Freedom Development Group Pty Limited v D'Ettorre Properties Pty Limited T/as D'Ettorre Real Estate

[2023] NSWCA 81

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Freedom Development Group Pty Limited v D’Ettorre Properties Pty Limited T/as D’Ettorre Real Estate [2023] NSWCA 81

Hearing dates:

4 April 2023

Date of orders:

26 April 2023

Decision date:

26 April 2023

Before:

Gleeson JA at [1]
Leeming JA at [86]
Kirk JA at [87]

Decision:

(1)   Appeal allowed.

(2)   Set aside orders 1 and 2 made in the District Court on 27 July 2022, and orders 1, 2 and 3 made in the District Court on 1 September 2022.

(3)   In lieu, order that the proceedings in the District Court be dismissed and the plaintiff pay the defendants’ costs.

(4)   The respondent pay the appellants’ costs in this Court.

Catchwords:

CONTRACTS — Real estate agent contract — Agent’s claim for commission — Whether agent “effectively introduced” the purchaser — Where actual purchaser was a trustee – Where no evidence of beneficiaries of the trust – Whether sufficient causal connection between introduction of prospective purchaser and ultimate sale — Where sole director of prospective purchaser one of the directors of actual purchaser

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, ss 237, 243(e)

Stamp Duties Act 1997 (NSW)

Uniform Civil Procedure Rules 2005 (NSW), r 42.1

Cases Cited:

ACCC v TPG Internet Pty Limited (2013) 250 CLR 640; [2013] HCA 54

Baker v Leonard Oades Pty Ltd [1964-5] NSWR 1745

Berben v Hedditch [1982] ANZ Conv R 535

Burchell v Gowrie and Blockhouse Collieries Ltd [1910] AC 614

Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; [2004] HCA 60

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25

Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117

Hopper v D J Sincock Pty Ltd (2012) 107 NSWLR 153; [2021] NCWCA 305

LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; [1977] HCA 13

McBrayne v Imperial Loan Co (1913) 13 DLR 448

Miller & Associates Insurance Broking Pty Limited v BMW Australia Finance Limited (2010) 241 CLR 357; [2010] HCA 31

Moneywood Pty Limited v Salamon Nominees Pty Limited (2001) 202 CLR 351; [2001] HCA 2

Outerbridge (t/as Century 21 Plateau Lifestyle Real Estate) v Hall (2020) 102 NSWLR 921; [2020] NSWCA 205

Prestige Residential Marketing Pty Ltd v Depune Pty Ltd [2008] NSWCA 179

T P Carroll Realty Pty Ltd t/as LJ Hooker Neutral Bay v Moyes [1997] NSWCA 321

University of Wollongong v Metwally (1984) 158 CLR 447; [1984] HCA 74

Whisprun Pty Ltd v Dixon Pty Ltd (2003) 234 CLR 492; [2003] HCA 48

Category:

Principal judgment

Parties:

Freedom Development Group Pty Limited (First appellant)
Edward Fernon (Second appellant)
D’Ettorre Properties Pty Limited T/as D’Ettorre Real Estate (Respondent)

Representation:

Counsel:
Mr M Cashion SC / Ms R Thrift (Appellants)
Ms B Oliak (Respondent)

Solicitors:
Breene v Breene Solicitors (Appellants)
E Berman & Co (Respondent)

File Number(s):

2022/246812

 Decision under appeal 

Court or tribunal:

District Court of New South Wales

Jurisdiction:

Civil

Date of Decision:

27 July 2022

Before:

Olsson SC DCJ

File Number(s):

2020/200811

HEADNOTE

[This headnote is not to be read as part of the judgment]

Freedom (the first appellant) held call options over two adjoining properties at Randwick. Freedom entered a non-exclusive agency agreement with D’Ettorre Properties Pty Limited (DRE; the respondent) on 8 November 2019 in relation to the sale of the properties. The agency agreement contained a clause which entitled DRE to commission if “the purchaser is effectively introduced by [DRE]”. In November 2019, the sole director of DRE, Mr D’Ettorre, introduced Mr Criola and later Mr Ben Ingham to the properties. Mr Criola was a “spotter” and business associate of Ben Ingham. After reaching agreement on price, Mr Criola nominated the purchasing entity to be a company, IFM Wansey Road Pty Ltd (IFM). Ben Ingham was the sole director of IFM. Although the parties later agreed an increase in price to $10.33m to cover Freedom’s costs in extending the option periods in the call options, binding contracts for sale and nomination deeds were not exchanged. On 15 January 2020, Mr D’Ettorre and Mr Fernon (the second appellant), a director of Freedom, spoke via phone and it was alleged that Mr Fernon represented that he had a Chinese buyer who will pay $11.3m (the first representation), to which Mr D’Ettorre replied that he would see if IFM would match that. Negotiations with IFM fell through. When Mr D’Ettorre could not find a buyer who would pay $11.3m, he gave up looking for a buyer for the properties.

