Bairstow Eves London Central Ltd v Smith & Anor [2004] EWHC 263 (QB)

[2004] EWHC 263 (QB)Case No CC/2003/APP/0912
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London WC2A 2LLDate 20 February 2004
Before
THE HONOURALBLE MR JUSTICE GROSS
Between
Bairstow Eves London Central LimitedClaimant/Appellant
Anthony Haycroft (instructed by Cartwright Cunningham Hazelgrove) for claimantJeremy Child (instructed by Darlingtons) for Pt 20 defendantsHearing Hearing date: 13 February 2004
Judgment

INTRODUCTION

[1]This is an appeal by the claimant, an estate agent (“Bairstow”) from a judgment of HHJ Richardson in the Romford County Court, given on 11 December, 2003 (“the judgment”). In the judgment, HHJ Richardson held, inter alia, that a term of a Confirmation of Marketing Agency Agreement dated the 9th March, 2002 (“the agreement”) providing for the payment of 3 per cent commission was unfair and therefore not binding on the consumer defendants and Part 20 claimants (“the vendors”), pursuant to the Unfair Terms in Consumer Contracts Regulations 1999 SI 1999/2083 (“the regulations”).[2]The sole ground of appeal is that the judge erred in law in that, by virtue of regulation 6(2), the regulations did not apply to the term in question. I should underline that if, contrary to Bairstow’s case, the regulations do apply to the relevant term, there is no challenge to the judge’s conclusion that it was unfair.[3]The facts relevant for present purposes may be very shortly summarised; indeed, on the appeal, the facts were not or not significantly in dispute. At the outset, it is noteworthy, if somewhat disconcerting, that the dispute is in total concerned with a claim for £2,925.75plus interest and costs.[4]The background is straightforward. The vendors wished to sell their property, a flat in Leytonstone. To this end, they entered into the agreement. The agreement was in writing and provided, insofar as here relevant, as follows:
“... To be read together with the terms and conditions overleaf... 6. INITIAL MARKETING PRICE £167,500-00 7. TYPE OF AGENCY — Important — see terms and conditions The Seller(s) agrees to instruct the Agent initially as a . . . SOLE AGENT 8. COMMISSION FEE — Important — see terms and conditions The Commission Fee payable by the seller(s) is: The STANDARD COMMISSION RATE or The EARLY PAYMENT DISCOUNTED COMMISSION RATE.... STANDARD COMMISSION RATE is 3 per cent of the final sale price of the property plus VAT. EARLY PAYMENT DISCOUNTED COMMISSION RATE 1.50 per cent plus VAT 9. SOLE AGENCY PERIOD - Important - see terms and conditions The Sole Agency Period ends a minimum of 8 weeks from the date of this Agreement 12. SIGNATURES OF AGENT AND SELLER(S) IMPORTANT — Before signing and accepting the terms of this agreement please read carefully the conditions overleaf 12.2 ... I/WE HAVE READ AND AGREED TO THE TERMS AND CONDITIONS OVERLEAF”
The signatures of the vendors appear immediately beneath clause 12.2. The Seller(s) agrees to instruct the Agent initially as a . . . SOLE AGENT The Commission Fee payable by the seller(s) is: The STANDARD COMMISSION RATE or

