The Facts

Vendor signs non-exclusive agency agreements with real estate agents to sell property

Two property sellers owned a 55-acre property containing a macadamia plantation in the hinterland of Byron Bay.

In November 2012, they signed an agency agreement appointing Agent 2 to sell their property. This agreement provided for an exclusive agency period from November 2012 to May 2013 and for a non-exclusive period thereafter.

In August 2015, the sellers also entered into a non-exclusive agency agreement with Agent 1 to sell their property.

The agency agreements provided for the sale price of the property to be "$5 million plus" or responsive to "offers over $5 million".

Agent 1 shows property to Ms W

On 4 December 2017, Ms W contacted Agent 1, expressing an interest in buying an income-producing property.

Agent 1 had several discussions with her about the property, arranged an inspection and provided substantial information.

Sale agreement reached but sellers withdraw

On 21 December 2017, Ms W made an offer of $4.5 million to buy the property.

Negotiations ensued and the sellers and Ms W verbally agreed to a sale at $4.7 million.

On 27 December 2017, prior to the exchange of contracts, Agent 1 forwarded to Ms W an email he had received from the sellers, withdrawing their acceptance of Ms W's offer.

Ms W was shocked by this news.

Agent 1 goes on holiday and Ms W unsuccessfully tries to contact him

Agent 1 also advised Ms W that he could not contact the sellers and that he was leaving on an overseas holiday that afternoon.

He reassured Ms W that he would be available via email and was also leaving his mobile phone with one of his staff, so he would be contactable at any time.

Later that day, Ms W rang Agent 1's mobile in an attempt to "try and understand if there is a way forward here". Agent 1's secretary answered and offered Ms W an appointment in a few weeks' time upon his return. Ms W declined this suggestion as unhelpful.

Ms W contacts Agent 2, who contacts sellers on buyer's behalf

Ms W decided to look at other properties and contacted Agent 2 to enquire about the market.

When Agent 2 asked Ms W if there were any properties she had already seen and liked, Ms W mentioned the property with the macadamia plantation she had been shown by Agent 1.

Agent 2 then contacted the sellers on Ms W's behalf and was advised that they would not accept less than $5 million for the property.

Ms W buys property and Agent 2 receives sales commission

On 29 December 2017, Ms W confirmed that she was prepared to pay $5 million for the property, plus $125,000.00 for the assignment of the management contracts for the macadamia farm and the sale of other machinery.

The sellers accepted this offer and contracts were exchanged on 11 January 2018.

Settlement took place on 15 March 2018 and a sales commission of $108,086 was payable to Agent 2.

Agent 1 sues sellers for sales commission

Agent 1 was aggrieved at not receiving the sales commission and sued in the District Court to recover the commission under the terms of the agency agreement.

The primary judge rejected Agent 1's claim and Agent 1 appealed to the NSW Court of Appeal.

case a - The case for Agent 1

case b - The case for the sellers

  • The agency agreement entitles me to be paid a commission on the sale of the property if I was the effective cause of the sale, which I was.
  • In selling a unique property such as this, laying the foundation for the sale is a huge part of the sales process. I not only introduced Ms W to the property, but I also provided all the information necessary to make an informed decision about the function of the macadamia farm and subsequent purchase. I provided soil test results, a list of equipment included in the sale, a rate notice, a map of the property, grower summary reports, details of the irrigation licence, particulars of the extensions made to the property and the relevant farm management agreement.
  • I also handled most of the negotiations between Ms W and the sellers, including an offer, a counter-offer, a second counter-offer and acceptance. The acceptance was withdrawn through no fault of mine.
  • The only thing that Agent 2 did was to clarify the sellers' position in relation to the price, a step that was not especially difficult and was a relatively small contribution to securing the sale.
  • Although I went on holiday, as all workers are entitled to, I was still involved in the transaction and would have clarified the sellers' position myself if given the opportunity. My secretary suggested to Ms W via telephone that she could arrange a meeting when I returned from holiday, but Ms W knew that I was contactable via email and could have easily contacted me that way.
  • Even though Ms W chose to go to another agent instead, the work that I did up to that point would have continued to influence her in her decision to buy the property.
  • Given that I did most of the work, that I would have finalised the sale if given the opportunity, and that the work I did played a significant causal role in Ms W's purchase of the property, I was the "effective cause of sale" and the court should order the sellers to pay my commission.
  • Agent 1 was not the "effective cause of the sale" and so is not entitled to be paid a commission under the agency agreement.
  • Our initial aim was to attain a selling price of $5.5 million, and we were always very clear with both Agent 1 and Agent 2 that we would never accept less than $5 million for the property. After Ms W inspected the property with Agent 1, we even sent Agent 1 a message that said: "[s]eriously, if there is no 5 in the offer, including crop at $125K and ALL machinery, it won't fly".
  • We ultimately didn't go through with the sale to Ms W for $4.7 million because the offer price was too low. In fact, after withdrawing our acceptance, we resolved to take the property off the market. We only reconsidered this when Agent 2 contacted us.
  • After the initial deal fell through, Ms W also thought the sale opportunity was over. As she explained, she did not know what our true bottom line was and she no longer trusted us. Because she could not get clarification from Agent 1, she had resigned herself to looking at other properties.
  • It was only through Agent 2's intervention that Ms W learnt what our true price expectations were and was reassured that we were genuine sellers. Likewise, Agent 2 is the one who negotiated a sale price which we were prepared to accept in order to part with the property.
  • Since Agent 1 did not bring about the state of affairs resulting in the sale, no contractual right to receive commission arose and the court must reject Agent 1's appeal.

So, which case won?

Cast your judgment below to find out

Nathan Stack
Selling your home
Stacks Law Firm

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