On 11 February 2020, a second agent, Mr Ippolito, became involved. He informed Mr Fernon that he might have a prospective purchaser. On 17 February 2020, Mr Ippolito conveyed an offer of $10.35m from Mr John Ingham, which was accepted by Mr Fernon on the basis that Mr Ippolito agreed to a reduced commission and Mr Fernon obtained salvage rights to a kitchen. On 28 February 2020, binding sale contracts and nomination deeds were exchanged between Freedom and Wansey Road Randwick Pty Ltd (WRR) as trustee for the Wansey Rd Randwick Trust (the Trust). John Ingham and Ben Ingham were directors of WRR. Ben Ingham also personally guaranteed WRR’s obligations under the nomination deeds. On learning of the sale of the properties, Mr D’Ettorre contacted Mr Fernon seeking the identity of the purchaser. Eventually, Mr Fernon told Mr D’Ettorre that “the buyer is Johnny” (the second representation).

DRE commenced proceedings in the District Court asserting that it was entitled to commission because it had effectively introduced the actual purchaser. Although IFM did not buy the properties, DRE claimed that the ultimate sale was due to Mr D’Ettorre’s introduction of Ben Ingham. Alternatively, DRE sought damages under the Australian Consumer Law (ACL) against Freedom and Mr Fernon on the basis that the first and / or second representations of Mr Fernon were misleading or deceptive in contravention of s 18 of the ACL.

The primary judge found that DRE was entitled to the commission as it had effectively introduced the actual purchaser. The primary judge also found that Mr Fernon’s second representation was misleading or deceptive. The first representation was found not to have been pressed by DRE. Judgment was entered against both Freedom and Mr Fernon in the amount of the commission of $154,275, plus interest and costs.

The main issues on appeal were:

the proper construction of the commission clause;

whether DRE had established that it effectively introduced the actual purchaser; and

whether DRE had established that either of the representations were a basis for Freedom and Mr Fernon’s liability to DRE in damages under the ACL.

The Court (Gleeson JA, Leeming and Kirk JJA agreeing) held, allowing the appeal:

As to issue (1)

For there to be an “effective introduction” of “the purchaser” entitling DRE to commission there must be a sufficient causal nexus between the introduction of the purchaser and the ultimate sale of the property. DRE was required to do more than merely acquaint the purchaser and the vendor. What is a sufficient connection is a question of fact in each case: [35]–[43].

LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; [1977] HCA 13; T P Carroll Realty Pty Ltd t/as LJ Hooker Neutral Bay v Moyes [1997] NSWCA 321; Prestige Residential Marketing Pty Ltd v Depune Pty Ltd [2008] NSWCA 179, considered.

As to issue (2)

A causal nexus cannot be inferred from DRE’s introduction of Ben Ingham to the properties in November 2019 and the ultimate sale in February 2020 to a company in its capacity as a trustee, nominated by John Ingham, merely because Ben Ingham was a director of the actual purchaser or gave a guarantee in the nomination deeds. Ben Ingham’s distinct positions as a director and guarantor of the actual purchaser were not commensurate with him having an ownership interest directly or indirectly in the actual purchaser. Nor was there any evidence that Ben Ingham was a beneficiary of the Trust: [46]–[61].

As to issue (3)

Accepting that the first representation was a statement of present fact, it had a tendency to lead Mr D’Ettorre into error in believing that the prospective purchaser would need to substantially increase the price offered to secure the properties. DRE’s pleaded case on reliance and causation rose no higher than its contractual claim which had been rejected. Causation was not made out on the pleaded case. Insofar as DRE sought to raise a new case on appeal with respect to causation which was not pleaded or run at trial, it should not be permitted to do so: [68]–[77].

