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[1977] HCA 13
High Court of Australia
1977-03-04
Murphy JJ, Moffitt P, Mahoney J, Hutley J
Original judgment source is linked above.
High Court of Australia Barwick C.J. Gibbs, Stephen, Jacobs and Murphy JJ. LJ Hooker Ltd v WJ Adams Estates Pty Ltd [1977] HCA 13
The appellant sued the respondent in the Supreme Court of New South Wales on three counts:
(1) that the respondent under a contract of agency promised to pay commission to the appellant upon its introduction of a person willing and able to purchase the respondent's property in Pitt and George Streets in the City of Sydney ("the property");
(2) that under an implied contract, the respondent promised to pay one half of the commission otherwise payable upon a sale of the property to a single purchaser if the person to whom the appellant introduced the property became a joint venturer with the person who signed the contract to purchase the property;
(3) (added by amendment) that the respondent promised to pay commission at a rate referentially agreed between them upon the appellant introducing to the respondent a person who became the purchaser of the property on terms acceptable to the respondent.
The learned primary judge found that neither the first nor second count was made out and rejected each. No cross-appeal has been lodged against these findings. The matter thus proceeded before the Court of Appeal Division of the Supreme Court upon the third count alone. So it has proceeded, as indeed it must, before this Court on appeal from the Supreme Court.
The primary judge found for the appellant on the third count for the full amount claimed. He did so because he concluded that the appellant was an effective cause of the sale of the property in fact made by the respondent. In this he was substantially influenced by his view of the case of Burchell v. Gowrie and Blockhouse Collieries Ltd. [9] .
The Court of Appeal by majority (Moffitt P. and Mahoney J.A., Hutley J.A. dissenting) allowed the respondent's appeal, set aside the judgment for the appellant and substituted judgment for the respondent.
The detailed facts evidenced in the case and the terms of the agreement round which the appellant's submission are built appear in the reasons for judgment to be delivered by other Justices. I need only mention the principal features.
A contract of agency was made between the respondent and the appellant. The terms of the agency, though not express, are, I think, clear enough. They were that the appellant should be paid commission at the rate currently charged in the City of Sydney by real estate agents in comparable transactions upon the purchase price to be paid to the respondent upon the sale of the property under a contract entered into by a purchaser whom the appellant had introduced to the property or to the respondent as an intending purchaser. The third count in terms speaks of introduction of the purchaser to the respondent. This, though perhaps the usual way in which a real estate agent earns his commission, is not the only way he may earn it. In stating the contract which, in my opinion, emerges from the evidence, I have expressed the circumstance in which the agent would earn his commission alternatively as the introduction of the person to the property of which he becomes the actual purchaser or to the vendor as a purchaser of that property. This change from the actual language of the third count accommodates it to relevant authority and to the manner in which that count was sought to be supported.
It is quite plain from the evidence that the company which signed the contract to purchase the property and which was accepted by the respondent as the purchaser was not introduced to that property or to the respondent by the appellant. The appellant was in no sense instrumental in bringing about the signature of that contract. The appellant's claim, as pleaded in the third count and as advanced before this Court, is for payment of an amount of commission appropriate to the introduction by the appellant of a purchaser of the whole of the property. If no more appeared than what I have so far recited it must be concluded, in my opinion, that the appellant could not succeed in that claim.
However, the appellant submits that it is entitled to commission upon the sale of the whole of the property because it introduced the property to a company on whose behalf the appellant claims the property was purchased jointly with the company which signed the contract of sale as purchaser. In order to deal with this submission, I should set out the essential structure of the facts as they appear to me. In doing so, I leave aside details which to my mind are immaterial to the solution of the appeal.
The appellant introduced the property to company A (Ann Arbor Investments Pty. Ltd.). Unbeknown to the appellant, the respondent was currently negotiating with company B (Stocks & Realty (Sydney) Pty. Ltd.) for the sale of the property to that company. The appellant some months before the signature of the contract of sale of the property became aware of the fact that there were negotiations to sell proceeding between the respondent and some person or company whose identity was not known to the appellant. But without any intimation to or knowledge of the appellant, company A did become aware of the interest of company B in the purchase of the property. Company A and company B then entered into the agreement in writing bearing date 6th May, 1968. This agreement is set out in reasons for judgment of other justices. The appellant did not bring company B's activity in relation to the purchase of the property to the notice or knowledge of company A: the appellant, as I have said, was unaware of company B's identity. The appellant did not participate in any way in the formation of the agreement between the two companies: it was unaware of the making of the agreement until after the signature of the contract of sale of the property by the respondent to company B.
After the agreement of 6th May had been made, each of the companies separately negotiated with the respondent to purchase the property. Company B was successful and entered into a contract of sale. The respondent was unaware at the time it sold its land to company B of the existence of the agreement of 6th May or of any interest of company A in the purchase.
It is in these circumstances that the appellant claims to have been an effective cause of the sale which in fact took place. The appellant's counsel submits that there is an unbroken chain of causation, beginning with its introduction of the property to company. A and ending in the signature of the contract of sale by company B and the respondent. It is said that company A's introduction to the property - and, for that matter, to the respondent - as a potential purchaser led to company A, though without any influence or knowledge of the appellant, becoming aware of the interest of company B in purchasing the property and thereafter entering into the agreement of 6th May 1968, albeit again without the knowledge or intervention of the appellant. It is submitted that that agreement made the two companies joint venturers in the purchase of the property as well as in its subsequent redevelopment. Therefore, according to the argument, the property by reason of that agreement was purchased by company B on behalf of both companies which were to have equal interests and responsibilities in the purchase. It is conceded that the respondent was at all relevant times unaware of the existence or of the terms of the agreement of 6th May and of any joint venture in the purchase or, for that matter, in the redevelopment of the land. It is also conceded, and indeed contended, that the respondent sold the whole of the property by one sale which so far as the respondent was concerned was a sale to company B.
I first approach the appellant's claim to commission on this sale upon the assumed footing that, by reason of the agreement of 6th May, company B became the agent of company A to purchase on their joint behalf the whole of the property and that company A by reason of that agreement acquired an equitable interest in the property upon its purchase by company B.
This is not, in my opinion for reasons I will give, an acceptable hypothesis. But, for the moment, I will assume it. It is important to analyse the situation which on that assumption existed. The respondent did not sell a moiety of its property: nor did it sell any interest less than the entire freehold. Company A derived, upon the purchase and through the agreement of 6th May, an equitable estate in the property in common with company B. That interest was in the whole of the property: not in any divided part of it. It did not acquire its interest from the respondent but through the agreement of 6th May - a transaction with which neither the appellant nor the respondent had any connexion whatever.
These facts do not, in my opinion, support the conclusion that the appellant is entitled to commission upon the sale of the whole of the property to company B. No effort or activity of the appellant formed any part of the causation of that sale. It did not introduce the property to the actual purchaser: it did not introduce company A to company B: nor was it in any way instrumental in or the cause of the formation of the agreement of 6th May. If that agreement created a joint venture between the two companies to purchase as distinct from redevelop the property, the appellant had no part in the formation or activity of that joint venture. The most that could be said is that, if the appellant had not introduced the property to company A, that company would have no interest in company B's efforts to acquire the property or to make the agreement of 6th May. But clearly, in my opinion, even if the appellant's introduction of company A to the property could be regarded as having any effect upon the creation of the joint venture, that effort could be no more in law than a causa sine qua non and not a cause even of the formation of the joint venture, supposing there to be one, let alone a cause of the sale of the property to that joint venture, again supposing there was such a sale.
It is true that an agent to procure a purchaser of property in stated terms may earn the commission payable to him in various ways. But the commission is not fully earned unless there is a sale which has resulted wholly or partially from the efforts of the agent. 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 that 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. But the essence of the reason for that conclusion is that the person introduced by the agent to the property becomes the purchaser, that is to say, is accepted by the vendor as such, albeit in ignorance of the agent's relevant activity. As the law stands, the intending vendor is not bound to accept as the purchaser the person whom the agent has introduced to the property or to that vendor. Thus it is the acceptance of that person as the purchaser which creates the liability of that vendor to the agent.
In the present case, it cannot be said that the person introduced by the appellant to the property and to the respondent was accepted by the respondent as the purchaser of the property: not even as one of joint purchasers of it. Indeed, the respondent had chosen not to accept company A as the purchaser, preferring company B.
Some well recognized principles of law in relation to claims by real estate agents have been relied upon by the appellant in supporting its claim to commission. First, it is said that the vendor need not be aware of the fact that the appointed agent has introduced the property to the person who becomes its purchaser: second, that an agent employed to find a purchaser of the whole of a property is entitled to a commission, rateable to the value of the land sold, if the principal sells a portion of the land to a purchaser who was introduced to the land by the agent, though not to the principal.
But, in my opinion, the two principles to which I have adverted do not support the conclusion that the appellant is entitled to commission, quite apart from the intractable fact that there never was a sale of part of the property. The interest of company A was not derived by purchase from the respondent: or, put another way, the case is not one in which a vendor has chosen to sell only a part of the property for which he has commissioned an agent to find a purchaser. Where a sale is of part of the property to an introduced purchaser, it is essential, in my opinion, that the vendor accepts that person as the purchaser of the moiety. Indeed, it is the vendor's act in selling to that person that attracts his liability to the agent for an aliquot commission. But, subject to a comment I will make later on an endeavour to rely on the second count, we are not concerned in this case with the results of a sale of a moiety of the property: as I have said, there was none.
The proper analysis in the present case, in my opinion, is that company A, without the intervention of the appellant or the knowledge of the respondent, agreed with company B to acquire an interest in common with company B in the whole of the property upon its purchase by company B. The situation is not comparable to a sale by a vendor to a purchaser of part of the property, where that purchaser was introduced to the property or the vendor by the agent. Further, it seems to me that in this case the acquisition by company A of an interest in the property as joint purchaser would not entitle the appellant to commission simply because the appellant had introduced company A to the property and to the respondent. In my opinion, the acceptance by the respondent of company A as a purchaser would be indispensable to the success of the appellant's claim. That, in the circumstances of this case, involves the knowledge by the respondent that the purchase by company B was a purchase on behalf of companies A and B. With that knowledge and an appreciation of the possible consequences of such a sale, the respondent may well have declined to enter into such a sale. I am unable to accept the conclusion that, because company A made an agreement with company B through which it acquired an interst in the property the subject of sale by the respondent to company B, the appellant is entitled to any commission upon that sale.
The argument that the appellant was an effective cause of the sale to company B is to my mind completely unacceptable.
There was an effort made during the argument to resurrect the second count and claim that in respect of the sale of the entirety of the property the appellant was entitled to be paid one half of the commission. I have already indicated that there was no cross-appeal against the rejection of this count by the primary judge. Further, the claim is, in my opinion, insupportable. I can see no basis in law on which in respect of a single sale of the entirety of a property, albeit to joint purchasers, an agent is entitled to a commission commensurate to the interst taken up in the joint venture by the person he has introduced to the property. This claim of the appellant has neither principle nor authority to support it. In my opinion, it must be rejected.
The case of L. J. Hooker Ltd. v. Dominion Factors Pty. Ltd. [10] was much relied upon by counsel for the appellant. He claimed that the case decided that it was possible for two agents each to be entitled to full commission in respect of a sale of a piece of real estate. The present is not a case in which more than one agent claims commission. But the appellant seeks to draw some relevant principle from the case. I would agree that it is better to speak of the basis of the agent's entitlement to commission being that he is an effective cause of the sale. Where the performance of the agent's obligation is based upon his introduction of the property to the purchaser or of the purchaser to the vendor I have some difficulty in conceiving how two agents in relation to a sale of the whole of a property to a single purchaser should at an identical time introduce the property to the purchaser or the purchaser to the vendor. I would have thought that in the ordinary course of things, one introduction would have preceded the other, and in that case the efforts of the second agent on the scene might well be thought not to have been causal of the sale. But, if the case can be made out that an agent without introducing the property to the purchaser or the purchaser to the vendor, none the less causally assists in bringing about the sale, I suppose it is conceivable that two agents may each establish his right to a full commission: one, it may be, through the introduction of the purchaser to the property or of the purchaser to the vendor and the other by actions which are properly held to be an effective cause of the sale.
It may be that if each of two agents introduces a person who becomes, i.e. is accepted by the vendor as, a joint purchaser with the other person so introduced, both agents will be entitled to a full commission. If, on the other hand, the vendor sells a moiety to each purchaser, each agent will be entitled to a proportionate amount of the commission payable on a sale of the whole of the property.
L. J. Hooker Ltd. v. Dominion Factors Pty. Ltd. [1] was a case as to interpleader. It really decided no more than that the two agents were not claiming from the vendor the identical sum of money as itself a matter in suit. Each was attempting to obtain payment in respect of a separate and different contract and in respect of different activities, though each claimed the same amount of money. Both on authority and on principle the interpleader was an inappropriate procedure in such circumstances. But I derive no assistance from the case in the resolution of the present case.
Neither the decision nor any reasoning of the Privy Council in Burchell v. Gowrie and Blockhouse Collieries Ltd. [2] provide any support for the appellant's submission. In the long run, counsel for the appellant did not oppose that conclusion. The headnote of the case accurately discloses what the case decided. The headnote is in the following terms:
In an action by the appellant to recover an agreed commission on the proceeds of a sale of mining property by the respondent company the latter contended that he was not the efficient cause of the particular sale affected: -
Held, that as the appellant had brought the company into relation with the actual purchaser he was entitled to recover although the company had sold behind his back on terms which he had advised them not to accept.
No more need be said about the case, for, in my opinion, it has no relevance to the case presently in hand, particularly if the facts of the case are properly understood. 1. [1910] A.C. 614.
I should now express my own view of the meaning and effect of the agreement of 6th May. The parties to the agreement were to negotiate separately to become the purchaser of the whole of the property of the respondent. Quite clearly, neither was negotiating on behalf of both. It is noticeable that the parties to the agreement were careful not to have agreed that one would negotiate on behalf of both. It was agreed that each should negotiate independently, though each promised that its negotiation would be conducted on the footing of agreed terms of purchase. Clause (d), it seems to me, means precisely what it says: that when one company had become the purchaser, it should complete the purchase and thereafter carry out the redevelopment of the site jointly with the other company on the basis of equality. Each was to seek terms of sale upon which both had agreed but which are not disclosed. However, I think it can be inferred from the terms of cl. (d) that the negotiated terms of sale should not call for the payment of more than $500,000 up to the time that title was to be transferred to the purchaser. That clause did not mean, in my opinion, that each party was to contribute half a million dollars to the purchase price: or, for that matter, $250,000 to that price. The purpose of the clause, rather, it seems to me, was to ensure that not more than half a million dollars would be called for in cash under the contract of sale, the balance being found by mortgage or other source of finance. The "completion of purchase" within the meaning of that clause, in my opinion, was the point at which the land was to be transferred in terms of the contract to the purchaser. In fact, the contract which was ultimately entered into did provide that, upon payment of $500,000, the land should be transferred to the purchaser, the balance of the price being secured by mortgage to the vendor in the terms of the contract of sale. The expression "equity capital" in cl. (d) might in some contexts mean the amount which shareholders were to contribute to the capital of a company and it is a possible view that this is what the words mean in this case. That meaning is not inconsistent with the clause also providing that the amount of cash to be paid under the purchase up to the time of transfer of the property to the purchaser should be no more than $500,000. Having regard to the mutual intention and obligation to redevelop the property jointly, a limitation on the amount of cash required to acquire the property would be reflected in the ultimate cost of the redevelopment. No doubt the cost of the land, though not acquired jointly, would be included in the total cost of the redevelopment.
It is said that the effect of the agreement was to make the actual purchaser the agent of itself and company A to purchase the property in their joint interest. I cannot so interpret what took place in the making of the agreement. Its terms are to an extent somewhat ambiguous. They contemplate that either of the parties to the agreement might become the purchaser and, in that event, there was thereafter to be a joint redevelopment upon the land. Clause (c) of the agreement, in my opinion, means that that company which became the purchaser should itself complete the purchase. It does not impose upon the other company any obligation at that point to contribute to the purchase price, though, as I have said, cl. (d) has its influence upon the amount of the cost of the redevelopment which the other company (in the result company A) would in due course be required to share. As appears from the facts, the way in which company A contributed to the redevelopment was by subscription to the capital of the purchasing company. This indicates that the carrying out of the agreement did not necessarily involve placing title legally or equitably in the joint names of the two companies, nor did it involve the contribution by company A of any cash to the actual purchase price as distinct from the cost of redevelopment. This method of executing the agreement was, in my opinion, the method which its language contemplated. But I reach that conclusion in point of construction quite apart from the subsequent conduct of the parties. In my opinion, it is not correct to say that the property was purchased by the two companies as tenants in common. The property was purchased by the one company, subject to a contractual obligation attaching at the time of purchase to redevelop the land in association with the other company on a joint basis. The manner in which this was to be effectuated was not, in truth, fully worked out by the parties to the agreement but such indications as there are in the document, in my opinion, point in the direction that the parties contemplated that each would have equal shareholding in a company which would hold the title to the land and effect the redevelopment.
Upon my construction of the agreement, no equitable interest in the land was obtained by company A at the time of the purchase of the land by company B. It had rights acquired under the agreement of 6th May to be allowed to participate upon an equal footing in the redevelopment of the land. But the exercise of such right did not, in my opinion, necessarily involve the holding of any direct interest in the land. Its right was that the land when acquired should be redeveloped as a joint enterprise. That right would entitle company A, as things turned out, at least to prevent company B from applying the land to any other use. If, without breach by company B of the arrangement for the joint redevelopment, there had in fact been no redevelopment, company A, in my opinion, would have had no right in the land or available equitable remedies against company B in respect of the land.
In my opinion, even upon the assumed meaning and effect of the agreement of 6th May, the respondent for the reasons I have given was not bound to pay the appellant any commission in respect of the sale to company B. Further, upon the proper interpretation of the agreement of 6th May, the same result should follow.
The appellant began the present proceedings in the Supreme Court of New South Wales to recover from the respondent $28,480 as commission on the sale of land. The respondent was the owner of land in Sydney which was the site of Adams Hotel. In September 1965 the respondent placed the land in the hands of the appellant, a company which carries on business as a real estate agent, "to locate a satisfactory purchaser at a satisfactory price". The appellant introduced the property to Mr. Loblay, a real property developer who conducted his operations through a number of companies which he and a fellow director, Mr. Harvey, apparently control. Mr. Loblay made several unsuccessful offers to buy the land, but by April 1968 was willing to pay $1.8m., the price which the respondent required. However, in the meantime Mr. Hoyle, the respondent's solicitor, had commenced negotiations with another developer, Stocks & Holdings Ltd. ("Stocks & Holdings"). The appellant had played no part in introducing that company to the respondent. By May 1968 Stocks & Holdings was also willing to buy the land for $1.8m. By this time separate negotiations were being conducted by Mr. Hoyle, on behalf of the respondent, directly with Stocks & Holdings and, through the agency of the appellant, with Mr. Loblay. The learned trial judge found that Mr. Loblay and Stocks & Holdings "were each willing and able to purchase and viewed independently each would, apart from the intervention of the other, have probably done so". However, before either set of negotiations was concluded, each of the two prospective purchasers learnt that the other was in the field. On 6th May 1968 there was a meeting between Mr. Loblay and Mr. Graf (the managing director of Stocks & Holdings) and an agreement was made which was reduced to writing. The agreement was expressed to be between Stocks & Realty (Sydney) Pty. Ltd. ("Stocks & Realty") (which is a subsidiary of Stocks & Holdings) and Ann Arbor Investments Pty. Ltd. ("Ann Arbor") (which is a company controlled by Messrs. Loblay and Harvey). It was agreed that each company would seek to purchase the property and that each would continue to negotiate with the respondent "on terms and conditions mutually agreed and fully disclosed between them". The agreement contained the following provisions:
(c) Upon one of the parties becoming purchaser, that party agrees to complete the purchase and carry out the redevelopment of the site jointly on a basis of equality.
(d) The total equity capital which the parties agree will be required up to the time of completion of purchase shall be approximately $500,000.00.
(e) In the redevelopment the joint venture will seek to arrange the transaction on a sale and lease back basis or management agreement producing like results.
There is no suggestion that this agreement was entered into for the purpose of depriving the appellant of commission. It appears that the parties wished to avoid the possibility that if Mr. Loblay and Stocks & Holdings competed for the land the price might be increased. The respondent did not know that the agreement had been made, and continued to negotiate separately with Mr. Loblay and Stocks & Holdings for the sale of the land. However, by about 10th May 1968 the respondent had decided to sell to Stocks & Realty. The appellant apparently learnt of this decision, and on 14th or 15th May 1968 wrote to the respondent a letter in which it was stated that the appellant had reason to believe that "there is some collusion" between Mr. Loblay and Stocks & Holdings and that if this suspicion were correct the appellant would claim commission on the sale. There is no evidence that at that time either the appellant or the respondent was aware of the nature of the agreement made between Ann Arbor and Stocks & Realty, or even that an agreement had been made. A contract for the sale of the land by the respondent to Stocks & Realty for a price of $1.8m. was executed on 4th June 1968. On 14th August 1968, Stocks & Realty made an allotment of shares to another company associated with Stocks & Holdings and to Ann Arbor, so that the two interests had equal shareholdings in Stocks & Realty. The contract of sale of the land was completed in March 1969.
The right of an agent to receive commission from his principal rests on contract express or implied. It was made clear by the House of Lords in Luxor (Eastbourne) Ltd. v. Cooper [3] that commission contracts "are subject to no peculiar rules or principles of their own" (per Lord Russell of Killowen [4] ). In some places special rules have been introduced by statute but there is no statutory provision in force in New South Wales relevant to the questions that arise in the present case. In inquiring whether an agent is entitled to commission it is first necessary, as Viscount Simon L.C. said in Luxor (Eastbourne) Ltd. v. Cooper [5] "to ascertain with precision what are the express terms of the particular contract under discussion, and then to consider whether these express terms necessitate the addition, by implication, of other terms". The initial question - what, on the proper construction of the contract, is the event upon the happening of which the agent acquires a right to commission - is one which has led to difficulty and to a diversity of opinions in many cases. But it is not the crucial question in the present case. When the question of construction has been determined a second question may arise. If, upon the true construction of the contract, the commission is only payable in the event that a particular transaction was brought about by the agent, e.g. upon the completion of a sale effected by his instrumentality, the question may arise whether the transaction which in fact occurred was brought about as the result of his agency.
When an agent is employed to sell a property, or to find a buyer, he does not earn his commission simply by finding someone who is ready, willing and able to buy, or who offers to buy. Nothwithstanding what was said in an earlier decision of this Court, Macnamara v. Martin [6] , it has become clear since Luxor (Eastbourne) Ltd. v. Cooper [3] that in such a case it is at least necessary that a binding contract of sale should have been executed: see Luxor (Eastbourne) Ltd. v. Cooper [7] ; Jones v. Lowe [8] ; Fowler v. Bratt [9] ; McCallum v. Hicks [10] . In Victoria and in New Zealand it has been held that it is enough in such a case that a binding contract has been entered into as a result of the agency, even though the purchaser subsequently proves unable to complete it: Scott v. Willmore & Randell [11] ; Latter v. Parsons [12] ; Manns v. Bradley [13] . In Queensland, on the other hand, it has been held that the agent is not entitled to commission unless the purchaser who signed the contract was ready, willing and able to complete it: Pettigrew v. Klumpp [14] ; Hill v. Davidson [15] . In Anderson v. Densley [16] three members of this Court, speaking obiter, said:
Where an agent is employed on commission to sell a property (and non-completion is not due to the default of the vendor) the commission only becomes payable if the sale is completed If the plaintiff was the effective cause of that sale he would at common law have earned his commission. The Court of Appeal of New South Wales has since followed and applied that statement: Montano v. Caffrey [17] . As at present advised I see no reason to differ from the view expressed in Anderson v. Densley [18] , but it is unnecessary to consider that question more fully because in the present case the contract made was actually completed. 1. (1908) 7 C.L.R. 699. 2. [1941] A.C. 108. 3. [1941] A.C., at pp. 126, 129, 154. 4. [1945] K.B. 73. 5. [1950] 2 K.B. 96. 6. [1950] 2 K.B. 271. 7. [1949] V.L.R. 113. 8. (1906) 26 N.Z.L.R. 645. 9. [1960] N.Z.L.R. 586. 10. [1942] St. R. Qd, 131. 11. [1950] St. R. Qd 31. 12. (1953) 90 C.L.R. 460, at p. 467. 13. (1968) 88 W.N. (Pt 1) (N.S.W.) 240. 14. (1953) 90 C.L.R. 460.
It is therefore clear that the appellant is not entitled to recover commission under the contract in the present case simply because it expended considerable time and energy in the interests of the respondent and found a person ready, willing and able to buy and indeed brought that person to the very brink of a sale. The appellant must show that a sale was actually effected. Of course, a sale was made and completed in the present case, but the appellant must also establish the necessary causal relationship between its actions and the sale, or in other words, that the sale was brought about through its agency. The law on this question was stated in Burchell v. Gowrie and Blockhouse Collieries Ltd. [19] as follows:
There was no dispute about the law applicable to the first question. It was admitted that, in the words of Erle C.J. in Green v. Bartlett [20] , "if the relation of buyer and seller is really brought about by the act of the agent, he is entitled to commission although the actual sale has not been effected by him." Or in the words of the later authorities, the plaintiff must shew that some act of his was the causa causans of the sale (Tribe v. Taylor [21] ), or was an efficient cause of the sale (Millar v. Radford [22] ). Like all questions of causation this is ultimately a question of fact. 1. [1910] A.C. 614, at p. 624. 2. (1863) 14 C.B. (N.S.) 681, at p. 685 [143 E.R. 613, at p. 614.] 3. (1876) 1 C.P.D. 505, at p. 510. 4. (1903) 19 T.L.R. 575.
