O'Gorman & ors v Albion Park Real Estate Pty Ltd t/as Ray White Albion Park

NCAT Consumer and Commercial|2023-01-09

Application

This application, as filed, seeks orders that the Tribunal determine the reasonable fees (i.e. whether the licensee is entitled to the whole or any part of the commission set out in his statement dated 1 September 2022).
By the operation of section 36(4) of the Property Stock and Agents Act 2002 the applicants seek declarations pursuant to Part 6A and section 79N of the Fair Trading Act 1987 (NSW) ("FTA") that the amount of $28,000 is not due or owing by the applicants to the respondent.
The applicants are deemed to be consumers for the purpose of the Property Stock and Agents Act 2002 (NSW) ("PSAA") and FTA.
The respondent is a licensed real estate agent and a supplier real estate services including the service of selling real estate on behalf of consumers.
On 1 September 2022 the respondent served a statement of claim pursuant to section 36(1) of the PSBAA on the applicants for $28,000 including GST being commission claimed for the sale of 135 Tongarra Road Albion Park.
The applicants filed their application with the Tribunal on 21 October 2022.

Procedural

At a Directions Hearing on 10 November 2022 the Tribunal made orders for the filing a service of documents on which the parties would rely at the final hearing.
The applicants complied with the orders to file their documents on 23 November 2022.
The respondent complied with the orders to file their documents on 22 December 2022.
The application was listed for hearing 9 January 2023.
On 6 January 2023 the applicants sought leave to be represented by their legal practitioner at the final hearing.
The respondent informed the Tribunal by email on 6 January 2023 that if leave was granted to the applicants to be legally represented at the hearing then it also sought leave to be legally represented, but that their lawyer would not be available on 9 January 2023.
The applicants appeared at the hearing in person without their lawyer.
The directors of the respondent, Rob Linnehan and Ben Linnehan appeared in person at the hearing without their lawyer.
Both parties informed the Tribunal that they wished to proceed with the application with the applicants self-represented and the respondent represented by its directors.
The matter was heard at an in person hearing on 9 January 2023.

Evidence

Documents tendered into evidence by the applicants are: 1. Exhibit A1-the applicants' application to the Tribunal filed on 23 November 2022; 2. The oral sworn evidence of Simon Peter O'Gorman
Documents tendered into evidence by the respondent are: 1. Exhibit R1-an Affidavit of Robert John Linnehan sworn 19 December 2022, 2. Exhibit R2-email from Daly Lawyers to Simon O'Gorman dated 23 July 2019, 3. The sworn oral evidence of Robert John Linnehan, 4. The sworn oral evidence of Ben Robert Linnehan.
At the conclusion of the hearing the Tribunal directed that a full copy of the contract for the sale of land giving rise to the claim be filed with the Tribunal. The applicants filed the copy of the contract on 13 January 2023. The respondent filed not further documents in response to the filing of the contract.

