Leaving the claimant without his expected £1.2 million fee for introducing the buyer of a property, the Supreme Court has explored the boundaries of claims based on implied terms and unjust enrichment (Barton and others v Morris and another in place of Gwyn Jones (deceased))1. By a majority, the court held that a contract which provided for an introduction fee to be paid if a property sold for a certain amount precluded any implied terms or a claim in unjust enrichment when the property unexpectedly sold for less than that amount.
Demonstrating the nuances and uncertainties in applying the law in this area, not only did the courts at each level of appeal reach different results, there were dissenting opinions in the Supreme Court as to whether a contract term should be implied and whether a claim in unjust enrichment could be made out.
The dispute concerned an oral contract by Foxpace Limited, the owner of a property, to pay an individual, Mr Barton, £1.2 million in the event that the property was sold for £6.5 million to a buyer introduced by Mr Barton. The parties did not specify what was to happen if the property sold for less than £6.5 million.
The property was sold for £6 million to a buyer that Mr Barton introduced. Foxpace argued that this meant that the success fee had not been triggered and that no lesser amounts were payable. However, Foxpace offered to pay Mr Barton £400,000 as a goodwill gesture, which he rejected. Mr Barton subsequently commenced proceedings.
The High Court held that Mr Barton was not entitled to anything as there was no contractual obligation on Foxpace to pay him if the property sold for less than £6.5 million2. The Court of Appeal upheld Mr Barton's appeal, finding that even though the oral contract was silent on what would happen if the property sold for less than £6.5 million, this did not rule out a claim in unjust enrichment and Foxpace would be unjustly enriched by benefiting from the introduction without paying Mr Barton a reasonable fee3. In addition, the same result might be achieved by implying into the contract a term that a reasonable fee would be paid if the property sold for less than £6.5 million. The court held that Mr Barton was entitled to be paid a reasonable fee.
The Supreme Court upheld the further appeal, finding that the express terms of the oral contract precluded any implied terms or claims in unjust enrichment.
Supreme Court's reasoning
The Supreme Court reasoned that there are principally two ways in which a claimant can establish a legal entitlement to money from a defendant for whom they have performed a service. The first is where there is a contractual relationship. The second exists where there is no contractual relationship and is based on unjust enrichment. The issues generated by this claim were in the intersection of these two kinds of legal entitlement.
Implied contract term. The High Court had found on the facts that there was no express term in the oral contract providing for the payment of any fee to Mr Barton if the property was sold for anything less than £6.5 million. The court reasoned that 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 under the contract in the absence of those circumstances. This is the doctrine of "expressum facit cessare tacitum" or "what is expressed makes what is implied silent". As Lord Hoffmann made clear in Attorney General of Belize v Belize Telecom Ltd4, the silence of a contract as to what obligations arise on the happening of a particular event means that no obligations arise on the happening of that event.
In addition, a term could not be implied into the contract to the effect that Mr Barton would be paid a reasonable fee if the sale was for less than £6.5 million as:
- it was not clear what fee the parties would have agreed;
- the obligation to pay a reasonable fee was not so obvious that it went without saying; and
- the payment of a reasonable fee was not necessary to give the agreement business efficacy or coherence.
Mr Barton raised the issue of Section 15 of the Supply of Goods and Services Act 1982, as amended by section 100(5) of the Consumer Rights Act 2015, which provides that if the consideration is not specified in a relevant contract for the supply of a service, a term will be implied that the supplier will be paid a reasonable fee. However, the court held that this operates only where the contract is silent as to remuneration, whereas in this case the oral contract did determine the consideration for the introduction. Additionally, this was not a situation where a supplier had agreed to carry out a service, as there was no contractual obligation on Mr Barton to provide any introduction to Foxpace.
Mr Barton also sought to rely on a line of cases relating to estate agency fees, including Firth v Hylane5, in which the court held that an estate agent was entitled to a reasonable fee where a property sold for less than a specific price at which a higher fee had been agreed. However, the court held that Mr Barton could not do so as:
- he is not an estate agent;
- Foxpace did not approach him to find a buyer;
- the agreed fee of £1.2 million was several times more than the reasonable fee for this introduction; and
- the agreed 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 as it was calculated in a completely different way so as to be a reimbursement of the personal investment Mr Barton had made at various points in the project of selling the property.
