Written assignment - Lecture Wells v Devani Feedback PDF

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Written assignment 2019: Case analysis - Wells v Devani
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LAWS622 LAW OF CONTRACT Written assignment 2019: Case analysis - Wells v Devani Feedback notes INTRODUCTORY NOTES Your assignments were marked holistically but the 3 elements which were crucial to your grade are:   

The substantive discussion in the responses to the questions. The clarity of your analysis and the articulation and presentation of the arguments. The referencing and footnoting.

This feedback is not presented as a model answer; for the purposes of explanation and completeness – and, most importantly, to enhance your understanding and facilitate your learning – the commentary on most of the questions is more expansive than what you would have been expected to provide. Note that Question 10 has been divided into two parts for the purposes of this feedback. The assignment was primarily designed to do three things. First and foremost, it should have rammed home the fact that in order to understand the law you need to read cases deeply and thoroughly – you can’t afford to just skim or read parts of judgments in isolation or rely on secondary sources to tell you what the law is. Secondly, the questions were structured in such a way that you were systematically guided through the UKSC and UKCA judgments in Wells v Devani. This should have not only assisted your understanding of the substantive legal issues in the case itself, but also helped you to appreciate how, in pursuit of reaching a decision, the judges deal with the arguments on either side and address the reasoning in the lower court(s) or, indeed, that adopted by fellow judges on the bench. Last, but by no means least, it is hoped that through the completion of this exercise (and engaging with the feedback), you recognise the importance of honing your capability to produce an acceptable standard of presentation, communication and referencing in your legal writing – crucial skills in the repertoire of every good lawyer. You should read this feedback in conjunction with the comments which have been made on your assignment. In particular, pay attention to the way in which referencing and footnoting has been incorporated into these notes. This is always an issue for students setting out on a law degree but you need to recognise that it is an integral part of learning the law. First, and foremost, the requirement to reference ensures that you engage with your sources; that, in turn, increases the likelihood that you will actually start to understand what it is you are writing about. Secondly, being able to cite authority for your arguments is an essential skill for a lawyer – the Court will seldom, if ever, be willing to accept a bland assertion or “your word” on a legal argument; it will ask what support there is for the proposition you are putting forward. Thirdly, it is good academic practise to get into the habit of acknowledging your sources (the General Academic Regulations Part 7 Section 2.1.3 says that a student breaches the Academic Regulations if, during an assessment and/or course

of study, he or she “plagiarises the work of another person without indicating that the work is not the student’s own”). Finally, careful and assiduous referencing - just like good, grammatically correct writing – may say something to other people about your trustworthiness and attention to detail; characteristics which are important generally but especially so in the legal profession. You should make the New Zealand Law Style Guide1 your referencing bible – a regular consultation will lend sustenance to your lawyerly skills (if not the soul!). If you have any questions or comments on this feedback note please do not hesitate to email me.

CASE ANALYSIS 1. Explain in your own words what the material facts were in the case. Note that you are dealing with the case in the appellate courts (the Court of Appeal and the Supreme Court respectively). Any dispute surrounding the facts which arose at trial – such as the differing versions regarding what was said in the telephone conversation on 29 January – was determined by His Honour Judge Moloney QC in the County Court. The dispute arose out of the sale of flats, which had been developed by a joint venture partly owned by Wells. Wells had sold half of the fourteen flats in the development, but had been unable to sell the remaining seven which were placed with local estate agents. An acquaintance introduced Wells to another estate agent, Devani. In a telephone conversation on 29 January 2008 Devani told Wells that he was an estate agent. Wells asked Devani about his fees and Devani replied that his standard terms were 2% plus VAT. There was no discussion regarding the circumstances in which that commission would fall due. Within days Devani had introduced Newlon Housing Trust (Newlon) and on 5 February 2008 Newlon agreed to buy all of the unsold flats for the asking price. Later that day – ie after he had introduced the buyer - Devani sent Wells an email to which he attached his terms of business. The transaction proceeded to completion and Devani claimed his commission. Wells refused to pay.