Facts found on the evidence

The applicants were the registered proprietors of the property at 135 Tongarra Road Albion Park ("Property"). The applicants inherited the property from their father in about 2016.
The Property adjoins 141 Tongarra Road Albion Park ("141 Tongarra") and at all relevant times 141 Tongarra was owned by another unrelated registered proprietor.
Before engaging the respondent as their agent for the sale of the Property, McDonald's Australia Limited ("McDonalds") contacted the applicants about selling their Property. The applicants understood that McDonalds required both the Property and 141 Tongarra for a viable site for a McDonalds' fast food outlet.
A sale price was negotiated for the Property with McDonalds of $1,300,000 between the applicants' and McDonalds with the offer being subject to development approval of the Property for use of a fast food outlet.
On 9 April 2019 Head of Property for McDonalds, Diana Grosmann, sent to the applicants' solicitor a precedent clause for inclusion in a contract for sale of land making such a contract subject to development approval being obtained. Correspondence continued between McDonalds and the applicants' solicitor negotiating the terms of the proposed of the Property until 22 May 2019 when the applicants' solicitor confirmed to McDonalds that the applicants would proceed with the sale and that McDonalds would prepare the contract.
On 23 July 2019 the applicants' solicitor informed the applicants that McDonalds had withdrawn their offer. The applicants' evidence is that the reason that McDonalds withdrew their offer was because they could not secure the adjoining property, 141 Tongarra.
On 9 October 2019 the applicants entered into a Sales Inspection Report and Exclusive Agency Agreement ("Agreement") with the respondent for the sale of the Property for a period form 9 October 2019 until 30 April 2020 (Clause 1). The Agreement was a standard form Real Estate Institute of NSW Agreement. It included that the respondent's commission would be 2% inclusive of GST. That the respondent's opinion of a current estimated selling price was between $1,150,000 and $1,200,000. The amount that the applicant's instructed the respondent to market the Property for was $1,350,000.00.
Relevantly the Agreement included clauses: 1. Clause 2.i provides: In addition to the exclusive selling rights granted to the Agent under Clause 1, the Principal also grants to the Agent non-exclusive selling rights to the Property commencing on the expiry of the Exclusive Agency Period specified in Clause 1 and until such further time as either the Property is sold or this agreement is terminated by either party giving notice in writing, but without prejudice to either party's rights accrued or obligations incurred prior to the effective termination, now called the "Continuing Agency Period". 1. Clause 3.1 provides: The Exclusive Agent shall be entitled to a fee of 2% (GST incl.) if during the Exclusive Agency Period the Property is sold either (a) by the Agent; (b) bay another agent; or (c) by the Principal. 1. Clause 3.ii provides: The Agent shall be entitled to a fee at the agreed amount if at any time following the expiration of the Exclusive Agency Period the principal enters into a contract for the sale of the Property with a purchaser effectively introduced to the Principal or the Property during the Exclusive Agency Period by the Agent, by another agent or by the Principal. 1. Clause 3.iii provides: The Agent shall be entitled to a fee at the agreed amount if during the Continuing Agency Period the agent effectively introduces to the Principal or the Property a purchaser who subsequently enters into a binding contract.
The respondent's evidence is that from 13 May 2020 the respondent was exchanging text messages with Josh Heffernan, the Business Development Manager of McDonalds, about the sale of the applicants' Property, including on13, 18, 19 May, 3, 9, 26 June, 9, 10, 22, 25 July 2020.
On 10 July 2020 the applicants gave notice in writing that they terminated the respondent's continuing agency agreement.
On 30 September 2020 McDonald's issued to Rob Linnehan, Director of Ray White Albion Park a proposal in writing for the purchase on the Property on the terms set out in the letter as the offer to the applicants. The offer was for a sale price of $1,400,000 including GST and subject to and conditional upon development approval being obtained within 15 months of the date of the contract. The proposal was signed by Josh Heffernan on behalf of McDonalds. The respondent's evidence is that they delivered the offer to the applicants', and they signed it signifying their agreement to the terms of sale.
The applicants contacted Josh Heffernan of McDonalds after terminating the continuing agency agreement and negotiations were revived. The owners of 141 Tongarra were also involved in negotiating the sale of their property to McDonalds. The applicants' evidence is that their solicitor assisted the applicants to negotiate the sale of the Property.
On 19 March 2021 the applicants entered into a contract for the sale of the Property with McDonalds for a price of $1,400,000. Largely in the terms of the offer made under cover of McDonald's letter dated 30 September 2020. The contract prepared by McDonalds describes the applicant vendors agent as Ray White Albion Park, the respondent.
The contract for the sale of the Property was completed in August 2022.
The applicants contend that the respondent was not the effective cause of sale and therefore not entitled to the commission in the amount of $28,000.
A summary of the facts is: 1. Without the intervention of an agent, but with their solicitor's assistance, the applicants had been negotiating with McDonalds until 23 July 2019 to sell the Property at a price of $1,300,000, 2. McDonalds, being unable to reach agreement to purchase the adjoining property, 141 Tongarra, withdrew their offer. 3. The respondent's, Robert Linnehan's, evidence is that he contacted McDonald's "immediately" after entering into the Exclusive Agency Agreement on 9 October 2019 and continued discussions about the sale of the Property with its Business Development Managers, latterly with Josh Heffernan. The Exclusive Agency Agreement ended on 30 April 2020. 4. The Continuing Agency Period commenced on 1 May 2020 until it was terminated on 10 July 2020 5. Text messages were exchanged between the respondent and McDonalds in the period May 2020 until 25 July 2020. The text messages demonstrate the respondent's attempts to bring the negotiations to an agreement on price and terms and conditions of sale. 6. The negotiations were protracted because it was necessary for McDonald to secure both the Property and 141 Tongarra for the development to be viable. 7. The applicants signed an acceptance of McDonald's written offer for the Property in the respondent's office on 20 September 2020. 8. The contract for sale was not entered into until 19 March 2021 despite the acceptance of McDonald's offer on or about 20 September 2020.

