Victorian Civil and Administrative Tribunal|2004-06-30

Maguire v Flinders Reality Pty Ltd [2004] VCAT 1332 (30 June 2004)

Fair Trading Act 1999; Real Estate Agent; Entitlement to Commission; Estate Agents Act 1980; Rectification of Engagement Agreement; Quantification of Commission.

Flinders Reality Pty Ltd (ACN 072 227 886) T/as Biggin & Scott Elsternwick

1. The agreement between the parties dated 5 July 2002 be rectified and the agent referred to therein be named as Flinders Reality Pty Ltd (ACN 072 227 886) trading as Biggin & Scott (Elsternwick).

2. (i) The parties are within 21 days to arrange with the Principal Registrar a time for the hearing of submissions as to the form of Orders to be made and as to the question of costs.

(ii) In the event the parties are able to reach an agreement, upon the parties written confirmation, the Tribunal will make orders "on the papers" without the need for further appearance.

1 In these reasons I will refer to Rachel Louise Maguire as the Vendor and Flinders Reality Pty Ltd, t/as Biggin & Scott Elsternwick, as the Agent.

2 These proceedings are concerned with the entitlement, if any, of the Agent to commission following the sale of the Vendor's property at 32 Hollywood Grove, Carnegie (the Property) at an auction conducted by the Agent on 6 July 2002.

3 Section 49A of the Estate Agent Act 1980 provides:-

"(1) An estate agent must not obtain, or seek to obtain, any payment from a person in respect of work done by, or on behalf of, the agent or in respect of any outgoings occurred by the agent unless -

(a) The agent holds a written engagement or appointment that is signed by the person ..."

4 Section 50 of the Estate Agents Act 1980 provides:-

"(1) ... an estate agent shall not be entitled to sue for or recover or retain any commission or money in respect of any outgoings for or in respect of any transaction unless:

(a) at all material times in relation to the transaction he is the holder of an Estate Agent's licence; and

(b) the agent has complied with Section 49A(1) with respect to the engagement or appointment ..."

5 In support of its claim for commission in connection with the sale of the Property the Agent relied upon an Exclusive Auction Authority document dated 5 July 2002 and signed by Mr Anthony Grimwade who was at all material times a director of the Agent, and, by the Vendor.

6 The Exclusive Auction Authority form described the agent as Biggin & Scott (Elsternwick) Pty Ltd.

7 The agreement dated 5 July 2002 superseded an agreement dated 8 June 2002 in circumstances, which I will detail later in these reasons. For the moment however it is sufficient to note the agreement dated 8 June 2002 was in the name of Biggin & Scott (Elsternwick) Pty Ltd of 376 Glenhuntly Road, Elsternwick and was signed on behalf of the Agent by Mr Grimwade. It was also signed by the Vendor.

8 On the evidence before me I am satisfied, indeed I believe it is common ground, that:-

(i) There was not at any material time a legal entity Biggin & Scott (Elsternwick) Pty Ltd;

(ii) At all times material Flinders Reality Pty Ltd traded as Biggin & Scott (Elsternwick) and was the holder of an Estate Agent's Licence.

(iii) At all times material the Agent carried on its business, as an Estate Agent, at and from 376 Glenhuntly Road, Elsternwick.

(iv) At all times material the Vendor was, and was aware, she was dealing with the entity which carried on business as Real Estate Agents at 376 Glenhuntly Road, Elsternwick under the name of Biggin & Scott (Elsternwick).

(v) On 7 April 2004 the Vendor entered into an Exclusive Auction Authority Agreement with the Agent in connection with the sale of a property at 29 Munster Avenue, Carnegie. The Authority was signed on behalf of the Agent by Mr Grimwade. In that the document the agent was described as Biggin & Scott. Their address was 376 Glenhuntly Road, Elsternwick.

