Chana Scotcher Realty Pty Ltd v Fawkes and Duivenvoorde - [2003] NSWLC 5

No judgment structure available for this case.

Local Court of New South Wales

CITATION: Chana Scotcher Realty Pty Ltd v Fawkes & Duivenvoorde [2003] NSWLC 5

JURISDICTION: Civil

PARTIES: Chana Scotcher Realty Pty Ltd (Plaintiff)
Ronald Fawkes & Janet Fawkes (Defendants)
Johan Duivenvoorde & Lynda Duivenvoorde (Third Parties)

FILE NUMBER: 7887/01

PLACE OF HEARING: Downing Centre Local Court Sydney

DATE OF DECISION:
03/06/2002

MAGISTRATE: Magsitrate B A Lulham

CATCHWORDS: Contract - Agent - Principal - Estate Agent - Commission - Implied Terms - Costs

LEGISLATION CITED:

CASES CITED: Burcell v Gary & Blackhouse Collieries Ltd (1910) AC 614
LJ Hooker Ltd v W J Adams Estates Pty Ltd (1977) 138 CLR 52
Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2000) 202 CLR 351
Harcourts Coxen v Lunam & Anor (1997) ANZ Conveyancing Report CCH 392
Harcourts Group Ltd v McKenzie (1994) ANZ Conveyancing Report CCH 273
BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 16 ALR 363
Hawkins v Clayton (1988) 164 CLR 539
Burn v Australian Airlines Ltd (1995) 131 ALR 422

REPRESENTATION: Mr Peterson Solicitor for Plaintiff
Mr Prior Solicitor for Defendants
M Lawson Solicitor for Third Parties

ORDERS: 1. In all the circumstances of this case I am satisfied the defendant is entitled to an order against the plaintiff for the costs of the third party proceedings.; 2. The plaintiff is ordered to pay to the defendant the costs and disbursements payable by the defendant to the third party pursuant to the order made herein.; 3. The costs and disbursements payable pursuant to each order will be as agreed between the parties. In default of agreement in relation to any order, then the costs and disbursements in relation to that order shall be assessed under the Legal Profession Act.

Reasons for Decision

1 By Statement of Liquidated Claim dated 29 June 2001 the plaintiff a company carrying on business as real estate agents under the business name of Asset Realty Turramurra sued the defendants for the sum of $40,000 for commission payable on the sale of the defendant's home, 14 Water Street, Wahroonga, New South Wales (hereinafter called "the subject property"). It was not in dispute that the defendants sold their home at an auction sale on 24 March 2001 to the third parties Mr & Mrs Duivenvoorde as purchasers for the sum of $1,850,000 through Estate Agents Burns & Burns. In the Statement of Claim the plaintiff claimed it introduced the purchasers Mr & Mrs. Duivenvoorde to the defendants' home on 21 August 1999 and again on 21 October 2000. The commission and costs on the sale price of $1,850,000 is $45,903.66 but the plaintiff abandoned the amount above $40,000.

2 The defendants filed their Notice of Grounds of Defence dated 12 July 2001. In such Defence the defendants admitted entering into a selling agency agreement with the plaintiff on 30 July 1999 in respect of the subject property.

3 The defendants denied that the plaintiff had introduced the purchasers to the subject property during the period of the agreement with the purchaser or that the purchasers entered into an agreement for purchase pursuant to any such introduction so as to entitle the plaintiff to claim a commission in respect of the sale of the property to the purchasers.

4 The defendants further pleaded that if the plaintiff did introduce the purchaser to the property, then such introduction was not the effective cause of sale and that the purchasers did not enter into any contract of sale with the defendants pursuant to any act or thing done by the plaintiff.

5 The defendants by a Third Party Notice dated 12 September 2001 directed to the purchasers Mr & Mrs Duivenvoorde claimed against them contribution towards or indemnity for any judgment recovered against the defendants by the plaintiff. In issuing the Third Party Notice the defendants relied upon Special Condition 10 in the contract of sale dated 24 March 2001 between the defendants as vendor and the third parties as purchasers which clause is as follows;

REAL ESTATE AGENT

'The purchaser warrants that the purchaser was not introduced to the vendor or the property by any real estate agent except the agent, if any, named on the front page hereof or by any other person who might be entitled to claim commission from the vendor in respect of this sale and the purchasers indemnifies the vendor (and if more than one, each of them) against any claim for commission which might be made by any agent resulting from an introduction constituting a breach of such warranty and against all costs and expenses incidental to defending any such claim. It is agreed that these indemnities shall be continuing indemnities not merging on completion.'

6 In their defence to the Third Party Notice the third parties admitted they purchased the subject property but denied the plaintiff had introduced them to the property or that they had entered into a contact as a result of that alleged introduction. In the Notice the third parties pleaded the following matters;

'1 Denies that the plaintiff was the effective cause of sale.

2 Denies that the plaintiff is entitled to commission as a result of their purchase of the property.

4 Admits that the third party were taken to the property on or about 21 October 2000 by the plaintiff but deny that this was to inspect the property with an interest in its purchase and that they indicated to the plaintiff that they had no interest in it.

5 Denies that the plaintiff undertook any inquiry in respect to the property on their behalf, did anything to foster their interest in it or address their dislike regarding the property.

6 Claims that Burns & Burns introduced them to the property and was the effective cause of sale of the property to them.'

7 The matter was very well prepared and detailed witnesses statements were tendered. I have received very helpful written submission on behalf of each of the parties. In my view it is not necessary for me to go through the evidence and cross examination of each of the witnesses in great detail, as in my view, the important facts are not really in issue.

8 In her witness statement Chana Scotcher said she met the purchasers Mr & Mrs Duivenvoorde in connection with her work as a real estate agent in 1996. They bought a house from a different agent in 1996 and she was aware in 1998 that they were looking to purchase again.

9 Mr Scotcher met the vendors Mr & Mrs Fawkes who were wishing to sell their property and on 30 July she entered, on behalf of her company, an Agency Agreement and Selling Authority with Mr & Mrs Fawkes for the sale of 14 Water Street, Wahroonga. The sales inspection report and agency agreement was on the usual written form and included the following provisions;

10 Agent's opinion regarding a probable selling price - $2,300.000

11 Clause 8 (i) The agent shall be entitled to a commission of 2.3% of selling price here shown as a percentage of the sale price.

(a) If he sells the property in accordance with this agency agreement or he effectively introduces to the principal a purchase who enters into a contract to buy the property or;

Clause 13 This agreement may be terminated by written notice but without prejudice to the other parties rights or obligations.

The above parties agree to convert their agency agreement into an Exclusive Agency Agreement/Auction and Exclusive Agency Agreement/Sole Agency Agreement. All clauses of the above Agency Agreement shall continue in full force and effect and the clauses appearing below are inserted as additional clauses.

14. EXCLUSIVE AGENCY

(i) The Agent is granted exclusive selling rights and shall be entitled to the payments mentioned in Clause 8 as his commission if during the period of the agreement or any extension EITHER the property is sold:

OR

(ii) This Exclusive Agency Agreement shall be terminated at midnight on the 31st October 1999 or such later date as the Principal may notify in writing whereupon the Agent shall retain non exclusive selling rights until terminated in writing also.

15. AUCTION AGENCY

(i) The party is authorised to sell the property for the reserve price of TBA or such a price as the Principal may agree to accept if not specified and the Principal is to inform the Agent in writing of this reserve price before the auction.

(ii) The Agent or his Auctioneer is authorised:

(iii) All the provisions of Clause 14, that is to say the Exclusive Agency, shall apply and form part of this Auction Agency Agreement.

16. SOLE AGENCY

(i) The Agent is granted sole selling rights and shall be entitled to the payments mentioned in Clause 8 as his commission if, during the period of this agreement or any extension, EITHER the property is sold:

OR

(ii) This Sole Agency Agreement shall terminate at midnight on the 31st October 1999 or such later date as the Principal may notify in writing to the Agent whereupon the Agent shall retain non exclusive selling rights until terminated in writing also.

12 Advertising signs were erected on the property and the property was suitably advertised in various newspapers. Open house inspections were held on 21 and 28 August and 4 and 11 September 1999.

13 Ms Scotcher indicated that on 21 August 1999 Mrs Lynda Duivenvoorde attended the property on open inspection day. She wrote her name in the visitors attendance book, although she incorrectly spelt the name.

14 The subject property was not sold at auction by the agent on 18 September 1999. It was passed with the highest bid of $1.75 million. Two offers were received to buy the property prior to auction. Neither was from the ultimate purchasers. There is no suggestion that the purchasers attended the auction.

15 The agent indicated that she continued to market the property during 2000 with a purchase price of $2.2 million. Ms Scotcher said that on 21 October 2000 she contacted Mrs Duivenvoorde about inspecting a property at 11 Warrawee Avenue, Warrawee. Her witness statement indicated that Mrs Duivenvoorde asked;

Duivenvoorde: "Is the property at 14 Water Street, Wahroonga still for sale".

Scotcher: "Yes it is still on the market".

Duivenvoorde: "As you know I have seen the property but my husband has not seen the property".

Scotcher: "I can arrange an inspection for him."

16 Her witness statement indicates that she spoke to Mrs Fawkes and arranged to show the property to Mr & Mrs Duivenvoorde on that day. She says that they looked at the Warrawee property and then went to the Water Street property. She said Mr & Mrs Duivenvoorde inspected the property, she believed Mr & Mrs Fawkes were present, and spoke to Mr & Mrs Duivenvoorde.

17 Ms Scotcher said that there was a discussion about the property but no offer was made.

18 She said subsequently she became aware that the property 14 Water Street had been advertised for auction by Burns & Burns. Subsequent to the auction she found out that Mr & Mrs Duivenvoorde had purchased the property. She said she had a conversation with Mrs Duivenvoorde who agreed it was Ms Scotcher who introduced her to the property. She said she discussed the sale with Mr Fawkes who suggested she take it up with Julia Burns of Burns & Burns.