2. Explain the issues in the case. The two issues are identified by the Supreme Court.2 The first is whether the discussion between Devani and Wells gave rise to a legally binding contract to pay the commission or 1

Geoff McLay, Christopher Murray, Jonathan Orpin New Zealand Law Style Guide (3rd ed 2018, The Law Foundation). The first edition of the New Zealand Law Style Guide was published in 2009. Since then it has been adopted by all the New Zealand law schools, the New Zealand publishers of law reports and journals and other entities such as the Law Commission . It is also followed by virtually all courts (including the Supreme Court and the Court of Appeal) and tribunals and an increasing number of barristers use it in their court submissions. 2 Wells v Devani [2019] UKSC 4 at [1] per Lord Kitchin.

whether, in a situation where the parties have expressly agreed in oral discussions that a commission would be payable at an agreed percentage but have not expressly identified and agreed the precise event upon which commission is payable, the bargain is incomplete and, as such, unenforceable as a contract. The second issue is whether Devani’s failure to comply with certain obligations under the Estate Agents Act 1979 had caused prejudice to Wells. Matters arising from this issue are considered in more detail in relation to Questions 15-17 below.

3. What was the decision in the County Court? His Honour Judge Moloney QC held that there was a contract between Devani and Wells. The judge ruled that because the written terms were sent after Devani had introduced the buyer the claim turned upon what was agreed during the telephone call. The judge accepted Devani’s account of the telephone call but concluded that neither party had agreed what event triggered payment. In the absence of an agreement, the law would imply the minimum term necessary to give business efficacy to the parties’ intention. The judge held that the law would imply the minimum term necessary to give business efficacy to the parties’ intentions. The least onerous term for Wells, and the one which nobody would have disputed had it been suggested by an officious bystander, was that payment of the 2% commission was due on the completion of the purchase of the properties by any party which Devani had introduced to Wells.3 The judge held that the prejudice caused to Mr Wells was not so bad that the court should disallow the claim for commission but, instead, reduced the claim by one-third.

4. What was the decision of the majority in the Court of Appeal? The majority of the Court of Appeal (Lewison LJ and McCombe LJ) disagreed with the approach of the trial judge and held that there was no legally binding contract between Devani and Wells.4

5. What were the reasons which the majority in the Court of Appeal gave for concluding that there was no legally binding agreement between the parties? The majority states that “the question is whether the agreement is complete”.5 It held that here it was not complete because: the specification of the commission triggering event was critical to the formation of a binding contract;6 that the parties had not discussed or agreed on the event that would trigger the commission;7 that because the event was not specified

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At [11]. Wells v Devani [2016] EWCA Civ 1106 at [40] per Lewison LJ, at [79] per McCombe LJ. 5 At [36] per Lewison LJ. 6 At [23]. 7 At [16] per Lewison LJ, at [81] per McCombe LJ.

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the contract was incomplete;8 and that a court cannot turn an incomplete bargain into a complete one by implying terms into the agreement and combining these with express terms.9

6. What is an implied term? What was the argument based on implied terms? Why did the majority in the Court of Appeal consider that it was not possible to imply such a term in this case? An implied term in this context10 is a term that is not expressly agreed by the parties but is nevertheless incorporated into a contract by the court to give effect to the parties’ reasonable intentions where it is necessary to give the agreement business efficacy or where it would be so obvious that “it goes without saying”.11 The question is whether by taking into account the relevant surrounding factual matrix or what the parties said, or the parties’ conduct, the court can imply a term identifying the commission entitling event which gives business efficacy to the parties’ presumed common intention? Lewison LJ recognised that the court may imply terms into a concluded contract, but said that to do so assumes there is a concluded contract into which terms can be implied. Here, in the opinion of the majority, there was no concluded contract (for the reasons set out in 5 above) and, according to Lewison LJ, "It is not legitimate, under the guise of implying terms, to make a contract for the parties. That is to put the cart before the horse".12