Unjust enrichment. For a claim in unjust enrichment to succeed, the court must be satisfied that:
- the defendant has been enriched;
- the enrichment was at the claimant's expense;
- the enrichment was unjust; and
- there are no defences available to the defendant.
Foxpace had accepted for the purposes of the appeal that it had been enriched at Mr Barton's expense in circumstances where there were no defences available to it. What was in issue was whether the enrichment was unjust. The unjust factor on which Mr Barton relied was the so-called "failure of basis" concept, which essentially means the failure of a state of affairs on which an agreement was premised. The court referred to Lord Bingham MR's warning in Philips Electronique Grand Public SA v British Sky Broadcasting Ltd6 that where parties fail to deal with a potential eventuality in their contract it cannot necessarily be inferred that they had not contemplated such an eventuality.
The fact that neither party raised with the other what would happen if the property were not sold for £6.5 million did not suggest that they were assuming that the sale would be for at least £6.5 million. There could be no remedy in unjust enrichment because a nil reward for a sale for less than £6.5 million was what the parties had agreed. Once again, the silence of the contract as to what obligations would arise on the happening of the particular event meant that no obligations arose and a claim in unjust enrichment was therefore untenable. As Lady Rose put it, "unjust enrichment mends no-one’s bargain". The court could not make a finding that the basis on which Mr Barton introduced the buyer was that the property would be sold for £6.5 million; therefore, the sale for £6 million did not constitute a failure of that basis for the purposes of founding a claim for unjust enrichment.
Lady Rose gave the leading judgment in Barton and others v Morris and another in place of Gwyn Jones (deceased), with which Lord Briggs and Lord Stephens agreed. However, Lord Leggatt and Lord Burrows gave dissenting judgements. Both reasoned that Mr Barton's claim for an implied term at law should succeed. The key factors in reaching this decision were that:
- It did not matter that Mr Barton was not an estate agent when carrying out the service of introducing the buyer as the parties had clearly intended this to be a commercial, rather than benevolent, arrangement. Therefore, terms routinely implied into arrangements made with estate agents should apply equally to the parties' oral contract.
- The silence of the oral contract on what the remuneration should be if the property sold for less than £6.5 million meant that the implied term to pay Mr Barton a reasonable fee remained unaltered. This implied term would only be replaced if the property sold for £6.5 million or more, in which case Mr Barton would be due £1.2 million; that is, more than he would have been entitled to had there been no express agreement. This is somewhat at odds with the legal concept of expressum facit cessare tacitum referred to by Lady Rose in her judgment.
Lord Burrows went further in his dissenting judgment, saying that had there been no implied term, unjust enrichment would have applied and Mr Barton would have been entitled to the market value of the service that he provided. This was on the basis that the enrichment was unjust because the "failure of basis" concept applied: the shared objective was to sell the property for at least £6.5 million and the parties did not contemplate anything else. Therefore, the failure to sell the property for at least £6.5 million was a failure of basis, making the enrichment unjust.
Barton demonstrates the uncertainty that can ensue from the silence of contracts on key aspects of commercial arrangements. Oral contracts have a particular tendency to suffer from important gaps and a failure to address the key terms of the bargain as comprehensively as they should. The range of decisions arrived at in the various courts during the Barton proceedings demonstrates the dangers of failing to specify how a contract will apply in all eventualities, and highlights the unpredictability of commercial outcomes, even when required to be determined by the courts. Taking the time to think beyond the primary operative aspect of a deal and flesh out the other key scenarios will provide parties with much greater certainty and likely avoid costly and time-consuming litigation.
Airlie Goodman, Miles Robinson and Mark Stefanini are partners, Jonny Cohen is a senior associate, and Sarah Shearman is a professional support lawyer, at Mayer Brown International LLP.
This article first appeared in the March 2023 issue of PLC Magazine.