Kulara v Holland[2008] QDC 294

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   On 2 May 2008 judgment was given in the Magistrates Court, Cairns in favour of the respondent against the appellant for real estate agent’s commission in the sum of $26,345.  The appellant argues that the Magistrate erred in concluding that the respondent was entitled to his commission.

Facts

2. [2]
   There was little dispute about the facts in this case. The appellant was the owner of Kulara Farm which is an 11.83 hectare avocado orchard at Yungaburra on the Atherton Tablelands. In 2006 the appellant it was endeavouring to sell Kulara Farm. The respondent is a licensed real estate agent.

3. [3]
   The following is a relevant chronology:-

• 13 Jul 2006 - The appellant appoints the respondent as agent to sell the property.
• 5 Oct 2006 – The purchaser inspects the property with the respondent.
• 11-18 Oct 2006 – First contract signed for $950,000.
• 6 Nov 2006 – Purchaser terminates first contract.
• 17 Nov 2006 – The appellant appoints a second real estate agent and a second contract with the purchaser is signed for $940,000.
• 19 Dec 2006 – Second contract settles.

4. [4]
   The purchaser named on both contracts of sale is Melissa Jayne Nott, although essentially she and her husband were acting together in inspecting the property negotiating conditions of purchase and deciding to buy it. Tragically, Mr Nott died prior to the hearing of the claim in the Magistrates Court.

5. [5]
   The respondent gave evidence on his own behalf at the hearing and Mrs Nott and an auctioneer, Mr Ford, gave evidence for the appellant. There was no evidence from anyone representing the appellant or from the second real estate agent.

6. [6]
   It was Mrs Nott’s evidence that she and her husband purchased a number of properties for investment throughout their marriage and that the purchase of the properties would be a joint decision as was the case with respect to Kulara Farm even though it was purchased in Mrs Nott’s name alone.

7. [7]
   Mrs Nott said that the property first came to their attention when they observed an advertisement for an auction sale of the farm machinery and other items in the Tablelander newspaper whilst holidaying on the Atherton Tablelands. This led to Mr and Mrs Nott considering that the property was possibly for sale. At this time Mr and Mrs Nott went with a friend who lived close to the property for a drive around Kulara Farm. They thought it was “a very beautiful property” and Mrs Nott particularly was “passionate” about it.

8. [8]
   Mr Nott contacted the auctioneer, Mr Ford, and it was confirmed that Kulara Farm was for sale. Arrangements were made for Mr and Mrs Nott to inspect the property and for that purpose Mr and Mrs Nott flew from Cairns to Atherton.  At the airport they were met by the respondent and, accompanied by the respondent, Mr and Mrs Nott spent approximately 1 ½-2 ½  hours inspecting the property.  Mr Ford was also present.

9. [9]
   During the inspection it was Mrs Nott’s evidence that the respondent made a comment to which Mr Nott took “significant” offence.

10. [10]
    The first contract drawn up by the respondent and signed by Mrs Nott was subject to finance and it was terminated when the bank valuation was for an amount significantly less than the purchase price. Subsequent negotiations led to a reduction in the purchase price. It was Mrs Nott’s evidence that her husband was offended by the comments made by the respondent to him particularly regarding the value of the property, and as a result there was “no way in the world my husband was going to purchase the property through Rick Holland”.

11. [11]
    On 17 November 2006 Mrs Nott signed a contract to purchase Kulara Farm for $940,000 through Robert Smith Australian Real Estate Co, another licensed agent. On the same date the appellant signed a document appointing Robert Smith Australian Real Estate Co Pty Ltd agent for the sale of Kulara Farm. The second contract was unconditional regarding finance with settlement 21 days from acceptance. Settlement took place on 19 December 2006.

12. [12]
    The Appointment of Real Estate Agent appointing the respondent as agent for the sale of Kulara Farm was in the standard Form 22a under the Property Agents and Motor Vehicles Dealers Act 2000.  The respondent was appointed on the basis of an Open Listing and pursuant to the agreement was entitled to commission if a contract of sale of Kulara Farm was entered into with a buyer and completed and the respondent was the “effective cause” of the sale. 

Parties’ arguments

13. [13]
    The respondent argued that he was the effective cause of the sale of Kulara Farm pursuant to the second contract because he introduced the purchaser to the appellant and showed the property to the purchaser. The argument is that the first contract evolved into the second contract and therefore the respondent was the effective cause of the completion of the second contract.

14. [14]
    The appellant argues that Mrs Nott was not introduced to the property by the respondent, in fact she and her husband had independently learnt it was for sale and had independently looked at it. In any event, the relationship between Mr and Mrs Nott and the respondent deteriorated to such an extent that the respondent in fact became an impediment to the sale. It was only with the introduction of a second agent that the sale could be effected. This meant that the chain of causation was broken and the respondent was not the effective cause of the sale.

The law

15. [15]
    Cases involving claims by agents for commission upon the sale of property have regularly come before the courts. The determination of such cases depends usually on the interpretation of the terms of the appointment of the agent. Such agreements often provided that commission was payable upon the introduction by the agent of a person willing and able to purchase the property either to the property or to the vendor.

16. [16]
    In L J Hooker Ltd v W J Adams Estates Pty Ltd [1976-1977] 138 CLR 52 Barwick CJ at pages 58-59 said:-

“The most common way of performing the agent’s task is to introduce to the principal a person who becomes the purchaser under a binding contract of sale.  In terms of causation, the agent has thus been an effective cause of the sale.  It is nothing to the point in such a case that the person would have become the purchaser without the intervention of the agent: or that the principal’s own efforts were also an effective cause of the sale. 