EARLY PAYMENT DISCOUNTED COMMISSION RATE

[5]It may be noted that the 3 per cent Standard Commission Rate formed part of the standard printed clauses of the agreement; by contrast, the 1.5 per cent figure for the Early Payment Discounted Commission Rate was a handwritten insertion in the agreement. Likewise, the figure for the minimum sole agency period was inserted in handwriting.[6]Overleaf, there were a number of Terms and Conditions (“the terms”), which provided, inter alia, as follows:
“Entitlement to commission 1. The Agent will charge a fee in relation to its marketing of the property. The fee is called the “Commission Fee”
. The Agent will earn the Commission Fee if during the period of this Agreement, it introduces a buyer to the property being marketed or enters into negotiations with the person who later contracts to purchase the property. Commission Fee 5. The Commission Fee payable is specified in the Agreement and it will be either: (1) The Standard Commission Rate of 3 per cent of the final sale price of the property plus VAT... (2) The Early Payment Discounted Rate as stated plus VAT... 6. The Early Payment Discounted Rate is only available if the term for early payment set out in Clause 9 below is met. Payment of Fees 9. The Early Payment Discounted Rate is only available if the full sum payable is received by the Agent within 10 working days of the completion date, time being of the essence of the contract. If the full sum is not received within 10 working days of the completion date, the Standard Commission Rate is due and payable (at the option of the Agent). Interest for late payment 10. If the Commission Fee is not paid in full within 10 working days of the completion date or any agreed alternative payment date, interest will become payable on any outstanding sum or sums. The interest payable will be 3 per cent above the National Westminster Bank Plc base rate then in force. Sole Agency Period 14. On the expiry of the Sole Agency Period, the Agreement shall continue on a Multiple Agency basis subject to the Standard Commission Rate and all other terms and conditions of this Agreement . . .” Commission Fee Payment of Fees Interest for late payment

Sole Agency Period

[7]Pausing here, the effect of the agreement, so far as it concerns the payment of commission, may be summarised in neutral terms, as follows. Commission was payable at a rate of 1.5 per cent if paid in full within 10 working days of completion or any agreed alternative payment date. If it was not so paid, then the vendors became liable to pay commission at 3 per cent on the entirety of the final sale price of the property. But matters did not stop there; if the full 1.5 per cent commission was not paid within the 10 day period, then interest was to be paid on any outstanding sums at 3 per cent above the base rate as defined. In such circumstances, therefore, Bairstow would be entitled to receive not only the full 1.5 per cent commission but an additional 1.5 per cent commission plus interest on all outstanding sums.[8]In the events which happened, Bairstow introduced a purchaser and a sale of the property was agreed at a price of £166,000, Completion took place on 25 July 2002. There is no dispute that Bairstow was entitled to commission in this regard. At a rate of 1.5 per cent, the commission due to Bairstow amounted to £2,490 plus VAT of £435.75, a total of £2,925.75.[9]Inexplicably and as the judge held in the judgment, inexcusably, the Part 20 defendants, a firm of solicitors (“Darlingtons”) failed to pay Bairstow the full 1.5 per cent commission due within 10 working days of the completion date. Darlingtons were in funds and the vendors had given them an irrevocable authority to pay Bairstow its commission out of the completion moneys. Although a payment was made of £2,538.75, there was a shortfall of some £387.00 in the amount paid to Bairstow.[10]After the exercise of some forbearance, in November 2002, Bairstow claimed the entirety of the 3 per cent Standard Commission Rate, amounting to £5,851.50 (inclusive of VAT), less a credit for the £2,538.75paid, leaving a balance outstanding of £3,3l2,75. At the same time, on 5 November 2002, Bairstow’s solicitors made it clear that if the outstanding £387 was paid within 10 days, then Bairstow would not seek to recover commission in accordance with the 3 per cent rate.[11]No such payment was made and proceedings were commenced by Bairstow against the vendors. For their part, the vendors commenced Part 20 proceedings against Darlingtons. I was told that subsequent to the commencement of proceedings, the £387 shortfall was paid but, nonetheless, the proceedings continued to the fast track trial before HHJ Richardson and, thence, to this appeal.[12]In outline — I must return later to a more detailed consideration of the relevant section of the judgment — HHJ Richardson held as follows: i) As already foreshadowed, the learned judge concluded that the provisions of the agreement requiring a 3 per cent commission to be paid fell within the regulations, were unfair and were not binding on the vendors. Accordingly, the £387 having already been paid, Bairstow’s claim against the vendors was dismissed. In respect of this conclusion, the judge gave permission to appeal. ii) The judge went on to consider the position as between the vendors and Darlingtons, in the event that the full 3 per cent had indeed been payable, contrary to his own conclusion. In this regard, the judge found in favour of the vendors and against Darlingtons; if he was wrong in holding that the full 3 per cent commission was not payable, then Darlingtons would in principle be liable to indemnify the vendors. Here, the vendors have been given permission to appeal only for the purpose of claiming an indemnity against Darlingtons in the event that the Bairstow appeal succeeds. Darlingtons were refused permission to appeal any part of the judgment. iii) There was a further dispute between the vendors and Darlingtons, which the judge resolved in favour of Darlingtons. It is of no relevance to the appeal and I say no more of it.[13]While in form, therefore, the live topic of the appeal concerns Bairstow’s claim against the vendors, in substance the outcome of the appeal will not affect the vendors at all. Either the appeal fails, in which case the vendors have no further liability; or the appeal succeeds, in which case Darlingtons will be bound to indemnify the vendors against their resulting liability to Bairstow. In these circumstances, sensibly, only Bairstow and Darlingtons have been represented on the hearing of the appeal, with Darlingtons standing in the shoes of the vendors.

