The Background
Mr Barton was a property developer. He agreed with Foxpace Ltd that if he introduced to Foxpace a potential purchaser for a property called Nash House, who then went ahead and bought the house for £6.5million, Foxpace would pay Mr Barton £1.2million. The parties did not agree what would happen if the purchaser introduced by Mr Barton paid less than £6.5million for the house. Mr Barton introduced Western UK (Acton) Ltd to Foxpace and the price was initially agreed at £6.5million. However, it transpired that the ability to develop the site might be curtailed due to the HS2 high speed railway project and so the price was reduced to £6million and the sale completed at that price.
The judge at first instance held that Mr Barton and Foxpace had a binding oral agreement in relation to the £6.5million price but, as the contract was silent on what happened below that price, Mr Barton was entitled to nothing. His alternative claim for unjust enrichment was refused on the basis that it would undermine the parties' contract. The Court of Appeal disagreed and allowed Mr Barton's appeal against the decision of the High Court. They held that the silence of the contract did not rule out a claim for unjust enrichment. Foxpace would be unjustly enriched if it took the benefit of the introduction without paying Mr Barton a reasonable fee. Two judges in the Court of Appeal thought that the same result could be achieved by the implication of a term as to reasonable remuneration. But Foxpace were not happy and appealed the decision to the Supreme Court on three grounds. First, that the Court of Appeal had been wrong in law to hold that it was possible that Foxpace had been unjustly enriched by Mr Barton's performance of the contract, given its terms. Secondly, that the Court of Appeal was wrong to assume that there was an unjust factor sufficient to entitle Mr Barton to relief on the basis of unjust enrichment. Thirdly, that the Court of Appeal's alternative conclusion that Mr Barton might have been permitted to charge a reasonable fee on the basis of implied terms was wrong.
The Supreme Court allowed the appeal and set aside the Court of Appeal's decision by a majority of 3-2. The identity of the dissenters was, however, interesting with Lord Leggatt and Lord Burrows being in the minority and this article looks at all the judgments in a little depth.
The Majority Judgment
The majority started by looking that the approach of the judge at first instance as to the express terms of the contract. It noted the judge's finding in fact that the contract was to the effect that a sale for £6.5million would trigger a fee but that there was no express agreement to the effect that a sale for less than that would trigger one. In these circumstances and following the usual inference that when a contract does not expressly provide for what is to happen, nothing is to happen, the judge held that the contractual claim failed. The majority expressed some sympathy with this very straightforward conclusion which followed Lord Hoffmann's decision in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, but questioned whether the usual inference necessarily meant that the judge should have immediately jumped to the conclusion that the claim in contract failed. Implied terms were relevant and the majority started by outlining the circumstances in which terms can be implied, reiterating the usual rule that they may need to be included in order to give effect to the unexpressed intention of the parties (i.e. a term implied by fact) or because the contract is one of a class into which the law implies a term.
In relation to the possibility of there being a term implied by fact and following the Supreme Court's decision in Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, the court reiterated the usual tests of business efficacy and obviousness which are essentially two different ways of expressing the same question, namely what the contract, seen as a whole, against the relevant background, would reasonably be understood to mean. Applying that test the majority took the view that, to imply a term to the effect that Mr Barton was paid for a price less than £6.5million, was contradicting an express term of the contract. They also considered that while the implication of a term might have been necessary to stop Foxpace playing a "dirty trick" on Mr Barton and deliberately reducing the price below £6.5million to avoid paying him, the judge at first instance had absolved Foxpace from any such price manipulation. The reduction was as a genuine result of HS2.
In relation to the possible existence of a legally implied term, the possible application of section 15 of the Supply of Goods and Services Act 1982 was discussed in terms of which it is provided that where under a "relevant contract" for the supply of a service, the consideration for the service is not determined by the contract, there is an implied term that the party contracting with the supplier will pay a reasonable charge. While that section was found not to apply because the contract in this case was not a "relevant contract", Mr Barton argued that the provision reflected the common law position that a term will be implied where services are provided and there is no agreement as to remuneration. The majority examined a series of estate agent cases and relied in particular on the recent decision of the Supreme Court in Devani v Wells [2019] UKSC 4 in which the court held that where an estate agent and a seller agreed that the estate agent would find a particular purchase then, absent a provision to the contrary, they would be taken to have made a legally binding contract under which the agent was entitled to commission on the completion of a sale to a purchaser that the agent had found. The majority was not persuaded, however, that Devani assisted Mr Barton. First, he was not an estate agent. Secondly, the fee of £1.2million was several times the reasonable fee for this sort of introduction. Thirdly, the fee was not in the nature of a bonus over and above a reasonable fee for getting a favourable price for the property - it was calculated in an entirely different way. For all of these reasons the majority concluded that no term fell to be implied in law.