Whisprun Pty Ltd v Dixon Pty Ltd (2003) 234 CLR 492; [2003] HCA 48; University of Wollongong v Metwally (1984) 158 CLR 447; [1984] HCA 74, applied.

The second representation as to the identity of the actual purchaser was necessarily qualified and incomplete given Mr Fernon’s statement that this was all he wanted to say as he did not want to jeopardise the settlement. Viewed in context, the second representation did not have the tendency to lead Mr D’Ettorre into error. He was an experienced real estate agent who understood that the identity of the purchaser was being kept confidential until settlement. Nor did DRE advance any submission on reliance or identify a causal connection between the second representation and the pleaded loss or damage suffered by DRE, which again rose no higher than its contractual case which had been rejected: [78]–[83].

Judgment

1. GLEESON JA: The principal question on this appeal is whether a real estate agent is entitled to commission.

2. D’Ettorre Properties Pty Limited trading as D’Ettorre Real Estate (DRE) brought proceedings in the District Court claiming commission payable under an agency agreement with Freedom Development Group Pty Limited (Freedom) arising out of the sale of two neighbouring properties at Wansey Road, Randwick (the properties) to a purchaser nominated by Freedom which held call options over the properties. At the date of the contracts for sale, another agent Mr Steffan Ippolito, was acting for Freedom as its agent under an agency agreement. DRE claimed that it was entitled to commission because it had “effectively introduced” the purchaser to Freedom. Alternatively, DRE claimed damages for misleading or deceptive conduct allegedly engaged in by Mr Edward Fernon on behalf of Freedom arising from misrepresentations made by Mr Fernon to Mr Dominic D’Ettorrre, the sole director of DRE, as to what another buyer was prepared to pay for the properties, and after the contracts of sale were exchanged as to the identity of the purchaser. The primary judge gave judgment for DRE in the sum of $154,275, being the amount of the commission, and later made further orders, by consent, for interest and costs. Freedom and Mr Fernon appeal against the judgment.

3. For the reasons given below, the appeal should be allowed and the judgment and orders below should be set aside. In lieu, the District Court proceedings should be dismissed with costs. DRE should pay the costs in this Court.

The facts

4. The primary facts, which are not in dispute, may be summarised as follows.

5. Freedom is a property developer. The call option which Freedom held over one of the properties entitled it to nominate another person as buyer; it was extended by agreement with the owner on 29 November 2019 for 12 months. The call option held over the other property entitled Freedom to nominate another person to exercise the call option; it was extended by agreement with the owner on 23 December 2019 for three months. Freedom had obtained development approval in September 2019 which allowed for the construction of a boarding house on the properties. Freedom engaged a number of real estate agencies to sell the properties without success, having reduced its price expectations from around $14 million to $11.5 million by the time it engaged DRE.

6. On 8 November 2019, Freedom appointed DRE as its agent for sale of those properties. This was not a sole or exclusive agency agreement. The “Agency Period” commenced on that date and concluded when the properties were sold, or the agreement was terminated in writing by either party. The agreement provided that DRE was entitled to a commission if during the Agency Period “the purchaser is effectively introduced by the Agent” (cl 7.1). Mr D’Ettorre had been in the real estate business for over 20 years. On 11 November 2017, he introduced Mr Rino Criola to the properties. Mr D’Ettorre understood that Mr Criola was a “spotter” and business associate of Mr Ben Ingham, who he described as a member of the prominent Ingham family.

7. Mr D’Ettorre met Mr Criola and Ben Ingham on 27 November 2017 and the latter expressed an interest in purchasing the properties. Mr D’Ettorre moved quickly to get a deal done knowing that the call options on the properties would shortly expire. He negotiated the sale price of the properties with Mr Criola and received an offer to purchase the properties for $10.2 million which was accepted by Mr Fernon on 6 December 2019.

8. On 9 December 2019, Mr Criola provided Mr D’Ettorree with details of the purchasing entity and its lawyers, Hunter Lawyers. The nominated purchaser was a company, IFM Wansey Road Pty Ltd. (The sole director of the prospective purchaser was Ben Ingham.) On the same day Mr D’Ettorre issued a sales advice to Mr Fernon and Mr Pascale, the solicitor for the prospective purchaser. Thereafter, Mr D’Ettorre attempted to close the deal. On 17 or 18 December 2019, Mr D’Ettorre participated in a three-way telephone conversation with Mr Criola and Mr Fernon, in which he referred to Mr Criola by name as “Rino”, whereas previously he had only referred to “my buyers”.