THEREGULATIONS

[14]The regulations come accompanied by a helpful Explanatory Note, which, though not part of the regulations, merits citation:
“These regulations revoke and replace the Unfair Terms in Consumer Contracts Regulations 1994. Those regulations implemented Council Directive 93/13/EEC on unfair terms in consumer contracts ... regulations 3 to 9 of these regulations re-enact regulations 2 to 7 of the 1994 Regulations with modifications to reflect more closely the wording of the Directive. The regulations apply, with certain exceptions, to unfair terms in contracts concluded between a consumer and a seller or supplier (regulation 4). The regulations provide that an unfair term is one which has not been individually negotiated and which, contrary to the requirement of good faith, causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer (regulation 5).Schedule 2 contains an indicative list of terms which may be regarded as unfair. The assessment of unfairness will take into account all the circumstances attending the conclusion of the contract. However, the assessment is not to relate to the definition of the main subject matter of the contract or the adequacy of the price or remuneration as against the goods or services supplied in exchange as long as the terms concerned are in plain, intelligible language (regulation 6). Unfair contract terms are not binding on the consumer (regulation 8).”
[15]Turning to the regulations themselves, these are, so far as here relevant, in the following terms: “4 Terms to which these regulations apply(1) These regulations apply in relation to unfair terms in contracts concluded between a seller and a consumer. 5 Unfair Terms (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. (5) Schedule 2 to these regulations contains an indicative and non-exhaustive list of the terms which may be regarded as unfair. 6 Assessment of unfair terms (1) ... the unfairness of a contractual term shall be assessed taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract . . .(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate (a) to the definition of the main subject matter of the contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in the exchange. 7 Written contracts (1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language. 8 Effect of unfair term (1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer. SCHEDULE 2 INDICATIVE AND NON-EXHAUSTIVE LIST OF TERMS WHICH MAY BE REGARDED AS UNFAIR (e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation;” (2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate SCHEDULE 2

INDICATIVE AND NON-EXHAUSTIVE LIST OF TERMS WHICH MAY BE REGARDED AS UNFAIR

[16]In Director General of Fair Trading v First National Bank plc [2001] UKHL 52;[2002] 1 AC 481, the (predecessor) 1994 Regulations came to be considered by the House of Lords. For present purposes, valuable guidance may be obtained from this authority on regulation 6(2)(b) of the regulations (regulation 3(2)(b) in the 1994 Regulations). Lord Bingham said this, at [12]:
“The regulations, as Professor Sir Guenter Treitel QC has aptly observed... ‘are not intended to operate as a mechanism of quality or price control’ and regulation 3(2) is of ‘crucial importance in recognising the parties’ freedom of contract with respect to the essential features of their bargain’... But there is an important ‘distinction between the term or terms which express the substance of the bargain and ‘incidental’ (if important) terms which surround them’: Chitty on Contracts. The object of the regulations and the Directive is to protect consumers against the inclusion of unfair and prejudicial terms in standard-form contracts into which they enter, and that object would plainly be frustrated if regulation 3(2)(b) were so broadly interpreted as to cover any terms other than those falling squarely within it. . . .”
[17]In his speech, Lord Steyn expressed the matter this way, at [34]: “Under the regulations, a term in a standard form contract that is unfair is not binding on the consumer. But certain provisions, sometimes called core terms, have been excepted from the regulatory regime. Regulation 3(2) so provides . . . .regulation 3(2) must be given a restrictive interpretation. Unless that is done regulation 3(2)(a) will enable the main purpose of the scheme to be frustrated by endless formalistic arguments as to whether a provision is a definitional or an exclusionary provision. Similarly, regulation 3(2)(b) dealing with ‘the adequacy of the price or remuneration’ must be given a restrictive interpretation. After all, in a broad sense all terms of the contract are in some way related to the price or remuneration. That is not what is intended. Even price escalation clauses have been treated by the director as subject to the fairness provision... It would be a gaping hole in the system if such clauses were not subject to the fairness requirement...