(vi) On 8 September 2000 and 7 January 2001 the Vendor's husband, Martin Maguire entered into Exclusive Auction Authority Agreements with the Agent in connection with the sale of properties at 5 Clifton Street, Caulfield East and 60 Murray Street, Elsternwick. Each of those Agreements was signed by Mr Grimwade on behalf of the Agent and the agent was described in the document as Biggin & Scott (Elsternwick) Pty Ltd.

9 On the evidence I am satisfied that at the time the Vendor signed the Agreement dated 5 July 2002 she was aware that she was entering into an Agreement with the entity which was carrying on business as an Estate Agent at 376 Glenhuntly Road, Elsternwick and in respect of which Mr Grimwade was a director and that she and her husband had previous dealings with that entity in connection with sale of real estate.

"The Tribunal must act fairly and according to the substantial merits of the case in all proceedings".

11 Section 108(2) of the Fair Trading Act 1999 relevantly provides:-

"2. The Tribunal may do one or more of the following in relation to a fair trading dispute -

[The changes made by the 2003 amendments to the Act do not affect the power to order rectification].

12 I am satisfied at the time the Vendor signed the Authority dated 5 July 2002 she was aware she was entering into an Agreement with the Agent. It was the entity with which she and her husband had dealt and which it carried on its business at 376 Glenhuntly Road, Elsternwick. In all dealings Mr Grimwade was the director who acted on behalf of the Vendor and her husband.

13 The doctrine of rectification refers to mistakes in instruments and is an order that an instrument be "rectified" or "reformed" so that the mistake in it will be eliminated. (Carter and Harlend "Contract Law in Australia "1256"). Rectification is concerned with documents and not contracts. Rectification reforms the document, it does not reform the contract.

14 The error made in the document dated 5 July 2002 was simply the addition of "Pty Ltd" to the business name Biggin & Scott (Elsternwick).

15 Pursuant to Section 108(2)(h) of the Fair Trading Act 1999 I will make an order that the Authority Agreement dated 5 July 2002 be rectified so that the agent is identified as Flinders Reality Pty Ltd (ACN 072 227 886) T/as Biggin & Scott (Elsternwick).

16 When that correction is made the evidence satisfies me that the Agent has complied with the requirements of Section 49A and Section 50 of the Estate Agent Act 1980 to which I have referred.

17 On 8 June 2002 the Vendor entered into an Exclusive Auction Authority Agreement with the Agent for the sale of the Property. The period of the Authority was from the date of the signing of the Agreement until 30 days after the auction date, 6 July 2002. The commission payable to the Agent in the event of the sale of the property was to be calculated at the rate of 1.5% of the sale price up to $650,000.00 plus 20% of the amount, if any, by which the sale price exceeded $650,000.00. The parties described the formula by which the commission was to be determined as an "incentive" commission. The Agreement also provided the Agent was to be reimbursed for advertising costs and other related expenses to a maximum of $5,400.00.

18 In the three prior dealings between the Agent and the Vendor and her husband the concept of an incentive commission was employed.

19 In her evidence before me the Vendor said in relation to the commission formula used for the sale of the Property and also used for the three prior sales that the "commissions were proposed by us".

20 The Vendor's husband was a builder who had worked in the building industry since the 1980s. He had renovated a number of properties over the years, including the Property in question. The three prior dealings between the Agent and the Vendor and her husband all involved properties which had been purchased and then renovated by Mr Maguire prior to their re-sale.

21 In the history which was annexed to her application the Vendor referred to a series of complaints made to the Agent arising from what she described as an "alleged unsatisfactory performance" on the part of the Agent culminating with the Vendor sending a letter by facsimile to the Agent on 3 July 2002 stating:-

"Following your failure to return our phone calls to contact us A.S.A.P. on three occasions this week we hereby withdraw 32 Hollywood Grove from sale immediately we instruct you to cancel all advertisements, the inspection on Thursday 4 July and the auction on Saturday July 6th."