In relation to this matter the learned trial judge based his decision on alternative grounds. First, he said that he regarded the case as governed by the reasoning in Burchell v. Gowrie and Blockhouse Collieries Ltd. [23] , which he thought led to the conclusion that the appellant was an effective cause of the purchase by Stocks & Realty. Alternatively, he held that the real commercial fact was that Ann Arbor was itself a purchaser and that its participation in the purchase was effectively caused by the efforts of the appellant.
With all respect, I consider that a finding that the purchase by Stocks & Realty was brought about by the acts of the appellant is insupportable. The appellant did not introduce Stocks & Realty (or Stocks & Holdings) to the respondent or to the land, and played no part in influencing Stocks & Realty to enter into the agreement of 6th May or into the contract to buy the land. The reasoning in Burchell v. Gowrie and Blockhouse Collieries Ltd. does not lead to any different conclusion. In that case the sale was effected to "agents or co-adventurers" of the person introduced by the agent, acting in the same interest as the person originally introduced [24] . It was held that the acts of the agent were an effective cause of the sale which actually took place. The case shows that an agent may be instrumental in bringing about a sale notwithstanding that his negotiations have been with one person and that the sale is made to a different person. Asprey J.A. correctly and succinctly stated the position when he said, in Moran v. Hull [25] , "if the agent's efforts with A result in a sale to A, B and C, the agent has earned his commission". It would be equally true to say that if the agent's efforts with A result in a sale to B, the agent has earned his commission. Illustrations of this latter proposition may be found in two Canadian cases, Stratton v. Vachon & Wilson [26] (where the purchase was made by associates of the person introduced by the agent, although the latter person took no part in the purchase) and McBrayne v. Imperial Loan Co. [27] (where the purchase was by a company with which the person introduced by the agent was associated). See also Gunn v. Showell's Brewery Co. Ltd. and Crosswell's Ltd. [28] where the agent was employed to purchase, and the purchaser was a new company promoted by the person for whom the agent was acting. But Burchell v. Gowrie and Blockhouse Collieries Ltd. [29] does not establish that if an agent introduces A as a possible buyer, and a sale is later made to B, who happens to be a co-adventurer of A, but whose association with A did not cause him to make the purchase, the sale must necessarily be held to have resulted from the agent's efforts. If as a result of the interest which the appellant had excited in Mr. Loblay that gentleman had himself interested Stocks & Realty in the land, with the result that that company bought the property, the appellant might well have been an effective cause of the sale. But that was not the case; Stocks & Holdings was willing to buy the land before Messrs. Loblay and Graf had their discussion, and after 6th May continued to negotiate with the respondent in the same way as it had been doing before. The endeavours made by the appellant to sell to Mr. Loblay did not result in the sale to Stocks & Realty.
The alternative ground upon which the learned trial judge relied was that Ann Arbor was, as a matter of commercial reality, a purchaser of a half-interest in the property. I am prepared to assume, without deciding, that under the agreement of 6th May 1968, Ann Arbor acquired an equitable interest in the land immediately it was purchased by Stocks & Realty. However, it did not acquire that interest from the respondent. The purchase of the land was not made by Stocks & Realty as agent for Ann Arbor. The parties to the agreement of 6th May 1968 did not intend that the purchase should be made by one of them on behalf of both. They intended that both should endeavour to purchase, and (on the assumption already made as to the effect of the agreement) that when the property was bought it should be held by the purchaser in trust for both parties equally. The document of 6th May 1968 did not disguise the commercial reality. The reality was that Ann Arbor did not purchase an interest in the land from the respondent. In fact, when the contract was completed, no interest was conveyed from the respondent to Ann Arbor. So far as the respondent was concerned, the sale and the conveyance were to Stocks & Realty alone; the respondent knew nothing about the acquisition of an equitable interest by Ann Arbor. It is contrary to the facts of the case to say that the appellant was instrumental in bringing about a sale of an interest in the property by the respondent to Ann Arbor, and thereby earned its commission.
I do not intend to cast any doubt on the proposition that where an agent is appointed to find a purchaser for land, it will, in many cases (depending of course upon the express terms of the contract), be necessary to imply a term that if the vendor disposes of part only of the land or of any interest therein, as a result of the introduction effected by the agent, the latter will receive commission on the sale so made: cf. A. Norton Pty. Ltd. v. Fowler [30] . I cannot however accept that it would be necessary to imply a term that if the vendor disposes of the whole of the land, otherwise than through the agency of the agent, commission will be payable if in reality an interest is acquired by a person introduced by the agent, although the vendor has no knowledge that any such interest is being acquired and believes that the sale is of the entire interest in the land. No doubt, when an agent who is engaged to sell is in fact instrumental in bringing about a sale, it is immaterial to his right to commission that the owner is unaware that the sale was brought about through his agency. In such a case the event has occurred upon which the agent becomes entitled to his remuneration under the contract, and it does not matter that the owner is unaware that this has occurred. It does not, however, follow that it is possible to imply a term that an agent is entitled to remuneration if he is instrumental in causing some other person to acquire an interest in the land, when the owner sells nothing to that person and is unaware that he has acquired the interest.
The position in the present case may be re-stated shortly as follows: The appellant was engaged by the respondent to find a buyer. The appellant introduced A, who was ready and willing to buy. In fact the land was bought by B, with whom the appellant had had nothing to do. It may be assumed that B bought as trustee for A and B, but the respondent was unaware of that fact, and the purchase by B did not result from the appellant's efforts to sell to A. In these circumstances the sale that occurred - that to B - was not brought about by the act of the appellant. Commission is not payable under the contract.
For these reasons I agree with the conclusion reached by the majority of the Court of Appeal that judgment should have been entered in favour of the respondent. I would dismiss the appeal.
This appeal is concerned with the curious outcome of protracted negotiations for the sale of a Sydney hotel property; curious because two potential purchasers, discovering themselves to be rivals, agreed to make common cause: the property would be bought in the name of only one of them, but they would in fact share equally as joint venturers in its redevelopment.
The sale took place and the vendor was initially unaware of the agreement, as was its estate agent. The agent had been responsible for the introduction of one only of the two potential purchasers, not the one in whose name the property was bought. The estate agent, when it did learn of the agreement, claimed commission on the sale but this claim the vendor rejected. The vendor, having found for itself the purchaser in whose name the property was in fact purchased, saw no reason to reward the estate agent.
The estate agent sued successfully for its commission before Samuels J. in the New South Wales Supreme Court. An appeal by the vendor succeeded before the Court of Appeal, Hutley J.A. dissenting. It is from the majority decision of the Court of Appeal, reversing Samuels J., that the present appeal is now brought to this Court.
My brother Jacobs has described, in his reasons for judgment, the general circumstances with which this appeal is concerned. To succeed the appellant must establish that what it did or procured answers the description of what it was for which the respondent agreed to reward it by payment of commission. Because of the very meagre nature of the express terms of the contract between the parties, the contract calls for some implication of terms. It follows that to determine this appeal three distinct steps are involved; the relevant acts on the part of the appellant must be identified, the express terms of the contract described and those additional terms which the law will imply ascertained. This done, a comparison of the appellant's acts with the contractual description of what was required of the appellant if it were to earn the promised reward should provide the outcome of the appeal.
The relevant conduct of the appellant, that is, what it did or procured in seeking to earn commission, may, when reduced to its essentials, be stated quite shortly. It is described in all its necessary detail in the judgment of Samuels J. and those of the members of the Court of Appeal. The appellant first of all introduced to the respondent two prospective joint purchasers, whose interests subsequently came to be represented by a company incorporated for that purpose, Ann Arbor Investments Pty. Ltd. ("Ann Arbor"). It thereafter played a part in the lengthy negotiations which ensued. While those negotiations were proceeding separate negotiations began between the respondent and another prospective purchaser concerning whom the appellant knew nothing; this prospective purchaser subsequently caused a company Stocks & Realty (Sydney) Pty. Ltd. ("Stocks") to be incorporated to represent its interests. Thereafter for some time the respondent continued its separate negotiations with each prospective purchaser. The latter each became aware of the other's existence and identity and on meeting together they decided to make the joint venture agreement to which I have already referred. The learned trial judge describes the position of the parties immediately before that time as one in which the two prospective purchasers were "each willing and able to purchase and viewed independently each would, apart from the intervention of the other, have probably done so. Between themselves, they were, although they had negotiated separately, ad idem upon the terms to which they were then prepared to agree. And I am satisfied that the defendant would have closed with either of them." By entering into this joint venture agreement they avoided the risk that they might, by bidding against one another, force up the price at which the property was ultimately bought.
Neither appellant nor respondent knew of the joint venture agreement. They continued negotiations with Ann Arbor and the respondent at the same time continued negotiations with Stocks. Then, when finality in both instances seemed close at hand, the respondent terminated negotiations with Ann Arbor and entered into a contract of sale with Stocks.