Contractual obligations, effective cause of sale and effective introduction

The facts are set out in the Findings found on the Evidence in these reasons.
It is well established that for a licensed real estate agent to be entitled to commission they must establish that they effectively introduced a purchaser to vendor and were the effective cause of sale.
The issue to be determined is whether the respondent was "the effective cause of sale" and if a purchaser "has been effectively introduced" and when the Agreement conferred a right to be paid commissions.
In the present case, the applicants had been in negotiations with their purchaser before entering into the Agreement with the respondent on 19 October 2019. During the term of the Exclusive Agency Period and then the Continuing Agency Period, discussions took place between the respondent and McDonalds. No proposed sale was agreed upon during that period.
At a meeting on 30 September 2020 at the respondent's office with Greg O'Gorman and Mrs O'Gorman, Simon O'Gorman, and representing McDonald's, Josh Heffernan and John Waight together with Rob Linnehan agreement was concluded for the sale of the Property at a price of $1,400,000. The McDonalds letter of offer dated 30 September 2020 sent to the respondent and subsequently signed by the applicants accepting the offer supports the respondent's contention that the respondent was involved in the negotiations after the termination of the ongoing agency agreement by the applicants in July 2020.
Ultimately the contract for the sale of the Property was entered into between the applicants and McDonalds on 19 March 2021 some 8 months after the applicants terminated the continuing agency agreement. The contract for the sale of the Property was interdependent and conditional upon the completion of the sale of 141 Tongarra to McDonald's.
The Tribunal will also consider what, if any effect, the inclusion of its name on the contract has in establishing it was the effective cause of sale of the Property. The evidence is that the contract was prepared by McDonald's solicitor rather than the applicants' solicitor as would otherwise be usual practice in conveyancing transactions. The inference being that the sale being subject to development approval, McDonalds required particular and unique provisions to them to be included in the Special Conditions.
The respondent's name has been included on the contract by McDonald's as the applicants' selling agent. The contract contains a Special Condition 44: Agent's commission The Purchaser represents and warrants that it was not introduced to the Property or to the Vendor either directly or indirectly by any real estate agent or other person entitled to claim commission or fee from the Vendor other than the Vendor's agent named in this contract.
The contract was submitted to the applicants' solicitor for approval before the contract was entered into on 19 March 2021. The copy of the contract adduced in evidence does not show Special Condition 44 struck through or altered. The Tribunal finds that on the contract signed by the applicants the McDonald's agreed with them that the only estate agent entitled to claim commission was the respondent named on the front page of the contract. By not challenging Special Condition 44 before entering into the contract it can be construed that the applicants did not object to the respondent being nominated as the selling agent on the date of the contract. 19 March 2021.

Pre Agreement negotiations

With the purchaser, McDonald's, withdrawing an original offer of $1,300,000 on or about 23 July 2019 those negotiations without the intervention of any agent were at an end.

