Savills has won its case against a vendor who refused to pay the firm’s commission even though they did not introduce buyer
Savills had not introduced the buyer, although the case did not revolve around that but the status of the marketing report.
The case at the Court of Appeal was heard in January and the judgment issued in February, but it appears to have received no publicity and it is only now that the barrister who represented Savills has spoken of the outcome. Savills itself yesterday declined to comment.
The Court of Appeal overturned an earlier court decision, which sided with the vendor.
The case, between Savills (UK) Ltd, and Peter Blacker and his company Sidemanor Ltd, concerned the sale of a property known as the Mill Ride Estate, near Ascot, Berkshire.
The property consisted of a golf course, 150 acres of land and a cottage.
It was bought by Sidemanor in 2003 with a mortgage from Barclays, on the basis that the loan to value should not fall below 60%.
By early 2012, as a result of valuations carried out by Savills for the bank, Sidemanor was under pressure from Barclays to reduce the outstanding loan. The cottage had been sold in 2011 to Mr Blacker in his own name, with contracts exchanged but completion postponed until the following year; income from the golf course failed to meet forecasts.
Mr Blacker and his co-director felt the best way of optimising the value of the estate was to obtain planning permission to redevelop the golf course as a large mansion house in parkland, which would be attractive to wealthy international buyers.
In 2012, Savills prepared a valuation report for Barclays, producing a number of different valuations ranging from £2.5m to £10m. The highest valuation assumed a sale of the estate, including the cottage, with planning permission for a mansion.
Later that year, Savills director Paul Finnegan produced a report for Mr Blacker entitled “Recommendations for the marketing and sale of Mill Ride Estate”.
It recommended an asking price of around £15m, based on the property having full planning permission.
The report said: “We recommend a sale by private treaty. We suggest that the estate is offered for sale as soon as planning consent has been granted and we advise that the marketing is initially carried out on a very private basis.”
The report said Savills’ fee would be 2% of the sale price, not including agreed marketing costs and VAT, with Savills acting as agents with sole selling rights.
The report invited the client to sign an instruction letter.
However, the report was never signed by any of the parties because Mr Blacker decided to change the marketing strategy. By that time it was September 2012 and Barclays was withdrawing its facility the following March.
Mr Blacker felt that planning permission might not be granted by then. Knight Frank had inspected the estate and provided a marketing report in which they indicated they had been asked by Mr Blacker to advise on a sale of the estate “as is”.
An adviser to Mr Blacker suggested instructing both firms to sell the estate, with 1.25% to each agent, and for marketing to begin at once.
Mr Finnegan “hastily” amended the draft report he had prepared earlier, and this was signed by Mr Blacker. It confirmed that Savills would be happy to work with Knight Frank.
However, parts of the report still referred to the estate being offered for sale “as soon as planning consent has been granted”, while the terms of business referred to Savills having sole selling rights.
In late October 2012, a purchaser was introduced to Mr Blacker without any involvement from either Savills or Knight Frank.
An offer was made at £6.88m and contracts were exchanged in November 2012. The cottage was also transferred to the purchasers.
Savills sought its commission but this was refused on the basis that the estate had been sold without planning permission – Savills’ report having said that the estate would be offered for sale once planning permission had been granted.
Savills took Sidemanor to court, claiming a commission of £120,000 plus VAT but on October 6, 2015, the claim was dismissed by Judge Edward Bailey.
However, Savills has now won on appeal.
The Appeal Court ruled that the strategy set out in its report was “no more than a recommendation”. It was not a contractual requirement “that the estate be sold only after the grant of planning permission; still less that no commission should be payable except in those circumstances”.
The court ruled that commission was payable “in the events which happened”.
Savills was represented by Glenn Willetts of No5 Barristers’ Chambers, which says that Savills had claimed £120,400 plus VAT, and that the Court of Appeal ordered the defendants to pay Savills £144,000 with interest of nearly £27,000 and costs of £80,000.
Mr Willetts said: “We are delighted with this outcome, which proves that marketing recommendations are simply that; they are proposals and are not binding.