Supreme Court Finds No Entitlement To Payment In Circumstances Not Addressed By Express Contractual Terms

• Law Firm: Herbert Smith Freehills
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Author: Mr Ben Phillips
• Published date: 15 February 2023

The Supreme Court has, by a majority, allowed an appeal against a Court of Appeal judgment ( considered here) that granted an award for unjust enrichment where a property was sold for less than the value required to entitle the claimant to a fee under the express terms of the contract: Barton and others v Morris and another in place of Gwyn Jones (deceased) [2023] UKSC 3.

By providing that payment would be made if the property was sold for a particular value and remaining silent as to what would happen if the property was sold for less than that value, the contract had excluded any obligation to pay the claimant in such a scenario.

There was no basis on which a term could be implied in fact or by law requiring the claimant to receive reasonable remuneration for his service if the property sold for a lower price. The claimant had agreed to receive a fee that was significantly higher than reasonable if the property was sold for a particular value, but had also taken on the contractual risk of receiving nothing should the property be sold for less than that value.

A claim for unjust enrichment could not step in to mend the bargain that the claimant had made. In any event, the Supreme Court rejected the claimant's argument that there had been a "failure of basis" as a result of the property not being sold for the stated value, so as to found a claim in unjust enrichment. The fact that the contract provided for payment to be made if the property was sold for a particular value did not necessarily mean that the contract was based on the property being sold for that value.

The judgment raises a number of interesting points regarding the extent to which the courts will assist parties whose contract does not include comprehensive terms for payment. The parties' dispute probably would have been avoided if the contract between them had fully addressed, in express terms, the different scenarios in which a fee should or should not be paid to the claimant. This underlines the importance of drafting contracts as clearly as possible, with a view to minimising uncertainty.

Background

The claimant, Mr Barton, entered into an oral agreement with Foxpace Limited, which was aiming to sell a property in London. Foxpace agreed to pay Mr Barton '1.2 million if the property was sold for '6.5 million to a purchaser introduced to Foxpace by Mr Barton. The parties did not discuss whether any payment would be due to Mr Barton if the property was sold for less than '6.5 million.

Mr...