7. Explain in your own words where Arden LJ’s reasoning differs from that of the majority in the Court of Appeal. Arden LJ considered that “whether something is actually agreed is a question of law and a question of inference from or evaluation of the primary facts”.13 The point at which an estate agent is entitled to claim commission is determined by “the proper interpretation of the contract”.14 Here the trial judge had made a finding of fact that Devani had made known that he was an estate agent and that it was agreed that his commission was 2% plus VAT if he found a purchaser for Wells’ property;15 that, according to Arden LJ, should be interpreted to mean that the agreed commission is payable on completion of the purchase by a purchaser introduced by Devani.16 Because it is possible to interpret the contract in

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At [24] per Lewison LJ, at [81] per McCombe LJ. At [19] per Lewison LJ, at [82] per McCombe LJ. 10 Terms might also be implied on the basis of trade usage or custom or by statute or because the law considers it necessary to imply a term having regard to the particular type of contract. 11 Wells v Devani, above n 2, at [28] per Lord Kitchin. 12 Wells v Devani, above n 4, at [19] per Lewison LJ. 13 At [95] per Arden LJ. 14 At [97]. 15 At [93]. 16 At [97] and referring to Jones v Lowe [1945] KB 73. 9

that way, it was not necessary for the trial judge to imply a term; although the outcome, in Arden LJ’s view, is the same.17

8. Arden LJ takes the view that the conversation between the parties on 29 January gave rise to a unilateral contract. Explain her analysis (you should elaborate on your answer by referring to the reasoning in one other case which has been considered in lectures and/or workshops where unilateral contracts have been discussed). Agreeing with the conclusion of the trial judge, Arden LJ states that the telephone conversation on 29 January gives rise to a unilateral contract.18 It is perhaps more accurate to characterise it as an offer of a unilateral contract where, once the offeree starts to perform the requested act, there is an acceptance of the offer of a unilateral contract and the offer cannot be revoked.19 Here there is an offer of a unilateral contract by Wells – ie a promise to pay the commission if the flats are sold - but there is no corresponding promise by Devani to find a buyer. The reasoning is similar to that Carlill v Carbolic Smoke Ball Company,20 where an advertisement with specific and precise terms was treated as making a unilateral offer to pay a reward but there was no undertaking by the customer to use the smokeball. The unilateral offer was accepted when Mrs Carlill started using the smokeball and developed into a bilateral contract once Mrs Carlill contracted the flu – ie she fulfilled the conditions of the offer made in the advertisement.21 In relation to the facts of this case, while Devani was not bound to introduce Wells to a successful buyer, if he did the deal would develop into a bilateral contract and Wells would be bound to pay Devani’s commission.22 Arden LJ goes on to say that she does not need to decide exactly when Wells became bound to pay the commission. The purchase had been completed: “The agreement at that stage ceased to be unilateral. After that time Mr Wells could no longer withdraw from his deal with Mr Devani. There was then no longer a unilateral contract but a bilateral contract”.23

9. What was the decision in the UK Supreme Court? The Supreme Court agreed with the trial judge and Arden LJ that there was a legally binding contract and unanimously allowed Devani’s appeal. Lord Kitchin gave the leading judgment, with whom Lords Wilson, Sumption and Carnwath agreed. Lord Briggs gave a concurring judgment (with which Lord Kitchin agreed24).

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At [97]. At [99]-[100]. 19 See at [100] where Arden LJ refers to a passage from Burrows, Restatement of the English Law of Contract (OUP 2016) at 60. 20 Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256. 21 At 268 per Bowen LJ. 22 Wells v Devani, above n 4, at [106] per Arden LJ. 23 At [101]. 24 Wells v Devani, above n 2, at [57] per Lord Kitchin. 18

10. (A) How does the reasoning of the Supreme Court differ from that of the majority in the Court of Appeal on the question of whether there was a legally binding agreement between the parties? Lord Kitchin said, the question of whether there was a binding contract required a consideration of what was communicated between the parties by their words and their conduct and whether, objectively assessed, that led to the conclusion that they intended to create a legally binding relationship and that they had agreed all the terms that the law requires as essential for that purpose.25 While acknowledging that there will be cases where the words and conduct relied on are so vague that it is impossible to identify the terms or attribute to the parties any contractual intention, Lord Kitchin emphasises that, “the courts are reluctant to find an agreement is too vague or uncertain to be enforced where it is found that the parties had the intention of being contractually bound and have acted on their agreement”.26 Lord Kitchin agrees with Arden LJ that, in the present case, there was no need to imply a term into the agreement reached between Wells and Devani. While there was no discussion of the precise event that would trigger payment of commission, Lord Kitchin finds support in the case law involving estate agents27 for his conclusion that, absent a provision to the contrary, it would naturally be understood that payment would become due on completion and from the proceeds of sale.28 In his view that is the only sensible interpretation of their telephone conversation and the circumstances in which it took place:29 …if, as here,… the bargain is, in substance, ‘find me a purchaser’ and the agent introduces a prospective purchase to whom the property is sold, then a reasonable person would understand that the parties intended the commission to be payable on completion and from the proceeds of sale. Furthermore Lord Briggs, in referring to the telephone conversation, says that, “it was evident from the fact that nothing further was said before the conversation was ended that there was agreement, intended to create legal relations between them, for which purpose nothing further needed to be negotiated”.30

10. (B) The Supreme Court takes a different view to that of the majority in the Court of Appeal on the judgment of the Privy Council in Scancarriers A/S v Aotearoa International Ltd. Explain the different interpretations which the Court of Appeal and the Supreme Court respectively put on what Lord Roskill said in Scancarriers. In the Court of Appeal the majority referred to the Privy Council decision in Scancarriers A/S v Aotearoa International Ltd31, in which Lord Roskill stated that it is not correct in principle,

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At [17]. At [18]. 27 See at [20]-[22]. 28 At [19] and [23]. 29 At [26]. 30 At [60] per Lord Briggs. 31 Scancarriers A/S v Aotearoa International Ltd [1985] 2 Lloyd's Rep 419. 26

in determining whether there is a binding contract, to combine express and implied terms in order to create what would not otherwise be a legally binding bargain.32 In the majority's view, the trial judge had fallen into that trap in this case.33 The event giving rise to an estate agent's entitlement to commission was of critical importance and there was no one rubric which all estate agency contracts followed.34 Without an agreement on when and whether any commission would be due, the parties' relations had not been sufficiently particularised for there to be a legally binding agreement.35 This was a term which was essential for the formation of legally binding relations. It could not, Lewison LJ said, be decided by reference to the standard of reasonableness nor was it a case where the law provided a default rule.36 In the Supreme Court’s view, Scancarriers was not a bar to the implication of a term in this case. In Scancarriers the Privy Council held that a "quote" which the shipper provided for freight rates was never intended to create a legal relationship and implying a term in those circumstances was tantamount to writing a contract for the parties. According to the Supreme Court, that was not the situation in this case and Scancarriers did not lay down any “general rule that it is not possible to imply something that is so obvious that it goes without saying into anything, including something the law regards as no more than an offer”.37

11. Summarise the approach which the Supreme Court takes to the possible application of an implied term in this case. While, on the facts, Lord Kitchin considered that there was no need to imply a term into the agreement reached between Wells and Devani, he went on to say that, if it had been necessary to imply a term, he would have had no hesitation in implying a term that payment would fall due on completion of a purchase by a buyer Devani had introduced. Lord Kitchin considered that “a term to that effect must be implied to make the contract work and to give it practical and commercial coherence”.38 Applying the Supreme Court’s decision in Marks & Spencer Plc v BNP Paribas,39 such a term would be necessary to give the contract business efficacy and would not go beyond what was necessary for that purpose. As indicated above, Lord Kitchin did not accept that there is any general rule, as found by the majority in the Court of Appeal, that a term cannot be implied into an agreement to render it sufficiently certain or complete to constitute a binding contract. He went on to say:40 . . . where it is apparent the parties intended to be bound and to create legal relations, it may be permissible to imply a term to give the contract such business efficacy as the parties must have intended. For example, an agreement may be 32

At 422. Wells v Devani, above n 4, at [21] per Lewison LJ. 34 At [23]. 35 At [24]. 36 At [37]. 37 Wells v Devani, above n 2, at [33] per Lord Kitchen. 38 At [29]. 39 Marks & Spencer Plc v BNP Paribas [2015] UKSC 72. 40 Wells v Devani, above ...