Silence in contracts may not always be golden, rules Supreme Court
In Barton v Morris and another in place of Gwyn-Jones  UKSC 3, the Supreme Court looked at the question of whether an obligation had arisen to pay a commission, in circumstances where the express condition required to trigger the obligation had not been met.
The lead judgment by Lady Rose contains important clarifications on the law concerning implied contractual terms. In particular it provides guidance on the circumstances in which contractual terms in place between parties can serve as a bar to an unjust enrichment claim. The judgment is of interest to those entering into contingent obligations in all sectors.
The first respondent, Mr Philip Barton, sought a fee of £1.2 million that he claimed was due to him on the sale of a property owned by Foxpace Ltd (Foxpace), the fourth respondent. Foxpace was in liquidation and the sole director and shareholder of Foxpace was Mr Timothy Gwyn Jones.
Mr Barton agreed with Foxpace to introduce a potential purchaser for Nash House. The oral agreement between the parties was that Mr Barton would be paid £1.2 million on the condition that the property was purchased for at least £6.5 million by a party that he introduced.
Mr Barton subsequently introduced Western UK Acton Ltd (Western) to Foxpace. Documents were drawn up for the sale of Nash House to Western for £6.55 million. However, during the sale process it became known to the parties that Nash House fell within an area earmarked for the construction of the HS2 rail link. As a result, further negotiations took place which resulted in an agreement to reduce the purchase price to £6 million.
Since the oral agreement between Foxpace and Mr Barton made no provision as to what would happen if Nash House sold for less than £6.5 million, Foxpace’s position was that there was no obligation to pay anything to Mr Barton. Accordingly, Mr Barton brought a claim for the reasonable value of his services. He relied on the existence of an implied contractual term between the parties, or alternatively based his claim on unjust enrichment (notwithstanding the existence of a valid and subsisting contract) and sought reasonable remuneration.
First instance and Court of Appeal
At first instance, it was held that Mr Barton was not entitled to the commission or any other remuneration, given the express condition triggering the payment of the £1.2 million in commission had not been met.
The Court of Appeal allowed Mr Barton’s appeal, however. It held that he was entitled to reasonable remuneration for his services, notwithstanding that the express condition for triggering payment of the £1.2 million had not been met. The Court of Appeal held that silence in the contract as to what would happen if the sale to Western was for less than £6.5 million did not rule out a claim in unjust enrichment. It also determined that Foxpace would be unjustly enriched if it took the benefit of the introduction without paying a reasonable fee to Mr Barton. The same result could also be reached by implying a term into the contract that a reasonable fee would be paid if Western bought the property for less than £6.5 million. As a result, the Court of Appeal awarded Mr Barton £435,000, which the Court assessed as a ‘reasonable’ fee in the circumstances. The decision was then appealed to the Supreme Court.
Supreme Court decision
A majority of the Supreme Court (Lady Rose, Lord Briggs and Lord Stephens) held that the proper construction of the oral agreement was that the commission of £1.2 million would only be payable if at least £6.5 million was paid for Nash House. Implying a term that commission would be payable in the event a lower purchase price was achieved would be inconsistent with that express term. Accordingly, it was not possible to imply a term into the contract providing that the commission was payable in those circumstances.
Given the finding on the terms of the oral agreement, Mr Barton failed to persuade the Supreme Court of a basis for remedy under unjust enrichment. The Court held that there was no obligation for Foxpace to pay commission to Mr Barton where a sale had not been achieved for at least £6.5 million, as this would be contrary to the oral agreement reached between the parties.
As Mr Barton had not established any implied term providing that commission would be payable fora sale at less than £6.5 million, the oral agreement reached between the parties was that there would be nil reward for a sale below £6.5 million. Accordingly, there was no unjust enrichment in this case. Foxpace obtained a benefit in being introduced to a buyer for Nash House in circumstances where it did not need to pay a commission. However, this was not unjust, because it was the outcome provided for under the terms of the oral agreement between the parties. The Court noted in this regard that the law of unjust enrichment “mends no-one’s bargain”.
A minority of the Supreme Court (Lord Leggatt and Lord Burrows) dissented on the basis that Mr Barton was entitled to remuneration unless otherwise agreed. The contract was silent on what would happen if the sale price of £6.5 million was not achieved. Therefore, the terms of the agreement between the parties did not negate Mr Barton’s implied right to be paid a reasonable sum for the services he provided in bringing about the sale of Nash House.
The dissenting opinions demonstrate that the decision was finely balanced and that, whilst the case turned on well-known legal principles, those principles are capable of being interpreted in different ways by different courts and by different judges. This case serves as a cautionary tale that all eventualities should be dealt with expressly in a contract (and ideally in writing) to minimise the risk of a dispute.