, Mr Latilla asked Mr Way to obtain information about gold mining concessions and promised to protect Mr Way’s interests if he did so. Mr Way obtained the necessary information for Mr Latilla who then acquired the concessions which proved very valuable. Mr Way claimed that there had been a concluded contract that he should receive a share of the concession and he invited the court to award him one third of Mr Latilla’s profit “by custom, or on a reasonable basis”. The House of Lords was unable to accede to that because there was no material before the House upon which they could decide the share which the parties must be taken to have agreed. But whilst there was no concluded contract as to remuneration, it was plain that there was “a contract of employment” under which Mr Way was engaged to do work “in circumstances which clearly indicated that the work was not to be gratuitous” (per Lord Atkin at p 763). The House of Lords reduced the payment from the £30,000 awarded by the judge to £5,000.

1. That case can therefore be seen as one of many cases in which work is performed in anticipation of the conclusion of a contract to settle remuneration, where no such contract is ever concluded and where the court awards a reasonable sum to the claimant as payment for his services. Mr Pomfret asks rhetorically whether the fact not only that there was a concluded agreement here between Foxpace and Mr Barton but also that the agreement was that if Nash House sold for £6.5 million Mr Barton would be paid a fee of £1.2 million could alter the analysis. In my judgment it alters it entirely for the reasons I discuss in the following paragraphs. I do not consider that section 15 either on its own terms or as an indication as to what should happen at common law where there is a unilateral contract which is silent as to remuneration assists Mr Barton. That is because this contract was not silent as to remuneration.

1. Another route by which the law implies a term is where the term is an incident of the particular kind of contract in issue. This was explained in Liverpool City Council v Irwin [1977] AC 239 (“Irwin”). The appellants in that case occupied a council maisonette in a high rise block and withheld their rent in protest against the conditions in the building. They alleged that the council was in breach of an implied duty to repair and maintain the common parts of the building. The council denied the existence of such a duty. There was no formal demise of the maisonette but only a document described as ‘conditions of tenancy’ which set out obligations on the part of the tenants but none on the part of the council. The House of Lords held that the contract of letting represented by the conditions of tenancy was incomplete so that it had to be established what the complete contract was. The obligations which had to be read into the contract were such as the nature of the contract itself implicitly required.

1. Lord Wilberforce said (p 252H) that the first step was to ascertain what the terms of the contract were. The contract was partly but not wholly stated in writing. In order to complete it and to give it a bilateral character it was necessary to take account of the actions of the parties and the circumstances. He noted that to say that the construction of a complete contract out of these elements involved a process of ‘implication’ may be correct; “it would be so if implication means the supplying of what is not expressed” (p 253H). But importantly he went on to make clear that he was not talking about implying terms to which the parties would, if asked, have unhesitatingly agreed as part of the bargain, nor of implying terms because the contract will not work without them. This was a different kind of implied term – a different “shade on a continuous spectrum” – because: “The court here is simply concerned to establish what the contract is, the parties not having themselves fully stated the terms.” Turning to the lease before the House, clearly the tenants had an easement to use the stairs, lifts and rubbish chutes, but the question was whether the easement was accompanied by any obligation on the landlord to maintain them. That depended on the test to be applied, as to which Lord Wilberforce said this (pp 254F-255A):

   “In my opinion such obligation should be read into the contract as the nature of the contract itself implicitly requires, no more, no less: a test, in other words, of necessity. … I do not think that this approach involves any innovation as regards the law of contract. The necessity to have regard to the inherent nature of a contract and of the relationship thereby established was stated in this House in Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555.”

1. Lord Wilberforce said that in Lister v Romford Ice,Viscount Simonds drew a clear distinction between a search for an implied term such as might be necessary to give business efficacy to a particular contract and a search based on wider considerations for such a term as the nature of the contract might call for, or as a legal incident of this kind of contract. Lord Cross of Chelsea in Irwin also stressed the distinction between terms implied into the contract on the application of the business efficacy test and what the House was doing in the appeal before it:

   “When it implies a term in a contract the court is sometimes laying down a general rule that in all contracts of a certain type - sale of goods, master and servant, landlord and tenant and so on - some provision is to be implied unless the parties have expressly excluded it. In deciding whether or not to lay down such a prima facie rule the court will naturally ask itself whether in the general run of such cases the term in question would be one which it would be reasonable to insert. Sometimes, however, there is no question of laying down any prima facie rule applicable to all cases of a defined type but what the court is being in effect asked to do is to rectify a particular - often a very detailed - contract by inserting in it a term which the parties have not expressed. Here it is not enough for the court to say that the suggested term is a reasonable one the presence of which would make the contract a better or fairer one; it must be able to say that the insertion of the term is necessary to give - as it is put – ‘business efficacy’ to the contract and that if its absence had been pointed out at the time both parties - assuming them to have been reasonable men - would have agreed without hesitation to its insertion.” (pp 257H-258B)