But for the effect of the joint venture agreement there could be no question of the appellant having, in these circumstances, earned commission on the sale to Stocks, which it did not introduce to the respondent and in whose negotiations with the respondent it played no part.
The effect of the joint venture agreement has been considered in some detail in the reasons for judgment of Jacobs J. and with his conclusion I am in agreement. I share his Honour's view that, for the reasons he states, its effect was that Ann Arbor became entitled not merely to share equally in the development of the property but became entitled in equity to a one-half interest in the property itself when purchased by Stocks from the respondent. However whether or not this consequence of the joint venture agreement results in the appellant having earned its commission will depend upon the precise terms of its agency contract with the respondent. To these I now turn.
The agency contract, in so far as express, was exiguous in the extreme, clearly calling for the implication of additional terms. It was oral, made in the course of one or more conversations between representatives of appellant and respondent in September 1965. Those conversations were sworn to by only one witness, whose imperfect recollection supplies their gist, although little more than that; this was that the appellant would, on the respondent's behalf, seek to find a buyer of the respondent's hotel property at a price acceptable to the respondent, being at that time something over three quarters of a million dollars.
These then were the express terms to which Viscount Simon referred when, in Luxor (Eastbourne) Ltd. v. Cooper [31] , speaking of the implication of terms in commission agents' contracts, he said that the first task was "to ascertain with precision what are the express terms of the particular contract under discussion"; only then might one turn to consider whether those express terms necessitated the addition, by implication, of other terms.
The express terms in this case amount to no more than a meagre statement of that which the appellant is to do in the future. In my view agency contracts such as this are unilateral contracts in which the agent qualifies for a reward by procuring for the intending vendor the sale of his property. They may possess peculiar features of their own, as suggested by J. R. Murdoch in The Nature of Estate Agency, Law Quarterly Review, vol. 91 (1975), p. 357, but with these we are not here concerned. They do however clearly involve the promise of a reward. Where, as here, the parties have confined their express agreement to a description, itself inadequate, of what the promisee, the agent, is to do if he is to gain that reward from the promisor, the intending vendor, the law will, by recourse to an implied term, supply the missing promise by the promisor to pay commission, calculated at a reasonable rate, upon the sale of the property. It may also by like means supplement the statement of what it is that the promisee must do to become entitled to that reward, but only in a case where, and to the extent to which, the law permits of the making of such a supplementary implication.
That the appellant's reward should consist of remuneration by way of a reasonable rate of commission, payable upon completion of the sale, may readily enough be implied. The implication of such a term flows readily enough "as a matter of probability" from all the circumstances (Midgley Estates Ltd. v. Hand, per Jenkins L.J. [32] ) having regard to the relationship between the parties and to the matter in hand. The absence of any reference to a reward requires that "obviously some term must be implied if the intention of the parties is not to be defeated" (Luxor (Eastbourne) Ltd. v. Cooper, per Lord Wright [33] ) and of the foregoing term it can be predicated that "it goes without saying". This is very much such a case as Lord Somervell referred to in Lister v. Romford Ice & Cold Storage Co. Ltd. [34] when he spoke of instances in which "the contract, written or oral, is silent as to matters which have to be settled one way or the other if the contract is to be effective". To imply such a term does no more than give effect to what may be inferred to have been the manifest intention of the parties. Without such a term the contract would lack all "business efficacy" (The Moorcock [35] ); to imply it is to supply the answer which, at the time of contract, the parties would have given to the question of an "officious bystander" (Shirlaw v. Southern Foundries (1926) Ltd. [36] ).
An alternative basis for the implication of such a term involves no inquiry as to intention of the parties but rather the implication of what Treitel, Law of Contract, 4th ed. (1975), pp. 128-132 describes as a term implied in law as distinct from one implied in fact, what H. K. Lucke, in his "Ad Hoc Implications in Written Contracts" Adelaide Law Review, vol. 5 (1973), p. 32, calls "settled", as distinct from "ad hoc", implication. As Lord Reid observed in Sterling Engineering Co. Ltd. v. Patchett [37] , "the phrase "implied term" can be used to denote a term inherent in the nature of the contract which the law will imply in every case unless the parties agree to vary or exclude it". Of such implied terms, not dependent upon the parties' intention, the implied conditions and warranties on the sale of goods provide examples. Before they became a part of the statute law the courts readily implied them, as in Jones v. Just [38] . In Miller v. Beal [39] , Jessel M.R. observed, of an auctioneer selling goods without any prior specific agreement as to commission, that "the main object generally which auctioneers had in view when they entered into transactions of such a kind was to earn their commission, and it would be doing an injustice not to allow it them", and cases such as British Bank for Foreign Trade Ltd. v. Novinex Ltd. [40] and Renner v. Fraser [41] provide a basis for allowing commission on the sale price calculated at a reasonable rate ascertained in accordance with the custom of the trade. No doubt commission would also be recoverable on a quantum meruit claim (cf. Jacques v. Lloyd D. Goerge & Partners Ltd., per Cairns J. [42] at least if the case were to be regarded as one in which, although the agent's services were contractual, there was no agreement as to the agent's reward): Way v. Latilla, per Lord Atkin [43] .
One way or another there is, then, no difficulty in the present case of implying such a term. It is when one comes to consider the other half of the bargain, the description of what it was which the appellant had to do in order to earn his reward, that the position as to the implication of terms is more obscure. As was said by Samuels J., the facts are scarcely in dispute; what was said between the representatives of the parties when the contract was made was that the appellant was to "locate a satisfactory purchaser at a satisfactory price" for the Adams Hotel property, the respondent's then notion of a satisfactory price being discussed and the appellant agreeing to "proceed to see what we can do".
The task is, no doubt, to determine whether this term of the contract, understood in the light of permissible processes of construction and assisted, if needs be, by permissible implication of terms, can be regarded as satisfied by the actual conduct of the appellant. There is, I think, no doubt that the term requires that there must be an actual sale to an introduced purchaser; such a meaning will both reflect what is the prima facie likely intention of parties to all such contracts (Midgley Estates Ltd. v. Hand, per Jenkins L.J. [44] ) and will give proper effect to the meaning of "purchaser". It is accordingly unnecessary to examine the great volume of recent cases in the English courts on this particular aspect of estate agents' commission contracts, most of which are reviewed by Cairns L.J. in Christie Owen & Davies Ltd. v. Rapacioli [45] . From them may, however, usefully be extracted the oft repeated injunction against treating such contracts as involving special rules of construction. As Upjohn L.J. said in Ackroyd & Sons v. Hasan [46] "there are no special principles of construction applicable to commission contracts with estate agents"; such contracts must, as Ormerod L.J. observed, "be interpreted according to the ordinary rules of construction" [47] .
Unaided by recourse to processes of construction or implication I am unable to regard the appellant as having performed the service described by this term of the contract. The purchaser to be located was to be a purchaser of the hotel property and the only party naturally answering that description was Stocks; but the appellant neither introduced Stocks to the respondent or to the property nor did it play any other relevant part in Stocks' purchase. As Samuels J. observes in the passage from his judgment which I have already quoted, Stocks was, quite independently of Ann Arbor, always willing and able to purchase and was likely to have done so even if Ann Arbor had never ventured upon the scene. If Ann Arbor played no appreciable part in inducing Stocks to buy, certainly the appellant played none whatever. The appellant cannot therefore treat Stocks as the purchaser whose purchase entitled it to commission under its contract with the respondent.
The concept of effective cause has often been called in aid to entitle an agent to commission in cases where, instead of the straightforward case of the introduced party becoming the purchaser, a more complex fact situation has arisen. For example, the sale may be made not simply to the party introduced by the agent but instead to a syndicate or partnership of which he is a member (see cases annotated in 164 A.L.R. 949), or to his dummy (see cases annotated in 7 A.L.R. 87), or, with his full approval, to his associates who, together with him, are jointly concerned on behalf of a corporate group in which all are interested (Burchell v. Gowrie and Blockhouse Collieries Ltd. [48] ), or to a company which he forms or in the formation of which he plays a part (McBrayne v. Imperial Loan Co. [49] ), or to persons with whom he initially associated himself in his negotiations with the vendor, although he later drops out of the transaction altogether (Stratton v. Vachon & Wilson [50] ). In each of these instances courts have, in appropriate circumstances, construed the contract as entitling the agent to commission because the agent was an effective cause of the sale, his initial introduction of the prospective buyer having led quite directly to the sale.
Can the appellant gain any assistance from these decisions? At first blush there appears to be some analogy between this case and those cited above: the appellant's introduction of Ann Arbor to the respondent is undoubted, and Ann Arbor did acquire an interest in the property the subject of the sale. However Ann Arbor cannot be regarded as a "purchaser" of the property either in the usual sense of that word or for the purposes of the commission agreement. Any view of Ann Arbor, rather than Stocks, as the real purchaser of the property is untenable; at best Ann Arbor could only be treated either as buyer of one half of the property or as a party on whose behalf Stocks acquired and held one half of such beneficial interest in the property as accrued to Stocks as purchaser.