19 In cross examination Ms Scotcher admitted that prior to the auction sale on 18 September 1999 she wrote to the vendors Mr & Mrs Fawkes advising them of the names of persons who had shown interest in the property. (There are approximately 65 names on the list) She agreed the third parties names were not included on such list. She agreed that she had done nothing to show or market the subject property to Mr & Mrs Duivenvoorde between 21 August 1999 and 21 October 2000. She agreed that Mr & Mrs Duivenvoorde were inspecting a property at Bengalla Street when a discussion about the comparison of that property with the subject property arose and she agreed she suggested that Mr Duivenvoorde inspect the property. The following evidence was given; (T.p105L5)

Q. For the purpose of preparing the two properties?

A. That could be correct.

Q. That is correct isn't it. That's the reason they went to Water Street to compare it against Bengalla?

A. Yes.

20 She agreed that neither Mr or Mrs Duivenvoorde showed any interest in the property. She said she did contact them two or three days after the inspection. She said Mrs Duivenvoorde was not showing any interest in the property.

21 Ms Scotcher agreed that when she became aware of the property being advertised for auction by Burns & Burns she spoke to Mr Fawkes, who invited her to contact Ms Burns about a joint agency. He further asked her for a list of persons who had inspected the property with her so that he could hand the list to Burns & Burns. She said she did not contact Julia Burns and admitted she said;

"I'm not willing to do that, I want a full commission".

22 That conversation took place prior to the auction in March 2001.

23 She agreed that she did not introduce Mrs Duivenvoorde to the vendors during the house inspection on 21 August 1999 but her recollection was that Mr & Mrs Duivenvoorde met Mr & Mrs Fawkes on 21 October.

24 Mr Lawson commenced by cross examining Ms Scotcher regarding the advertising schedule and the payment of the accounts. The questions did not assist me at all. She was cross examined as to the conversation with Mrs Duivenvoorde immediately following her purchase of the property and relating to whether Ms Scotcher would be involved in the sale of Mrs Duivenvoorde existing home. That cross examination did not assist either.

25 That completed the evidence of the plaintiff and the case for the plaintiff.

26 The witness statement of Ronald Arthur Fawkes dated 23 January 2002 following certain amendments and deletions was admitted into evidence.

27 In such witness statement Mr Fawkes states that Ms Scotcher told him there were only two interested parties in the property prior to the auction conducted by her, namely Mr & Mrs Best and Mr & Mrs Dave Wood. He said following the expiration of the three months agency period, the plaintiff was permitted to continue to show purchasers through the property, although the property was not generally marketed for sale.

28 Mr Fawkes said that shortly after signing the agreement with Burns & Burns he had the following conversation with Ms Scotcher;

Scotcher: "I see that you have listed the property with Burns & Burns".

Ronald Fawkes : "Yes, I thought that you had a reasonable period in which to sell the property and that a new agent might have more success". I have told Julia Burns that you have introduced some interested parties to the property and she is willing to enter into a conjunction agency with you. Would you prepare a list of the person that you have introduced to the property and provide this to Julia Burns".

Scotcher: "I have worked too hard to share my commission with anyone else, I want a full commission".

29 Mr Fawkes said he had no recollection of the purchasers inspecting the property on or about 21 October with Mr Scotcher. He said they were introduced to he and his wife by Ms Julia Burns shortly before the auction on 24 March 2001. He set out work which Ms Burns undertook in the nature of obtaining building inspections and a quotation from a builder as the rendering of the exposed brickwork in the family room and rumpus room.

30 Mr Fawkes said he had a telephone conversation with Ms Scotcher on the Monday following the auction, namely 26 March 2001. He said Ms Scotcher claimed to be entitled to a commission on the basis that the name of the purchaser was on a list which she forwarded to them following the open house inspection on 21 August 1999.

31 Mr Fawkes was adamant he could not recall meeting the eventual purchasers on 21 October 2000 with Ms Scotcher. He said he had no recollection at all, although he did not dispute an inspection took place. His understanding was that the agency agreement with Ms Scotcher expired on 31 October. He agreed that after such date Ms Scotcher continued to try to sell the property, although it was not openly on the market. Mr Fawkes said he could not recall any telephone conversations with Ms Scotcher during 2000 but then agreed that there was the conversation when she asked to be allowed to advertise the property for sale on just one further occasion. He admitted that conversation took place. He agreed that the reserve price for the auction with Ms Scotcher was $2.2 million. He reduced the reserve price for the auction with Ms Burns to $2.1 million and at the auction accepted the bid of $1.85 million.

32 He was sure that he spoke to Ms Burns and indicated to her that if either Mr & Mrs Best or a Mr & Mrs Bucknell/Wood purchased the property, then he felt that Ms Scotcher would be entitled to part of the commission.

33 The statement of Jane Eleanor Fawkes was admitted into evidence. She stated that she could not recall the purchasers Mr & Mrs Duivenvoorde inspecting the property on 21 October 2000.

34 In evidence in chief she said that she could recall Ms Scotcher brought someone through the property in October 2000;

"but whether it was the Duivenvoordes or anyone else, I don't really recall".

