Member Article

Agent not effective cause of sale

With Watson Burton LLP Law Firm

A commercial property agent is entitled to receive commission where he has been the “effective cause” of a sale to a developer. This is a set of commercial events which have no single defining rule but depends on the facts of each individual case. The most recent consideration of this phrase was in the case of Pettigrew v George Wimpey UK Limited [2007] EWHC 2559. Mr Pettigrew was a chartered surveyor and estate agent. In 1992 he received a flyer from Wimpey, asking for suitable sites for development and promising commission. T, the regional land manager in the Hook office, sent a similar letter in 1996 and Mr Pettigrew sent details of a Chichester site (the Site).

T asked Mr Pettigrew to register Wimpey’s interest in the Site with the Seller. However, the Site was considered to be a long term project and T’s role was to focus on short term projects, so the Site file was considered “dead” after a few months.

T left Wimpey in 1997 and was replaced by N who also left Wimpey in 2000. He advised Mr Pettigrew to address future correspondence to B, his colleague, and B told Mr Pettigrew in 2003 to liaise with Mr Taylor in the Chandlers Ford office.

Mr Taylor had previously worked for Alfred McAlpine Homes which was taken over by Wimpey in 2001. Mr Taylor had a close working relationship with H, an agent for the Seller, and not with Mr Pettigrew. In 2004, H sent out tender packs for the Site. Wimpey were successful in their tender, but denied Mr Pettigrew his commission, arguing that he was not the effective cause of the acquisition.

The court ruled that no commission was due, satisfied that the Site file and any lead within it was considered “dead” by Wimpey within the year. The court did not agree with Mr Pettigrew’s assertion that the introduction of buyer to seller was sufficient. It held that:

• it was for the surveyor to establish that his actions brought about the relationship between buyer and seller;
• it is an implied contract term that the agent must be an effective cause of the purchase to obtain commission; and
• it was for the surveyor to prove that he was an “effective cause”.

Long term projects with various changes of personnel are not uncommon in the house building industry. This case highlights the difficulties which commercial property agents may encounter when trying to secure their commission, who should re-establish the exact nature of their relationship with each new relevant representative of the prospective purchaser.

If you have any queries relating to this article, please contact Lucy Bond at Watson Burton LLP on 0113 235 5455 or email lucy.bond@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .