HEADNOTE
[This headnote is not to be read as part of the judgment]
Freedom (the first appellant) held call options over two adjoining properties at Randwick. Freedom entered a non-exclusive agency agreement with D'Ettorre Properties Pty Limited (DRE; the respondent) on 8 November 2019 in relation to the sale of the properties. The agency agreement contained a clause which entitled DRE to commission if "the purchaser is effectively introduced by [DRE]". In November 2019, the sole director of DRE, Mr D'Ettorre, introduced Mr Criola and later Mr Ben Ingham to the properties. Mr Criola was a "spotter" and business associate of Ben Ingham. After reaching agreement on price, Mr Criola nominated the purchasing entity to be a company, IFM Wansey Road Pty Ltd (IFM). Ben Ingham was the sole director of IFM. Although the parties later agreed an increase in price to $10.33m to cover Freedom's costs in extending the option periods in the call options, binding contracts for sale and nomination deeds were not exchanged. On 15 January 2020, Mr D'Ettorre and Mr Fernon (the second appellant), a director of Freedom, spoke via phone and it was alleged that Mr Fernon represented that he had a Chinese buyer who will pay $11.3m (the first representation), to which Mr D'Ettorre replied that he would see if IFM would match that. Negotiations with IFM fell through. When Mr D'Ettorre could not find a buyer who would pay $11.3m, he gave up looking for a buyer for the properties.
On 11 February 2020, a second agent, Mr Ippolito, became involved. He informed Mr Fernon that he might have a prospective purchaser. On 17 February 2020, Mr Ippolito conveyed an offer of $10.35m from Mr John Ingham, which was accepted by Mr Fernon on the basis that Mr Ippolito agreed to a reduced commission and Mr Fernon obtained salvage rights to a kitchen. On 28 February 2020, binding sale contracts and nomination deeds were exchanged between Freedom and Wansey Road Randwick Pty Ltd (WRR) as trustee for the Wansey Rd Randwick Trust (the Trust). John Ingham and Ben Ingham were directors of WRR. Ben Ingham also personally guaranteed WRR's obligations under the nomination deeds. On learning of the sale of the properties, Mr D'Ettorre contacted Mr Fernon seeking the identity of the purchaser. Eventually, Mr Fernon told Mr D'Ettorre that "the buyer is Johnny" (the second representation).
DRE commenced proceedings in the District Court asserting that it was entitled to commission because it had effectively introduced the actual purchaser. Although IFM did not buy the properties, DRE claimed that the ultimate sale was due to Mr D'Ettorre's introduction of Ben Ingham. Alternatively, DRE sought damages under the Australian Consumer Law (ACL) against Freedom and Mr Fernon on the basis that the first and / or second representations of Mr Fernon were misleading or deceptive in contravention of s 18 of the ACL.
The primary judge found that DRE was entitled to the commission as it had effectively introduced the actual purchaser. The primary judge also found that Mr Fernon's second representation was misleading or deceptive. The first representation was found not to have been pressed by DRE. Judgment was entered against both Freedom and Mr Fernon in the amount of the commission of $154,275, plus interest and costs.
The main issues on appeal were:
the proper construction of the commission clause;
whether DRE had established that it effectively introduced the actual purchaser; and
whether DRE had established that either of the representations were a basis for Freedom and Mr Fernon's liability to DRE in damages under the ACL.
The Court (Gleeson JA, Leeming and Kirk JJA agreeing) held, allowing the appeal:
As to issue (1)
For there to be an "effective introduction" of "the purchaser" entitling DRE to commission there must be a sufficient causal nexus between the introduction of the purchaser and the ultimate sale of the property. DRE was required to do more than merely acquaint the purchaser and the vendor. What is a sufficient connection is a question of fact in each case: [35]-[43].
LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; [1977] HCA 13; T P Carroll Realty Pty Ltd t/as LJ Hooker Neutral Bay v Moyes [1997] NSWCA 321; Prestige Residential Marketing Pty Ltd v Depune Pty Ltd [2008] NSWCA 179, considered.
As to issue (2)
A causal nexus cannot be inferred from DRE's introduction of Ben Ingham to the properties in November 2019 and the ultimate sale in February 2020 to a company in its capacity as a trustee, nominated by John Ingham, merely because Ben Ingham was a director of the actual purchaser or gave a guarantee in the nomination deeds. Ben Ingham's distinct positions as a director and guarantor of the actual purchaser were not commensurate with him having an ownership interest directly or indirectly in the actual purchaser. Nor was there any evidence that Ben Ingham was a beneficiary of the Trust: [46]-[61].
As to issue (3)
Accepting that the first representation was a statement of present fact, it had a tendency to lead Mr D'Ettorre into error in believing that the prospective purchaser would need to substantially increase the price offered to secure the properties. DRE's pleaded case on reliance and causation rose no higher than its contractual claim which had been rejected. Causation was not made out on the pleaded case. Insofar as DRE sought to raise a new case on appeal with respect to causation which was not pleaded or run at trial, it should not be permitted to do so: [68]-[77].
Whisprun Pty Ltd v Dixon Pty Ltd (2003) 234 CLR 492; [2003] HCA 48; University of Wollongong v Metwally (1984) 158 CLR 447; [1984] HCA 74, applied.
The second representation as to the identity of the actual purchaser was necessarily qualified and incomplete given Mr Fernon's statement that this was all he wanted to say as he did not want to jeopardise the settlement. Viewed in context, the second representation did not have the tendency to lead Mr D'Ettorre into error. He was an experienced real estate agent who understood that the identity of the purchaser was being kept confidential until settlement. Nor did DRE advance any submission on reliance or identify a causal connection between the second representation and the pleaded loss or damage suffered by DRE, which again rose no higher than its contractual case which had been rejected: [78]-[83].