35 She said the first time she could recall meeting Mr & Mrs Duivenvoorde was three weeks prior to the auction in March 2001.

36 In cross examination Mrs Fawkes agreed that at least by June 2000 the property was on the market for $2.2 million, although it was on the basis that the property wasn't to be generally advertised or marketed. She agreed that on one occasion her husband agreed to Ms Scotcher advertising the property if she wanted to. She said she could not recall the inspection on 21 October 2000. She thought it unlikely her husband was present because he normally worked on Saturday, his busiest day.

37 The witness statement of Lynda Mary Duivenvoorde sworn 20 January 2002 was admitted. She said that on 21 August 1999 she and her husband walked past the subject property. It was open for inspection. She decided to have a look, gave her name to the agent and left. She said the property did not appeal to her. She had no interest in it.

38 She further stated that in October 2000 she and her husband were looking at properties with Ms Scotcher in Warrawee and they looked at a property in Bangalla Street, Warrawee. She said her husband, after the inspection, said to Ms Scotcher;

"How does this property compare price wise to the property in Water Street that was for sale last year"?. From my wife's description that property sounds similar to this".

Scotcher replied;

"That property hasn't been sold but it's quietly back on the market. We can go down and take a look at it, that way you can compare it yourself with this one yourself".

39 She said that they inspected the property. She said she didn't like it and nor did her husband and they expressed no interest in the property.

40 She said subsequently she was looking at properties with Julia Burns who suggested she should inspect the subject property. During the inspection she said to Julia Burns;

"I couldn't live with these internal walls. I don't like the exposed brickwork. I would also prefer a full sized tennis court".

41 She said Julia Burns offered to obtain quotations to render and paint the inside walls. The quotation was obtained. She said Julia Burns gave them a copy of a valuation report and a copy of a pest and building report for the property and gave them details of previous sales in the area. Julia Burns prepared an appraisal of their own home. She said they purchased the property at auction.

42 She said Ms Scotcher contacted her on the Monday after the auction and asked to be given a listing for the sale of their property. She indicated Julia Burns would be selling their home and Mrs Duivenvoorde alleged that Ms Scotcher replied;

"If that's the case I will be claiming commission for the sale of 14 Water Street, Wahroonga. You will have to stand up in a Court of law and tell the Judge that you saw 14 Water Street with me".

43 Mrs Duivenvoorde conceded her husband saw the advertising sign on 21 August 1999 and as a result of that she suggested she inspect the property. She said she had no idea of the asking price for the property. She confirmed that she inspected the property with her husband on 21 October. She could not recall Mr Fawkes arriving during or being there during the inspection. She said when she was introduced to Mrs Fawkes about three weeks prior to the auction in March 2001 she did not recognise her as someone she had previously met.

JOHAN SIMON DUIVENVOORDE

44 The witness statement of Johan Simon Duivenvoorde dated 30 January was admitted into evidence. Such statement confirms the evidence of his wife as to the inspection on 21 August 1999 by his wife. He made no offers. Neither he nor his wife attended the 21 August auction. He did not know if the property sold. He said it was he who raised the price of the subject property during the inspection of the Bangalla Street property on 21 October 2000 which then led to Ms Scotcher arranging the inspection later on that day. Following that inspection he said he was not interested in the property, made no offers and did nothing to show he was even remotely interested in the subject property.

45 He said that following his wife's inspection of 14 Water Street, Wahroonga with Julia Burns he inspected the property with his wife. A quotation was obtained for the rendering and painting of the walls. He said Julia Burns gave him a copy of a valuation, building inspection report, a copy of the contract and sales figures for other properties. He said he obtained a satisfactory appraisal from Julia Burns in relation to the sale of his property. He said he found Julia Burns assistance and suggestions extremely valuable and convincing.

46 Mr Duivenvoorde said that between 21 August 1999 and 21 October 2000 he was not aware that the property remained on the market and was only told an hour before he inspected the property on 21 August that it was still on the market. He said he was not aware of a reserve price on the property during that time of $2.2 million. He said he could not recall any conversation with Mrs Fawkes on 21 October 2000.

47 Chana Scotcher was called in reply. She said that following the unsuccessful auction she was told by the vendors that they required a little break. She said the property wasn't advertised until she sought permission about twelve months later. She had some inspections during the early part of 2000 but she could not remember how many or who they were.

48 That concludes my summary of the evidence.

49 I have considered carefully the authorities referred to in the very helpful submissions received from Mr Peterson and Mr Lawson. All the cases are unanimous about one aspect of the law on agents commission. The finding in each case will depend on the facts in the particular matter. It may well be that in one case the mere placing by an agent of an advertising sign outside the property will be sufficient on the particular facts in the case, to entitle him to commission. The facts might prove it was that sign and that sign alone, which caused the purchaser to attend on the property, speak to the owner and there and then agree to purchase the property. On those facts the agent may have a very strong case for the commission on the sale. In other factual situations the presence of the sign would be of very little or no importance.

50 In the agency agreement in this matter Clause 8(1)(a) sets out the provision of the general or ordinary basis of the agency, namely that the agent shall be entitled to a commission if he sells the property in accordance with the agency agreement or he effectively introduces to the principal a purchaser who enters into a contract to buy the property.

