Legal4/11/2020 12:00:00 AM

Agent goes on holiday and misses out on $108K commission

Article by the Wolters Kluwer Property Law Editors

The sellers engaged a number of real estate agents on a non-exclusive basis to sell their 55-acre property which included a macadamia farm and a prestige house. Mr Outerbridge was one of the agents so engaged.

Under the agency agreement, Mr Outerbridge was entitled to a 2.2% commission on the final selling price if he was the “effective cause of sale”.

Mr Outerbridge marketed the property with an advertised sale price of $5.5m.

The eventual purchaser subsequently contacted Mr Outerbridge stating that she was looking for a property to buy. Mr Outerbridge provided the purchaser with substantial information in relation to the property.

Mr Outerbridge then showed the purchaser around the property and introduced her to the sellers. The purchaser made an initial offer of $4.5m to purchase the property, however, the offer was rejected by the sellers.

Mr Outerbridge subsequently advised the purchaser to increase her offer, which she did to $4.7m. The offer was initially accepted by the sellers but they later changed their minds.

Mr Outerbridge then went on a holiday overseas for a few weeks. He informed the purchaser that he was contactable via email or that she could call his office during his absence. The purchaser did try to contact him via his office in the hope of setting up a meeting with the sellers to discuss the sale. However, she was informed by Mr Outerbridge’s secretary that there was nothing that could be done to progress the matter until Mr Outerbridge returned from holidays.

The purchaser was under the impression that the sellers were not serious about selling the property and that the sale had fallen over. A few days later, she contacted a different agent with a view to seeing what else was on the market. However, the second agent was also engaged to sell the property on a non-exclusive basis and knew that the sellers were hoping to obtain a sale price of around $5.5m. Once the purchaser realised the price the sellers were hoping to obtain, she was persuaded by the second agent to make a higher offer which led to the sale.

Mr Outerbridge sued to recover the commission of $108,086 said to be owing to him under the agency agreement. The primary judge, however, found that Mr Outerbridge was not the effective cause of the sale of the property within the meaning of the agency agreement. It was noted that while Mr Outerbridge’s role in achieving the sale was very significant, he did not bring about a state of affairs giving rise to the contractual right to the commission.

Mr Outerbridge then appealed against this finding.

Decision

The Court of Appeal agreed with the primary judge’s decision and dismissed the appeal. The court noted that the second agent did not just continue the negotiations between the sellers and the purchaser — she resurrected the transaction, restored trust between the parties and bridged a significant price gap. In these circumstances, and notwithstanding that the actions of Mr Outerbridge generated the purchaser’s interest in a relatively unique property, it was the second agent who was the effective cause of sale.

Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall [2020] NSWCA 205.