Scottish Court of Session Decisions

In March 1894 Mr Robert Menzies, S.S.C., Edinburgh, and the firm of Menzies, Bruce-Low, & Thomson, W.S., of which he was a partner, brought an action against M'Lennan & Urquhart, brewers, Dalkeith, for payment of £480, being commission at the rate of 1 1 2 per cent. upon £32,000, or alternatively as remuneration for his services upon the principle of quantum meruit.

The circumstances giving rise to the action were as follows—Upon 29th May 1889 Mr Alexander M'Lennan, the senior partner of the defenders’ firm, wrote in name of the firm to Mr Menzies in the following terms:—“With reference to the conversation between our Mr M'Lennan and you on the 24th inst., we are willing, on your obtaining for us the price arranged for brewery (viz., £32,000), to pay you a commission of 1 1 2 per cent., but on the distinct understanding that the profits of the business are not to be advertised or in any other way published, and that in the event of there being no sale you are to have no account against us.” Mr Menzies acknowledged this letter as being “perfectly satisfactory,” and thereafter entered into negotiations with a Mr Alfred Beal in London, who in July 1889 undertook to purchase the brewery at the price of £35,000, and sent a formal minute of agreement to Mr Menzies, which was communicated to the defenders. Upon 23rd July Mr Menzies received the following letter from Mr M'Lennan:—“On behalf of my firm of Messrs M'Lennan & Urquhart, brewers, and myself and partners thereof, I hereby authorise you to sign a minute of agreement for sale of our brewery to Mr Alfred Beal of Regent Street, London, on the understanding that the price to be paid to us is £32,000 sterling for everything except stock-in-trade and book-debts, which are to be taken at valuation and paid for extra. I have perused the agreement mentioned, a copy of which is to be sent to me.” The following docquet was afterwards appended to the letter by the two other partners:—“We homologate the above letter. … We also homologate the arrangement made by our senior as to commission to be paid to you on the sale.” After receiving the letter of 23rd July Mr Menzies signed the minute of agreement.

By the fourth article of the minute it was provided—“The vendor undertakes to prove that the nett profits of the brewery for the last four years have been on the average not less than £5400 per annum, and that the business has been established over forty years.” In article 5 the purchaser agreed to deposit £1000 in bank in the joint names of himself and the vendor, which was to be repaid in the event of the vendor failing to implement the undertaking in article 4. If the vendor implemented that undertaking a more formal agreement was to be entered into, and the purchaser was to deposit a further sum of £4000 on 2nd September. If he failed to complete the transaction and pay the purchase price before October 1st, these two sums were to be forfeited to the vendor.

The evidence required by the fourth article of the agreement was duly furnished, and on 22nd August the more formal agreement was executed.

The latter agreement was one between the defenders themselves and Mr Beal. The price stipulated was £35,000, and such sum as should be fixed by valuation as the price of the stock-in-trade and book-debts. Mr Beal had deposited £1000 in bank under the agreement with Mr Menzies, and by the formal agreement he became bound within six days to deposit a further sum of £4000 “as part of the purchase price.” The balance of the price was to be paid on or before 31st October 1889.

The eighth article of the agreement was in the following terms :—“If the purchaser shall fail to pay the balance of the said purchase money on or before the 31st day of October 1889, the said two deposits of £1000 and £4000 shall be forfeited to the vendors in full satisfaction of all causes of action.”

Mr Beal failed to carry through the purchase and pay the balance of the price at the time stipulated, and the defenders claimed from him, and after a litigation obtained payment of the £5000.

The defenders pleaded—“(2) The pursuers not having obtained for the defenders the price arranged for their brewery, and not having effected a sale of the same, they have no right to the commission sued for.”

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Upon 10th November 1894 the Lord Ordinary (Low) pronounced the following interlocutor :—“Finds that, in the circumstances set forth in the record, the terms of the letter of 29th May 1889 by the defenders to the pursuer Robert Menzies do not bar the pursuers from claiming remuneration for the services rendered by the said Robert Menzies to the defenders in negotiating a sale of the brewery, and that the pursuers are entitled to said remuneration quantum meruerunt: With these findings appoints the cause to be enrolled for further procedure : Reserves the question of expenses, and grants leave to reclaim.

“ Opinion.—[After narrating the facts] —I am of opinion that the pursuer cannot claim commission. Reading the words of the letter of 29th May 1889, ‘on your obtaining for us the price arranged,’ in their ordinary and natural sense, they seem to me to mean that the commission was to be payable if, and only if, the price arranged was actually obtained. Therefore as the price has not actually been obtained the commission cannot be claimed.

