Farmcrest Pty Ltd v Jager[2013] QDC 290

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   The appellant is a real estate agency. The respondent was the owner of a residence in Oriel Road, Clayfield. On about 14 December 2009 the respondent executed a Form 22A pursuant to the Property Agents and Motor Dealers Act 2000 (“PAMDA”) appointing the appellant to an exclusive agency for the sale of the property for the period up to 11 February 2010. This period of appointment was later extended to 28 March 2010 by execution of a Form 23 pursuant to the provisions of PAMDA. This appeal is from a decision of the Magistrates Court rejecting a claim by the appellant for commission for the sale of the residential property. In the proceedings below there was also a dispute as to the issue of non-compliance with ss 134A and 135 of PAMDA. That issue was the subject of a notice of contention by the respondent to the appeal.

Background

2. [2]
   Francesco Masinello knew the respondent and her family well. He was the listing agent for the appellant. It was he who arranged for the respondent to execute the Form 22A appointment and who was the central figure in arranging for Susan Sherlock and David Reid to view the property on a number of occasions from late January 2010.

3. [3]
   Ultimately on 16 March 2010 Mr Reid as purchaser and the respondent signed a contract for the sale of the property. The contract was subject to:

1. (i)
   Finance;

2. (ii)
   Building and pest inspections;

3. (iii)
   The sale of Mr Reid and Ms Sherlock’s home in Tasmania.

4. [4]
   Subsequently the parties’ solicitors drew up a second contract of 18 March 2010 to overcome a number of difficulties in the initial contract. The essential terms and conditions of the contract were however largely the same.

5. [5]
   That contract was terminated by Mr Reid on 31 March 2010 on the basis of his dissatisfaction with the building and pest reports. In particular he relied on the absence of a pool fence and of termite traps. It seems that the respondent made it clear at that time that she did not intend to erect a pool fence or to do the suggested termite treatment.

6. [6]
   Subsequently the respondent entered into a contract for the sale of the property to Ms Sherlock and Mr Reid on 6 August 2010. The contract was in many ways similar to the earlier contract but was also different in a number of respects. I shall refer to those similarities and differences in due course. Before doing so it is useful to consider the manner in which that contract came about.

7. [7]
   After the termination of the contract of 18 March 2010 on 31 March, Mr Masinello and the appellant had no further involvement in the sale of the property. No other persons were shown the property by the appellant and they had no further relevant contact with Mr Reid or Ms Sherlock or with the respondent or her husband.

8. [8]
   The respondent said that after the termination of the contract by Mr Reid she engaged another real estate agent, Harcourts at Ascot, as agent. Nevertheless in June 2010 Ms Sherlock dropped a letter dated 12 June 2010 into the respondent’s letterbox. It became Exhibit 8 at the trial. It was in the following terms:

“62 Oriel Road

12/6/2010

Dear owner,

I would like to discuss purchase of your home and suggest a way forward that may make the sale easier for you. We are the couple from Hobart who made an offer some months ago. We are still very interested and we are now in a position to go unconditional as we have sold our home in Hobart.

We do not think that you need to engage your current agent and are not sure whether you are still contracted to Ray White’s, which may save you some money, but we’ll leave that to you. Please ring me to discuss further.

Susannah Sherlock

0418 510 347

[email protected]”

9. [9]
   The letter was unexpected. There was no suggestion that the termination of the March contract, and subsequent entering into of a new contract was a contrivance designed to deprive the appellant of its entitlement to commission. It was not suggested the respondent after 31 March 2010 did not genuinely wish to have nothing more to do with Ms Sherlock and Mr Reid.

10. [10]
    After receiving the letter, the respondent’s husband, Lance Jager, contacted Ms Sherlock and thereafter conducted negotiations on his wife’s behalf. Ms Sherlock again inspected the house a number of times. Mr Jager said in evidence he was not prepared for his wife to enter into another contract with Mr Reid and Ms Sherlock that was subject to finance or building or pest inspections or subject to the sale of their own home. He said that he therefore sat down with Ms Sherlock and worked through those issues so that they did not present a problem.