The first of these possibilities is untenable since there was no sale of half the property to anyone, let alone to Ann Arbor. The second fares no better; whatever interest Ann Arbor acquired it got through Stocks and under the joint venture agreement and not at all from the respondent.
To extend the meaning of the words "locate a purchaser", whether by liberal construction or by some process of implication, so as to include that situation where an agent in effect "procured the sale" or was an (or the) "effective cause" of the sale does not avail the present appellant. Stocks was no "dummy" for or successor to Ann Arbor in the sense that the introduction of the latter could be said to have been a cause, effective or otherwise, of the purchase by Stocks. The joint venture agreement was not relevantly related to, nor did it arise out of, the introduction of Ann Arbor by the agent; nor, as the learned trial judge has found, was the joint venture agreement an event without which Stocks would not have become the purchaser. There is no room, in the present case, for the operation of any term based on the idea of "effective cause".
No appeal to commercial realities seems to me to assist the appellant. The reality, both factual and commercial, was that the vendor sold to a buyer which it found for itself and who purchased without the intervention or encouragement of any agent, one indeed which would probably have bought, as the learned trial judge found, whether or not the other prospective buyer had ever communicated at all with it. The joint venture agreement contemplates not a joint purchase from the respondent but a purchase by one or other of the joint venturers, the other of them thereupon acquiring from the buyer rights in the subject matter of the purchase. Those rights would be derived not from the vendor but from the other joint venturer, pursuant to the terms of the joint venture agreement.
No process of construction of the contract occurs to me which will, in these circumstances, in any way assist the appellant. It is important to recall what I have earlier referred to, that contracts of this kind are subject to no special rules and are to be construed according to ordinary principles applicable to contracts generally. One must guard against any tendency to strain the proper limits of construction, and, for that matter, of implication, due to a feeling of the apparent injustice involved where an estate agent goes unrewarded despite its protracted efforts on a vendor's behalf, a feeling no doubt heightened when the vendor has in fact achieved a sale and the agent has not been altogether unconnected with its occurrence. Rightly or wrongly the law, as it has evolved, has made the earning of an agreed commission an all or nothing affair, on the one hand denying to agents any reward despite substantial labour on their part and on the other handsomely rewarding agents who with little effort manage to effect a sale. As Lord Russell of Killowen said in Luxor (Eastbourne) Ltd. v. Cooper, "The agent takes the risk in the hope of a substantial remuneration for comparatively small exertion" [51] . The law has seized upon their success or failure in bringing about a sale as the sole criterion of reward and rates of commission have no doubt come to reflect this state of affairs. To adopt unduly extended concepts of effective cause in an individual endeavour to do what may appear to be justice in a particular case not only disregards the settled approach of the law in this field but may, by its effect as a precedent, disrupt the existing pattern of acceptable scales of reward for services rendered by estate agents.
Has, then, a recourse to implication more to offer the appellant? I think not. No implied term sought to be based upon the intention of the parties can be relied upon; one can be confident that at the time of contract nothing was further from the mind of either party than that someome introduced by the agent, while not itself buying the property, might indirectly, by means of a joint venture agreement with another, acquire an interest in the property. There is no question here of any answer evoked by an officious bystander's question revealing a previously unarticulated intention.
The uncertainty surrounding the nature of any term as to commission upon which the parties might have agreed, had they been able to agree upon any, demonstrates the inappropriateness of making any implication; would commission be calculated upon the actual sale price or only upon the like proportion of it as Ann Arbor's proportionate interest in the property? Should the rate of commission be that applicable to the actual sale price or only to that proportion of it? Should the obligation to pay it persist whether or not the vendor also became liable to pay full commission to another agent who might introduce the actual buyer? No one answer to each of these questions can be predicated as that which the parties, as reasonable men, would necessarily have joined in giving.
In any event the contract is not on its face one which, in respect of the service to be undertaken by the agent, is wanting in efficacy; in this respect the contract as it stands is, in the words of Owen J. in Campbell v. Manly Municipal Council [52] , "a workable and effective agreement, and while it might perhaps be reasonable to imply such a term, it certainly is not necessary to do so". No clear necessity exists for the imputation of a term, such as Jordan C.J. regarded in Heimann v. The Commonwealth [53] as essential before any implication might be made. This is not a case in which any inference that the parties intended the implication of a term as to the reward-earning conduct is of such cogency "that another intention could hardly be supposed": Gullett v. Gardner, per Dixon J. [54] , and see Peters American Delicacy Co. Ltd. v. Champion [55] .
The only alternative basis upon which a term might be implied would be by the operation of custom or by the existence of some settled rule of law calling for such an implication in the case of contracts of this particular nature. No question of custom arises and there is no settled rule applicable to the relationship of vendor and estate agent which would support the implication of a term such as the appellant requires - Luxor (Eastbourne) Ltd. v. Cooper, per Viscount Simon [56] , Lord Russell of Killowen [57] and Lord Wright [58] .
It follows that in my view the appellant, being unable to rely upon any implied term or principle of construction as to the reward-earning service, and not having in fact performed the service called for by the express term of the contract, has not shown its entitlement to any commission.
This is an appeal from a decision of the New South Wales Court of Appeal (Moffitt P. and Mahoney J.A., Hutley J.A. dissenting) reversing a decision of Samuels J. who had held that the respondent W.J. Adams Estates Pty. Ltd. was liable to pay $28,480 by way of commission to the appellant L.J. Hooker Ltd., a large real estate agency company.
In September 1965 there was a conversation between Tosh a director of the appellant, and Adams, who, it was admitted, had authority to act for the respondent in this regard. The conversation related to a block of land owned by the respondent in the City of Sydney. The respondent carried on an hotel business on one part of the land and let out other parts of the land. It seems that the respondent company was effectively controlled by executors of a deceased estate. Tosh asked Adams whether he would consider selling the property. There was discussion on how much the property was worth. Finally Adams said that the estate would consider selling, providing they achieved a satisfactory price. The satisfactory price was mentioned as being "something over $3/4 million". Tosh in his evidence stated: "He [Adams] said we could endeavour to locate a satisfactory purchaser at a satisfactory price I said "Thank you, we will proceed to see what we can do" ".
In March 1966 Tucker, another director of the appellant, took over the conduct of the matter. He urged Adams to auction the property. Adams refused because he feared staff disruption at the hotel. Adams told Tucker to try to get a new price of $1.75m. for the property. Tucker at that time was engaged in negotiations with a man called Loblay for the purchase of an adjoining site and brought to Loblay's attention the availability of the Adams' property. Tucker then commenced a long period of acting as intermediary between Adams on the one hand and, at times, an associate of Adams' called Flynn and beneficiaries of the estate, and on the other hand Loblay and an associate of his called Harvey. These negotiations continued throughout 1966 and again in 1967. Part of this time was used in seeking to obtain vacant possession, an activity in which Tucker was involved.
In 1968 matters accelerated. In January the respondent's solicitor approached the solicitor of Stocks & Holdings Ltd., another property developer, to try to interest it in the property. Thereafter negotiations continued in parallel. On the one hand, the respondent was negotiating through the appellant with Loblay and Harvey, and on the other hand the respondent was negotiating directly with Graf the director of Stocks & Holdings Ltd. From at least early in April onwards, Tucker had been told and believed there was another possible purchaser. By mid-April the Loblay group had decided to purchase through its company Ann Arbor Investments Pty. Ltd. and negotiations proceeded on this basis. The shareholdings in Ann Arbor Investments Pty. Ltd. went through a series of rearrangements but at all relevant times remained either in the hands of Loblay and Harvey or their nominees or other companies they controlled.
At the end of April, Stocks & Holdings Ltd. incorporated Stocks & Realty (Sydney) Pty. Ltd., the company to which the property was eventually sold. Also at the end of April, Tucker told Loblay that there was a competing purchaser, and that he suspected, though the respondent had not told him, that this competitor was Stocks & Holdings Ltd. Loblay approached Graf and the following agreement was made on 6th May without the knowledge of the appellant or the respondent.
This is to confirm that the Agreement between Stocks & Realty (Sydney) Pty. Limited and Ann Arbor Investments Pty. Limited, as reached in discussion between Mr. E. Graf and Mr. L. Loblay this day, is as follows:
(a) Each company will seek to purchase the property being the whole of the land in Certificate of Title Volume 7846 Folio 119. Pitt to George Streets, Sydney.
(b) Each company will continue to negotiate with the Vendor on terms and conditions mutually agreed and fully disclosed between them.