1. Lord Cross firmly rejected the submission that the implied term for which the tenant was contending would pass the strict test for implying terms – he thought that if an officious bystander had asked the council whether it would be under any legal liability to keep the common parts in working order the answer might well have been “Certainly not”. But in the circumstances of the letting of flats in a high block, he concluded that in the case of ordinary commercial lettings the landlord should be under some obligation to keep the common parts in repair and the facilities in working order unless he has expressly excluded any such obligation.

1. Lord Edmund-Davies also agreed that The Moorcock implied term test was not satisfied because the council, if asked at the time it granted the tenancies, would have rejected the term that the tenants sought to imply: p. 266F-G. But he accepted the tenants’ “more attractive” alternative submission that the obligation contended for by the tenants was implied by the general law as a legal incident of this kind of contract and that the landlords must be assumed to know about that as well as anyone else.

1. That there are these two kinds of implied terms has been stressed more recently in Geys v Société Générale, London Branch [2013] 1 AC 523, para 55 where Baroness Hale of Richmond said, in a case involving an employment relationship:

   “In this connection, it is important to distinguish between two different kinds of implied terms. First, there are those terms which are implied into a particular contract because, on its proper construction, the parties must have intended to include them: see Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988. Such terms are only implied where it is necessary to give business efficacy to the particular contract in question. Second, there are those terms which are implied into a class of contractual relationship, such as that between landlord and tenant or between employer and employee, where the parties may have left a good deal unsaid, but the courts have implied the term as a necessary incident of the relationship concerned, unless the parties have expressly excluded it: see Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555, Liverpool City Council v Irwin [1977] AC 239.”

1. Given that there is no basis for implying a term on the Marks and Spencer test and that there is no statutorily implied term here, I turn to consider whether the term on which Mr Barton seeks to rely is to be implied as an incident of this kind of contract.

(c) Implied terms: the estate agent cases

1. Mr Barton relies before this court on a series of cases dealing with estate agents. Some of these cases do not draw the distinction that was explained in Irwin and Geys as clearly as they might. The courts’ concern to make sure estate agents get paid has a long history. The cases arise because the arrangement made between an estate agent and someone with a house they want to sell is often very informal – a phone call or a short face to face conversation – but then a substantial sum of money is claimed by the agent as a percentage of the purchase price and the vendor is unwilling to pay. The courts have had to piece together what the obligations to pay are and when they arise from what Denning LJ described in one case as “the common understanding of men”: Dennis Reed Ltd v Goody [1950] 2 KB 277, 284.

1. The House of Lords considered when an agent becomes entitled to the fee in Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 (“Luxor”). The agent in Luxor had agreed to a commission which would become payable on completion of the sale. He introduced prospective purchasers who were prepared to buy the property but the defendants changed their plans and no sale took place. It followed that no commission was payable under the contract but the agent argued that he was entitled to damages for breach of an implied term that the vendor would do nothing to prevent the satisfactory completion of the transaction and so deprive him of his commission. The House of Lords declined to imply such a term. Viscount Simon LC described the different kinds of arrangement that can arise between a vendor and the agent (pp 120 – 121). In one class of case, the agent becomes entitled to the commission as soon as he introduces a purchaser who makes an offer of a specified amount, whether the seller then goes through with the purchase or not. In other cases, there may be an implied term that, at least once the agent has expended substantial time and money in finding a purchaser, the vendor will not withdraw the authority given to the agent. In the third type of case, the express terms of the contract provide that the agent will receive the commission only upon completion of the transaction. In that third type of case, Viscount Simon said, there was no room for the suggested implied term:

   “The agent is promised a reward in return for an event, and the event has not happened. He runs the risk of disappointment, but if he is not willing to run the risk he should introduce into the express terms of the contract the clause which protects him.”