The majority then turned its attention to Mr Barton's unjust enrichment claim. They set out four factors that the court needed to consider. First, has the defendant been enriched. Secondly, was the enrichment at the claimant's expense. Thirdly, was the enrichment unjust. Finally, are there any defences available to the defendant. Foxpace accepted that the answer to the first two questions was "yes" and the answer to the fourth question was "no". Accordingly, the issue between the parties was question 3 - was Foxpace's enrichment arising from the introduction by Mr Barton unjust unless they paid him a reasonable fee? While the majority were not entirely clear as to what the failure of consideration/basis was said to be by Mr Barton, they noted that the suggestion was that, because the parties had not considered a lower sale price, the shared assumption had been a £6.5million sale price and when that failed to materialise, the basis of their agreement failed. The majority was not impressed by that argument. They indicated that "the most one can say is that Mr Barton [and Foxpace] did not discuss it and they did not provide for it in the contract" and that the failure to obtain the price of £6.5million was not a failure of consideration/basis entitling Mr Barton to succeed in his unjust enrichment claim. Rather, it was just a failure to agree a contractual term.
In relation to the effect of the contract on the unjust enrichment claim, the majority said this "When parties stipulate in their contract the circumstances that must occur in order to impose a legal obligation on one party to pay, they necessarily exclude any obligation to pay in the absence of those circumstances; both any obligation to pay under the contract and obligation to pay to avoid an enrichment they have received from the counterparty from being unjust. The "silence" of the contract as to what obligations arise on the happening of the particular event means that no obligations arise as Lord Hoffmann made clear in Belize…This excludes not only an implied contractual term but a claim in unjust enrichment". Mr Barton's claim was, according to the majority, nothing more than a claim based on the "perceived requirements of fairness" and was, therefore, rejected.
The Dissenting Judgments
The Barton case is notable for the identity and quality of the dissenting judgments, given by Lord Leggatt and Lord Burrows and it is instructive to look at both in turn.
The key question identified by Lord Leggatt was - what is the consequence of saying nothing? Foxpace argue that the consequence of no express agreement is that no payment is due. Mr Barton argues that the consequence of the omission is that his entitlement is not governed by contract law but by the law of unjust enrichment. Lord Leggatt begins his judgment by explaining that he considers that both of these contentions are wrong. The fact that the contract did not expressly deal with whether a fee was payable does not meant that contract law can't be applied. Nor does it mean that under the law of contract, nothing was payable. The law of contract sets out rules for ascertaining the legal rights and obligations of parties extending well beyond their expressly stated intentions.
The whole passage of Lord Leggatt's judgment between paragraphs 126 and 133 on sources of contractual obligations is worth reading. As he explains, there would be very little law of contract if a choice to be bound by an obligation had to be expressly stated. Contracts (even carefully drafted ones) can't cover all eventualities and the whole point of establishing default rules is to avoid unfair outcomes where parties have, for whatever reason, not negotiated express terms to cover certain contingencies. Some of the default rules apply to all contracts of a particular type (i.e. implied terms in law) and others apply where a contract requires a tailor-made term which the parties have not expressly agreed but is nonetheless required to give business efficacy to the contract (i.e. implied terms in fact). In looking at the distinction between implied terms in fact and law, Lord Leggatt focussed heavily on which party bears the burden of expression. Where implication of law is concerned, a contract is assumed to include any term implied in law as a standard incident of a contract of that type, unless such a term is expressly excluded. However, by contrast, where implication of fact is concerned, a party contending that a term must be implied has to overcome a presumption that, where there is a detailed written contract, the parties have expressed all the terms particular to their individual bargain.
In relation to implication in law, Lord Leggatt noted that there are various relevant default rules. One is that if there is no fixed consideration for the provisions of services, the beneficiary of these services must pay a reasonable fee. He continues to say that "The obligation to pay a reasonable sum reflects the ordinary expectation that those who, in a commercial context, provide valuable services to others do so for reward and not simply out of charity or benevolence; and by the same token someone who requests such services does so on the understanding that they are to be paid for". This rule was not new and was recognised as far back as in Blackstone's Commentaries Of the Rights of Things (1766). In terms of supply of services, the common law rule was codified by the 1982 Act. Lord Leggatt considered that a unilateral contract of the kind in this case was included within the definition of "relevant contract" under the Act and even if it was not included, they clearly fell within the scope of the common law rule to the same effect.
In relation to commission agreements such as the one agreed by Mr Barton, Lord Leggatt noted that the presumption was that no commission would be payable until the principal derives the benefit of a completed sale resulting from the agent's efforts. That was clear from several cases including Devani. That case was a classic example of one where a commercial norm was incorporated into the common law which had led to a default rule in all similar cases and prevailed in the absence of an express term to the contract. The question had been whether the terms expressly agreed negatived the default position and it was clear that they did not. That reflected the position in the present case. It was plain that Mr Barton wasn't introducing a purchaser as a gratuitous favour but rather was doing so as part of an arm's length business deal with a property developer. Clearly, there was an intention that he would be paid for the services supplied and if nothing was agreed then that gap should be filled by the implication that a reasonable sum would be paid to him. The oral agreement actually reached did not negative Mr Barton's right to payment.