It does not, however, necessarily follow that the pursuer is not entitled to remuneration. That depends upon whether the special contract excludes such a claim in the circumstances which have actually occurred. The question seems to me to be one of difficulty, but after the best consideration which I have been able to give it, I am of opinion that all claim to remuneration is not excluded.

The first question is, What is the true construction of the letter of 29th May 1889 ? That letter appears to me to be open to construction, because the phraseology used in the first part of the letter is different from that employed in the second part. In the first part of the letter it is said that the commission is to be paid ‘on your obtaining for us the price,’ while in the second part of the letter it is stipulated that the pursuer is to have ‘no account’ against the defenders ‘in the event of there being no sale.’ I think that it must be conceded that the words ‘no account against us,’ are equivalent to ‘no claim against us for commission or otherwise,’ but the question remains, ‘What is the meaning of the words’ in the event of there being no sale ?’

It is clear that if there had been merely abortive negotiations for a sale the pursuer could have claimed nothing, and I also think that the same result would have followed if a contract of sale had been completed, but the purchaser had turned out to be unable either to implement the contract or to pay damages for breach of contract. If, on the other hand, a contract of sale had been concluded but not implemented, and the defenders had claimed and obtained damages for breach of contract, a delicate question would have arisen. I am not prepared to say that in that case the pursuer would have been cut off from all claim for remuneration. But it seems to me that as events have turned out the pursuer is in a more favourable position than he would have been in such a case.

In the final contract, which was entered into between Beal and the defenders themselves, the latter agreed that if the balance of the price was not paid at the stipulated time the £5000 which had been deposited should be forfeited to them ‘in full satisfaction of all causes of action.’ By that stipulation the defenders barred themselves from demanding specific implement of the contract of sale which the pursuer had arranged on their behalf, and bound themselves to take the deposited £5000 in lieu of implement.

“Beal did fail to implement the contract, and the defenders have obtained payment of the deposited £5000. Beal refused to recognise the defenders' right to the £5000— or at all events to the whole sum—and the rights of the parties were determined by the Court in the case of The Commercial Bank v. Beal, November 7, 1890, 18 R. 80. In that case Beal pleaded that the provision in the agreement as to the forfeiture of the £5000 was either (1) a penalty clause, in which case the defenders could only claim such damages as they had actually sustained, or (2) a clause fixing the amount of liquidate damages, in which case the amount was exorbitant. The defenders on the other hand contended that the £5000 was part of the price which had been paid, and which was, by express agreement, forfeited in the event which had happened. Lord Trayner held that the stipulation was one for liquidate damages, and that the amount was not exorbitant. He accordingly gave decree for the defenders. The Second Division affirmed the result at which Lord Trayner had arrived, but on a different ground, holding that the provision in the agreement was in no sense a stipulation for penalty or liquidate damages, but an express contract that the portion of the price which had been deposited should be forfeited.

“The case therefore stands thus. By the exertions of the pursuer a contract for the purchase of the brewery by Beal was concluded; the defenders agreed that if Beal failed to implement the contract they were not to sue for specific implement or for damages, but were to accept forfeiture of the £5000 of the price which had been deposited in full of all claims; and finally the defenders have obtained payment of the £5000.

That is a position of matters which in my opinion could not have been and was not in the contemplation of the parties when they entered into the agreement embodied in the letter of 29th May 1889.

It is true that the ‘price arranged’ has not been obtained by the defenders, but it is also true that there was a sale in the sense of a completed contract, and that the defenders (while retaining the brewery) have received payment of £5000 of the price arranged.

I am therefore of opinion that the event is one which was not contemplated or provided for in the agreement of 29th May, and that therefore that agreement does not bar the pursuer from claiming quantum meruit.

I have been unable to find any authority

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in the law of Scotland bearing upon this case, but in England there are numerous decisions upon kindred questions, from which rules of law applicable to the present case may be deduced. All the authorities are collected in Smith's leading cases under the report given of the case of Cutter v. Powell, vol. ii., p. 1.

It is clearly established that where there is a special contract for definite remuneration for certain services, if and when they have been rendered, there can be no claim for remuneration unless the services contracted for have been fully rendered. The case of Cutter v. Powell is a strong example of that rule.