The Agreement

By entering into the Agreement with the respondent on 9 October 2019, it was open to the respondent to offer the Property to any prospective purchaser, including McDonald's. The marketing of the Property to McDonald's can be seen as a separate and distinct attempt to sell the Property McDonalds apart from the previous negotiations.
The Clause 3.i provides that the respondent is entitled to its commission fee of 2% if during the Exclusive Agency Period the Property is sold either by the Agent, by another agent or the Principal. Clause 3.ii provides that the Agent is entitled to a fee at the agreed amount if at any time following the expiration of the Exclusive Agency Period the Principal enters into a contract for the sale of the Property effectively introduced to the Principal or the Property during the exclusive Agency Period by the Agent, by any other agent or by the Principal.
The triggers for the applicants to pay commission: 1. under Clause 3.i, is that the Property is "sold" by either the Agent, any other agent or the Principal during the Exclusive Agency Period. The Property was not sold during the Exclusive Agency Period. Clause 3.i will not apply. 2. under Cause 3.ii following the Exclusive Agency Period the Principal enters into a "contract for sale" for the Property with a purchaser effectively introduced to the Principal during the Exclusive Agency Period by the Agent, any other agent or the Principal. Although the respondent marketed the Property to McDonald's during the Exclusive Agency Period, no offer was received by the applicants from McDonald's during the period. McDonald's was introduced to the applicants by the respondent during the Exclusive Agency Period. 3. Under Clause 3.iii at the agreed amount if during the Continuing Agency Period the Agent effectively introduces a purchaser who subsequently enters into a binding contract. The purchaser was introduced to the applicants during the Exclusive Agency Period and negotiations were revived after it became a Continuing Agency Agreement.
If the applicants are to succeed to obtain the order sought by them that are not required to pay the respondent's commission, they must satisfy the onus of proof that they were not introduced to McDonald's during the Exclusive Agency Period, or ongoing Agency Period.
The Court of Appeal in Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall [2020] NSWCA 205 ('Outerbridge') found that a revived sale in which a second agent was found to be an effective cause of revived sale. The Court found that mere introduction of the buyer is insufficient to establish the effective cause of sale.
Senior Member Sarginson in Simeon Property Pty Ltd v Chadban; Chadban v Simeon Property Pty Ltd [2021] NSWCATCD 156 ("Simeon") at [135] set out a useful summary of the legal principles. 135 Having considered the relevant authorities, the following legal principles are applicable: (1) Interpretation of the provisions of an agency agreement involve applicable principles of construction of contractual terms; and a factual finding as to whether or not the contractual clause is enlivened (Outerbridge at [2]). (2) Although "effective cause" of a sale and "effectively introduced…the purchaser to the property" are not necessarily identical concepts, the concepts are interrelated (Outerbridge at [59]; Ken Wolf Real Estate Pty Ltd v O'Holloran [2012] NSWSC 993 at [46]; Depune Prestige Residential Marketing Pty Limited v Depune Pty Limited [2008] NSWCA 179 ('Depune') at [61]). That is because an agent is not entitled to a commission from its principal if it does nothing more than finding a person who is ready, willing, and able to purchase, or makes an offer to purchase (LJ Hooker at p 172); or merely locating or finding an individual who independently of any further action by the agent later agreed to purchase the subject property (Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] HCA 2; (2001) 202 CLR 351 "(Moneywood") at [82]). To be an "effective introduction" there must be a sufficient casual nexus between the "introduction" of the purchaser and the ultimate sale of the property to the purchaser (Depune at [61]). (3) The actions of more than one agent can be an effective cause of the sale. The test is not whether the actions of the agent were the sole cause of the sale. The appropriate analysis is whether the actions of the agent were "an effective cause" of the sale (Outerbridge at [60]). (4) Although it is possible that two agents are independently an effective cause of the sale and thus both entitled to a commission, this will only arise in "rare cases" (LJ Hooker Ltd v WJ Adams Estates Pty Ltd [1977] HCA 13; (1977) 138 CLR 52 ('LJ Hooker') at pp 61 and 86; Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117 ('Emmons') at [47]). (5) Whether the actions of the agent were sufficient to be an effective cause of the sale involves consideration of all circumstances which may have had some causal relationship to the sale. If there are two successive agents involved, this includes consideration of the work performed by the second agent (Outerbridge at [62]-[64]). (6) To determine whether the actions of an agent were sufficient to be an effective cause of the sale, the Tribunal must consider whether the actions of the agent "really brought about the relation of buyer and seller; that is, whether a sale is really brought about by the actions of the agent" (Outerbridge at [61] applying the principle set out in LJ Hooker and subsequently applied in Moneywood). (7) The actions of the agent must have "flowed through…thus causing the ultimate sale" and the purchaser "continued to be influenced" by the actions of the agent in the decision to purchase (Emmons at [45]). As stated in Outerbridge at [80] "Ultimately, the issue is not so much whether the purchaser has been influenced but the extent of the influence on the sale that in fact eventuated including its price." (8) The mere fact that an agent introduces a prospective purchaser to a property and that person (who ultimately purchases the property) makes an offer is not, of itself, sufficient to establish the actions of the agent were an effective cause of sale. Relevantly, if a second agent conducts negotiations on price which were commenced during the period of the first agency, the Tribunal must consider whether the first agent "could and would have overcome" the difference in the positions of the parties if it had not been deprived of the opportunity to do so (Emmons at [3]; Outerbridge at [68])). (9) If the first agent, by its actions, renders itself unable to sell the property; or there is an "apparently unbridgeable gap" in negotiations conducted under the auspices of the first agent; or the second agent's intervention "resuscitates the transaction" then the actions of the first agent are not "an effective cause" of the sale even if the first agent introduced the ultimate purchaser to the property (Outerbridge at [65]-[66]).

