A bust-up between the developer of a block of flats and an estate agent managed to find its way through the County Court, the Court of Appeal, and all the way up to the top court in the land, the Supreme Court. It was all about an alleged oral deal, vigorously denied, concerning commission claimed by an agent on a sale of several properties.
There are not that many businesses with serious money at stake where purely oral deals are done between the parties, but the property world still appears to be one of them, and, par excellence, the art world is another.
This recent case provides some important lessons to those in the trade who still do deals over a handshake.
It was a phone conversation in January 2008 between an agent (Mr Devani) and a developer (Mr Wells), with nothing put in writing afterwards, which gave rise to the epic decade-long journey through the English legal system. All because there was no written contract.
As Lord Kitchin’s judgment recites: “The parties at trial gave strikingly different accounts about what was said in the course of this telephone conversation. It was Mr Devani’s evidence that he told Mr Wells that he was an estate agent and that his commission terms would be 2% plus VAT. Mr Wells maintained that Mr Devani made no mention of any commission and gave the impression he was an investor looking to buy on his own account.”
After minute analysis, the County Court Judge found there was a binding contract between Mr Devani and Mr Wells and so the monies were payable. However, as Mr Devani was awarded less than he claimed, the aggrieved parties went to the Court of Appeal where Lord Justice Lewison – who has written the defining book on ‘the interpretation of contracts’ – decided that there was no contract between the two litigants.
Off both sides went, each upset for their own reasons, to the Supreme Court. Another detailed analysis took place with Lord Kitchin eventually taking a very different view from that of Lord Justice Lewison. After trawling through the judgments in previous cases back to 1941, and quoting them at length, he said the approach of the County Court judge had been correct. Key to his summing up was this; “Put another way, to leave Mr Wells without any obligation to pay Mr Devani would be completely inconsistent with the nature of their relationship…”
Needless to say, apart from the time involved, there was a great deal of expense as well. The Supreme Court gave its judgment in February 2019.
Some well-invested time sorting out the paperwork or 11 years of arguments, expense, time in court and much more? The lesson for the art trade is self-evident. In an important deal (and even an unimportant one) get a proper contract prepared.
Milton Silverman is senior commercial dispute resolution partner at Streathers Solicitors LLP, London.