The Supreme Court has, by a majority, allowed an appeal against a Court of Appeal judgment (considered here) that granted an award for unjust enrichment where a property was sold for less than the value required to entitle the claimant to a fee under the express terms of the contract: Barton and others v Morris and another in place of Gwyn Jones (deceased) [2023] UKSC 3.
By providing that payment would be made if the property was sold for a particular value and remaining silent as to what would happen if the property was sold for less than that value, the contract had excluded any obligation to pay the claimant in such a scenario.
There was no basis on which a term could be implied in fact or by law requiring the claimant to receive reasonable remuneration for his service if the property sold for a lower price. The claimant had agreed to receive a fee that was significantly higher than reasonable if the property was sold for a particular value, but had also taken on the contractual risk of receiving nothing should the property be sold for less than that value.
A claim for unjust enrichment could not step in to mend the bargain that the claimant had made. In any event, the Supreme Court rejected the claimant's argument that there had been a "failure of basis" as a result of the property not being sold for the stated value, so as to found a claim in unjust enrichment. The fact that the contract provided for payment to be made if the property was sold for a particular value did not necessarily mean that the contract was based on the property being sold for that value.
The judgment raises a number of interesting points regarding the extent to which the courts will assist parties whose contract does not include comprehensive terms for payment. The parties' dispute probably would have been avoided if the contract between them had fully addressed, in express terms, the different scenarios in which a fee should or should not be paid to the claimant. This underlines the importance of drafting contracts as clearly as possible, with a view to minimising uncertainty.
Background
The claimant, Mr Barton, entered into an oral agreement with Foxpace Limited, which was aiming to sell a property in London. Foxpace agreed to pay Mr Barton £1.2 million if the property was sold for £6.5 million to a purchaser introduced to Foxpace by Mr Barton. The parties did not discuss whether any payment would be due to Mr Barton if the property was sold for less than £6.5 million.
Mr Barton introduced a potential purchaser to Foxpace, who ultimately purchased the property for £6 million. Foxpace then refused to pay the £1.2 million claimed by Mr Barton.
In its first instance judgment, the High Court (HHJ Pearce): (i) rejected Mr Barton's argument that he was entitled to receive the £1.2 million payment under the express terms of the contract, holding that those express terms only entitled Mr Barton to that payment if the property was sold for £6.5 million; and (ii) rejected Mr Barton's alternative argument that Foxpace had been unjustly enriched at his expense, holding that granting Mr Barton compensation on that basis would constitute an unacceptable interference with the terms of the contract, in line with the decision in MacDonald Dickens & Macklin v Costello [2011] EWCA Civ 930. HHJ Pearce therefore found that Mr Barton was not entitled to payment from Foxpace.
Mr Barton appealed the High Court's decision in relation to unjust enrichment. Contrary to the High Court's view, the Court of Appeal found that Mr Barton's claim for unjust enrichment would not unacceptably interfere with the contract agreed with Foxpace. Distinguishing the case from Costello (in which the parties had agreed contractual terms that would be contradicted if the unjust enrichment claim were to succeed), the Court of Appeal observed that Mr Barton's agreement with Foxpace contained no express terms setting out what would happen if the property were to be sold for less than £6.5 million, meaning that Mr Barton's unjust enrichment claim would not undermine the parties' contractual allocation of risk.
The Court of Appeal therefore found that Mr Barton was entitled to payment of £435,000, which was intended to reflect the value of the service that Mr Barton had provided. The Court of Appeal also indicated that rather than claiming unjust enrichment, Mr Barton could have claimed that his contract with Foxpace contained an implied term that he would be reasonably remunerated for his service, irrespective of the value for which the property was sold.
The Court of Appeal's judgment was appealed to the Supreme Court, on the basis that the Court of Appeal was wrong to find that Foxpace had been unjustly enriched and wrong to conclude that Mr Barton may have been entitled to payment based on an implied term.
Decision
By a majority of 3:2 (Lord Leggatt and Lord Burrows dissenting), the Supreme Court allowed the appeal, finding that Mr Barton was not entitled to payment based on unjust enrichment or otherwise. Lady Rose gave the majority judgment, with which Lord Briggs and Lord Stephens agreed.
