West Law Report

Excluding fraud-based claims

Posted in Contract terms, Times Law Report by mrkooenglish on May 30, 2008

From The TimesMay 27, 2008

Excluding fraud-based claims
Court of Appeal

Published May 27, 2008

Satyam Computer Services Ltd v Upaid Systems Ltd

It would only be through the use of the clearest possible specific language that parties to a settlement would be taken to have excluded fraud-based claims.

The Court of Appeal (Lord Justice Waller, Lord Justice Lawrence Collins and Lord Justice Rimer) stated on May 9, 2007, when dismissing the appeal of Satyam Computers Services Ltd against a decision by Mr Justice Flaux in the Queen’s Bench Division ([2008] 1 All ER (Comm) 737) on preliminary issues of interpretation of commercial agreements between Satyam and Upaid Systems Ltd.

LORD JUSTICE LAWRENCE COLLINS said that it would only be through using the clearest possible specific language that parties to a settlement agreement would be taken to have excluded fraud-based claims. The principle extended to causes of action of which dishonesty was not a necessary ingredient but which had been committed dishonestly.

Where the claims in question were based on fraud or involved allegations of dishonesty, very clear and specific language in an agreement was required to settle such claims or exclude their subsequent pursuit, a fortiori, if they were unknown at the time that the settlement agreement was entered into.

FOXTONS LTD v BICKNELL & ANR

Posted in Contract terms, Implied terms, Westlaw Reports by mrkooenglish on May 8, 2008

Last updated: 7:17 PM BST 07/05/2008
Court of Appeal (Civil Division)

Waller, Rix LJJ and Lord Neuberger of Abbotsbury

April 23, 2008

Commission – Contract terms – Estate agents – Implied terms – Purchasers – Sale of property – Entitlement to commission if contracts exchanged with purchaser introduced by agent – Estate Agents (Provision of Information) Regulations 1991

FACTS

The appellant (B) appealed against a decision that she was liable to pay the respondent estate agent (F) commission on the sale of her house. B had appointed F on a sole agency basis to sell her house. F’s terms of business made B liable to pay commission if at any time contracts were exchanged with a purchaser introduced by F during the period of the sole agency or with whom F had had negotiations during that period. That wording reflected the terms of the Estate Agents (Provision of Information) Regulations 1991. F showed the house twice to a person (L) who was looking for a house on behalf of his former wife (K). K visited the house after F’s sole agency had been terminated and F was acting under a multiple agency agreement. K did not like the house. Three months later K visited the house again by arrangement with another estate agent. K offered to buy the house and the purchase was completed. B paid commission to the other agent. F began proceedings to recover its commission. The judge held that the words “at any time” negated any implication that F had to be the effective cause of the sale, and that in any event F was the effective cause of the sale to K. B submitted that the expression “a purchaser” in the phrase “a purchaser introduced by” F did not mean “a person who at some time in the future becomes a purchaser”, as the judge had held, but “a person who becomes a purchaser as a result of” F’s introduction.

ISSUE

Whether the expression “a purchaser” in the phrase “a purchaser introduced by” F did not mean “a person who at some time in the future becomes a purchaser”, as the judge had held, but “a person who becomes a purchaser as a result of” F’s introduction.

HELD (appeal allowed)

(1) The interpretation of the term “a purchaser” put forward by B, which required F to have introduced the person to the purchase rather than to the property, was to be preferred. That interpretation was in accord with the main principles which could be extracted from the decided cases, John D Wood & Co v Dantata (1987) 283 EG 314 CA (Civ Div) applied. The notion that an estate agent could only recover commission if he introduced someone who became a purchaser as a result of the introduction sat well with the normal principle that an agent, whose commission was received on the basis of a successful transaction, must normally be the effective cause of the transaction if he was to receive his commission. It was not apparent why an agent should be entitled to commission on a purchase for which he had no responsibility and which effectively originated after the sole agency had terminated. On B’s interpretation it was much less likely that a client who had instructed more than one agent would be liable for more than one commission. The fact that there was no connection between F’s efforts and an ultimate sale would be irrelevant, on F’s interpretation, as would the passage of time. In order to be entitled to a commission under its standard terms for having introduced a purchaser, F had to show that it had introduced the person concerned as the eventual purchaser or in other words that F had introduced the purchaser to the purchase and not merely to the property. It followed that there was no question of implying into the terms a requirement that F must have been the, or an, effective cause of the purchase.

(2) On a proper analysis of the facts, the judge’s conclusion that F was the effective cause of the sale of the house to K, which was tantamount to concluding that K was a purchaser introduced by F, was not justifiable. K was plainly not interested in purchasing the house after her first visit. That meant that L, who acted as her agent, was not interested either. There was nothing to suggest that K’s interest in the house some ten weeks later was based on F’s earlier activities. In the circumstances F failed to show that it had introduced K to the purchase or as the eventual purchaser.

Patrick Blakesley (instructed by in-house solicitor) for the respondent. Clive H Jones (instructed by Blake Lapthorn Tarlo Lyons, Portsmouth) for the appellant.