22 A great deal of the hearing time was taken up with evidence from the Applicant, her husband and Mr Grimwade regarding the alleged unsatisfactory performance of the Agent. The evidence indicated that although a number of members of the staff of the Agent were from time to time involved with the sale of the Property, apart from the conduct of the auction itself, most of the relevant work involved Mr Grimwade and an employee, I gather an estate agent, Shireen Brown.

23 Much of the criticism by the Vendor was directed to Ms Brown.

24 The complaints of alleged unsatisfactory performance ranged from trivial, one spelling error on the auction board, a person attending at the property on one of the occasions when it was opened for inspection on 29 June 2002 put chewing gum onto a rug, to the more serious.

25 The Vendor's first expressed concern was that only one staff member, Shireen Brown was involved. The Vendor was critical of the performance of Ms Brown throughout the selling period. It was said that she made errors, under-quoted the property and failed to attend appointments. It should be understood that at the time of this Property was on the market the practice of estate agent's under quoting was rife. It was a case of "quote is low, watch it go". Whatever ethical view might be taken of the practice it was not at that time unlawful and as I have said it was a practice which was widespread throughout the real estate agent community. While I am satisfied that the Vendor consistently expressed her concern about the property being under-quoted in the end it seems to me that whether or not that was an appropriate approach in the marketing of the property was a matter of opinion and it would appear the opinion of Ms Brown differed from that of the Vendor. The failure to keep appointments included the failure to attend an appointment on 26 June 2002 with two Age journalists in circumstances where a potential buyer turned up but Ms Brown did not attend as had been arranged. Her failure to do so breached the reasonable skill standard.

26 On 16 June 2002 the property was opened for an inspection and both Mr Grimwade and Ms Brown were present. A large number of people attended. So much so that the Vendor was concerned about security because there were only two representative of the Agent present managing the large number of people. Also they ran out of brochures on that occasion. The fact that there were insufficient brochures brought to the property to satisfy the demand may possibly be excused on the first occasion.

27 On 19 June 2002 the property was again opened for an inspection. A large number of people attended but Ms Brown was on her own, apparently another employee of the Agent did not attend as expected. Insufficient brochures were again provided and Ms Brown was not able deal with all those who where in attendance. The Vendor's dissatisfaction with this is justified

28 On 30 June 2002 there were insufficient brochures at the property when it was again open for inspection. Again, unsatisfactory on any view

29 There were examples of spelling and other errors in newspaper and magazine articles and advertisements regarding the sale of the property. For the present purposes it does not seem necessary that they be detailed. The Vendor no doubt was irritated by these errors for which she held the Agent responsible. While it is understandable that she would reach that conclusion the possibility that the errors were errors of the publisher needs to be kept in mind.

30 The Vendor also referred to the absence fixed pointer signs and mobile pointer signs at the times when the property was opened for inspection.

31 The concerns that the Vendor had as a result of the matters to which I have referred were heightened by her inability to speak to any of the Agent's sales staff for three day from 1 July 2002. They were all away from the office at a three-day seminar.

32 On 3 July 2002 a letter signed by the Vendor and her husband was transmitted by facsimile to the Agent. The opening paragraph of the letter was as follows:-

"Following your failure to return our phone calls to contact us A.S.A.P. on three separate occasions this week we hereby withdraw 32 Hollywood Grove from sale immediately we instruct you to cancel all advertisements, the inspection on Thursday 4 July and the auction on Saturday July 6th."

33 The letter provoked an immediate response. Mr Grimwade telephoned and sent a letter. A bunch of flowers was also sent to the Vendor. The inspection scheduled for 4 July 2002 went ahead.

34 The arrangements made for the inspection on 4 July did not proceed smoothly. Sometime shortly prior 4 July the Agent had a sticker prepared which was attached to the "for sale" sign at the property which said boldly, "OPEN THIS THURSDAY 4TH JULY AT 1.00 - 1.30 PM". On 3 July 2002 in the Real Estate classified advertisement page of the Age newspaper an advertisement appeared indicating the Property was open for inspection "THUR 1.30 - 2.00."