Conclusion

The Tribunal is satisfied that the respondent has complied with its obligations under s55 of the PSAA by entering into complying agency agreement and have issued a Statement of Claim in accordance with s36(1) of the PSAA. The respondent is entitled to make a claim for commission under the agency agreement.
The participants in the sale of the applicants' Property and their roles have become clouded by the circumstances of the negotiations. McDonald's first approached the applicants directly about purchasing the Property. That approach resulted in negotiations between, the applicants, the applicants' solicitor and McDonald's. An agreement was made to sell the Property for $1,300,000. No contract was entered into, or sale concluded as McDonald's could not get agreement from the adjoining property to purchase 141 Tongarra. McDonald's withdrew their offer on or about 22 May 2019.
After that date the respondent and the applicants entered into the Exclusive Agency Agreement on 9 October 2019. From that point the respondent was in a position to introduce any purchaser to the respondents and the consequences were the terms and conditions of the Agreement governed any entitlement to commission if a sale that resulted. As a likely potential purchaser, the respondent contacted McDonald's during the Exclusive Agency Period without a sale of the Property progressing.
After the Exclusive Agency Agreement ended, it became a Continuing Agency Agreement on 1 May 2020, the respondent was actively involved in continuing negotiations with McDonald's and extract a revied offer, including unsuccessfully attempting to finalise an offer of $1,225,000 on 9 June 2020. Finally on 30 September 2020, after the end of the Continuing Agency Agreement on 10 July 2020, McDonalds issued a letter of offer for the Property with a price of $1,400,000 addressed to Rob Linnehan of the respondent. The offer contained terms and conditions including that the sale was subject to McDonalds obtaining development approval on terms acceptable to it within 15 months of the date of the any contract entered into.
The applicants' evidence is that after terminating the Continuing Agency Agreement they and their solicitor continued to negotiate the terms of the sale with McDonald's. The letter of offer was signed by the applicants on or about 30 September 2020 by the applicants in the respondent's office and the acceptance was delivered to McDonald's representatives. Consequent on the applicants' acceptance of the offer, McDonald's lawyers prepared a draft contract including the terms and conditions in the form of special conditions acceptable to McDonald's. Importantly the contract included the respondent nominated as the vendor (applicants) agent and an acknowledgement agreed upon between the parties that the respondent was the only entity entitled to claim commission or fee from the vendor. The purchaser warranted that it was not introduced to the Property by any real estate agent or other person entitled to claim commission or fee from the vendor other than the vendor's agent (the respondent) named in the contract. The deposit paid by the purchaser on entering into the contract of $140,000 was paid to the respondent's trust account as stakeholder under the contract on 20 March 2021 and disbursed by the respondent to the applicants on completion of the contract on 14 November 2022.
The Tribunal has considered the construction of the terms of the Agreement. It is satisfied that the respondent is entitled to a fee or commission in three situations as referred to the reasons stated above. Its entitlement arises under clause 3.ii and 3.iii of the Agreement. For the purposes of the Agreement the respondent introduced the applicants to McDonald's after the Agreement was entered into and subsequently a contract for the sale of the Property was entered into. The Tribunal is satisfied that there was an agreement between the applicants and the respondent that if the respondent introduced a purchaser to the applicants either during the Exclusive Agency Period or the Continuing Agency Period the respondent was entitled to a fee or commission (see Outeridge at [2]). The commission is expressly stated in the Agreement, that is 2% of the any sale price.
The term used in clause 3.ii entitling the agent to commissions is "entering into a contract for the sale of the Property with a purchaser effectively introduced to the Principal". The term is used in clause 3.iii "the Agent effectively introduces to the Principal or the Property a purchaser who subsequently enters into a binding contract."