11. [11]
    A new contract entered into on 6 August 2010 provided for a deposit of $100,000 (compared to $50,000 in the March 2010 contracts) but as the Magistrate found, “the condition that the defendant be entitled to the deposit for her own use before settlement meant if he (sic) went and put up a pool fence and spent money doing other bits and pieces if the contract fell over, he (sic) would be compensated for it”. Other special conditions of the August contract related to Council approvals. Apparently an old garage in the property had been turned into a guesthouse without Council approval. The respondent was required by the August contract to get such approval retrospectively, at significant cost.

12. [12]
    The August contract originally provided for a settlement date of 31 January 2011 which was, Mr Jager said in evidence, the expected date of settlement of Mr Reid and Ms Sherlock’s home in Tasmania. Whether that was so was not established but in any case the purchasers, pursuant to a term of the contract, subsequently brought settlement forward to 22 October 2010.

13. [13]
    The Magistrate determined that the appellant was not entitled to commission pursuant to cl 7.3 of the schedule to the contract of appointment on 14 December 2009 because Mr Reid and Ms Sherlock were not “effectively introduced to the property by the agent during the agency”.

14. [14]
    In further and better particulars of the allegation the purchasers were not so introduced, the respondent pleaded:

1. That the purchasers were not when introduced then “ready, willing and able to complete the purchase because they terminated the contract not being satisfied with building and pest inspections” and/or;

2. Were not the same persons as the ultimate purchasers; and/or

3. The August 2010 contract was a result of negotiations undertaken directly between the respondent and the purchasers independently of and without the assistance, input or effort of the appellant three and a-half months after the agency terminated and was on terms and conditions materially and fundamentally different from the 18 March 2010 contract.

Judgment Below

15. [15]
    The learned Magistrate determined that the term “effectively introduced” must relate to “entering into an enforceable contract” so that the introduction “must be as ‘effective’ after the agency had concluded as it would have been before it concluded in that it results in the making of an enforceable contract” (see judgment p 7, last paragraph). His Honour concluded that he was satisfied the appellant introduced both Mr Reid and Ms Sherlock to the property during the period of the agency but that the appellant was unable to establish a causal connection between that introduction and the contract of 6 August 2010 and consequent sale.

16. [16]
    In coming to this conclusion his Honour enumerated a number of factors which he said were of relevance to his conclusion. They were:

1. When introduced Mr Reid was not “ready, willing and able to purchase the property”. The appellant’s agent, Mr Masinello, was not able to negotiate a way around that impasse.

2. There was a relatively substantial period of time, (which I calculate at 128 days) between the end of the period of appointment and the date of the contract of August 2010.

3. The plaintiff did not play any part or have any involvement in the subsequent negotiations which led to the formation of that contract. In effect it was the defendant who introduced the property to the purchasers the second time. The only tangible evidence touching the matter of the purchasers’ state of mind, apart from the signature on the contract, was Ms Sherlock’s letter (which I have earlier set out). The Magistrate accepted the evidence of Mr and Mrs Jager surrounding the negotiations and the formation of the contract of 6 August 2010.

4. The contract of 6 August 2010 was more precise and comprehensive in its special conditions than the earlier contract of 18 March. In particular it required the defendant to produce to the buyer on or before completion evidence from the local Council, in writing, that the guesthouse work had been approved or constructed in accordance with approvals. By contrast the contract of 18 March had no such requirement.

5. The deposit required by the contract of 6 March was $100,000, compared to $50,000 for the contract of 18 March and provided for the respondent to have the deposit for her own use after the building approvals had been produced. The contract also required the defendant to erect a pool fence which complied with appropriate regulations and at her own cost on or before completion. The contract of 18 March had no such requirement.

6. The respondent was required by the later contract to cause termite baiting treatment to be carried out and to provide written evidence to the buyers on completion that that had been done. There was no similar provision in the contract of 18 March.

