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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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
