T P CARROLL REALTY PTY LTD t/a L J HOOKER NEUTRAL BAY v MOYES

Court of Appeal (NSW)|1997-04-17|Before: Gleeson CJ

GLEESON CJ, BROWNIE and CLARKE AJJA 17 April 1997, 17 April 1997 [1997] NSWCA 321

CONTRACT - PRINCIPAL AND AGENT - Whether agent entitled to commission - Whether agent effectively introduced purchaser to vendors - No error in trial judge's finding of fact - Appeal dismissed.

Gleeson CJ This is an appeal from a decision of Taylor DCJ dismissing a real estate agent's claim for commission.

The primary facts of the matter, which were not in dispute, may be summarised as follows.

The respondents to the appeal, Mr and Mrs Moyes, owned a house at 31 Battle Boulevard, Seaforth. In July 1990 they put their house on the market for sale. On 31 July 1990 they entered into a written agency agreement with the appellant, T P Carroll Realty Pty Ltd trading under the firm name of L J Hooker Neutral Bay. This was not a sole or exclusive agency agreement.

The appellant found a purchaser, Mr S J Taylor, who agreed to buy the property for $2,937,810. Mr Taylor was a life insurance agent. He had business connections with a number of insurance companies, including Australian Eagle Insurance Co Ltd.

On the day on which Mr Taylor was taken by a representative of the appellant to inspect the respondent's property he received a visit apparently for mixed social and business purposes, from an officer of Australian Eagle Insurance Co Ltd, Mr Dougherty. Mr Dougherty accompanied Mr Taylor and the real estate agent on an inspection of the property. Mr Dougherty's purpose was purely social.

Before a contract for sale of the property was entered into between Mr Taylor as purchaser and Mr and Mrs Moyes, the respondents, as vendors, the respondents sought some assurance as to the capacity of Mr Taylor to honour the financial commitments he was undertaking, and, in particular, as to his capacity to pay the deposit which the contract required.

It is unnecessary to go into the full detail of the reasons why the respondents required those assurances. One matter that was of significance to them, however, was that they were intending to acquire some real estate in Queensland, and it was of importance to them to have some kind of assurance that Mr Taylor would be able to meet his financial commitments to them.

That was how Australian Eagle Insurance Co Ltd came to have an involvement in the contract between the respondents and Mr Taylor. In brief, Mr Taylor, who said he was owed substantial sums of money by way of commission by Australian Eagle Insurance Co Ltd, used his association with the insurance company, and its indebtedness to him, as the means by which he assured the respondents of his financial capacity. The insurance company, for its part, permitted Mr Taylor to use it in that way and, in particular, it gave an acknowledgment as to its indebtedness to Mr Taylor, and it accepted an irrevocable order signed by Mr Taylor drawing upon that indebtedness. In the result, a contract for sale dated 24 August 1990 was entered into between the respondents and Mr Taylor. That contract made the following provisions concerning a deposit.

The contract called for a deposit of $317,250. It provided that the purchaser was to pay an initial deposit of $20,000. It further provided that he was to pay the balance of the deposit, being an amount of $297,250, no later than Thursday 6 September 1990. It also provided that the balance of the deposit was to be paid pursuant to an irrevocable order on Australian Eagle Insurance Co Ltd. The insurance company accepted such an order.

For reasons which were not fully explored in the evidence, and which are presently immaterial, the insurance company did not pay the sum of $297,250 and consequently Mr Taylor defaulted. The respondents then terminated their contract with Mr Taylor.

At no time up until that happened had the insurance company had any interest in purchasing the respondents' property. The insurance company's only connection with the transaction between the respondents and Mr Taylor was in the circumstances that have been described. Nor had the insurance company had any connection with the real estate agents, other than that which has already been described. The real estate agents had met Mr Dougherty when in a social capacity he had accompanied Mr Taylor on Mr Taylor's inspection of the property. Subsequently the real estate agents had known that the insurance company became involved to the extent I have described in the contract between the respondents and Mr Taylor.

Following the termination of the contract between the respondents and Mr Taylor, the respondents threatened litigation in the Federal Court against the insurance company and against Mr Taylor. They alleged, amongst other things, that the insurance company had engaged in misleading and deceptive conduct in contravention of the Trade Practices Act. The damages they claimed included damages for loss of the bargain involved in their contract with Mr Taylor, and damages relating to the financial position that had arisen as a result of commitments they had undertaken on the faith of the contract.