1. Viscount Simon distinguished the earlier case of Prickett v Badger (1856) 1 CB (NS) 296. In that case, the plaintiff was an estate agent and the defendant was the lord of the manor of Highbury seeking to sell 14 acres of land on the Seven Sisters Road, Holloway for £650 per acre. The plaintiff agreed to find a buyer and that the commission would be 1.5% of the purchase price. The plaintiff advertised the site and found a buyer at £675 per acre. The defendant then disclosed that he was not in fact the owner of the land, and the owner declined to sell. The court in that case had held that the agent was entitled to sue for a quantum meruit. Viscount Simon said in Luxor that Prickett v Badger must be regarded as “turning on its special facts, which were very unusual” in that the vendor turned out to have no interest in the land. He went on (p 121):

   “The report attributes to Pollock C.B., who tried the case at Assizes, the assertion that if a man places in the hands of several house-agents a house which he is desirous of letting or selling, ‘though the successful agent alone would be entitled to claim commission, the others would clearly be entitled to something for their trouble.’ If the Chief Baron really made this observation, it certainly is not in accordance with the usual result of arrangements made with house agents, and it should be noted that Williams J [in the Court of Appeal in Prickett, at p 305] speaks of ‘the implied understanding that the agent is only to receive a commission if he succeeds in effecting a sale, but, if not, then he is to get nothing.’”

1. Lord Russell of Killowen and Lord Wright agreed that the agent was not entitled to any payment if the sale did not go through. Lord Russell said (p 125):

   “As to the claim on a quantum meruit, I do not see how this can be justified in the face of the express provision for remuneration which the contract contains. This must necessarily exclude such a claim, unless it can (upon the facts of a particular case) be based upon a contract subsequent to the original contract, and arising from some conduct on the part of the principal.”

1. Lord Russell also referred to the large commission that the agent would have earned if the sale had gone through as justifying the risk that he took. He noted that the sum of £10,000 promised to the agent was equivalent to the remuneration of a year’s work by a Lord Chancellor and would have been “no mean reward” for work done by the agent within a period of eight or nine days. He held that there was no lack of business efficacy in the contract even if the principal were free to refuse to sell to the agent’s client (pp 125-126).

1. The leading modern case on the ‘understanding’ from which an estate agent’s entitlement to commission emerges is Devani v Wells [2019] UKSC 4, [2020] AC 129. In that case, the claimant estate agent telephoned the defendant regarding some flats that the defendant wished to sell. The claimant told the defendant that his standard commission was 2 per cent plus VAT but nothing was said as to the precise event which would trigger the obligation to pay. In due course the flats were sold to a purchaser who had been introduced by the claimant but the defendant refused to pay the commission, arguing that there had been insufficient agreement on the terms to give rise to a legally binding contract. The Supreme Court held that where an estate agent and a vendor agreed that the estate agent would find a purchaser then, absent a provision to the contrary, they would be taken to have made a legally binding contract under which the agent was entitled to commission on the completion of a sale to a purchaser that the agent has found.

1. On the facts found by the judge in Devani, the agent’s standard terms of business provided for commission to be payable on exchange of contracts but the agent had only submitted his standard written terms to the vendor after he had introduced the purchaser so those terms were not incorporated into the contract. Lord Kitchin JSC (with whom the other Justices agreed) referred to a number of previous estate agent cases in the early 1950s including the judgment of Denning LJ in Dennis Reed Ltd v Goody to which I have already referred. Lord Kitchin said at para 23 that the case before them was:

   “… another in which the parties meant by their words and actions that the agent was engaged on the usual terms, that is to say that a commission became payable not upon the introduction by Mr Devani of a prospective purchaser to Mr Wells, nor upon the exchange of contracts, but rather upon completion of the sale and then from its proceeds, for it was at that time that Newlon actually bought and paid for the property and so became its purchaser.”

1. Lord Kitchin, disagreeing with the decision of the Court of Appeal, held that where there was no express term as to when commission was payable and the bargain was in substance “find me a buyer”, then a reasonable person would understand that the parties intended the commission to be payable from the proceeds of sale on completion of the sale to a purchaser whom the agent had introduced.

1. The high point of Mr Barton’s argument in reliance on this line of cases is Firth v Hylane Ltd [1959] EWCA Civ J0211-3 (vLex), [1959] EGD 212 (“Hylane”). That was a decision of the Court of Appeal, a judgment of Morris LJ with whom Sellers and Pearce LJJ agreed. The estate agent claimed £500 for professional fees and £100 for advertising costs and out of pocket expenses. The defendants wanted to sell their property and engaged Mr Firth to assist them. As Morris LJ said: “Quite naturally, Mr Firth, whose work in life is that of an estate agent, would expect to be remunerated for his services” (Transcript, p 2). The agreement was formed in an exchange of letters and amounted to an agreement that Hylane would pay a commission of £1,000 together with expenses if the property was sold to a buyer introduced by Mr Firth for not less than £35,000.