THE JUDGMENT

[18]As to the question with which this appeal is concerned, namely whether the regulations are engaged, the judgment proceeded as follows.[19]First, the judge held that, with reference to regulation 7(1), the agreement was in plain and intelligible language.[20]Secondly, the learned judge addressed the argument that, by virtue of regulation 6(2), no attack could be made on the terms relating to the payment of 3 per cent commission. In considering this question, he drew on the approach of the House of Lords in First National Bank(supra). HHJ Richardson’s key conclusions then followed:
“41. ... the argument which is made against the full commission provisions of the marketing agency agreement does not involve an assessment of fairness relating to the adequacy of the price or remuneration as against the goods or services supplied in exchange. In my judgment the regulations intend that a court should look at the substance and the reality of the transaction, not at the form: see regulation 6(1). 42. The reality in this case is that the negotiation related to the 1.5 per cent term. There is no argument here on behalf of the defendants that they should be relieved from their bargain because of anything to do with the negotiation of the price for the services. The simple reality is that neither party assessed 3 per cent for adequacy against the service supplied, nor am I called on to assess 3 per cent for adequacy for the service supplied. In my judgment the reality here is that 1.5 per cent was the agreed price for the service when the matter is viewed from the point of view of the estate agent and the consumer negotiating the agreement in March 2002. 43. It follows that I do not regard myself in this case as making any assessment of the fairness of the term by reference to the adequacy of the price against the services supplied. That I entirely accept would not be a course open to the court under the regulations; but the attack on the fairness of the full commission provisions in my judgment is altogether different.”
[21]Thirdly, the judge then turned to regulation 5(1) and held that the provisions in the agreement requiring a 3 per cent commission to be paid were unfair and not binding on the vendors. Although, as already observed, there is no appeal against the judge’s conclusion here, it is appropriate to have regard to this part of the judgment for any light which it may shed on the critical question of the applicability of regulation 6(2). The judge remarked on the doubling of the 1.5 per centrate to 3 per cent; the fact that if (as indeed happened) only a small proportion of the 1.5 per centwas outstanding, the whole of the additional 1.5 per cent would have to be paid; still further, the “extraordinary proposition” (as the judge put it) that, under clause 10 of the terms, the vendor would be liable to pay interest for late payment. While acknowledging that the vendors had failed to read the agreement carefully, the judge further remarked on the commonplace negotiation relating to the sale of “a perfectly ordinary small suburban dwelling house” and said that it was “not at all surprising” that the full import of the agreement should be missed by the vendors. The reality of the provisions relating to the 3 per cent was that “the supplier is given a beneficial option or discretion or power” and that they imposed on the consumer “a disadvantageous burden or risk or duty”. HHJ Richardson’s conclusion was expressed in the following terms: 48. The clause is a trap for consumers. It can operate where there is simply a misunderstanding between them and their solicitors, perhaps not even their fault — as indeed it was not their fault here. It can operate where, as here, the option was exercised effectively when just £387 was outstanding. In my judgment this is not a good standard of commercial morality or practice, and ... it falls comfortably within the regulations, and it follows that the provisions of the marketing agreement which require a 3 per cent commission to be paid are not binding on the consumer.