No term implied in fact or in law
The Supreme Court considered the Court of Appeal's reference to the possibility of an implied term that Mr Barton would be reasonably remunerated in the event that the property was purchased for less than £6.5 million, but found that such an implied term would contradict the express terms of the agreement. The agreement had not specified that Foxpace would pay a fee "if, and only if" the property was sold for £6.5 million, but this was not decisive. The effect of the agreement was that Mr Barton was only entitled to be paid if the express trigger for payment – the sale of the property for £6.5 million – had occurred.
The Supreme Court rejected the suggestion that a payment term should be implied as a matter of fact, in order to give business efficacy to the agreement, given that the express terms of the agreement would mean that Mr Barton would be paid no fee at all if the property were to be sold for very slightly less than £6.5 million. While noting that it might be necessary to imply a term that Foxpace "would not, in effect, play a dirty trick" by agreeing a reduced price with the purchaser in order to avoid paying Mr Barton, the Supreme Court found that it was not necessary to imply a payment term simply because (as was in fact the case) the property had sold for less than £6.5 million for a different (and innocent) reason. It was not out of the ordinary for a party to agree to receive a particularly high payment for fulfilling a condition whilst accepting the risk of receiving nothing should the condition not be met.
The Supreme Court also considered whether statute (specifically the Supply of Goods and Services Act 1982, s.15, which provides for a "reasonable charge" where a contract for the supply of a service does not determine consideration), or the equivalent common law rule, would step in to imply a payment term for Mr Barton. The Supreme Court rejected this suggestion, finding that the contract was not silent as to remuneration/consideration.
Finally, the Supreme Court considered Mr Barton's submission that a payment term was implied as a legal incident of the particular type of contract entered into with Foxpace. In making this submission, Mr Barton relied on particular case law in relation to estate agents' entitlement to a reasonable commission for their work. The Supreme Court distinguished Mr Barton's position from that of an estate agent, and reiterated that the fee Mr Barton would have been paid if the property had been sold for £6.5 million was "several times the reasonable fee" for his work. Together with the opportunity to receive that particularly high fee, he had taken on the commensurate risk of receiving nothing should the property be sold for less than £6.5 million.
For completeness, it is worth noting that in their dissenting judgments, Lord Leggat and Lord Burrows both considered that it was implied by law that Mr Barton was entitled to reasonable remuneration for his service, and that the parties had not expressly agreed otherwise.
No unjust enrichment
Mr Barton's claim for unjust enrichment was grounded on an alleged "failure of basis", contending that Mr Barton and Foxpace had assumed that the property would be bought for £6.5 million and that, when the property sold for less, the basis of their agreement therefore failed. The Supreme Court disagreed that the facts of the case indicated that the parties had made such an assumption regarding the sale value. The fact that the parties had not set out contractual terms dealing with the scenario of the property being sold for less than £6.5 million did not prove that they had assumed a higher sale value, or that they had not contemplated such a scenario. The Supreme Court therefore did not accept that the "basis" of the agreement was that the property would be sold for £6.5 million, meaning that Mr Barton did not succeed in his argument for the failure of that basis.
The Supreme Court also considered in detail whether Mr Barton's unjust enrichment claim was excluded by the principle in Costello that parties' contractual allocation of risk generally should be upheld. It disagreed with the Court of Appeal's conclusion that, because Mr Barton's agreement with Foxpace was silent as to what would happen in the case of a sale for less than £6.5 million, the Costello principle did not apply. Where parties to a contract set out the circumstances necessary for a payment obligation to apply, "they necessarily exclude any obligation to pay in the absence of those circumstances". Their silence as to what would happen if the property sold for less than £6.5 million meant that no payment obligation would arise in that scenario.
Mr Barton's claim for unjust enrichment therefore failed. The enrichment to Foxpace (ie the sale of the property with no fee paid to Mr Barton) was not unjust, because it was the consequence of the express contractual terms that the parties had agreed and because, as the Supreme Court's majority judgment concluded, "Unjust enrichment mends no-one's bargain".
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