1. The parties contemplated that an auction would be held to sell the property and Mr Firth duly arranged for an auction to take place. The highest offer at the auction was only £29,500. The defendant’s case was that after the auction, Mr Firth’s instructions had been cancelled. The trial judge rejected that on the facts because it was clear from correspondence between the parties that Mr Firth continued to search for a purchaser with the cooperation of Hylane and other lower amounts of remuneration were discussed dependent on other prices being achieved, with the property ultimately being sold for £31,000.

1. It was accepted that the £1,000 agreed by Mr Firth was a very high commission for such a sale – the seller would have been very fortunate to get £35,000 for the property. If he could achieve that price, he was content to pay the large commission of £1,000. Morris LJ said:

   “That was a special sum. But suppose that the Plaintiff, as an estate agent, introduced somebody as a purchaser to the Defendants, and the Defendants accepted the introduction and did sell to such a purchaser but at less than £35,000, then it could not be that the Plaintiff was not to be remunerated at all. That would be most unreasonable, and that could not have been in the contemplation of these parties. If you invite somebody to render a service, in circumstances in which payment is usual, and the service is rendered and accepted and a specific charge has not been agreed upon, then a reasonable sum becomes payable for the service.

   The £1,000 would not be earned unless the sale at £35,000 was effected through Mr Firth. The contract did not set out what was the amount to be paid if a purchaser at less than £35,000 was introduced as a result of which there was a sale, but the contract certainly did not provide that there was to be no remuneration in the case of the introduction of a purchaser to whom the company decided to sell for lessthan £35,000.” (Transcript, pp 4-5)

1. He therefore held that the agent was entitled to reasonable remuneration and agreed with the trial judge’s assessment that the reasonable amount was £450. Pearce LJ in Hylane agreed with Morris LJ and reasoned as follows:

   “The clear indication in the letter of 15 December 1955, was that the Plaintiff should be remunerated for his services if they came to a successful conclusion and were used by the Defendants. The Plaintiff was an estate agent. The Defendant was the owner of property, and the Defendant was instructing the Plaintiff to find a purchaser. It is argued that because an optimistic price was referred to and the remuneration in that event was to be unusually high, including something in the nature of a bonus, it was therefore intended that if the optimistic price was not reached, and the bonus was not earned, the Plaintiff was to get nothing. That would be a result which, in my view, is completely contrary to the normal expectations in such an employment. There is nothing inconsistent in paying a bonus in certain events and yet allowing a normal remuneration if the bonus is not earned. I think the learned judge was right in implying a term for reasonable remuneration.” (Transcript, p 14)

1. Understandably Mr Barton relies on those passages to say that the same should apply in his case; indeed, he argued before the Court of Appeal that Hylane was binding on that court as to the outcome of the case. Asplin LJ held that the decision in Hylane turned on a particular course of dealing and correspondence between the estate agent and his client in that case (as had been said by Morgan J in Berkeley Community Villages Ltd v Pullen [2007] 3 EGLR 101, [2007] EWHC 1330 (Ch) at para 108). Davis LJ also distinguished Hylane on the basis that Mr Firth had continued extensively to negotiate with the prospective purchaser even after the originally stipulated price of £35,000 had proved unobtainable. Before this court, Mr Twigger on behalf of Foxpace, argued that Hylane was not relevant to the present appeal because the claimant in that case, Mr Firth, had clearly continued to provide valuable estate agent services after the auction leading to the sale of the property at the lower sum and must have done so in the expectation of receiving some fee.

1. I do not think one can dismiss Hylane so easily on that basis. Morris LJ described what had happened at the auction. When it appeared that the highest offer was one of £29,500, Morris LJ said: (emphasis added)

   “Mr Firth had no authority to accept that figure, but Mr Lane [of Hylane] was sitting beside him. Mr Firth referred the offer to Mr Lane. Mr Lane refused it rather peremptorily. So the property was not sold. If Mr Lane had said: “Yes, I will take that sum”, I cannot think that Mr Firth would not be entitled to some commission.” (Transcript, p 6)