35 The confusion which may have been caused because of the conflicting information contained in the sticker on the for sale sign and the information contained in the Age advertisement was overcome by having the property open for inspection from 1 till 2 pm on 4 July 2002.

36 The threatened action by the Vendor to cancel the auction was serious indeed. No doubt many of the matters to which I have referred as being the subject of complaint by the Vendor could not be classified as trivial. It is, however, to be noted that in the letter of 3 July the Vendor referred only to the failure of the Agent's sale staff to respond to telephone messages, which had been left.

37 The Vendor's threat should be viewed in the circumstances, which existed at the time. The marketing campaign for the property had on any view been an extraordinary success. In the four-week period the property was marketed something of the order of 600 people had attended at times when the property was open for inspection. The Agent had provided a set of the contract documents to at least six people and at least four genuine buyers had been identified. I agree with the assessment made by Mr Grimwade, that by 3 July the Vendor and her husband were aware they were going to achieve a "top result". I am also of the view they realised there was some vulnerability on the part of the Agent because of its errors and mistakes, and at times lack of attention, and that gave them an opportunity to renegotiate the commission arrangement. At a meeting which was held in the evening of 4 July a sticker which the Vendor and her husband had prepared stating "AUCTION CANCELLED" was produced. The sticker was capable of being placed across the for sale sign at the property.

38 During the course of the hearing the Agent was subjected to criticism. I am sure many of the complaints made by the Vendor in her evidence and on her behalf during the course of the hearing were exaggerated. For instance, Mr Grimwade was cross-examined about the confusion likely to have been caused by the sticker on the for sale sign saying that the property was open for inspection on 4 July between 1.00 and 1.30 pm and the Age advertisement which appeared on 3 July indicating that it was to be open from 1.30 to 2.00pm. It was suggested to Mr Grimwade that he was very reluctant to have the property open for inspection for 1 hour and that he had said, in effect, that anyone arriving to inspect before 1.30pm "could wait". Much was sought to be made about the fact that the suggestion that the property be opened for inspection for 1 hour was a suggestion made by the Vendor's husband and that Mr Grimwade was very reluctant to agree to that proposition. I am not sure who made the suggestion that the property be open for inspection for 1 hour. Clearly it was the common sense solution. But I do not accept there was a reluctance on the part of Mr Grimwade to agree to the property being open for inspection to an hour.

39 Throughout the hearing of the matter it was asserted that the Agent had conducted itself in an unprofessional manner. Notwithstanding the matters to which I have referred, and I do not underrate their significance, I do not believe the charge of unprofessionalism is justified. The action of the Agent in agreeing to vary initial commission agreement in order that the auction proceed on 6 July is a clear case of the Agent putting the interest of the client ahead of its own interest. The advertising budget was agreed at $5,400.00 and that amount was exceeded. The Vendor suggested the concession made by the Agent in not seeking reimbursement of advertising expenses beyond $5,400.00 was because of commissions or rebates, which the Agent may have derived. However on net basis it would seem that the additional expenses incurred by the Agent for advertising and which were not passed on, were of the order of $1,000.00.

40 On the day of the auction it was raining very heavily. At least one of witnesses described the rain as falling vertically. In spite of that, the auction had attracted a large crowd of people, estimated by Mr Denver, the director of the Agent who actually conducted the auction, to be of the order of 200. There were, he identified, four or five separate genuine bidders. The opening bid was $640,000.00 and the property was ultimately sold for $707,000.00. While some auctioneers may have opted to conduct the auction from the comfort of the front verandah, Mr Denver went out on to the nature strip, in the pouring rain, to conduct the auction so he could ensure that during the course of the auction he was able to identify bidders.

41 The words used by counsel who appeared for the Vendor to describe the conduct of the Agent in the management of the sale included "high handedness", "general incompetence", "adventitious", "opportunistic", "contumelious". None of those expressions, in my view can be justified.

