Agreements between friends should be recorded in writing to ensure they are enforceable.
The High Court has had to decide whether very substantial commission in relation to a sale of a hotel was payable pursuant to an alleged oral agreement between the parties.
On 22 December 2004, the Monte Carlo Grand Hotel was sold for 215 million euros. The vendor was a Monaco company whose majority shareholder is Toufic Aboukhater, a very wealthy businessman who used to own the Dorchester Hotel. Mr Aboualsaud, the Claimant, claimed commission of 21.5 million euros on the basis he had reached an agreement with the Defendants, Toufic and Bassam Aboukhater, that they would pay him 10% of the sale proceeds if he introduced a purchaser.
The Claimant is a financial adviser and manager and acts as financial adviser to Kuwait Pertroleum Corporation and to the Kuwait Ministry of Energy. He was friendly with Bassam Aboukhater, Toufic’s son, and he told Bassam in 2002 that he thought he could introduce a purchaser for the Hotel. He claimed that Bassam agreed upon behalf of his father that the Claimant would receive commission on a sliding scale rising to 10% of the proceeds if the sale price exceeded $200 million.
Unfortunately for the Claimant, he had no written commission agreement with the Defendants and no notes, e-mails or any other documentary evidence to support his claim that an enforceable agreement had been entered into. Although the Claimant had numerous dealings with the Defendants in relation to seeking to bring about a sale of the Hotel, the Defendants claimed that he was simply acting as a friend and there was no binding legal agreement and that he had not brought about the sale anyway.
In order to try to gain evidence to support his case, the Claimant arranged for a third party to call Bassam in early 2005 to seek an admission of the existence of the commission agreement. This call was recorded without Bassam’s knowledge and used in evidence to support the Claimant’s case.
Very detailed evidence was given as to the background to the matter and the parties discussions. It was the Claimant’s case that no formal agreement was entered into because of the relationship of the parties and the fact that any such arrangement may have to be disclosed to the purchaser and could reduce the price payable for the Hotel. However, the Defendants contended they would always document any enforceable agreement and they had actually concluded a written agreement in October 2004 with the agent who was instrumental in negotiating the actual sale whereby he was entitled to receive £10 million on the sale proceeding.
Although the Judge accepted that the transcript of the recorded conversation indicated some agreement had been reached, he held that it did not make it clear what the terms of that agreement were and whether it involved any more than Bassam accepting that he would recommend to his father that something would be paid in recognition of the Claimant’s efforts.
It was the lack of any supporting documentation that appears to have most influenced the judge in rejecting the claim that there was any binding agreement. He held that the need for businessmen to record in writing an agreement involving substantial sums was obvious. There was not even any note or memorandum of any agreement and no reference to it in any correspondence. Accordingly, the Judge held that there was nothing more than an understanding between the parties that a suitable sum was likely to be recommended to be paid to the Claimant if his introduction of a purchaser was successful.
In any event, the Judge held that the Claimant was not responsible for introducing the eventual purchaser. Whilst the purchaser was a consortium which included the company that the Claimant had introduced, the purchase had not proceeded as a result of the Claimant’s initial introduction and the Judge stressed that any agent has normally to be an effective cause of the transaction to be entitled to any commission.