7. The contract of 6 August also provided for the buyers to give the defendant notice that they wished to complete the contract in 30 days after such notice was given, and there was no similar provision in the earlier contract.

8. A refrigerator which was said by Mr Jager to be very expensive was also included in the sale and was apparently not part of the earlier contract (although Mr Jager said that Ms Sherlock said that she had thought it was part of that contract).

9. The contract of 6 August was not subject to finance or building or pest inspections.

10. The contract of 6 August was not subject to the sale of the purchaser’s home in Tasmania.

11. Clause 2.6(4)(a) of the standard terms and conditions of contract relating to the adjustment of land tax was deleted and replaced by special condition 7.1. Such a clause was not included in the earlier contract.

17. [17]
    The Magistrate concluded that after the appointment of the appellant as agent was concluded there was no further contact by the appellant with the ultimate purchasers or with the respondent. The ultimate purchasers themselves re‑established the contract about three months later (in fact the letter of 12 June was some 73 days, a little over two months, after termination of the retainer, but in my view nothing turns on this minor and inconsequential error). The Magistrate found that the purchasers and the respondent negotiated a contract without involving the appellant in any way and came to an agreement which was “different in important respects as dealt with above and that which the (appellant) was not able to bring about during the period of the agency”. His Honour held that he was not satisfied that the plaintiff was the effective cause of sale. The learned Magistrate concluded that the appellant was not the effective cause of the sale and was therefore not satisfied that the appellant “effectively introduced” the purchasers to the property.

Appellant’s notice of appeal

18. [18]
    The appellant submits that the Magistrate erred in finding that it had not effectively introduced the purchasers, Mr Reid and Ms Sherlock, to the property during the agency period. In particular it submits that the Magistrate erred:

1. (i)
   In finding there was not a sufficient causal connection between the appellant’s actions in introducing the purchaser to the property and the sale to warrant the appellant being paid commission;

2. (ii)
   In finding the contract of 6 August 2010 was different in important respects from the contract negotiated in March 2010;

3. (iii)
   In finding that the applicant’s introduction of the purchaser was not the, or an, effective cause of sale; and

4. (iv)
   In not finding the appellant has effectively introduced the purchasers to the property during the agency period and that it was thus entitled to the commissioned claim.

Agency Agreement

19. [19]
    In the form 22A (Exhibit 1) executed by the respondent, clause 7.3 of the terms of appointment attached provided;

“The Agent will be entitled to the Commission if an enforceable contract is entered into with a person introduced to the Property;

1. a)
   during the period of an Exclusive Appointment; or
2. b)
   during the period of a Sole or Open Appointment except where the introduction is made by the Client; or
3. c)
   After the conclusion of the Agency, the Property is sold to a purchaser effectively introduced to the Property by the Agent during the Agency.”

20. [20]
    The agency contract itself does not define “introduced” or “effectively introduced”.

21. [21]
    It can be seen the terms of clause 7.3 of the terms of appointment which I have set out contain significant grammatical errors. It was agreed between the parties that, in the circumstances of this case the relevant subclause was 7.3 (c), and that the clause should be read as if it said the following;

“The agent will be entitled to the commission if, after the conclusion of the agency, the property is sold to a purchaser effectively introduced to the property by the agent during the agency.”

The Appellant’s Submissions

22. [22]
    It is unnecessary to set out details of a comparison between the two contracts executed in March 2010 and that in August 2010. The learned Magistrate set out many of the differences and I have referred to them earlier. It is not asserted that the learned Magistrate was in factual error in his description of these differences. The argument concerns whether or not the circumstances of the formation of the August contract and those differences justify the finding that the Magistrate made that the agent was not the effective cause of sale.

23. [23]
    It was also not disputed that if the appellant was entitled to commission that payment would be in an amount of $73, 370, based on the ultimate purchase price of $2.65 m.