THE RIVAL ARGUMENTS ON THEAPPEAL

[22]Mr Haycroft (who did not appear below) appeared for Bairstow on the appeal. His attractively presented submissions may be summarised as follows: i) The judge had erred in law in holding regulation 6(2) inapplicable. Regulation 6(2) was applicable and, accordingly, the judge should never have reached regulation 5(1). ii) In considering the applicability of regulation 6(2), the matter began and ended with the agreement, which was clear and unambiguous. iii) Bairstow’s commission was the price for the services they supplied. Looking at the agreement at the time of its conclusion (in accordance with regulation 6(1)), the price payable was known with certainty. It was either 3 per cent or 1.5 per cent. It was 3 per cent:(1) in respect of a Sole Agency if after 10 days (as a matter of the vendors’ choice), the full discounted 1.5 per cent commission had not been paid; and(2) in respect of a Multiple Agency, after the termination of a Sole Agency. Alternatively, it was 1.5 per cent, if and only if the vendors chose to take advantage of the Early Payment Discounted Rate. On any view, the 3 per cent or 1.5 per cent came within regulation 6(2). These were and always had been the contractual price(s). Regulation 6(2) enshrined the freedom of the parties to bargain over the price. A 1.5 per cent commission reflected a discount for early payment, rather than 3 per cent constituting a sum payable in compensation for any failure of the vendors to fulfil an obligation. There was no obligation on the vendors to pay 1.5 per cent commission within 10 days of completion; if the vendors chose to do so, then they qualified for the reduced rate. For that matter, there was nothing remotely unfair in a discount for early payment; such discounts are commonplace in a variety of consumer contracts. iv) It was to be underlined that the vendors advanced no claim for misrepresentation or indeed for any extra-contractual relief. It was irrelevant whether or not the vendors had read the agreement carefully or at all; they had signed it. That being so, there was no question of ignoring or displacing the agreement. To rule as the judge did that the reality was a 1.5 per cent commission was impermissible; it ignored the provisions of the agreement providing for a commission or price of 3 per cent. v) The judge had fallen into error by focusing exclusively on the negotiation surrounding the 1.5 per cent. It was nothing to the point that the negotiation dealt with the 1.5 per cent discount. It was not in dispute that the 3 per cent rate was a standard term of the agreement; while that meant that regulation 5(1) was potentially applicable (in that the regulations did not “bite” at all on individually negotiated terms), this was of no assistance in determining the applicability of regulation 6(2). vi) As to clause 10 of the terms (“clause 10”) dealing with the payment of interest, Mr Haycroft’s stance was consistent. Clause10 was no more and no less than a contractual provision for interest. The vendors enjoyed an option to take advantage of the discounted commission rate; there was no obligation on the vendors to do anything within the 10-day period following completion. With a measure of forensic courage, Mr Haycroft offered the concession that, if anything, it was clause 10 which could be held to be unfair under the regulations; it was an ancillary term, purporting to levy interest, when none was due and payable pursuant to any obligation on the part of the vendors. vii) In reality, what the judge had done was the very thing which he himself had recognised he should not do. He had made an assessment of the fairness or otherwise of 3 per cent as a contractual price. Test it this way, urged Mr Haycroft: what if the Standard Commission Rate had been 2 per cent or 2.5 per cent; would the judge’s decision have been the same? This plainly was territory coming within regulation 6(2). Moreover, what of the 3 per cent rate charged in respect of Multiple Agency — where there was no Early Discounted Rate? How could the Standard Commission Rate be attacked under the regulations in that context? But if it was not attacked when a Multiple Agency was involved, the judge’s decision meant that the same rate was both within regulation 6(2) (in a Multiple Agency situation) but outside of regulation 6(2) (in a Sole Agency situation). That could not be right.[23]For Darlingtons and the vendors, Mr Child submitted that the judge was right for the reasons he gave in the judgment. In summary: i) The agreement was to be read as a whole. Both parties had contemplated a commission rate of 1.5 per cent and the judge was entitled to find that that was indeed the price under the agreement. Properly construed, the agreement obliged the vendors to pay 1.5 per cent commission within 10 days of completion. Clause 10, providing as it did for the payment of interest in the event of “late payment” was revealing. If the vendors failed to fulfil their obligation to pay 1.5 per cent commission in full within 10 days of completion, they came under a liability to pay both interest and a commission rate of 3 per cent. ii) On the basis of this analysis, the judge was not in any way precluded by regulation 6(2) from looking at the “escalation” from 1.5 per cent to 3 per cent. This did not involve him in assessing the adequacy of either 1.5 per cent or 3 per cent as a “price”. The judge was entitled and bound to explore how the price had doubled from 1.5 per cent to 3 per cent. iii) Given that regulation 6(2) was inapplicable, the judge had proceeded to consider regulation 5(1), read with, in particular, paragraph (e) of Schedule 2 to the regulations. The 3 per cent rate had been lurking in the background as a trap for the vendors; the negotiations had focused on the 1.5 per cent rate. The true position was that the price under the agreement was 1.5 per cent with Bairstow enjoying an option of charging 3 per cent. The judge was right to conclude that the relevant provisions of the agreement were unfair and not binding on the vendors. iv) As to the position when there was a Multiple Agency (a point, as I understood it, not raised by Bairstow before HHJ Richardson), it did not follow from the judge’s decision that the single 3 per cent rate was unfair in that context. But if that was the consequence of the judge’s decision, it did not lie in Bairstow’s mouth to complain of a result flowing from an unfair provision contained in its own standard contractual terms. It was for Bairstow, in the light of the judgment, to revisit and, if need be, revise the terms on which it contracted.[24]For completeness, it is fair to record that Mr Child canvassed various other arguments in a respondent’s Notice. These need not take up time here. An argument that the “doubled rate” constituted a penalty at common law would either not be needed by the vendors if they were right under the regulations or, conversely, would not help the vendors if they failed on the regulations. A further contention that the agreement was not expressed in “plain, intelligible language” under regulation 7(1) was not pursued in oral argument. No more need be said of the respondent’s notice.

