Recent Supreme Court split decision emphasises the importance of clear contractual terms to avoid disputes
02 February 2023
The facts of the case were straightforward. Mr Barton had an oral agreement that he would receive an introduction fee of £1.2 million from Foxpace Limited if Nash House, a property owned by Foxpace, was sold for £6.5 million to a purchaser introduced by him. Mr Barton introduced Western, who decided to purchase the property. Unfortunately for Mr Barton, Western had concerns about the potential effect on Nash House of the HS2 rail link. Ultimately, Western bought Nash House for only £6 million.
The Court of Appeal had ruled in favour of Mr Barton. However, the Supreme Court has now reversed that decision. The Supreme Court was split 3:2.
The majority held that the oral contract providing for an introduction fee payable upon Nash House being sold for £6.5 million meant that Foxpace had no obligation to pay reasonable remuneration to Mr Barton for his services when Nash House was sold for only £6 million. The oral contract was a complete statement of the circumstances in which Mr Barton would receive his agreed fee. When Nash House was sold for only £6 million, Mr Barton could not claim a reduced fee by way of an implied term or restitutionary remedy for “unjust enrichment” since that would be inconsistent with what had been agreed.
The majority considered that no term could be implied in fact because it was not obvious as to what that term should be and it was not necessary to give “business efficacy” to the agreement. The implied term in law for reasonable remuneration in the absence of any agreement did not arise here because of the parties' agreement. There was a clear agreement on the payment for services.
There was no "failure of basis" giving rise to an unjust enrichment claim because the parties must have contemplated that Nash House might sell for less than £6.5 million and, in any event, the parties' express stipulation of the circumstances which triggered payment necessarily excluded any obligation to pay in other circumstances.
The two dissenting judges took a different view. They considered that Mr Barton was entitled to reasonable remuneration under a term, implied by law, to pay a reasonable sum for his services where no sum was fixed by the contract. They considered that this entitlement to reasonable remuneration was not inconsistent with the contract and it was not excluded.
The decision provides some useful guidance on when the courts will imply terms into a contract in fact and in law. The fact that the Supreme Court judges were split also shows how difficult it can be to predict the outcome of these finely balanced contractual disputes. This is a situation where “prevention is better than cure”. The case demonstrates the critical importance of having clear contractual arrangements to avoid disputes arising. If only Mr Barton had requested a “sliding scale” fee arrangement based upon the selling price…..