24. [24]
    The appellant relies significantly on two decisions of the High Court in Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 and Lord and Anor v Trippe and Anor (1977) 14 ALR 129 to support its submission that it was entitled to commission.

25. [25]
    In each of those cases the court found that negotiations following the failure of an earlier contract to be completed did not disturb the agent’s earlier work which meant the agent remained the effective cause of sale and so entitled to commission. The appellant’s counsel referred in particular to the observations of Barwick CJ in Lord and Anor v Tripp and Anor (supra) that “(I)t is to be remembered that the agent’s commission may be regarded as earned when the vendor accepts a purchaser provided by the agent willing to sign a contract to the vendor’s satisfaction. That right to commission, in default of some special arrangement, will not be lost because the parties to the contract of sale by mutual arrangement vary its terms. There is no validity, in my opinion, in the submission of counsel for the appellants that the difference between the terms of the contract with Lord Pastoral and those of the contract with Mudginberri as to price, manner of payment or of description of the stock included in the sale operates to deny the respondent’s claim under cl 1.” 

26. [26]
    So too in Moneywood Pty Ltd v Salamon Nominees Pty Ltd (supra) McHugh J said at p. 360:

“It is also an implied term of an agreement between a real estate agent and a vendor that, if the agent is the effective cause of the sale, the agent is entitled to commission even if the final contract is significantly different from that originally contemplated. Once the agent's conduct is proved to be an effective cause of the sale, the agent is entitled to commission even if the vendor has sold only part of or an interest in the land to the purchaser or has varied the terms or the price that the agent negotiated or even if the actual purchaser was not the person introduced by the agent.”

27. [27]
    Similar remarks were made in that case by Gummow J at p. 377, paras 86-89 and by Kirby J at p. 390.

Consideration

28. [28]
    In my view however a significant difference between those two cases and this is that in each of those there was, throughout the history of the transaction, an apparent willingness by the proposed purchasers introduced by the agent to complete a contract to purchase the subject land. In Lord and Anor v Trippe and Anor (supra) the proposed purchases willingness to complete the transaction was frustrated by the decision of the administrator of the Northern Territory not to agree to the transfer. Despite that fact, the parties were able to negotiate through that impasse and come to a position suitable to the administrator that allowed the sale, which the purchaser and vendor always wished for, to be completed.

29. [29]
    In Moneywood Pty Ltd v Salamon Nominees Pty Ltd (supra) the original contract was frustrated by the inability of the vendor to obtain from the local authority conditions of approval for rezoning and also by the authority’s purchase of part of the land as a koala corridor. Nevertheless at no time did the vendor or purchaser ever conclude that they did not wish to complete a sale of the property, or what they could of it.

30. [30]
    The passages that I have set out, and the decisions in those cases must in my view be seen in that light. It is significantly easier to conclude that an agent was the effective cause of a sale where at all times the vendor and the purchaser introduced by the agent remained interested in completing a sale of the subject property, even if on terms somewhat, perhaps even significantly, different to those initially contemplated.

31. [31]
    By contrast in this case the learned Magistrate concluded that the plaintiff and vendor had each determined not to complete the sale of the property and thereafter severed the relationship. He accepted that the contract “was terminated by Mr Reid on the building and pest inspections, with the absence of a pool fence and termite traps being issues”. He recognised that the appellant’s own employee, Mr Masinello, had agreed the appellant “had not been able to find a buyer that was ready, willing and able to buy the property” and that the respondent’s husband was “not going to erect a pool fence or do termite treatment”. He appears to have accepted Mr Jager’s comment at the time the first agreement was terminated that Ms Sherlock and Mr Reid “were not the right buyers for the property”. He also appears to have accepted Mr Jager’s comment to an agent for Harcorts, that “he didn’t want to deal with (Ms Sherlock) again”. He specifically found that at the time that the 18 March contract was terminated, Mr Masinello had not been able to negotiate a way through the impasse.

