Sandale Pty Ltd v Costello[2004] QDC 442

CIVIL JURISDICTION

JUDGE McGILL SC

and

BRISBANE

..DATE 05/10/2004

JUDGMENT

HIS HONOUR: This is an appeal from a decision of a Magistrate who on the 11th May 2004 dismissed the appellant's claim against the respondent.

In this matter, I have the benefit of detailed and comprehensive outlines of argument which were filed in the Court in accordance with the practice direction, and also the benefit of carefully expressed reasons for judgment by the Magistrate concerned, and so I had the opportunity to consider the matter to some extent before coming into Court. In those circumstances, I think I can deal with the matter without further consideration.

The respondent engaged the appellant by a contract in writing to sell the respondent's house. The appellant is a real estate agent and the contract was in the Property Agents and Motor Dealers Act Form 22(a).

It appears that under that contract the entitlement to commission arose if “the agent sells”, this being an open listing as distinct from a sole agency or exclusive agency.

The respondent had previously listed the property with a different agent on an exclusive agency agreement at a particular price, but that agent had not secured a purchaser at the price and that agreement had expired. There was subsequently the open agency agreement entered into.

During the period of the exclusive agency agreement, there was an introduction to the property effected by the other agent of the person who became the ultimate purchaser, but negotiations through that agent at that time did not result in an agreement and the matter was left.

The appellant subsequently put up a for sale sign on the property and did some other things, but relevantly the for sale sign attracted the attention of the ultimate purchaser who again made contact, this time with the appellant, and there were some further negotiations between the parties.

The negotiations proceeded to the point where the ultimate purchaser had made an offer to purchase the property for $398,000 and that was as high as that purchaser was willing to go.

The Magistrate found that that purchaser had made it known to the appellant that that amount of $398,000 was the final offer and there is no reason to doubt that finding.

The respondent was not prepared to sign a contract at that figure. The respondent had made an earlier offer to sell at $412,000, which had been rejected when that offer to sell at $398,000 was made. The respondent told the appellant in response to the offer of $398,000 that $412,000 was an absolute minimum selling price and she would be willing to offer $410,000 if the appellant was prepared to take $10,000 as the total commission.

The effect of a sale on the basis of the commission rates agreed in the retainer, which are the usual commission rates, on a sale of $398,000 the appellant was entitled to $11,440 commission, so presumably at a sale of $412,000, the appellant was entitled to a bit more, but the respondent would have received just over $400,000. The respondent was willing to reduce the price so long as she received net $400,000.

That however was as far as matters went between the parties at that stage. A contract was not effected, and the parties on the face of it were still some distance apart.

The respondent was also advertising the property for sale privately in The Courier Mail, including the following day. The ultimate purchaser happened to see the advertisement and made contact with the respondent directly. In the course of that contact, the name of the first agent, the original agent came up as an agent who was still retained by the respondent, but on the same open agency basis, the same as the basis of the retainer of the appellant. It was an open listing basis, the same as the basis of the retainer of the appellant.

There were then some further negotiations between the ultimate purchaser and the respondent through that agent as a result of which the property was sold for $398,000, on the basis that that agent agreed to reduce his commission on the sale to $3000. That is in my experience an unusual course for a real estate agent to take, although no doubt the agent was prepared to accept the reality that some commission is better than none.

The practical effect of it, though, is that the respondent received $8440 more than if she had accepted the offer proffered by the ultimate purchaser through the appellant on the previous Friday. Evidently that extra $8440 was enough to make her willing to sign.

For practical purposes, therefore, the difference that the second agent made was that he persuaded the respondent to accept $5000 less than the amount that she had previously stated to the appellant she would accept, and achieved for her an extra $8440 by accepting a reduction in his commission.

The appellant claims that nevertheless it was entitled to commission on the basis that the property had been sold to someone who was relevantly introduced by it and that it was its acts which caused that contract to come into existence.

The situation was referred to by Gibbs J, as his Honour then was, in L J Hooker Ltd v. W J Adams Estates Pty Ltd, 1977 138 CLR 52 at page 66 to 67. For present purposes, it is sufficient to cite the passage on page 67, which is in these terms:

More recently, there has been some discussion in the High Court in the matter of Moneywood Pty Ltd v. Salamon Nominees Pty Ltd (2001) 202 CLR 351, a case which did not focus on this question of causation, but various Judges did refer to it in the course of their judgments. I think it is sufficient to quote the passage from the judgment of Justice Gummow at page 377 where his Honour said:

The Magistrate in the present case found that that had not occurred. The matter was approached by reference to the terminology of the effective cause, whether the appellant was the effective cause of the sale and that is a term which has been frequently used and is, I think, appropriate to describe the situation contemplated in the passages which I have just quoted. It does seem to me that it was applied in the sense required by the High Court by the Magistrate in the present case.

