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Which case won?

casea
The case for Agent 1
  • 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 The acceptance was withdrawn through no fault of mine.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.
caseb
The case for the sellers
  • 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?

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Case A Case B

Case B won. You were right!

How people voted
a30%
b70%

Expert commentary on the court's decision

“Although no general rule can be laid down regarding the right of the agent to be paid a commission, this case demonstrates that it is not usually enough for an agent simply to introduce a purchaser to a property in order to claim a commission. Agents with non-exclusive agency agreements would be wise to stay contactable and conclude negotiations to ensure their entitlement to a commission.”
Court of Appeal dismisses Agent 1’s appeal

In Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall [2020] NSWCA 205, the NSW Court of Appeal dismissed the appeal of Agent 1, Noel and Lynette Outerbridge, trading as Century 21. The court also ordered them to pay the costs of the sellers, Brian Hall and Marlene Bentino.

Agent 1 claims commission payable for effective introduction under agency agreement

The Outerbridges argued they had made an effective introduction and were therefore entitled to be paid commission by the sellers under clause 3.1 of the agency agreement.

Clause 3.1 provided that the agent is entitled to 2.2% of the final sale price:

…(where [the Agent] is the effective cause of the sale): … if a person has been effectively introduced to [the Vendor] or the Property by [the Agent] during the Agency Period … and that person, either during the Agency Period or thereafter, enters into a contract to purchase the [P]roperty … [emphasis added]

Introduction only “effective introduction” if an “effective cause of sale”

The court recognised that the concept of “effective cause of the sale” informed the concept of “effective introduction” when interpreting the agency agreement.

In other words, unless an introduction was the “effective cause of the sale”, it was not an “effective introduction” and would not entitle the agent to be paid a commission.

Whether introduction is “effective cause of sale” is question of fact

The court confirmed that a determination of whether an agent’s conduct is the “effective cause of sale” is a question of fact, ie a question of whether a sale is really brought about by the act of the agent.

The court referred to caselaw for the principle that “a test requiring proof of ‘effective cause’ is different from and more stringent than the test of proximate cause applicable to insurance contracts which in turn is more stringent than the ‘but for’ test of causation”.

Prospect of sale of property through Agent 1 was extinguished

The court conceded that Mr Outerbridge had played a significant causal role in relation to the purchaser, Ms Weiss, buying the property.

However, at the time Mr Outerbridge went on his overseas holiday, negotiations had ceased.

Ms Weiss believed that there was nothing she could do to re-engage negotiations with the sellers, Mr Hall and Ms Bentino, and that there was no possibility of her buying the property.

According to the court, the introduction by Mr Outerbridge was effectively exhausted, or as previous caselaw had more colourfully said, “the yeast of [the first agent] was no longer working”.

The Outerbridges argued that they nevertheless had continued influence, but the court rejected this argument, saying that continued influence was not the same thing as “effective cause of sale”.

Agent 2 resuscitated sale of property so no commission payable to Agent 1

While the court viewed the prospects of sale with Mr Outerbridge as extinguished, it believed that sale prospects were resuscitated by the actions of Agent 2, Ms Van Wijngaarden.

The court described Ms Van Wijngaarden’s intervention as crucial.

Ms Van Wijngaarden brought about the sale by clarifying to Ms Weiss that unless the sellers received an offer of at least $5 million, they wouldn’t sell, and also by reassuring Ms Weiss that they were genuine sellers.

The court was also confident that Mr Outerbridge could not have taken the steps that Ms Van Wijngaarden did to secure the sale, since he was in another country and was effectively uncontactable.

Accordingly, the Outerbridges were not the “effective cause of sale” and were not entitled to any commission.

Steps agents should take to ensure entitlement to commission

Although no general rule can be laid down regarding the right of the agent to be paid a commission, this case demonstrates that it is not usually enough for an agent simply to introduce a purchaser to a property in order to claim a commission.

Agents with non-exclusive agency agreements would be wise to stay contactable and conclude negotiations to ensure their entitlement to a commission.

Alternatively, they can reduce the risk of multiple agents trying to claim a commission by signing an exclusive agency agreement.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.
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