32. [32]
    The learned Magistrate concluded that it was the purchasers who “re-established contact with the defendant”, consistant, as I have said, with the view that he had effectively found that the relationship had been severed when the contract was terminated on 31 March. He accepted the evidence of Mr and Mrs Jager surrounding negotiations and formation of the contract signed on 6 August.

33. [33]
    The Magistrate’s findings are of critical importance and require significant weight to be attached to them. In Moneywood Pty Ltd v Saloman Nominees Pty Ltd (supra) Kirby J said at P 390;

“Questions of degree may ultimately turn into differences that are classified as so significant that the second transaction is viewed, for legal purposes, as distinct from the first. The agent will not then be seen as “the” cause of the completed transaction or the “effective cause”. Alternatively, the “transaction” will be viewed as materially different from that which the agent initially “caused”. But if the difference is simply that the anticipated sale of a larger subject matter cannot proceed but a supplementary contract is entered for sale of a portion of that subject matter, it is open to the decision-maker (depending on the evidence) to view the agent nonetheless as the cause of the smaller sale and to adjust the commission payable proportionately.

Because the answers to disputes of this kind involve evaluation and judgment (and to some extent impression) based on a consideration of the entirety of the evidence, absent recognisable error it will be normal for an appellate court to accord a high measure of deference to the decision of the primary judge on such questions.”

34. [34]
    A case which involved such a break in the necessary causal relationship between the agent’s actions and the sale which eventually took place, disentitling the agent to commission, was Rasmussen and Russo Pty Ltd v Gaviglio [1982] Qd R 571. The first contract, which was subject to finance, did not proceed as the purchasers were unable to obtain the approval of a bank to their application for finance. Both the contract of sale and the agency agreement were terminated on 5 April 1979.

35. [35]
    On that same day the purchasers approached a new real estate agent who was able to secure finance through a financier that did business only through that agent. The purchaser was referred to that agent by their bank manager. On 6 April 1979 the purchasers entered into a new contract with Gaviglio through the new agent, it being a condition of finance that the new agent be the agent entitled to commission. The second contract was completed, but the original agent also sued for commission.

36. [36]
    Although the trial judge found for the agent, the Full Court allowed an appeal by the vendor.

37. [37]
    Andrews SPJ with whom Kelly J agreed said at P 576:

“In my view there has been a break in the necessary “causal relationship” between the actions of the agents and the sale. I think that the sale which took place could not have occurred had it not been for the engagement of Blacks as agents. My view is that the first contract came to an end without any default on the part of the vendors by reason of the purchasers’ not obtaining finance in terms of the first contract. In such circumstances, it may be that the brevity of an intervening period of time is relevant as to inferences which may be drawn bearing upon good faith or the absence of it of persons such as the vendors and purchasers here, but I think His Honour has found there was no absence of good faith whatever on the part of the vendors. It has been said that there was virtually no dispute as to the facts of the case, but these are matters over which credibility looms large and I feel that I could not properly differ from His Honour’s views thereon. In my view, notwithstanding the brevity of the period to which I have referred, there was nevertheless a complete cessation of the necessary causal relationship between the respondent’s actions and the sale which eventually took place. As Gibbs J. pointed out in the Hooker case referred to above at p. 68, this is ultimately a question of fact.”

38. [38]
    In my view similar considerations caused me to conclude that in this case the Magistrate was justified in concluding there was a breach of the necessary causal relationship. The Magistrate here concluded that despite the relatively brief period between the termination of the first contract and the letter of 12 June that the agent’s influence on the parties had ended. His findings, which are findings of fact, are to be given respect.

39. [39]
    The appellant’s contention that the Magistrate was not entitled to come to the conclusion he did is in my view unjustified. In my view his finding that the appellant was not the “effective cause” of the ultimate sale of the property should not be disturbed and the appeal is dismissed.

40. [40]
    In that circumstance there is no need for me to consider the contention by the respondent in respect of the efficacy of the formation of the contract of agency.

41. [41]
    The appeal is dismissed with costs.