1. For Morris LJ at least, the outcome did not depend on the later work carried out by Mr Firth. However, it does seem to me that the fact it was always contemplated that the sale in Hylane would be by auction was important. That is because the significance of the specific figure of £35,000 was that Mr Firth as Hylane’s agent had authority to bind Hylane to a sale at that figure at the auction without further recourse but would need to obtain further authority to sell at a lower figure. This view of the case is supported by the reference made by Morris LJ in his judgment to the speech of Lord Watson in Toulmin v Millar (1886-1887) 3 TLR 836, whereLord Watson said:

   “When a proprietor, with the viewof selling his estate, goes to an agent and requests him to find a purchaser, naming at the same time the sum which he is willing to accept, that will constitute a general employment; and should the estate be eventually sold to a purchaser introduced by the agent, the latter will be entitled to his commission, although the price paid should be lessthan the sum named at the time the employment was given. The mention of a specific sum prevents the agent from selling for a lower price without the consent of his employer; but it is given merely as the basis of future negotiations, leaving the actual price to be settled in the course of these negotiations."

1. Sellers LJ in his concurring judgment in Hylane similarly referred to the judgment of Scrutton LJ in Price, Davies & Co v Smith (1929) LT 490, 493-494 where the defence to a claim for commission was that the agent had not been given authority to sell the premises at a price lower than £4,500. It was held that given that the seller was prepared to accept the lower price, the agent was still entitled to the commission.

1. In the present case there was no question of Mr Barton being able to act as Foxpace’s agent in the sense of having authority to bind Foxpace to a sale even at £6.5 million. That was not the nature of the relationship between them. I therefore agree with the Court of Appeal that the Hylane case is of limited assistance to Mr Barton.

(d) The application of the estate agent cases to the facts of this case

1. Can Mr Barton rely more generally on the estate agent cases to establish that as a matter of law it is an incident of his contract with Foxpace that he is entitled to a reasonable commission for having made a successful introduction of the purchaser for Nash House? In my judgment he cannot for the following reasons.

1. First, Mr Barton was not an estate agent. There is no evidence that suggests that he is in the business of introducing buyers to vendors. In his second witness statement in the insolvency proceedings, he describes how his involvement with Nash House came about. He had a substantial sum of money that he wanted to invest in property in the hope of making a profit. He was not the broker of the proposed first deal with Stonebridge but rather a lender to the consortium which hoped to buy the property. His role was always that of investor or of trying to put together, for his own benefit, a consortium which would finance the purchase of the property.

1. His role in introducing Western to Foxpace was, according to the evidence, a one-off. He had no scale of fees or other terms and conditions which he usually adopted and which a reasonable person engaging him would expect to govern the relationship. Foxpace did not approach him asking him to find a purchaser for Nash House. He describes in his second witness statement how he was himself introduced to Western by a colleague.

1. Secondly, as I have said, it is accepted that a fee of £1.2 million was several times the reasonable fee for this introduction.

1. This was, in my judgment, therefore a contract similar to that in Cutter v Powell discussed earlier. Mr Barton had no legal or moral entitlement to the return of the monies that he had spent in the course of the two failed transactions. If Nash House had been sold to someone else, there is no doubt that he would have forfeited the £1.2 million, as purchasers who fail to complete after exchanging contracts for the sale of property do. Mr Barton had the chance, unusually, to recoup his forfeited outlay either by buying the property himself for a reduced sum or by introducing someone who would buy the property for £6.5 million. He was not able to take advantage of either of those opportunities, but that is a risk that he took, on the findings made by the judge. There is no basis for implying a term into the contract that removes that risk, or, looking at it from Foxpace’s perspective, that requires them to risk having to surrender the £1.2 million which they were otherwise undoubtedly entitled to keep without having the commensurate chance of selling the property for a lower price, commission free.

1. Thirdly, the fee of £1.2 million was not in the nature of a bonus over and above a reasonable fee for getting a favourable price for the property; it was calculated in a completely different way. Mr Barton explained in his witness statement that he had provided the vast majority of the funds that Stonebridge paid Foxpace in respect of the first failed transaction and that, after the later failure of the sale to him personally, his personal investment in the project was £1,150,000 plus about £50,000 of professional costs making the £1.2 million. He explained that the agreement with Foxpace was focused on reimbursing him the £1.2 million. He gives more detail of the makeup of the £1.2 million in his second witness statement, in response to a challenge in the witness statement of Mr Gwyn Jones that Mr Barton had not provided any proof of his expenditure. He says that once it became clear there might be a direct sale of the property by Foxpace to Western (rather than a sale to him and a sub-sale from him to Western) he wanted to protect his own position as regards his earlier expenditure.