DECISION

[25]Particular gratitude is due to the judge for having himself located the authority of First National Bank. Guided by this authority, the landscape becomes clear. The object of the regulations is not price control nor are the regulations intended to interfere with the parties’ freedom of contract as to the essential features of their bargain. But, that said, regulation 6(2) must be given a restrictive interpretation; otherwise a coach and horses could be driven through the regulations. So, while it is not for the court to re-write the parties’ bargain as to the fairness or adequacy of the price itself, regulation 6(2) may be unlikely to shield terms as to price escalation or default provisions from scrutiny under the fairness requirement contained in regulation 5(1).I say “may be unlikely” because, of course, much depends on the individual contract under consideration. When, however, regulation 6(2) is inapplicable so that regulation 5(1) is engaged, it does not follow that a term will be adjudged unfair; whether or not a term is unfair involves a separate inquiry but one which cannot be undertaken at all insofar as regulation 6(2) is applicable and bars the way.[26]To my mind, in the present case the applicability of regulation 6(2) turns on the following question:(1) did the agreement provide for a 3 per cent commission rate (or price) with the vendors having an option but no obligation to pay 1.5 per cent? Or:(2) did the agreement place the vendors under an obligation to pay a price of 1.5 per cent,with a “default” provision exercisable at Bairstow’s option to insist on payment of 3 per cent? If the former, then regulation 6(2) would be applicable and the appeal must be allowed. If the latter, then regulation 6(2) would be inapplicable and the appeal must be dismissed.[27]On the available material, it seems plain to me that both parties contemplated an agreed operative price of 1.5 per cent with a default provision of 3 per cent. First, the market. On a fair reading of the transcript of his evidence, Mr Farquharson, the branch manager of Bairstow, recognised that it would have been unlikely to obtain such business at a commission rate of 3 per cent in the then prevailing market. Secondly, it was not or not seriously in dispute that the negotiation focused exclusively on the 1.5 per cent. While by itself this factor is not decisive, I do not think it is to be brushed aside as Mr Haycroft submitted. Thirdly, both parties proceeded on the assumption that the 1.5per cent commission would be paid within 10 days of completion; they had indeed no reason to assume otherwise; the completion moneys would necessarily be available from day one of the period. Unless something went wrong, the 3 per cent rate would never become relevant. On the part of the vendors, there is the evidence of Mr Smith, the vendor who took the lead in this matter; he accepted that he had not read the agreement but went on to say that, had he read it, the provision as to 3 per cent would not have troubled him as he would have assumed that the commission would be paid within 10 days of completion. It is an irresistible inference that Bairstow’s expectation was to the same effect.[28]In the light of these conclusions, does the language of the agreement preclude giving effect to that which both parties contemplated? HHJ Richardson did not think so and nor do I. With respect to Mr Haycroft’s argument to the contrary, this is not to ignore the agreement; this is, instead, to give effect to it. The task of the court is to ascertain the objective intentions of the contracting parties and, to this end, the language used by them is of the first importance. But contracts are not made in a vacuum; it is settled law that it is legitimate for the court to have regard to the surrounding circumstances or contractual matrix: Chitty on Contracts (28th ed.), Vol. 1, at paras 12-116 to 12-118. To do otherwise may well be to risk missing the true meaning of the bargain concluded by the parties. In my judgment, this is what the judge had in mind when, in paragraph 42 of the judgment, he referred to “the reality” of the 1.5 per cent rate constituting the agreed price under the agreement. His was an exercise in the true construction of the agreement — but in, rather than divorced from, its setting.