(c) Upon one of the parties becoming purchaser, that party agrees to complete the purchase and carry out the redevelopment of the site jointly on a basis of equality.
(d) The total equity capital which the parties agree will be required up to the time of completion of purchase shall be approximately $500,000.00.
(e) In the redevelopment the joint venture will seek to arrange the transaction on a sale and lease back basis or management agreement producing like results.
(f) In any redevelopment Stocks & Holdings Group of Companies may through its appropriate subsidiary be entitled to carry out the building works on terms not less favourable than the best outside tenderer.
(g) All questions in the joint venture will require unanimous approval.
(h) If personal guarantees have to be given by the parties then each party will give the same and give cross indemnities.
(i) Stocks & Realty (Sydney) Pty. Limited acknowledges that Landray Industries Limited, or an associated company of Landray, may be joined in as a partner of the share of Ann Arbor Pty. Limited. However the joint party for all purposes hereunder will be Ann Arbor Pty. Limited.
(j) As far as practicable the legal work will be shared equally by arrangement between the Solicitors and all costs shared equally between them.
By this stage in early May the appellant had brought the respondent and Loblay and Harvey close to agreement at a price of $1.8m. On 10th May the respondent withdrew the matter from the appellant and told the appellant that it was selling to the other purchaser. On 14th May the appellant by letter told the respondent that it suspected collusion between Ann Arbor Investments Pty. Ltd. and Stocks & Holdings Ltd. and that if this were the case it would claim commission.
Thereafter contracts dated 4th June 1968 were exchanged between the respondent and Stocks & Realty (Sydney) Pty. Ltd. with the same sale price of $1.8m. At the time of exchange of contracts only two shares in that company, two "B" class shares, had been issued - one to Graf and the other to his nominee. On 30th August 1968 Tucker again wrote to the respondent saying that Loblay had informed him of the existence of the agreement between the prospective purchasers but not its exact contents and that the respondent claimed its commission. On 16th September further shares in Stocks & Realty (Sydney) Pty. Ltd. were alloted - ten "A" class shares and two "B" class shares to Ann Arbor Investments Pty Ltd. and ten "A" class shares to another subsidiary of Stocks & Holdings Ltd. By letter of 24th September the respondent again denied knowledge of the collusion between Loblay and Stocks & Holdings Ltd. and in March of the next year the sale to Stocks & Realty (Sydney) Pty. Ltd. was completed.
On these facts there was no express contract between the appellant and the respondent. However, the conversation between Tosh and Adams resulted in an implied contract, the appellant being a real estate agent and the context being a business one. It is necessary to determine the content of the implied contract in the light of the language used in the conversation which I have set out and in the light of all the circumstances of the case. Certainly the respondent was to receive a commission on the execution of the consideration on its part. The central issues in the case are - (1) what were the terms of the implied contract and (2) did the events which happened result in the execution by the appellant of a consideration upon which an implied promise to pay commission depended, (3) the amount of the commission. The appellant in its declaration sought to spell out in alternative ways the implied contract upon which it sued but it was unnecessary for it to do so. It was entitled to sue on a common money count.
Certainly the respondent agreed to pay a commission to the appellant in the event that the agent introduced a person who became a purchaser of the whole estate and interest of the respondent in the property. The consideration being a commission, it would in accordance with common usage be calculated as a percentage of the price agreed to be paid to the respondent by such a purchaser. I do not think that a usage of real estate agents in New South Wales to claim commission based on the scale fixed by the Real Estate Institute of New South Wales (whatever it may be from time to time) was established to be both notorious and reasonable and thereby to have become an implied term of the contract. I think that the commission impliedly agreed to be paid was a reasonable commission and that the Real Estate Institute scale was evidence, no doubt strong evidence, of what was in the circumstances reasonable.
What then if a purchaser did not purchase the whole estate and interest of the respondent in the subject lands? What if the appellant located a purchaser who purchased a part of the lands? Or a purchaser who purchased a part interest in the whole of the lands? Again, what if the appellant located a person or company which did not itself purchase but through whose instrumentality a third party purchased? These are questions central to the present case. The answer depends upon the agreement presumed or implied from the commissioning of the respondent to locate a purchaser for the property. In my opinion in a case such as the present, a quite ordinary case of the putting of a property in the hands of a real estate agent "for sale" (as it is commonly but inaccurately expressed) the implied contract intended by the parties is that the agent is entitled to commission on that which the purchaser located by him purchases, a commission calculated on the price of that which the purchaser purchases. The agent must of course show the necessary causal relationship between the steps taken by him and the subsequent purchase by the purchaser. I shall return to this aspect later. Further, the purchaser must in fact purchase and there is no obligation on the vendor to accept the person who is located by the agent and thus to facilitate the earning by the agent of a commission. It used commonly to be thought otherwise but the contrary view was definitively displaced by Luxor (Eastbourne) Ltd. v. Cooper [59] . But no question on this aspect arises in the present case.
Next, the implied contract contained no condition that commission would only be payable in respect of a purchase by a person known by the respondent to have been introduced by the appellant. There is no common understanding in our community, nor was there any evidence of a particular usage, which would import such a requirement. If a proposing vendor commissions an agent to sell his property he takes the risk that the person who is in fact located by the agent may not disclose to him the fact that he has so been located. If he wishes to guard against that risk, he may do so by a term in the contract commissioning the agent or by a warranty from the purchaser in the contract of sale.
Lastly, the implied contract contained no condition that the property, or the interest therein, in respect of the sale of which the appellant claimed commission, should be purchased in the name of a purchaser personally located by the appellant. It would be sufficient that the named purchaser be one nominated by the person located or one who becomes the purchaser through the instrumentality of the person located by the appellant. We must seek in this connexion to give a content to the implied contract between the appellant and respondent which accords with business sense. Substance, not legal form, in such a context must be sought in order to determine that content. For example in Gunn v. Showell's Brewery Co. Ltd. and Crosswell's Ltd. [60] a brewery company agreed with an agent that "in every case when we purchase properties, houses, or businesses introduced by you we agree to pay you 5 per cent on the amount of the purchase " When the agent introduced a suitable business the company set up a subsidiary company which became the actual purchaser. It was held that the parent company was liable to pay commission. In Allen v. Anderson [61] an agent was instructed by the two owners of all the shares in a company to sell the property owned by the company. It was held that the agent could recover the commission from the shareholders in the company when they sold their shares to the prospective purchaser of the property introduced by the agent. However, in this connexion also, there must be established the necessary causal relationship between the location of the purchaser and the subsequent purchase and again I reserve consideration of this aspect.
(2) Did the events which happened result in the execution by the appellant of a consideration upon which an implied promise to pay commission depended?
On its face the sale which took place was from the respondent to Stocks & Realty (Sydney) Pty. Ltd. Loblay and Harvey's company, Ann Arbor Investments Pty. Ltd., on the exchange of contracts became, in my opinion, entitled to a one-half equitable interest in the property as a result of the collusive agreement of 6th May 1968. I read cl. (c) of that agreement as providing that whichever of the two parties thereto should sign the contract of sale it would both complete the purchase and carry out the redevelopment of the site "jointly on a basis of equality". Both the purchase of the site and the re-development were to be part of a joint venture. Before completion of the purchase each party was required to provide in cash approximately $500,000. The use of the words in cl. (d) "equity capital" shows that the parties intended that this would be in return for the issue of shares in the purchaser company. An equal shareholding on each side was intended. The clear inference is that the consequent $1,000,000 would go in payment of part of the purchase price of the property. It may also be inferred that the balance of the purchase price and the costs of redevelopment, subject to the obtaining of funds by sale and lease back under cl. (e), would be borrowed on security because there is a promise in cl. (h) to give personal guarantees if necessary. Now if before redevelopment the joint venture had terminated for any reason, it is quite clear that the party who happened to have been the purchaser could not have claimed beneficial ownership of the whole property. Equity would have required that the property be held in trust for both parties jointly, subject to any necessary winding up of the joint venture in accordance with the principles governing such a venture. It is not to the point that the agreement of 6th May was not as a whole specifically enforceable. Once the property was purchased equity would fasten on to the property the rights in respect of the property intended by the parties.