1. His witness statement does not, therefore, set out the extent or nature of the work he did other than saying that he “assisted with the negotiations” between Foxpace and Western and that he continued to be “heavily involved” in the discussions between Foxpace and Western after the problem with the HS2 project emerged – an involvement that he describes in a little more detail in his second witness statement. In his second witness statement (in which he deals with his unjust enrichment claim as well as his contractual claim) he squarely bases the claim on having provided to Foxpace “a clear benefit in introducing it to the ultimate purchaser of Nash House”. His claim is not based on anything other than having made the introduction, Western having bought Nash House and the agreement of Foxpace that Mr Barton could get the benefit of the fact that he had in fact already paid Foxpace £1.2 million for the property.

1. The background to the transaction shows that this arrangement was nothing like the arrangements discussed in the estate agent cases. The fee agreed was not related to any effort or costs incurred by him in finding Western. His position was different from that of estate agents who rely on recovering fees from successful introductions to finance their business which inevitably involves much wasted effort for clients who fail to find a buyer or who find a buyer through some other route.

1. I therefore conclude that HHJ Pearce was right to say that the contract claim fails. There was no express term creating an obligation on Foxpace to pay Mr Barton a commission if Nash House was sold for less than £6.5 million; it is certainly not clear that Foxpace would have unhesitatingly agreed to pay him a reasonable fee in that event or that such a term is necessary to give business efficacy to the contract between them. The estate agent cases do not suggest that a ‘common understanding’ among people would be that Mr Barton would be entitled to such a fee because Mr Barton is not an estate agent, he did not make the introduction in the course of running a business of making such introductions and although the agreement was in a commercial context in which people do not tend to act gratuitously, he took a risk that if he did not find a buyer at £6.5 million, he would not be able to recover the sums which he had forfeited in the course of the two earlier transactions.

1. The claim in unjust enrichment

(a) Failure of basis: the principles

1. The evolution of the claim in unjust enrichment was described in the recent comprehensive and scholarly judgment of Carr LJ in Dargamo Holdings Ltd v Avonwick Holdings Ltd [2021] EWCA Civ 1149, [2022] 1 All ER (Comm) 1244 (“Dargamo”) with which Sir Timothy Lloyd and Asplin LJ agreed: see paras 51 onwards. As she states there, there are four factors that a court needs to consider in a claim for unjust enrichment, as summarised in Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938, para 10. When faced with a claim for unjust enrichment, a court must first ask itself four questions: (1) has the defendant been enriched? (2) was the enrichment at the claimant’s expense? (3) was the enrichment unjust? (4) are there any defences available to the defendant? In the present appeal, it is accepted by Foxpace that the answer to the first two questions is ‘yes’ and that the answer to the fourth question is ‘no’. The issue between the parties is therefore whether Foxpace’s enrichment arising from the introduction by Mr Barton of Western as the purchaser of Nash House was unjust unless they pay Mr Barton a reasonable fee.

1. The unjust factor on which Mr Barton relies is ‘failure of basis’ – the terminology which is generally preferred to ‘failure of consideration’ for the reasons explained by Carr LJ in Dargamo at paras 77 onwards. She said at para 79:

   “The core concept of 'failure of basis' is that a benefit has been conferred on a joint understanding that the recipient's right to retain it is conditional. If the condition is not fulfilled, the recipient must return the benefit (see Goff & Jones [sc 7th edn, 2007] at 12-01). Whilst failure of basis ranks alongside the unjust factors of mistake, duress and undue influence as a factor negativing consent, it differs in that it is concerned with qualification of consent, as opposed to impaired or vitiated consent (see Burrows The Law of Restitution (3rd edn, 2011)).”

1. The two principal authorities on failure of basis are Barnes v Eastenders Cash & Carry plc [2014] UKSC 26, [2015] AC 1 (“Barnes”) and the decision of the High Court of Australia in Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68, (2001) 208 CLR 516 (“Roxborough”).

1. In Barnes, the Crown Court had made management receiver orders pursuant to the Proceeds of Crime Act 2002 against two companies linked with defendants who were suspected of fraud. The orders were made on the basis that the companies’ assets were to be treated as the assets of the defendants, and provided that the expenses and remuneration of the receivers would be paid out of the receivership property in accordance with a letter of agreement sent by the Crown Prosecution Service to the receiver. The CPS made clear in that letter that they did not undertake to indemnify the receiver if the receivership assets were not sufficient to cover the fees. The receiver orders were later quashed on appeal on the grounds that the material before the Crown Court had been insufficient to justify making them. The receiver applied to the Crown Court for an order that his expenses and fees nonetheless be paid out of the receivership assets, an application opposed by the companies. The judge refused to order payment from the companies’ assets but ordered the CPS to pay the fees and costs instead. The issue before the Supreme Court was whether there was any power to order the CPS to pay the fees.