Lord Leggatt then turned his attention to the unjust enrichment claim and, as canvassed above, took the view that it was misconceived for several reasons. First, "a party cannot be said to have been unjustly enriched by the receipt of a benefit to which he or she was legally entitled. Put another way, the existence of a contractual or other legal obligation to confer the benefit necessarily means that the resulting enrichment at the claimant's expense is not unjust". Secondly, the fact that there is another system for determining the claim - the law of contract - precludes the operation of unjust enrichment. It determines and governs the consequences of both the existence and absence of an obligation on one contracting party to confer a benefit on the other. Lord Leggatt considered that to "redistribute the allocation of benefits and losses provided for by the law of contract by applying another set of legal principles would undercut this regime".
Lord Burrows approach to the contractual question was similar. He started his analysis with what he described as the logically prior question (i.e. to the exclusion issue) of whether Mr Barton had any prima facie right to be paid for his services whether under contract law or by reason of the law of unjust enrichment. Like Lord Leggatt, he did consider that there was an implied term in law to the effect that Mr Barton was entitled to reasonable remuneration. He did not, however, consider that any such entitlement arose either as a consequence of a term implied in fact or as a matter of contractual interpretation. Objectively the contract was silent on the issue and the contract could work from a business efficacy point of view without dealing with the position of what happened if there was a sale for less than £6.5million. By contrast, while section 15 of the 1982 Act did not apply, it gave a strong steer to the courts that it was appropriate to imply a term as to reasonable remuneration into unilateral contracts and all the case law, including Devani led to the conclusion that a term should be implied as a matter of the common law.
Turning to the question of whether the contract excluded the operation of such a term, Lord Burrows said that he was wholly unconvinced by the arguments made by Foxpace. The parties were never concerned to preclude reasonable remuneration for the services rendered. Indeed, the judge held that Mr Barton and Foxpace had not even applied their minds to the question of what would happen if the price didn't reach £6.5million. The silence did not mean that the loss lay where it fell but, instead, meant that the common law implied a term. The common law rule was not ousted by the terms of the contract itself.
He differed in his analysis of unjust enrichment from the rest of the court. In his view, there was an unjust factor in this case namely the failure of consideration or failure of basis. In other words "that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself". While that definition focussed on the restitution of money, Lord Burrows saw no reason why it did not apply equally to other benefits including services. There had been a failure of consideration in this case because Mr Barton rendered services to Foxpace on the basis that he would be paid £1.2million for his services if Nash House sold for £6.5million. But Nash House sold for less and that was an unjust factor. Accordingly, in Lord Burrows' opinion, even if there had been no contractually implied term by law, Mr Barton had a prima facie right to a quantum meruit in the law of unjust enrichment.
Discussion
It is interesting to reflect on how, on the same facts, so many judges in this case looked at the case in an entirely different way perhaps reflecting that, as Lord Sumption once said speaking extra-judicially, when it comes to contract law, much is a question of taste. Some judges look at contracts in a very black and white way and if it isn't written down on paper then it isn't agreed. Others take a more nuanced view accepting that while a perfectly drafted contract (if such a thing exists) could be understood by reading the document alone or, in this case, by understanding what the parties had expressly agreed in discussions with each other, most of the time parties don't manage to anticipate and provide expressly in advance for every possible contingency. As Lord Leggatt puts it, that could be for a variety of reasons including "inertia, lack of opportunity or foresight, or deliberate choice". The default rules that exist in relation to implication of terms are, as he explains "generally optimal when they reflect prevailing social norms and expectations and therefore create rights and obligations which reasonable parties would be likely to agree between themselves".
In the present case, it is perhaps difficult to see how it could be said that Mr Barton was predicating his remuneration on the achievement of the price of £6.5million. What if the price had been £6.49million? Presumably, the majority would have reached the same result (unless there had been deliberate price manipulation by Foxpace). While this was an English case, it is interesting to reflect on whether the result would have been different in Scotland. The result in relation to unjust enrichment would likely have been the same and the way in which the interaction between contract claims and unjust enrichment claims are dealt with by, for example, Gloag or McBryde closely reflects how the majority and Lord Leggatt dealt with them in this case. However, on implied terms, as a Scots lawyer (or to this one at least), Lord Leggatt's and Lord Burrows' approach to implication is more attractive. While directly analogous Scots cases are difficult to find, some guidance as to how the Scottish courts would approach the issue can be found in cases where a price has been agreed for completion of work only but the work has been cancelled before completion and the trigger for payment not reached. In these cases, the Scottish courts have regularly found the party providing the service to be entitled to payment quantum meruit.
Whatever the correct analysis, Mr Barton's case illustrates again that while the principles of contract law are long-settled, the emphasis given to them by different judges leads to very different results and, therefore, if you want to be absolutely certain as to the result you'll get in court, put your contract in writing and make sure it says exactly what you mean.