51 I am satisfied the words;

"effectively introduces"

52 Burcell v Gary and Blackhouse Collieries Limited (1910) AC 614 AT 624, Anderson v Benzley (1953) 90 CLR 460 at 467, L.J. Hooker Limited v W.J. Adams Estates Pty Limited 138 CLR 52 at 58,67,76,86)

53 The term 'effective cause' was explained by Gummow J in Moneywood Pty Limited v Salamon Nominees Pty Limited (2000) 202 CLR 351 at 375 as follows;

Doyle v Mount Kidston Mining and Exploration Pty Ltd

54 In the same case Gummow J approved what Jacobs J had said in L.J. Hooker (1977) 138 CLR 52 at 86 as follows;

"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 could each by described as a cause of the ensuing sale."

55 For the plaintiff to succeed under Clause 8 of the Agreement the plaintiff has to prove that it was her actions which really brought about the sale by the vendors to the purchasers of the subject property.

56 I propose to examine the law in relation to Clause 14 when I deal with the claim under that clause.

57 The Agency Agreement was dated 30 July 1999 and I have previously set out the provisions of the clause setting out the terms of the general agency upon which the plaintiff was entitled to earn commission. The Agency Agreement provided that the agreement may be terminated by written notice.

58 I have previously set out the provisions of the Exclusive Agency, Auction Agency and Sole Agency. Those clauses were included and I am satisfied that the parties were bound by both the clauses relating to the Exclusive Agency and Auction Agency. The Sole Agency is in the same terms as the Exclusive Agency except that under the Sole Agency the agent is not entitled to his commission if the property is sold by the principal. As the clauses are the same, except that the Exclusive Agency gives the agent one additional right, then in my view the Exclusive Agency would apply.

59 Significantly the Agreement provides for the Exclusive Agency to be terminated on 31 October 1999 and I am satisfied that it was terminated on that day.

60 The plaintiff claims to be entitled to commission on two bases:

(i) Under Clause 8 of the General Agency Agreement

61 For the claim under Clause 14 the Exclusive Agency, the plaintiff can only rely on the events of 21 August 1999 as the Exclusive Agency terminated on 31 October 1999.

62 I find that the claim under Clause 8(1)(a) of the Agreement can rely on the events of both 21 August 1999 and 21 October 2000. I am satisfied the General Agency Agreement was not terminated following the 18 September auction conducted by the plaintiff. The property remained on the market, although it was not actively marketed in the sense of being advertised. I am satisfied the property remained for sale at a price of $2.2 million and the plaintiff continued to hold an agency pursuant to Clause 8 of the Agreement. I am satisfied the plaintiff still held an agency as at the date of the inspection on 21 October 2000.

FINDING ON CLAIM UNDER CLAUSE 8

63 I am satisfied the plaintiff has not proved, on the balance of probabilities that the events of 21 August 1999 and 21 October 2000 and the work associated with those events were the effective cause of the sale of the subject property to the purchasers.

64 It is not in dispute that Mr Duivenvoorde saw the 'for sale sign' on 21 August 1999 and on his suggestion Mrs Duivenvoorde briefly inspected the property. Following that inspection neither she nor her husband showed any interest in purchasing the property. They did not make an offer and significantly then did not attend the auction sale. I am satisfied that between 21 August 1999 and 21 October 2000 they were not even aware that the property was still for sale.

65 I am satisfied the inspection which took place on 21 October 2000 took place largely as indicated by Mr & Mrs Duivenvoorde. I am satisfied they inspected the subject property merely to compare that property with the property that they were then interested in buying, namely the property in Bangally Street. I am satisfied that immediately following that inspection they did not make any offer and were not interested in purchasing the subject property and did not show any interest in purchasing the subject property.

66 I find that the effective cause of the sale of the subject property was the effective marketing of the property by the new agents Burns & Burns and particularly that the steps taken by Ms Julie Burns to create an interest in the property by Mr & Mrs Duivenvoorde. I am satisfied she obtained the quotations as indicated to overcome the problems which Mr & Mrs Duivenvoorde saw with the property. I am satisfied it was her professional and helpful approach which for the first time aroused the interest of the purchasers in the property.

67 The plaintiff cannot succeed in the claim for commission based on Clause 8.

68 This is the more interesting and in my view the stronger basis for the plaintiffs claim for commission. Mr Peterson submits very strongly that the parties to the agreement the agent and the vendors Mr & Mrs Fawkes willingly entered into an Exclusive Agency and the plain and ordinary meaning of the words of the agreement should be given effect. He further submits;

(i) Significantly the word 'effectively' is not contained in Clause 14 (compare Clause 8).

(ii) There is no ground for reading that word into Clause 14.

(iii) The authorities dealing with the need for the agent to be the effective clause are based on factual situations for a General Agency and are not applicable to a case where as here the parties have reached a specific agreement as to when commission is to be payable.