9. Mr Fernon and Mr Pascale exchanged drafts of a one-page draft nomination deed between 19 and 23 December 2017. Mr Pascale refused Mr Fernon’s request for a guarantor of the nominee’s obligations to Freedom under the nomination deeds. Although Mr D’Ettorre liaised with the parties to have the contracts exchanged, the parties’ solicitors were unavailable over the holiday period.

10. On 14 January 2020, having negotiated that day with Mr Criola an increase in the purchase price by $130,000 to $10.33 million to cover the cost to Freedom of the extension of the option period in the call options, Mr D’Ettorre sent a text message to Mr Fernon confirming that the prospective purchaser was “ready to go”.

11. On 15 January 2020, Mr D’Ettorre sent a text message to Mr Fernon at 5.36 pm stating that the prospective purchaser would “pull out if not exchanged by tomorrow!”. There was a dispute at trial as to the precise terms of the telephone conversation which followed this text message. Mr D’Ettorre accepted in cross-examination that Mr Fernon sought a higher price as he now had an extra three months on the option agreement and mentioned a Chinese buyer and an institutional buyer. Her Honour accepted Mr D'Ettorre’s evidence that Mr Fernon told him that he had a Chinese buyer who will pay $11.3 million, to which Mr D’Ettorre replied that he would see if the prospective purchaser would match that: at [74], [75]. Later that night at 8.42 pm, Mr D’Ettorre sent a text message to Mr Fernon that the prospective purchaser was “out”.

12. There was evidence that Chinese investors referred to as the Capital Land Group had made an offer of $11.15 million in mid-November 2019, however when provided with the draft nomination deeds, option deeds, and contracts for sale, the Chinese buyer did not take the matter any further. In cross-examination, Mr Fernon gave evidence that he was still hopeful in January 2020 that the Chinese buyer would agree to a price of $11.323 million, saying “[w]e all live in hope”. Her Honour did not accept that there was any offer from the Chinese buyer at the time of the 15 January 2020 conversation: at [48].

13. On 29 January 2020, Mr Fernon sent a text message to Mr D’Ettorre asking for an update on his prospective buyers to which Mr D’Ettorre replied, “Not at this stage! Expecting an offer end of the week! I Will keep you posted!”. Mr D’Ettorre’s evidence was that when he could not find a buyer who would pay $11.3 million, he “gave up looking”.

14. In February 2020, a second agent, Mr Ippolito, became involved. He had been aware, since at least 14 November 2019, that Mr Criola and Ben Ingham were dealing with Mr D’Ettorre in relation to the properties. Mr Ippolito had a strong commercial relationship with Mr Criola. His evidence was that he knew that Ben Ingham and Mr Criola jointly owned properties and worked closely together.

15. On or about 11 February 2020, Mr Ippolito met Mr Criola who told him “[i]t’s all fallen over”, that he was frustrated with both Mr D’Ettorre and Mr Fernon and “[t]hey are too hard to deal with and I’ve moved on”. In response to Mr Ippolito asking if he could put it to “Johnny”, Mr Criola replied, “[d]o whatever you like, if he can do a deal, good on him”. “Johnny” was Mr John Ingham: he was a nephew of Ben Ingham. Mr Ippolito then telephoned John Ingham and told him about the Wansey Road boarding site, that “Ben and Rino looked at it and tried to do a deal, but they fell through and have pulled out” and asked if he would look at it. John Ingham indicated that he was interested, that he had missed out “at Glebe” and sought some more details. There was no challenge in cross-examination to these parts of Mr Ippolito’s affidavit evidence.

16. Mr Ippolito informed Mr Fernon on 11 February 2020 that he might have an interested party, being “a high net-worth family that are active in the area and looking for a boarding house”. After speaking with John Ingham on or about 14 February 2020, who said he was cashed up and keen to buy something, Mr Ippolito conveyed to Mr Fernon an offer for $10.2 million identifying the buyer as a “long term client, Johnny”. On 17 February 2020 he conveyed to Mr Fernon a final offer of $10.35 million. When asked by Mr Fernon the identity of the buyer, Mr Ippolito disclosed that the buyer was “Johnny Ingham”. Mr Fernon negotiated a fixed commission with Mr Ippolito of $90,000 plus GST and salvage rights to remove the kitchen. On 18 February 2020, Mr Fernon accepted the offer.