Another not unusual manner in which the agent may be entitled to his commission is the introduction to the property of the person who ultimately becomes the purchaser.  That introduction can be regarded as an effective cause of the sale, though the principal may not be aware when selling to that person that he has been introduced to the property as a purchaser by the agent.  Again, the circumstance that the principal’s own efforts effectively contributed to the resulting sale will not preclude the conclusion that the agent’s introduction of the purchaser to the property was an effective cause of the sale.”

17. [17]
    In this case the agent is entitled to commission if he is the “effective cause of the sale”. The term “effective cause” has been considered by the courts on a number of occasions. In Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] 202 CLR 351 Gummow J said at para [82] that:-

“…it is not enough that the engagement of the agent to find a purchaser or to introduce a purchaser was a step without the taking of which the sale would not have been effected.  Something more immediate is required if the criterion of contractual liability is to be satisfied.”

And at paragraph [86]:

“…the essential issue is whether the agent brought about a state of affairs giving rise to the contractual right to the commission.”

18. [18]
    In Moneywood, as here, an initial contract (which appointed the agent as the vendor’s agent) to purchase land by a developer did not complete, in that case because the local council notified the vendor that it might acquire part of the land.  A new contract of sale was entered into between the vendor and the developer for the original land less that sold to the council. The agent was not named on the second contract.  At paragraph 13 Gleeson CJ said:-

“The question is approached upon the basis of findings that there was an appointment of the appellant as the respondent’s agent, that the appointment was evidenced in writing in the first contract, and that there was a relationship between the agency, the first contract, and the second contract, of such a kind that it was proper to conclude that the work done by the appellant in its capacity as the respondent’s agent was an effective cause of the sale the subject of the second contract.  That does not resolve the issue, but it is a significant first step for the appellant.”

19. [19]
    In Bradley v Adams [1989] 1 QdR 256 Thomas J at p 263-264 said:

“The real issue in this case is whether the agent was the “effective cause” of the transaction that in fact occurred, as those words have come to be interpreted (L.J. Hooker Ltd v W.J. Adams Estates Pty Ltd (1977) 138 CLR 52).  Of course the mere fact that the vendor and purchaser vary the terms or even the structure of an original contract that results from an agent’s introduction will not necessarily be fatal to the agent’s claim for commission.”

He went on to say:-

“However, it is really a question of fact in each case whether the agent’s introduction (and where appropriate, other activity) is the effective cause of the sale.

…

However when further negotiations ensue and a different mechanism of sale or a variation of terms other than the price ensue, it must be a factual exercise from case to case to decide whether the agent’s work was the effective cause.”

The Magistrate’s decision

20. [20]
    In his decision the Magistrate posited that the questions to be asked with respect to a claim by a real estate agent for commission are –

“1.What is the event that gives the agent a right to commission; and

2.Was the transaction a result of the agency?”

The Magistrate referred in this regard to similar questions posed in the judgment of Gibbs J in L J Hooker v Adams Estates.

21. [21]
    The Magistrate noted that whether an agent was an effective cause of the transaction is an issue to be determined on the facts. The Magistrate referred to the relevant authorities and it is not contended by the appellant that he incorrectly stated the law.

22. [22]
    The Magistrate found that on the basis that the appellant signed the first contract of sale naming the respondent as agent; the respondent showed Mr and Mrs Nott the property during the inspection; the appellant “acquiesced” in the respondent attending at Mrs Nott’s solicitors to negotiate the terms of the contract; the respondent continued to liaise with Mrs Nott whilst the first contract was in place and afterwards; that therefore so far as the first contract was concerned, the respondent had introduced Mrs Nott to the property. He noted that in the normal course, if that sale had proceeded, the respondent would have been entitled to commission. He had introduced Mrs Nott to Kulara Farm and was the effective cause leading to the first contract of sale.

23. [23]
    With respect to the second contract, the Magistrate noted that the introduction had already taken place and there was no evidence before him as to what contribution the second agent made in the negotiations leading up to the signing of the second contract.

24. [24]
    So far as the deterioration of the relationship between the respondent and Mr and Mrs Nott is concerned, the Magistrate noted that the respondent described the relationship as cordial and that this assertion could not be directly contradicted because of Mr Nott’s untimely death. The Magistrate noted that there was only a very short period of time between the termination of the first contract on 6 November 2006 and the date of the second contract, 17 November 2006, and that the evidence was that from the first time Mr and Mrs Nott saw Kulara Farm, they liked the property and wanted to acquire it. The Magistrate found that “approaching another agent and dealing through that agent was to circumvent dealing with the [respondent]”.

25. [25]
    The Magistrate was satisfied that there was no substantial change in the terms of the two contracts of sale and described any differences as “marginal”. His Honour came to the conclusion that the respondent, having introduced Mrs Nott to Kulara Farm, was the effective cause of the second contract being signed and that it was simply the unwillingness of Mr and Mrs Nott to use the services of the respondent that led to the involvement of another agent. The appointment of the respondent as agent for the sale of Kulara Farm had not been terminated. The Magistrate found that the respondent was entitled to commission on the sale.

Conclusion

26. [26]
    The application of the law to a particular set of facts does involve, to some degree, a subjective assessment by the judicial officer concerned. In this case it was more than reasonably open on the evidence to find that the respondent introduced the purchaser to the property and the purchaser to the appellant and that the respondent was instrumental in the signing of the first contract. It was also reasonably open to find that the second contract was not substantially different in its terms to the first. There was very little evidence before the Magistrate as to the involvement of the second agent in the signing of and settlement of the second contract. At the end of the day, on the basis of the facts before the Magistrate, the attitude of Mr and Mrs Nott towards the respondent cannot have been relevant to the determination of the issues. The finding of fact that the respondent was the effective cause of the sale pursuant to the second contract was clearly open on the evidence before the Magistrate and this appeal should be dismissed.

Order

27. [27]
    I order that the appeal be dismissed.