(iv) Both of the conditions for the payment of commission to the plaintiff specifically set out in Clause 14 are met, namely;

(a) During the period of the Exclusive Agency, that is on 21 August the purchasers were introduced by the agent to the property, and;

(b) The purchasers subsequently purchased the property.

69 I propose to set out the provisions of Clause 14 in full again;

(i) The Agent is granted exclusive selling rights and shall be entitled to the payments mentioned in Clause 8 as his commission if during the period of the agreement or any extension EITHER the property is sold:

(a) by the Agent;

(b) by any other Agent or by any other person, or

(c) by the Principal.

OR

(ii) This Exclusive Agency Agreement shall be terminated at midnight on the 31st October 1999 or such later date as the Principal may notify in writing whereupon the Agent shall retain non exclusive selling rights until terminated in writing also.

70 The clause provides for very extensive and valuable rights to the agent. During the Exclusive Agency period the agent is entitled to his commission, if during that period the property is sold by another agent, another person or by the owner of the property. Those provisions are straight forward and are extraordinarily beneficial to the agent. The provisions are standard in an Exclusive Agency Agreement. The owners Mr & Mrs Fawkes clearly agreed to such provision. Whilst there was no evidence before me relating to these clauses it is, in my view, common knowledge that such clauses are included on the basis that during the Exclusive Agency period the agent will promote and market the property widely. The encouragement for the agent to do so is that he has an Exclusive Agency, giving him the valuable rights set out above. Moreover significantly the Exclusive Agency applies to situations where the property is to be sold by private contract as well as by public auction. If the sale is by private contract the agent is required to market and advertise the property with the cost of the advertising to be paid by the agent. If he doesn't sell the property he does not recover the cost of advertising.

71 That portion of Clause 14 dealing with the agent's entitlement if the property is sold during the period of the Exclusive Agency is straightforward and clearly able to be applied without difficulty.

72 The further provision providing for the agent to be entitled to his commission if he introduced a person to the owner or to the property during the period of the Exclusive Agency and such person subsequently purchases the property, was in my view originally intended to cover the situation where the agent did introduce a person to the property, perhaps simply by having his sign on the property. It was apparently not uncommon for some persons in that situation to then wait until the expiration of the Exclusive Agency and to then seek to deal direct with the owner on the basis that the property might be able to be obtained more cheaply if the vendor does not have to pay agent's commission. One can appreciate the need for the agent to be protected against such behaviour.

73 However the wording of the provisions entitling the agent to his commission if he introduces a person to the property or the owner during the Exclusive Agency and the person subsequently purchases the property if applied literally as urged by Mr Peterson, will clearly lead to absurdities.

74 For example, one could imagine a situation where an agent (original agent) during the three months exclusive period might introduce the owner of a property to another person (eventual purchaser) at a social function. It may be at the local golf club. There may be no reference to the fact that the owner has a property for sale. The property does not sell during the Exclusive Agency or immediately thereafter. If eighteen months later the owner again put the property on the market and if the eventual purchaser was to learn through other agents that the property was for sale and was to buy the property, then the literal application of the clause would mean the original agent would also be entitled to commission. The original agent would be able to prove that during the Exclusive Agency he introduced to the owner the person who subsequently purchased the property. That would be an absurd result.

75 I am of the view that the position in this matter is almost as absurd. On the literal interpretation of the clause, if any of the 50 or more persons who attended the open house inspections conducted by the plaintiff in August or September 1999, subsequently purchased the property at the public auction conducted by Burns & Burns in March 2001, then the plaintiff would be entitled to commission from the owners. The plaintiff would be entitled to commission even though the open house inspection may have played absolutely no part in the subsequent purchase by the person of the house. It may well be the purchaser might honestly not recall inspecting the house during the open inspection. I could well imagine that situation. The practice of conducting open houses for properties particularly to be sold by auction is a fairly recent innovation. With the immense interest in property sales, such open house inspections attract a large number of lookers. Many might colloquially be referred to as 'sticky beaks'. Open house inspections of a property will be attended by almost all of the owners in the neighbourhood, even though such persons do not have any interest in purchasing the property. As previously indicated, I can well imagine how many people could genuinely forget a visit or look at an open house inspection. In my view it would be absurd if a real estate agent could succeed in a claim for commission relying only on such a visit during an open house inspection, even though literally the terms of the provision in Clause 14 may have been met. Clearly that would be even more so the case if the successful auction was to be held, say five years after the initial open house inspection.

76 Neither Mr Peterson nor Mr Lawson in their very extensive written submissions could refer me to a case in New South Wales dealing specifically with an Exclusive Agency clause the same or similar to Clause 14. This is so even though the clause is on the standard real estate agency agreement form which has been in use since at least 1998 and probably for a considerable period prior to then. There was not a sole or an exclusive agency clause in Moneywood Pty Limited v Salamon Nominees Pty Limited (2000) 202 CLR 351 or in L.J. Hooker v W.J. Adams Estates 138 CLR 52 which are the leading recent authorities on claims for commission. I have not been able to find a reported case in New South Wales dealing specifically with the Exclusive Agency clause.