The Magistrate therefore defined the issue as whether the plaintiff company was the effective cause of the sale, and concluded that the plaintiff company was not, that there was in effect an impasse between the respondent and the ultimate purchaser as to price, and that impasse was overcome only by the action of the other agent, and but for the willingness of that other agent to reduce his commission, there would have been no sale of the property as between the ultimate purchaser and the respondent. That was the ultimate finding of the Magistrate.

It seems to me that that analysis of what occurred was clearly open to the Magistrate, and indeed, with respect, seems to me to have been the correct one. For practical purposes as the appellant left the situation, the parties were still too far apart, the respondent was not willing to accept $398,000 as the purchase price and the ultimate purchaser was not willing to pay more.

The respondent was persuaded to accept $398,000 as the ultimate purchase price only by the other agent and only by a process which involved the other agent making a substantial reduction in the amount of commission.

In those circumstances, it was in effect the equivalent of the other agent persuading the ultimate purchaser to increase the offer by $8440. If that had been the situation, I do not think it could have been seriously suggested that the appellant had been the effective cause of the contract that was ultimately entered into.

The situation, I think, is relevantly similar to, though perhaps not as clear a case as, the Full Court decisions in Rasmussen and Russo Pty Ltd v. Gariglio [1982] QdR 571 and Bradley v. Adams [1989] 1 QdR 256, particularly a passage in the judgment of Justice Thomas in the latter case at page 264 which was referred to.

The facts in that case were somewhat different, particularly the changes that were brought about, or which were made at the instance of the second agent, which made the difference between a contract which did not proceed and one which did were a good deal more substantial than the changes here. But ultimately, it may be that there is only a fairly small change necessary which makes the difference in a practical sense between a deal and no deal, but that is the crucial issue in relation to the entitlement to commission on the basis laid down in the passages in the High Court.

The agent's entitlement to commission depends on whether the agent sells under the contract, and that means the essential issue is whether the agent brought about that state of affairs, brought about that sale which gave rise to the contractual right of the commission. That is essentially a question of fact. The Magistrate, I think, properly found in the present case that the appellant did not bring about that state of affairs, but rather the state of affairs was brought about by the other agent.

I do not think it matters in the present circumstances that the contract that was ultimately signed was as between the parties to that contract in the same terms as an offer which had earlier been procured from that purchaser by the appellant. The important difference between that offer and the contract that was ultimately signed from the point of view of the respondent was that the contract that was ultimately signed yielded $8440 more for her, and that was enough to make the difference and persuade her to sign. That was achieved in the practical sense by the second agent's agreement to reduce his commission.

It was submitted on behalf of the appellant that that was an irrelevant consideration. Reference was made to a passage from the judgment of one of the Judges in Timms v. Carafano (1989) 53 SASR 572 at page 581. That was from a judgment of Matheson J, who was a dissenting Judge in that case and in circumstances where the case actually turned on particular terms of a contract of retainer, which it seems to me did not require that the sale be one of which the agent was the effective cause.

His Honour there was really considering the question of whether the transaction which was ultimately completed was substantially the same transaction as an earlier contract which had been brought about by the agent.

The comment that the amount of commission is not a relevant consideration on page 581 is really, I think, directed to the particular factual situation in that case, and does not amount to a proposition that the amount of the commission is never a relevant consideration. His Honour was simply saying that he did not think it made a relevant difference in the circumstances in that case when considering the issue his Honour had to decide.

The issue that I have to decide and the Magistrate had to decide is somewhat different and I think that the agreement between the respondent and the second agent to accept a lower commission was a relevant consideration, because it was factually what brought about the contract that was ultimately signed. It is in that sense more like the fact that in Rasmussen v. Russo, the second agent was able to arrange finance for the purchaser, something without which the purchaser could not purchase and as a result the purchaser had not completed the contract arranged by the first agent.

So it seems to me that the Magistrate was entitled to decide and properly decided that the appellant was not entitled to commission in the circumstances of this case. If I might add only that I otherwise agree with the helpful and clear reasons of the Magistrate.

I should say one more thing, that the further submission was made that it was sufficient to show that the actions of the appellant were an effective cause rather than the effective cause. As noted by Justice Kirby in Moneywood, the authorities have not always spoken with the same voice in relation to whether the definite or indefinite article is used in that context. But as his Honour pointed out, the ultimate test does not really turn on whether the definite or indefinite article is used, and his Honour adopted a formulation which was similar to the formulation of Gummow J which I have quoted earlier. His Honour's formulation is at page 388. I do not think that these amount to any real departure from the leading authority in the judgment of Justice Gibbs which I quoted earlier. That is certainly the test that I am applying, and applying that test, I think the appellant has failed to make out its case.

The appeal is accordingly dismissed with costs.

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