In Depune at [61] the Court of Appeal said, "To be an "effective introduction" there must be a sufficient casual nexus between the "introduction" of the purchaser and the ultimate sale of the property to the purchaser". The Tribunal is satisfied that the respondent's evidence supports its contention that it introduced the purchaser to the applicants and the negotiations were revived by the respondent after the date of the Agreement. The respondent was part of the negotiations that took many months while the purchaser satisfied itself that it could secure the adjoining land and use the Property for its purposes. The experience of the applicants in attempting to negotiate the sale with the assistance of their solicitor before entering into the Agreement with the respondent was that they were unsuccessful in negotiating an agreement. The introduction by the agent during the period Exclusive Agency Period and through the Continuing Agency Period demonstrates the causation of ultimately securing the entering into a contract for sale of the property to the purchaser. The position of the respondent being the causal link is strengthened by the terms of the offer being sent to the respondent by McDonalds and the meeting with the applicants to accept the offer being held in the respondent's office. In addition the inference that the respondent effectively introduced the McDonald's to the applicants and was the causal link in the contract being entered into is strengthened by the facts: 1. the contract when entered into included the respondent being identified as the vendors (applicants) agent, 2. the warranty by the purchaser that it was introduced to the applicants by the respondent, and, 3. the deposit being held by the respondent as stakeholder under the contract. 4. all of which were unchallenged by the applicants at the time of the applicants entering into the contract.
As identified by the Tribunal in Simeon at 135(6), the actions of the agent must have "flowed through…thus causing the ultimate sale" and the purchaser "continued to be influenced" by the actions of the agent in the decision to purchase (Emmons at [45]). As stated in Outerbridge at [80] "Ultimately, the issue is not so much whether the purchaser has been influenced but the extent of the influence on the sale that in fact eventuated including its price." The terms of the letter of offer subsequent to the termination of the Continuing Agency Agreement, where the six pages of terms are largely included in the terms of the contract albeit entered into some months after the letter of offer. The Tribunal takes into account that when individuals are negotiating with a major international company, the timing of property purchases are inclined to be dictated by the company.
The Tribunal is satisfied that respondent continued throughout its involvement to influence the purchaser to ultimately reach an agreement on the terms and conditions of the sale. The agreed price in the letter of offer of 20 September 2020 remained the same in the contract entered into on 19 March 2021.
The Tribunal is satisfied that the respondent is entitled to commission in acting as the applicants' agent on the sale of the Property to the purchaser. Further, the amount of the commission claimed in the Statement of Claim issued by the respondent to the applicants under s 36(1)(b) of the PSAA in the amount of $28,000 inclusive of GST is an amount being 2% of the selling price which is the agreed commission payable under the Agreement on a sale price of $1,400,000. The Tribunal is satisfied that the amount of commission claimed on $28,000 is a reasonable fee payable as it is the fee agreed between the applicants and respondent in the Agreement.
Section 79O of the FTA provides that in determining a consumer claim wholly or partly in favour of a respondent to the claim, the Tribunal may make, amongst other orders, an order that requires the claimant to pay to the respondent a specified amount of money,
Accordingly, the Tribunal orders that the applicants, Simon Peter O'Gorman, Paul Francis O'Gorman and Gregory Austin O'Gorman pay to the respondent, Albion Park Real Estate Pty Ltd trading as Ray White Albion Park the amount of $28,000.00.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 21 August 2023 - Formatting amendments. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 August 2023

Property Stock and Agents Act 2002(NSW)

Property Stock and Agents Regulation 2014(NSW)

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