1. Lord Toulson JSC (with whom Baroness Hale DPSC and Lord Kerr, Lord Wilson and Lord Hughes JJSC agreed) referred to the word ‘unjust’ in the term unjust enrichment as being in some respect a term of art. He approved of the statement in Goff & Jones The Law of Unjust Enrichment (8th ed (2011), now in 10th ed (2022) at 1-08) that unjust enrichment is not an abstract moral principle to which the courts must refer in deciding cases, but an organising concept that groups decided authorities that share a set of common features. Some of those decided authorities are cases where there has been a ‘failure of basis’. Failure of basis does not necessarily require failure of a promised counter-performance: “it may consist of the failure of a state of affairs on which the agreement was premised”: para 106. He held that the receiver had agreed to accept the burden of management of the companies on the basis that he would be entitled to take his remuneration and expenses from the companies' assets. That state of affairs which was fundamental to the agreement had failed to sustain itself: para 114. Lord Toulson went on at para 115:

   “In the present case there was a total failure of consideration in relation to the receiver's rights over the companies' assets, which was fundamental to the basis on which the receiver was requested by the CPS and agreed to act. I use the expression ‘fundamental to the basis’ because it should not be thought that mere failure of an expectation which motivated a party to enter into a contract may give rise to a restitutionary claim. Most contracts are entered into with intentions or expectations which may not be fulfilled, and the allocation of the risk of their non-fulfilment is a function of the contract. But in the present case the expectation that the receiver would have a legal right to recover his remuneration and expenses was not just a motivating factor. Nobody envisaged that the receiver should provide his services in managing the companies as a volunteer; those services were to be in return for his right to recover his remuneration and expenses from the assets of the companies, such as they might be. The agreement between the CPS and the receiver so provided, and that provision was incorporated into the order of the court.”

1. Lord Toulson concluded therefore that although the CPS had fulfilled its contractual obligations to the receiver, the receiver was entitled to recover his fees and expenses from the CPS because the work done and expenses incurred by the receiver were at the request of the CPS and there has been a failure of the basis on which the receiver was asked and agreed to do that work.

1. In Roxborough the claimant, Roxborough, had bought cigarettes from the defendant wholesaler, Rothmans, paying a price that expressly included a periodic licence fee imposed on the wholesalers and retailers of tobacco. The licensed retailer did not have to pay the fee if the fee had already been paid on that particular tobacco product by the wholesaler. Wholesalers therefore included the fee in their charges to the retailers with the intention of accounting for it to the revenue authorities. Retailers then did not have to pay the fee themselves and could pass the cost that they had incurred to the wholesaler on to their own retail customers.

1. The licence fee was held to be invalid so that the wholesalers did not in fact have to account for the fee to the revenue. The retailers claimed the recovery of the fees they had paid from the wholesalers. The majority judgment of Gleeson CJ, Gaudron and Hayne JJ described the position as one where reputable commercial people had entered into ordinary business dealings but where their “expectations were defeated by the supervening illegality of one aspect of those dealings”: para 5. They regarded the issue before them as whether there had been a failure of a severable part of the consideration that the retailer had paid to the wholesaler (para 20). They held that there had, because the tax component of the total price was treated as a distinct and separate element by the parties: “to permit recovery of the tax component would not result in confusion between rights of compensation and restitution, or between enforcing a contract and claiming a right by reason of events which have occurred in relation to a contract”. Gummow J having analysed the facts in detail concluded that the retailers “had paid moneys on a basis that later became falsified” because the state of affairs presented by the operation of the legislation imposing the licence fee failed to sustain itself (para 60). He recognised that there had been no failure by Rothmans in the performance of any promise it had made (para 104). But it was still unconscionable for Rothmans to enjoy the payments in respect of the tobacco licence fee in circumstances in which it was not specifically intended or specially provided that Rothmans should so enjoy them. He said “Here, ‘failure of consideration’ identifies the failure to sustain itself of the state of affairs contemplated as a basis for the payments the appellants seek to recover” (para 104).

(b) Was there a ‘basis’ which failed here?