77 However the New Zealand case of Harcourts Coxen v Lunam & Anor (1997) Aust and NZ Conveyancing Report CCH p.392 is most instructive. In that matter the agent had an exclusive agency and under such agency he was entitled to remuneration if the properties were sold to anyone introduced through the agency. The eventual purchasers were introduced during the agency and endeavoured to purchase the property but were unable to do so. The property was taken off the market and some three months after the expiration of the exclusive agency the owners advertised the property for sale without giving the address. The same purchasers saw the advertisement and contacted the owners and then realised they had been shown the property during the period of the agency. They purchased the property. Galland J referred to previous authorities in New Zealand and stated;

'All of the authorities in one way or another expressed the test as involving some degree of causation between the original introduction and the ultimate purchase'.

78 The authorities to which he referred were cases involving exclusive agency. Much reliance was placed on the decision of Tipping J in Harcourts Group Limited v McKenzie (1994) ANZ Conveyancing Report 273 in which case Tipping J accepted that it was necessary for the agent to show that the introduction was causative of the sale and he was not prepared to accept a submission that there was no need for a causative link under the agency.

79 Interestingly the agent in Harcourt Coxen v Lunam & Anor did not succeed even though the sale by the owner direct was only some four months after the expiration of the excusive agency period.

80 Clearly in that case the Court was prepared to imply a term into the contract which term was then given effect.

81 In this matter it would seem that the plaintiff is entitled to succeed on a strict literal reading of the Exclusive Agency clause. The question really is whether I am prepared to find that there is a further term implied in the agreement which has to be considered with the written terms.

82 A Court is able to imply a term into a contract if it is necessary if effect is to be given to the actual terms of the contract. The principles governing the implication of such a term are set out in the majority judgment of the Privy Counsel in B.P. Refinery (Western Port) Pty Limited v Shire of Hastings (1977) 16 ALR 363 at 365;

83 For a term to be implied the following conditions (which may overlap) must be satisfied;

'1. It must be reasonable and equitable.

2. It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it.

4. It must be capable of clear expression.

5. It must not contradict any express term of the contract.'

84 Those principles have been adopted repeatedly by the High Court including in the following;

Hawkins v Clayton (1988) 164 CLR 539 at 571-3

Burn v Australian Airlines Limited (995) 131 ALR 422 at 428, 443.

I am of the view that each of those five conditions apply in this case.

'And the introduction is causative of the subsequent purchase of the property by the purchasers.'

85 I propose to briefly consider the five principles set out in B.P. Refinery;

(ii) Effective Operation:

In my view as clearly shown in this case, the present clause given its literal meaning is unworkable and the clause should be implied to give the clause business efficacy.

(iii) Clarity of Expression:

The term which the Court has sought to imply in my view is capable of clear expression.

86 For all of the above reasons I am satisfied that the clause requiring the agent to satisfy the Court that his introduction was causative of the subsequent purchase by the purchasers should be included.

87 The plaintiff cannot prove the provisions of the implied term. I am satisfied that the sighting of the sign by Mr Duivenvoorde and the subsequent inspection of the subject property by his wife on that day was in no way causative of the subsequent purchase of the property by the purchasers. It played no role or part at all. The plaintiffs' claim based on Clause 14 must fail. Any claim based on Clause 16 would fail for the same reasons.

88 In the claim by the plaintiff against the defendant there will be a verdict for the defendant. The plaintiff will be ordered to pay the defendant's costs and disbursements of that action.

89 In the claim by the defendant against the third party there will be a verdict for the third party. I have considered carefully what is the correct order to be made for costs and disbursements in that matter.

90 Mr Peterson for the plaintiff opposes any claim by the defendant for the costs of the Third Party proceedings to be made against the plaintiff. The plaintiff opposes any claim for a Bullock order. Mr Peterson points out that the defendant joined the third party pursuant to a contract to which the plaintiff is not a party. Clearly, the plaintiff could not have joined the third party as an additional defendant. The plaintiff did not enter into any contract with the third party. Mr Peterson submits the litigation between the defendant and the third party and the costs of such litigation are a matter between the defendant and the third party.

91 Mr Prior, Solicitor for the defendant submits that the defendant's entitlement to indemnity from the third party is not dependent upon the facts establishing a breach of the warranty given by the third party, but rather upon the institution of such a claim by the agent whether or not it is successful. He further submits that the defendant's entitlement to indemnity in respect of costs arises by virtue of the institution of the proceedings by an agent claiming a commission, whether or not such claim is successful and the indemnity is in respect of and against 'all costs and expenses incidental to defending any such claim'.

92 Special Condition 10 of the Contract of Sale between the defendant and the third party is in the following form;

10. The purchaser warrants that the purchaser was not introduced to the vendor or the property by any real estate agent except the agent (if any) named on the front page hereof or by any other person who might be entitled to claim commission from the vendor in respect of the sale, and the purchaser indemnifies the vendor (and if more than one, each of them) against any claim for commission which might be made by any agent resulting from an introduction constituting a breach of such warranty and against all costs and expenses incidental to defending any such claim. It is agreed that these indemnities shall be continuing indemnities not merging on completion.