Thus Ann Arbor Investments Pty. Ltd. became entitled to a one-half interest in the whole of the property. No question arises in this case of a contract going off after exchange. The purchase was completed through the medium of the company Stocks & Realty (Sydney) Pty. Ltd. in which by the time of completion Ann Arbor Investments Pty. Ltd. held fifty per cent of the shares. Under the implied contract which existed between the appellant and the respondent and which I have enunciated under (1) above, the consideration upon which the implied promise to pay commission depended became executed, provided that there was the requisite causal relation between the purchase and the actions of the appellant. The facts that the interst of Ann Arbor Investments Pty. Ltd. was a one-half interest, that it was an equitable interest and that the transaction of sale and purchase was in the name of a nominated company do not take the events which happened outside the terms of the implied contract; nor does the fact that the Loblay interest was not known to the respondent, unless for that reason or any other reason in addition or alternative thereto there is not the necessary causal relationship between the location by the appellant of Loblay and Ann Arbor Investments Pty. Ltd. and the subsequent purchase of the one-half interest. To this I now turn. The phrase that is time honoured in this context is "effective cause" or "efficient cause", that the agent was an effective cause or the effective cause. See Anderson v. Densley [62] . The inquiry is a factual one and it probably does not matter in the long run whether the definite or indefinite pronoun is used before the words "effective cause". Thus in Burchell v. Gowrie and Blockhouse Collieries Ltd. [63] Lord Atkinson used the phrases "the effective cause" and "an effective cause" without distinction between them. In almost any factual situation a result will have more than one cause and if there could only be one effective cause in relation to a sale within the meaning of the implication, then there are plenty of events in this case which would have strong claims for the title in competition with the appellant's actions. "Effective cause" means more than simply "cause". The inquiry is whether the actions of the agent really brought about the relation of buyer and seller and it is seldom conclusive that there were other events which couuld each be described as a cause of the ensuing sale. The factual inquiry is whether a sale is really brought about by the act of the agent: Green v. Bartlett [64] quoted in Burchell's Case [65] .
On the implied contract in the present case there is only one aspect which makes one pause in determining that the appellant was the effective cause of the purchase by Loblay's nominee company Ann Arbor Investments Pty. Ltd. of its one-half equitable interest in the property, namely, that the respondent did not know of that interest. If it had known, there could never have been in common sense any question but that a commission was payable to the appellant.
But if it be accepted that the respondent had no knowledge of the collusion between the proposing purchasers before the exchange of contracts despite the appellant's letter of 14th May 1968, then it may be said that from the respondent's point of view the purchaser was Stocks & Holdings Pty. Ltd. and the price of $1.8 million was not to have any commission taken out of it. In that sense the respondent's ignorance caused the sale.
The fact that a vendor agrees to sell at a certain price to a certain person under the belief that on such a sale no commission will be payable to an agent does not prevent the agent being an effective cause of the sale. This is so even though the vendor satisfies the court that he would not have sold to that purchaser at that price if he had known that the agent had introduced that purchaser. It was no part of the contract between the agent and the vendor that the vendor should know of the agency when he did that act which ultimately brought a sale into existence, that which in any sense was a cause of the sale, namely, the entry into the contract of sale. On the contract which arose in the circumstances of this case knowledge of the identity of the purchaser of the one-half interest, being no part of any condition of the contract, did not relevantly affect the fact that the appellant's act really brought Loblay and his company into the negotiations which led to a sale in which that company had a half interest.
This conclusion does not depend upon any generalization that two agents who separately introduce the same purchaser may both be effective causes of a sale. That rare case, if it exists at all, can be left until it arises. If and when it does, I do not think that it will be simply solved by seeking to distinguish between an effective cause and the effective cause of a sale. I do not find it necessary to determine whether certain dicta in L. J. Hooker Ltd. v. Dominion Factors Pty. Ltd. [66] are correct.
It may also be mentioned that it is of no significance that the respondent withdrew its instructions to the appellant on 14th May 1968 almost a month before exchange of contracts and therefore well before the event on which commission was to become payable. It is well established that this does not defeat the appellant.
If he was generally employed to sell, and thereafter gave an introduction which resulted in a sale, he must be held to have earned his commission, although he did not make the contract of sale or adjust its terms; because, in that case, he had implemented his contract by giving the introduction, and his employer could not defeat his right to commission by determining his employment before the sale was effected. (Toulmin v. Millar, per Lord Watson [67] ). On the giving of general instructions the respondent clearly in the circumstances of this case undertook to pay commission to the appellant in respect of any action of the appellant which had the necessary causal link with the later purchase. 1. (1887) 58 L.T. 96, at pp. 96-97.
The revocation of the agent's retainer did not affect the right to this commission although it may be noted that sometimes in these circumstances the amount of commission has been described as damages, Burchell's Case [68] , a description which was based on a view of the relationship between a vendor and a real estate agent which has hardly survived Luxor (Eastbourne) Ltd. v. Cooper [69] .
The appellant was entitled to commission on that sale of which it was the effective cause within the terms of the implied contract between the parties. That was a sale of a one-half interest in the property. The commission agreed to be paid was that which was reasonable and, as I have said, a good guide to what is reasonable is that prescribed by the Real Estate Institute of New South Wales for its members. A sum of $28,480 is the commission by this scale on a price of $1,800,000. There is no evidence of the exact amount under that scale on a price of $900,000 but in the absence of any other evidence it should be determined that a commission of $14,240, being half that payable on a sale for twice the amount, is a reasonable sum.
The appellant claimed primarily that it was entitled to commission on the whole price. This claim depended upon the submission that it was in a relevant sense an effective cause of the sale of the whole property. Upon the facts it is sufficient to say that it was not.
Though the appellant was clearly suing on an implied contract and could have sued on a common money count the pleader sought in alternative ways in the declaration to spell out the terms of such an implied contract. The first two counts alleged:
At first instance the trial judge held that neither contracts alleged in these first two counts was established. There was no cross-appeal by the present appellant.
The trial judge held that the contract alleged in the third count had been established, had been performed and that the respondent was therefore liable to pay the full commission. On appeal the New South Wales Court of Appeal held by majority that the contract alleged in the third count had not been performed.
The condition alleged in the third count was that the respondent would pay to the appellant commission at the rate prescribed by the Real Estate Institute of New South Wales upon the appellant introducing to the respondent a person who became the purchaser of the property at the price and on the conditions acceptable to the respondent. I have concluded that what the appellant did was to introduce a person who became a purchaser of a half interest in the property. Does that mean that the appellant fails on the pleadings? I do not think so. First, in circumstances such as the present where the agreement to pay depends on no written agreement or any agreement to be determined from contested parol evidence but on an implied agreement in the manner which I have earlier discussed no purpose is served by such a rigid application of the rules as to pleading. If necessary an amendment could be made to ensure that the pleading conforms with the conditions implied in the contract. But, secondly, there is no language in the count which expressly states that the condition to be performed by the agent can only be performed in respect of the whole property and the reference to "property" in the count is in my opinion sufficient in the circumstances to comprehend a part of the property or an interest in the property. The appellant was therefore entitled to judgment on the third count. The fact that a sum of $28,480 was claimed and that liability was denied by the plea does not make the issue one of that sum or nothing. The issue in this respect is the amount of the debt which is proved, an amount which, as I have said, should on the evidence be determined to be $14,240.
I would therefore allow the appeal, set aside the judgment of the New South Wales Court of Appeal and enter verdict and judgment for the appellant in that sum.
As commercial transactions become more complicated, it is increasingly necessary to adapt the rules governing them. Professor Roebuck points out that "It has never seemed worthy of comment that we do not expect the general principles of the law of contract to cope with the special problems of many of the most important contracts we should be happy with our anomalies and exceptions, and look for more ways of creating new principles to deal with problems of limited scope" ("The Crisis of Contract", Tasmanian Law Review, vol. 3 (1970), pp. 192-193). (See also Gilmore, The Death of Contract, (1974).)
The law relating to real estate remuneration is not governed simply by the general law of contract, the artificialities of which are often ill-suited to the area. Commercial realities have often been recognized. The corporate veil, for example, has been torn away, with a result indefensible in strict contract but conforming with quasi-contractual notions of fairness and justice.
It would be unfortunate for the profession of real estate agents (and for the public dealing with them) if special contracts must be used to cover unexpected circumstances. Rather, the general law of contract should be modified to cope with the special problems of real estate agents' remuneration.
I agree with the analysis of the transactions by Jacobs J. The agent was the effective cause of a purchase by Ann Arbor Investments Pty. Ltd. of a half interest in the property, although there was no separate sale of a half interest in the property. From the vendor's point of view, there was a sale of the entire property. From the agent's point of view, there was a sale (which it could claim to have effectively caused) of an interest in half the property which was, from a commercial point of view, inextricably bound up with the vendor's sale.
The solution in this circumstance is not found in a liability in the vendor either for the commission on the sale of the whole, as the agent was not the effective cause of its sale, or for commissin on sale of a half interest (which, on the usual professional charges, would be more than half the commission on the sale of the whole), as there was no separate sale of the half-interest. If the terminology of contract is to be used, I would imply the term in the original vendor-agent agreement that, in the events that have happened, the vendor would be liable for half the usual commission on the sale of the whole property, that is, $14,240. This would be a reasonable commercial expectation.
The appeal should be allowed, the judgment of the Court of Appeal set aside and a verdict and judgment for the appellant entered in that sum.
LJ Hooker Ltd
WJ Adams Estates Pty Ltd