1. In the light of those cases, I turn to consider what the ‘basis’ is that Mr Barton says has failed here. Although Mr Pomfret was not entirely clear as to the basis on which he was relying, it seems that the best description of it was in his written case. There he submitted that there was a common assumption as between Foxpace and Mr Barton that Western would buy Nash House for £6.5 million. He submits that HHJ Pearce found that the parties simply did not consider a lower sale price; that was a factor that was outside of either party’s complete control and when it failed to materialise, their shared assumption and hence the basis of their agreement failed. Mr Barton therefore treats the reduction in the sale price in this case as equivalent to the setting aside of the receivership order in Barnes and the invalidity of the licence fee in Roxborough.

1. I am doubtful whether the judge did make a finding to support such an approach. It would be surprising to conclude that these parties simply did not envisage the possibility that Western would not be prepared to pay £6.5 million for Nash House. Two previous sales had fallen through following exchange of contracts and both had been for less than that amount. In parallel with the negotiations with Western, Foxpace was negotiating with Mr Kherallah for the sale of Nash House for £6.3 million. Mr Barton’s second witness statement describes a number of other unsuccessful attempts to sell Nash House between 2008 and 2013, all for substantially less than £6.5 million. There seems to be no rational basis on which the parties could have been so confident at the point when their agreement was concluded and Western was introduced that the sale of Nash House would go through for that amount.

1. In those circumstances, the fact that neither of them raised with the other what would happen in that event does not suggest to me that they were assuming that the sale would be for at least £6.5 million. I have already referred to Lord Bingham MR’s warning in Philips that one cannot draw from the failure of the parties to deal with a potential eventuality in their contract an inference that such an eventuality was simply not contemplated by them. The most one can say is that Mr Barton, Mr Rooke and Mr Morris did not discuss it and they did not provide for it in the contract. What HHJ Pearce concluded at para 189 was that the parties to the contract “had no shared or even individual expectation as to how the risk of the sale price being less than £6.5 million should be allocated for the purpose of determining whether Mr Barton should be entitled to payment”. That is right but it does not amount, in my judgment, to a finding that the ‘basis’ on which Mr Barton introduced Western to Foxpace was that Nash House would be sold for £6.5 million, such that a sale for £6 million constituted a failure of that basis for the purposes of founding a claim for unjust enrichment.

(c) The effect of the contract on the claim for unjust enrichment

1. HHJ Pearce records at para 169 of his judgment that during closing submissions he raised with Counsel the decision in MacDonald Dickens & Macklin v Costello [2012] QB 244 (“Costello”). He regarded that case as establishing a principle that the parties’ mutual obligations in a case in which they concluded a contract should be limited to the obligations which they have defined and allocated in the course of negotiating that contract, and that the court should uphold those contractual arrangements (see para 190). In Costello, the claimant builders contracted with a company owned by the defendants for the construction of buildings on land owned by the defendants. The defendants had informed the claimant that for tax reasons they were using their company, Oakwood, to enter into the contract rather than contracting themselves. Oakwood paid the claimant’s first few invoices in full but then stopped paying. The claimant brought a claim in unjust enrichment against the Costellos personally. Etherton LJ (with whom Patten and Pill LJJ) agreed said that there could be no doubt that Mr and Mrs Costello had benefited from, or, in restitutionary terms, had been enriched by, the work carried out by the claimants on the site. He described the point of principle that arose in the following terms:

   1. The second point of principle is whether a restitutionary claim should be allowed to undermine the contract between Oakwood and the claimants, that is to say, the way in which the parties chose to allocate the risks involved in the transaction. The parties arranged the transaction as one in which legally enforceable promises were made only between Oakwood and the claimants, even though the benefit of the contract was to be conferred on Mr and Mrs Costello. The obligation to pay for the claimants' services, and so the risk of non-payment, was contractually confined to Oakwood. If a claim was permitted directly against Mr and Mrs Costello it would shatter that contractual containment. It would also alter the usual consequences of Oakwood's insolvency, which was one of the risks assumed by the claimants in contracting with Oakwood, since a direct claim against Mr and Mrs Costello would improve the claimants' position over Oakwood's other unsecured creditors.”

3.Has the term as to reasonable remuneration, implied by law, been excluded?

4.Does Mr Barton have a prima facie right to a restitutionary quantum meruit to reverse unjust enrichment (assuming no contract term implied by law for reasonable remuneration)?

5.Would such a restitutionary quantum meruit to reverse unjust enrichment have been excluded (assuming no contract term implied by law for reasonable remuneration)?

6.Conclusion