There are however various exceptions to the rule; the first of which is stated by Mr Smith (p. 26), as follows :—‘It consists of cases in which something has been done under a special contract, but not in strict accordance with the terms of the contract. In such a case the party cannot receive the remuneration stipulated for in the contract because he has not done that which was to be the consideration for it. Still, if the other party have derived any benefit from his labour, it would be unjust to allow him to retain that without paying anything. The law therefore implies a promise on his part to pay such a remuneration as the benefit conferred upon him is reasonably worth.’

Again, Mr Smith (p. 34) says—‘Before leaving the first exception’ (that stated above) ‘to the general rule … it may be well to notice a large class of decisions forming only an apparent exception ; that is to say, cases in which the special contract being unperformed a new contract has been implied from the conduct of the parties to pay a remuneration commensurate with the benefit derived from the partial performance.’ Mr Smith, however, goes on (p. 35) to say—‘It must further be observed that when a special contract has been only partly performed, the mere fact that the part performance has been beneficial is not enough to render the party benefited by it liable to pay for this advantage ; it must be shewn that he has taken the benefit of the part performance under circumstances sufficient to raise an implied promise to pay for the work done notwithstanding the non-performance of the special contract.’

It seems to me that the present case falls within the 'apparent exception from the general rule referred to by Mr Smith in the last two passages which I have quoted.

The defenders agreed to give up their right to sue for specific performance upon condition that if the contract was not performed the portion of the price deposited should be forfeited. That was an arrangement different from the ordinary course of the transaction contemplated in the agreement of 29th May 1889, and the making and carrying out of that arrangement seem to me to constitute circumstances sufficient to raise an implied promise to pay a commensurate remuneration, notwithstanding the non-performance of the special contract.

“But the defenders contended that they had not been benefited at all by work done on their employment by the pursuer. What they aver upon record is that they are not lucrati by receipt of the £5000, because they have suffered loss to a greater amount by the disturbance and interruption to their business caused by the attempt to sell the brewery. Of course, in the absence of proof, I must assume that statement to be true. But it does not at all follow that the defenders have not been benefited by the pursuer's services in the sense of the rule of law to which I have referred. Loss through disturbance and interruption of business was, I imagine, a necessary incident of the brewery being offered for sale, and would have been equally incurred if the negotiations with Beal had been broken off before the final contract was signed, or if a sale had been made to a person who turned out to be unable either to pay the price or damages. Therefore the result of the pursuer's services having been, that, although the defenders have not obtained the stipulated price, they still retain the brewery, and have put £5000 into their pocket, these services have in my judgment been beneficial to them.

I am therefore of opinion that in the circumstances Mr Menzies is entitled to a reasonable remuneration for his services.”

The defenders reclaimed, and argued— The pursuer here was not a commission agent, but a law-agent who had made an express contract with them. If the price stipulated for, viz., £32,000 was “obtained,” then 1 1 2 per cent. commission was to be paid; if not obtained the pursuer was to have no claim. That was the plain mean ing of the contract, and £32,000 not having been obtained no commission was due. The pursuer was entitled to commission or nothing. There was no room for any question of quantum meruit. No minor contract such as remuneration for services could be spelt out of this definite and explicit contract — Bull v. Price, 1831, 7 Bing. 237; Peacock v. Freeman, May 12, 1888, 4 Times Law Rep. 541; Martin v. Tucker, July 27, 1885, 1 Times Law Rep. 655; Barnett v. Isaacson, June 24, 1888, 4 Times Law Rep. 645; and cases collected in Evans on Commission-Agents, pp. 2–25; see also Smith's Leading Cases, p. 35; Munro v. Butt, 1858, 8 Ellis & Blackburn, 738; Read v. Rann, 1830, 10 Barn & Cress. 438.

Argued for the pursuers — When Mr Menzies, with the approval of the defenders, entered into the agreement with Mr Beal the sale was complete and the commission bargained for was earned. The pursuer could not be affected by the subsequent actings of the purchaser, or by any subsequent arrangement he might make with the sellers. Had no subsequent agreement been entered into, and had the purchaser refused to implement his contract, the commission paid to the pursuer would have been a part of the damage for which Beal might have been sued— Horford v. Wilson, 1807, 1 Taunton, 12; Lockwood v. Levick, 1860, 29 L.J.C.P. 340; Petrie v. Earl of Airlie, 1834, 13 Sh. 68. In any case the defenders were lucrati to the extent of

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£5000, and the pursuer was entitled to remuneration quantum meruit—Kennedy v. Glass, July 3, 1890, 17 R. 1085; Prickett v. Badger, 1856, 26 LJCP 33, and 1 CBNS 296.

At advising—