[29]In any event, I am not persuaded that the language of the agreement — even considered in isolation — compels the conclusion that the price was a 3 per cent commission with a vendors’ option to pay 1.5 per cent within the defined period. At first blush, I see the force of Mr Haycroft’s arguments by reference to the style of the language (“Standard Commission Rate” and “Early Payment Discounted Rate”) and the linkage between clauses 6 and 9 of the terms. However, none of this is determinative of the question as to whether payment of the 1.5 per cent commission was a vendors’ option or a vendors’ obligation. Moreover, closer examination of the terms serves to undermine Mr Haycroft’s thesis. To begin with the concluding words of clause 9 — “(at the option of the agent)” — make little sense if Mr Haycroft is right; if his argument is well-founded, then the 3 per cent rate would throughout stand as the operative price and no question of Bairstow’s “option” would arise. Next and importantly, clause 10 is both relevant and revealing. On any natural reading, clause10 assumes an obligation to pay the 1.5 per cent commission in full within the relevant 10-day period; it sits most uneasily with the suggestion that payment of the 1.5 per cent commission was no more than an option open to the vendors. It is striking that Mr Haycroft was driven to proffer the concession already referred to in this regard.[30]In summary, I am satisfied that the agreement contemplated a 1.5 per cent rate as the price, with a default provision of 3 per cent, in the event that the vendors’ obligation to pay 1.5 per cent within 10 days of completion was not fulfilled. The 3 per cent rate was a fallback option, conferred on Bairstow. The notion of a 3 per cent price with the vendors enjoying an option but no obligation to pay a 1.5 per cent commission is, to my mind, simply fanciful; neither party had any reason to suppose that the 3 per cent figure would have any role, except as a fallback or default provision. It follows that the judge was correct to treat regulation 6(2) as inapplicable. It follows further, there being no appeal as to the judge’s decision on regulation 5(1), that the appeal must be dismissed. In the circumstances, the question of the vendors’ appeal as against Darlingtons does not arise.[31]For completeness: i) The answer to Mr Haycroft’s rhetorical and forensic question — what if the “Standard Commission Rate” figure had been 2 per cent or 2.5 per centinstead of 3 per cent ? — is that (for the reasons already canvassed) it would have made no difference to the only live issue on the appeal, namely, the applicability of regulation 6(2), at least unless, given the reduced differential, it served to cast doubt on the parties’ agreement to an operative price of 1.5 per cent. The presence of a figure lower than 3 per cent may of course have had a bearing on the separate inquiry as to fairness under regulation 5(1). ii) As is apparent, I have not had regard to the parties’ subsequent conduct in construing the agreement; such conduct is of course irrelevant. iii) I express no view as to whether regulation 6(2) is applicable to the provision for a 3 per cent commission rate in the context of a Multiple Agency. I do not think that HHJ Richardson’s decision was intended to impact on clause 14 of the terms. Bairstow will have to take its own advice and course in this regard. For my part, however, I will look to counsel for assistance in ensuring that the order as drawn up does not in terms impact on any question of Multiple Agency. iv) Finally and in fairness to Bairstow, it cannot be said that it rushed to claim the 3 per cent commission; it had waited a long time before pressing that claim. This dispute would indeed not have arisen but for Darlingtons’ lamentable failure to pay the full 1.5 per cent commission timeously. That said, this litigation would not have continued but for Bairstow’s apparently curious decision to press on regardless even after the outstanding £387.00 had been paid.[32]I shall be grateful for the assistance of counsel in drawing up the order and on all questions of costs.

Cited in 5 later judgments