News & Publications - Legal Briefing

Surveyors and Agents – Make Sure Your Commission Is Not At Risk, July 2009 A recent case in the English High Court will be of particular interest to Estate Agents and Chartered Surveyors. The case is Estafnous vs. London and Leeds Business Centres Limited (“LLBC”) and it challenges the notion that an Estate Agent is entitled to a commission where he is the “effective cause” of a transaction. The case is centred on a Commission Agreement entered into between Mr Estafnous, an Estate Agent and LLBC. LLBC had agreed to pay Mr Estafnous a commission of £2million “on the sale of a property” which it owned in London. The property was the sole asset in the ownership of LLBC. Mr Estafnous introduced the ultimate buyer to LLBC. However, after some considerable time and a number of proposed restructurings it was determined that LLBC (through a sale of its parent) be sold to the buyer rather than the property. Mr Estafnous claimed his commission on the basis that his agreement extended to a sale of shares. The English High Court, in considering the matter, took the view that a contract must use clear words to make a company liable for paying commission on a sale of itself or its parent. If the terms are not clear and if a sensible alternative interpretation is available, the court would hold that commission is not payable. Here it was determined that the commission was only payable on the sale of the property (as that is what the agreement specified) and not on the sale of the shares. As the property itself was not sold (only the shares), no commission was payable. This was despite the fact that the judge agreed that Mr Estafnous had introduced the buyer to LLBC. It should be remembered that the decision is a decision of the English High Court and would not necessarily be followed in Ireland. Nevertheless, the decision demonstrates the importance of clear drafting. Accordingly, Agents should ensure that their agreements are clearly worded so that any entitlement to fees is effective regardless of whether the sale is structured as a property sale, share sale or otherwise.         Relevant Partners Jim Murphy