93 In effect Mr Prior submits that an order should not be made for the defendant to pay the costs and disbursements of the third party because the agreement between the defendant and the third party includes an agreement by the third party to indemnify the defendant against such costs.

94 I have come to the view that the indemnity contained in Clause 10 'Against all costs and expenses incidental to defending any such claim' covers only the costs and disbursements as between the plaintiff and the defendant and does not include the costs and disbursements as between the defendant and the third party. I am not satisfied that those costs and disbursements are incidental to defending the claim of the plaintiff. It was the defendant's own decision to commence the proceedings against the third party and for the indemnity to cover those costs, in my view, the clause should have specifically said so. It would be a simple matter for such a provision to be included.

95 Mr Lawson, Counsel for the third party submits that the third party has been successful on the Third Party Notice and should be entitled to an order for costs against the defendant.

96 Part 19 Rule 9 of the Local Courts (Civil Claims) Rules provide;

Costs:

97 I have come to the view that in relation to the proceedings by the defendant against the third party, the defendant should pay the costs and disbursements of the third party. Costs should follow event.

98 I am of the view that the defendant is entitled to a Bullock order against the plaintiff.

99 It was the plaintiff who commenced these proceedings. As soon as the Third Party Notice was issued, in my view it must have been within the reasonable contemplation of the plaintiff that if it proceeded with the claim and lost, then the plaintiff could be liable for the legal costs of the third party. In my view the plaintiff's claim was based on a literal and in effect technical, interpretation of Clause 14. In my opinion the claim did not have any moral or business justification and was certainly contrary to what I would regard as the community's expectation of justice and fairness. Moreover, the evidence indicates that the defendants were prepared to assist the plaintiff by including her as an agent who would be entitled to half of the commission if certain persons whom she had introduced to the property and who had shown an interest in the property had purchased the property. That was a very fair and common sense approach which was rejected by the plaintiff. They are matters which I take into account when exercising my discretion in this matter. I also take into account the fact that once the defendant joined the third party, then all of the authorities indicate that it was proper for the proceedings to be heard together. Any application by the plaintiff to have its proceedings against the defendant heard separately to the proceedings by the defendant against the third party, would be doomed to failure. Hearing the actions together did not greatly increase the time or complexity of the proceedings. No additional witnesses were called. Indeed agreement was reached between the defendants and third parties as to the orders to be made in that proceeding depending on the outcome of the other proceeding.

100 In all the circumstances of this case I am satisfied the defendant is entitled to an order against the plaintiff for the costs of the third party proceedings.

101 The plaintiff is ordered to pay to the defendant the costs and disbursements payable by the defendant to the third party pursuant to the order made herein.

102 The costs and disbursements payable pursuant to each order will be as agreed between the parties. In default of agreement in relation to any order, then the costs and disbursements in relation to that order shall be assessed under the Legal Profession Act.

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Citations

Chana Scotcher Realty Pty Ltd v Fawkes and Duivenvoorde [2003] NSWLC 5

Cases Citing This Decision

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Cases Cited

7

Statutory Material Cited

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Anderson v Densley [1953] HCA 47

Johnson and Johnson Pacific Pty Limited v Unilever Australia Limited [2006] FCA 486

CITATION:	Chana Scotcher Realty Pty Ltd v Fawkes & Duivenvoorde [2003] NSWLC 5
JURISDICTION:	Civil
PARTIES:	Chana Scotcher Realty Pty Ltd (Plaintiff) Ronald Fawkes & Janet Fawkes (Defendants) Johan Duivenvoorde & Lynda Duivenvoorde (Third Parties)
FILE NUMBER:	7887/01
PLACE OF HEARING:	Downing Centre Local Court Sydney
DATE OF DECISION:	03/06/2002
MAGISTRATE:	Magsitrate B A Lulham
CATCHWORDS:	Contract - Agent - Principal - Estate Agent - Commission - Implied Terms - Costs
LEGISLATION CITED:
CASES CITED:	Burcell v Gary & Blackhouse Collieries Ltd (1910) AC 614 LJ Hooker Ltd v W J Adams Estates Pty Ltd (1977) 138 CLR 52 Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2000) 202 CLR 351 Harcourts Coxen v Lunam & Anor (1997) ANZ Conveyancing Report CCH 392 Harcourts Group Ltd v McKenzie (1994) ANZ Conveyancing Report CCH 273 BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 Hawkins v Clayton (1988) 164 CLR 539 Burn v Australian Airlines Ltd (1995) 131 ALR 422
REPRESENTATION:	Mr Peterson Solicitor for Plaintiff Mr Prior Solicitor for Defendants M Lawson Solicitor for Third Parties
ORDERS:	1. In all the circumstances of this case I am satisfied the defendant is entitled to an order against the plaintiff for the costs of the third party proceedings.; 2. The plaintiff is ordered to pay to the defendant the costs and disbursements payable by the defendant to the third party pursuant to the order made herein.; 3. The costs and disbursements payable pursuant to each order will be as agreed between the parties. In default of agreement in relation to any order, then the costs and disbursements in relation to that order shall be assessed under the Legal Profession Act.