17. On 19 February 2020, Mr Ippolito entered into an agency agreement with Mr Fernon on behalf of Freedom and issued a sales advice identifying the purchaser as Wansey Road Randwick Pty Ltd and its solicitor as JDK Legal.

18. Also on that date, Mr Fernon sent to Mr Ippolito a 16-page draft nomination deed which included provision for a guarantee. Mr Tim Calvert of JDK Legal redrafted the nomination deeds on 21 February 2020 identifying the purchaser as “Wansey Road Randwick Pty Ltd as trustee for the Wansey Rd Randwick Trust” and Ben Ingham as the guarantor. An inference can be drawn from a purchaser/transferee declaration made by the purchaser for the purposes of the Stamp Duties Act 1997 (NSW) that the trust was a unit trust. There was no evidence of the beneficiaries of the Wansey Rd Randwick Trust. Neither the trust deed nor the register of unitholders was in evidence.

19. It is apparent from documents produced on subpoena by Mr Criola and JDK Legal and tendered in evidence by DRE, that commencing on 19 February 2020 Mr Criola was the person primarily giving instructions to those solicitors in relation to the draft contracts for sale and the nomination deeds. On 28 February 2020, binding contracts for sale and nominations deeds were exchanged and the contracts subsequently completed, one in April 2020 and the other in May 2020.

20. Both John Ingham and Ben Ingham were directors of the actual purchaser. The unsigned contracts of sale, which are in evidence, include a guarantee of the purchaser’s obligations given by each of John Ingham and Ben Ingham. The nomination deeds were more comprehensive in their terms, including a guarantee by Ben Ingham, than those proposed with the prospective purchaser. Further, the actual purchaser paid $20,000 more than what had been offered by the prospective purchaser; Mr Ippolito reduced his commission to $90,000 plus GST; and Mr Fernon secured an agreement for salvage rights, principally a kitchen.

4. In cross-examination, Mr Ippolito adhered to his affidavit evidence that he only spoke to John Ingham in relation to the purchase of the properties. He said that John Ingham did not mention to him that he would be purchasing with anyone; that John Ingham gave him the name of the actual purchaser, but not the names of its directors; that he did not find out that Ben Ingham was a director of the actual purchaser until after the sale; that there was no mention by John Ingham that he was going to enter into the transaction with Ben Ingham instead of his mother and he did not say that Ben Ingham was going to be a guarantor; that he never had a conversation with Ben Ingham about the sale; and that he negotiated with John Ingham not Ben Ingham.

5. Mr D’Ettorre learned of the sale through an Instagram announcement on 28 February 2020 and telephoned Mr Fernon that day, who confirmed the sale but refused to tell him the name of the buyer. Eventually on 22 March 2020, Mr Fernon said to him “the buyer is Johnny. I cannot say more as settlement is in about three months and I don’t want to jeopardise the settlement”. Mr D’Ettorre did not learn the identity of the actual purchaser until it was publicly available.

6. According to an ASIC search tendered at trial, the shareholders of the prospective purchaser and the actual purchaser were the same: Mr Mark Ingham and Ms Rosemary Ingham. There was no evidence of their relationship with Ben Ingham. There was evidence that “Mary” was the mother of John Ingham and the ASIC search indicated that Rosemary Ingham and John Ingham lived at the same address in Point Piper.

7. A trust account statement of JDK Legal shows that the source of the funds for settlement of the purchase of the first property was from the actual purchaser, being an amount of $4,470,540.29 received by those solicitors on 15 April 2020. The source of the funds for settlement of the second purchase, including stamp duty of $294,852.50, was the ANZ Bank, the incoming mortgagee. As the actual purchaser had previously transferred funds for payment of duty in the amount of $294,852.50 to the trust account of JDK Legal, this amount was refunded by those solicitors to JMI Nominees Pty Ltd, on instructions given by Ms Jenny Zhu, Group Financial Controller of Tricon Group Pty Ltd, whose business address at Annandale was the same as that of Mr Criola. There was no evidence of the directors or shareholders of JMI Nominees Pty Ltd or whether this company was a trustee.