42 In effect, the threat by the Vendor to the cancel auction amounted to an assertion the conduct of the Agent was such as to constitute a serious breach of the Agreement made on 8 June 2002, which amounted to a repudiation of the obligations undertaken by the Agent in entering into that Agreement. On the evidence I heard, while I am satisfied there were breaches, I am not satisfied those breaches were of such a magnitude which would amount to a repudiation of the contract. And given the price realised at the auction, the Vendor has not proved any loss caused by those breaches.

43 I have dealt with these matters at some length in these reasons. Because of the time spent on them during the course the hearing it seemed appropriate that I should record my views on the matters which were raised. However, notwithstanding the time spent on those issues during the hearing and the conclusions, which I have expressed, none of those matters is crucial to the issues, which I have to determine.

44 There was a meeting on the evening of 4 July 2002, after the "open for inspection" where the Vendor and her husband and Mr Grimwade were present. By that time the Vendor had recanted the threat to call off the auction and the "open for inspection" scheduled for 4 July. It was also agreed that the auction was to proceed on 6 July 2002. It was however necessary for a written agreement to be reached in relation to the Agent's commission. At that meeting Mr Grimwade filled in a further Exclusive Auction Authority form. There were two significant variations to the form of the Agreement, which had been signed on 8 June 2002. Firstly, the Agent was to relinquish any claim to commission in respect of any sale, which may occur after the expiration of the Authority period, three days after the auction date.

45 Secondly, the Agent's commission was to be calculated by a flat fee of $5,000.00 (plus the GST) plus 7.5% of any additional amount over $600,000.00. There is however no suggestion made by the Agent that the Vendor did on that occasion agree to that commission proposal. Rather it was left on the basis that she would consider the position overnight and speak to Mr Denver, a director of the Agent, who was to conduct the auction and who it was arranged would meet with her on 5 July 2002.

46 The meeting with Mr Denver duly took place on 5 July 2002. The meeting was at the Property and in his evidence Mr Denver said that both Mr and Mrs Maguire were present. He had not met them before. The meeting was arranged to discuss the problems, which were still not resolved, and to get the new authority signed. He had the authority dated 8 June 2002 and at the request of the Vendor's husband handed it to him. Mr Maguire handed the authority form, which had been prepared by Mr Grimwade the day before but, which had not been signed by the Vendor to Mr Denver. With it was an attachment which stated:

"It is agreed that after 1 pm Tuesday 9 July 2002 Biggin & Scott (Elsternwick) Pty Ltd will have no claim against the Vendor for commission in relation to any sale which may take place subsequently to any person introduced to the property during the authority period."

"* Commission payable to Agent to be determined by the Vendor following the satisfactory settlement of the sale."

47 In his evidence Mr Denver said he was not happy with the form of the addendum and there was some discussion particularly in relation to the provision relating to commission. During the course of that discussion he said he was told by the Vendor's husband on at least two occasions words to the effect "good price - good commission, bad price - bad commission".

48 In her evidence the Vendor said of the meeting that the addendum was shown to Mr Denver who did not appear to have any difficulty in understanding its contents. She said she did not recall her husband saying words to the effect "good price - good commission ...". In his evidence the Vendor's husband said he had not said words to the effect "good price - good commission ...".

49 I had the opportunity of observing the Vendor and her husband and Mr Denver giving their evidence. On this issue I accept the evidence of Mr Denver that a representation to the effect that if the price achieved was good then commission to be fixed would also be good was made by Mr Maguire. In coming to that conclusion I note that Mr Denver was an estate agent of some considerable experience and it would appear some considerable ability. To suggest that he would accept and sign without discussion a document purporting to give the Vendor the right to determine the amount of commission would be akin to signing a blank cheque. It would be extraordinary to expect that such a provision would be agreed to without any discussion.