The next thing that relevantly occurred was that there were negotiations between the insurance company. The real estate agents had no part in those negotiations. A rather complicated settlement was ultimately reached. It was embodied in a deed. It is unnecessary to go into all the detail of the settlement arrangements. The arrangements included, for example, the making of an interest free loan by the insurance company to the respondents for a certain period. What is relevant for present purposes, and what has given rise to the present litigation, is that the settlement between the insurance company and the respondents included a provision that the respondents would sell to the insurance company, and the insurance company would buy from the respondents, the property at 31 Battle Boulevard, Seaforth. The terms of that agreement for sale and purchase

URYCARROLL REALTY PTY LTD ta LJ HOOKER NEUTRAL BAY v MOYES (Gleeson CUB

were complicated and included provisions for the re-sale, or attempted re-sale, of the property by the insurance company, and sharing in the proceeds of the re-sale between the insurance company and the respondents on certain terms and conditions, depending upon the price that was obtained. The basic purchase price for which the insurance company agreed to purchase the property from the respondents was $2,517,810.

The agreement between the respondents and the insurance company for the sale and purchase of 31 Battle Boulevard, Seaforth made no reference to any agency on the part of the appellant, L J Hooker Ltd, Neutral Bay. However, the appellant claimed to be entitled to commission on that sale pursuant to the terms of the agency agreement between the respondents and the appellant entered into in July 1990.

The relevant terms of the agency agreement were as follows:

"2. The principal hereby grants to the agent selling rights to the property from 27 July 1990 until such time as the property is sold or this agreement is terminated by either party giving notice in writing.

The agent shall be entitled to commission of 3.1 per cent for the first $100,000, and 2.5 per cent of balance of sale if during the agency period he effectively introduces to the principal a purchaser of the property who subsequently enters into a binding contract.

The commission to which the agent is entitled shall be due and payable upon completion of the sale or upon demand if the sale is not completed owing to the default of the principal after the parties have entered into a binding contract."

It is common ground that because of the terms of cl12 the agents were not entitled to commission in respect of the sale to Mr Taylor.

In support of its claim, the appellant alleged that it had effectively introduced Australian Eagle Insurance Co Ltd to the respondents in about September 1990, and that the insurance company, as purchaser, purchased the property and completed the purchase on 15 November 1990, for a consideration of $2,517,810. In the circumstances, the appellant claimed to be entitled to commission in the sum of $51,456.

Taylor DCJ at first instance rejected that claim, and the appellant has brought the present appeal.

The appellant's claim depended upon establishing that the appellant effectively introduced to the respondents a purchaser of their property, namely, Australian Eagle Insurance Co Ltd, which subsequently entered into a binding contract to purchase the property.

That the insurance company entered into a binding contract to purchase the property is not in dispute.

The expression "effectively introduced", in the context of this agency agreement, is to be understood against a well-developed background of agency law which holds that a real estate agent's entitlement to commission ordinarily depends upon the agent's efforts being an effective cause of the sale (cf L J Hooker Ltd u W J Adams Estates Pty Ltd (1976) 138 CLR 53; and note the judgment of McPherson J in Rasmussen and Russo Pty Ltd v Gauiglio (1982) Qld R 571).

Some argument on the present appeal turned upon a distinction, adverted to by Barwick CJ in the case of L J Hooker v W J Adams Estates Pty Ltd (supra), between introducing a purchaser to a vendor and introducing a purchaser to the vendor's property. For my part, I am content to deal with the matter upon the assumption, favourable to the appellant, that this distinction is not important, and that the appellant would be entitled to commission if it effectively introduced a purchaser to the respondents' properly.

The obstacle in the way of the appellant is that it did not effectively introduce Australian Eagle Insurance Co Ltd either to the property or to the respondents, and the appellant was not an effective cause of the purchase of the property by the insurance company.

The most that can be said is that if the appellant had not introduced Mr Taylor to the respondents, then the chain of events which ultimately resulted in the purchase of the property by the insurance company would not have occurred. In that sense the introduction of Mr Taylor was a sine qua non of the purchase of the property by the insurance company (cf 138 CLR at 58). That is not enough to constitute the activity of the appellant an effective cause of the sale to the respondents or to lead to the conclusion that the appellant effectively introduced a purchaser to the respondents.

The cause of the purchase by Australian Eagle Insurance Co Ltd of the respondents' property was the dispute that arose between the respondents and the insurance company, and the idea of a senior officer of the insurance company to propose the resolution of that dispute by arrangements which included the purchase by the insurance company of the respondents' property.

Taylor DCJ was correct to find as a fact that in the circumstances of the case the conditions set out in cl3 of the agency agreement had not been satisfied. The appeal should be dismissed with costs.

Brownie AJA I agree. Clarke AJA I also agree. Gleeson CJ The orders of the Court will be as I propose.

Counsel for the appellant: R Colquhoun Solicitors for the appellant: Messrs Carneys Counsel for the respondent: J T Gleeson

Solicitors for the respondent: Blake Dawson Waldron

At a glance

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Judgment (38 paragraphs)

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