50 The discussion about the commission and the manner in which it would be fixed took place, I am satisfied, before the authority and the addendum was signed by Mr Denver on 5 July 2002. Simultaneously with the signing of the authority and addendum the initial authority dated 8 June 2002 was cancelled and the cancellation was initialled by Mr Denver. I am satisfied Mr Denver was induced to signing the new authority and the varied commission arrangement by reason of the representations made by Mr Maguire, in the presence of the Vendor, and as I would find with her authority and on her behalf, to the effect that if a good price was achieved then good commission would be allowed.

51 In deciding what commission should be allowed the Vendor is accordingly estopped from denying that the determination of the commission to be paid to the Agent must take into account that as a good price was achieved good commission should be allowed.

52 On the question of the price, I did not understand the Vendor to argue against a proposition that a good price was achieved. In spite of the very poor weather condition a very keen auction took place, the property was put on the market after a bid of $670,000 had been made and the property was ultimately sold for $703,000.00.

53 The addendum to the Authority signed 5 July 2002 provided the commission was to be determined by the Vendor "following the satisfactory settlement of the sale". This represented a departure, of some significance, from the norm, namely, the agent's commission is earned on the coming in to existence of an unconditional contract of sale. Commission was not payable by the Vendor on the signing of the contracts at the conclusion of the auction, as would be the usual case that rather on settlement, which did not take, places until late November early December 2002. That variation, I conclude is another indication of the Vendor seeking to maximise her position by reason of the errors made by Agent and, it is to be noted, that when the Agent raised the question of commission following the auction, the point was taken that it was premature to do so as settlement had not taken place.

54 Finding as I have, that the determination of the commission had to take into account the representation, "good price - good commission; bad price - bad commission." It seems to me that is akin to the Vendor representing her determination of commission would be reasonable in the circumstances.

55 I accept the Vendor's submission the question of commission is to be governed by the contract and the principles of quantum meruit do not apply.

56 For the reasons set out in paragraph 15 of its submission I agree with the Agent's contention the letter of 18 December 2002 is not a determination in accordance with the contract. The evidence shows a series of offers and counter offers in relation to commission but no agreement has been reached. It is therefore necessary for me to determine the amount of the commission in accordance with the contract. That, among other things, is to take into account the representations made shortly prior to Mr Denver signing the Authority and Addendum on 5 July 2002.

57 There could be no argument but that the price achieved at the auction was excellent. That result of course reflects the quality of the Property. But the role of the Agent in the marketing and the conduct of the auction was also an important factor. In spite of the shortcomings, the Property attracted a great deal of attention when it was opened for inspection in the weeks leading to the auction. On those occasions the Agent had an important role in ensuring those people who were genuinely interested were encouraged to attend the auction. Regard also should be paid to the Agent's success in obtaining editorial coverage for the Property and the auction in a number of publications. In spite of the inclement weather there was a very large crowd in attendance at the auction. Mr Denver conducted the auction from the nature strip, not the comfort of the front verandah, and encouraged strong bidding.

58 In light of the Vendor's representation, "good price - good commission" and for the reasons to which I have referred I fix the commission to which the Agent is entitled at $15,000.00. The Vendor is also to pay GST of $1,500.00.

59 I will hear submissions from the parties as to the form of the orders to be made in light of my findings, and on the question of costs. To that end I make the following directions:

(1) The parties are within 21 days to arrange with the Principal Registrar a time for the hearing of submissions as to the form of orders to be made and as to the question of costs.

(2) In the event the parties are able to reach an agreement upon the parties written confirmation the Tribunal will make orders "on the papers" without the need for further appearance.

Fair Trading Act 1999

Maguire v Flinders Reality Pty Ltd [2004] VCAT 1332

At a glance

Court

Decision date

Source

Judgment (86 paragraphs)

Maguire v Flinders Reality Pty Ltd [2004] VCAT 1332 (30 June 2004)

Parties

Legislation Cited (2)