8. The essential case advanced by Freedom before the District Court and on appeal is that DRE is not entitled to commission because the actual purchaser was not “effectively introduced” by Mr D’Ettorre. Rather, it was the independent efforts of the second agent, Mr Ippolito, who introduced the actual purchaser, which resulted in the sale. Further, Freedom says that its conduct the subject of the alleged misrepresentations by Mr Fernon was not misleading or deceptive, and in any event, DRE failed to establish causation of any actual or likely loss or damage justifying an order for compensation under s 237 and s 243(e) of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act 2010 (Cth).

Issues on appeal

26. The appeal raises three principal issues: (1) the proper construction of the commission clause, (2) whether the entitlement to commission arises on the facts, and (3) alternatively, whether DRE made out its claim for relief in respect of the alleged misleading or deceptive conduct of Freedom and Mr Fernon’s involvement in that conduct.

Commission claim

The primary judge’s essential findings

27. Having recorded her factual findings (at [7]-[59]), her Honour referred to some authorities dealing with claims for commission (at [60]-[69]), including LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52 at 66; [1977] HCA 13, where the agent relied upon an implied term and Gibbs J said that the agent must establish the necessary causal relationship between its actions and the sale.

28. Her Honour said that whether DRE effectively introduced the actual purchaser requires a careful consideration of the facts (at [70]) and proceeded to consider the interactions between Mr D’Ettorre and Mr Fernon. Her Honour found that for whatever reason, the terms of the nomination deeds had not been finalised by the end of December 2019 and early January 2020 (at [73]) and observed that the situation changed after the options were finally extended, as this gave Mr Fernon time to reflect and seek other buyers (at [85]).

29. Addressing Mr Ippolito’s role, her Honour said at [86]:

Mr Ippolito then became involved again. Mr Ippolito did give evidence and was cross-examined at some length. He had known Mr Johnny Ingham since 2008 and had done leasing work for him in the eastern suburbs. He had also sold him a property in Bondi and was aware that he had an interest in boarding houses. It was not put to Mr Ippolito that he did not have conversations with Mr Johnny Ingham to which he had deposed.

30. After stating that Freedom’s real interest was the size of the benefit from the sale and that the price negotiated by Mr Ippolito was higher than the price negotiated by Mr D’Ettorre, her Honour found at [89]:

Mr Ippolito secured a better deal for Mr Fernon or for Freedom in a number of ways. Firstly, he fixed his commission at $99,000.00 which was at least $50,000.00 less than Mr D’Ettorre could offer. Mr Ippolito arranged the guarantor and a slightly higher price as well as a salvage provision (the kitchen). Mr Ippolito told Mr Fernon that he had a buyer although he did not name him. He said he was a long term client. There were some initial discussions and the right to salvage the kitchen or kitchens, he said, was the “last thing really to get the deal over the line”. In short, he secured slightly better price and some better terms.

31. Under the heading “Was there a break in the chain of causation”, her Honour made the following findings (at [90]-[98]):

[90]   Mr D’Ettorre carried out significantly more work on securing a sale of the property than Mr Ippolito. That is not, of course, the test but it is one factor to be taken into consideration.

[91]   Mr D’Ettorre introduced Mr Fernon to Mr Criola (albeit not by name until negotiations were in an advanced state).

[92]   Both Mr D’Ettorre and Mr Criola knew Mr Ippolito. The latter held Mr J Ingham’s name on his database. He had worked with him extensively.

[93]   There was no need for the property to be marketed again: Mr Ippolito went straight to Mr J Ingham and within a matter of weeks the deal was done.

[94]   Mr Criola spoke with Mr Ippolito at or shortly after the sale had fallen over. He knew Mr Ippolito was going to put the deal to Mr Fernon.

[95]   Contracts were exchanged with Mr Fernon. The purchaser might have been a company but Mr B Ingham was one of only two directors and he was the guarantor under the Nomination Deeds.

[96]   To the extent there needed to be negotiations, it was Mr B Ingham who represented the purchaser.

[97]   It is not a question of balancing how much work each agent did, although in my view Mr D’Ettorre was responsible for the majority. The question is causal link. Mr D’Ettorre might have been out of the sale but it was he who had told Mr Fernon about Mr Criola and probably about Mr B Ingham. Ippolito contacted Mr Fernon. Mr Ippolito knew the identity of the proposed purchasers. He went directly to Mr J Ingham and secured the deal that directly included Mr B Ingham.

[98]   I have not overlooked the fact that Mr Ippolito might have seen that the property was still on the market – he probably did - but he also knew that the sale had fallen over and he knew from Mr Criola the identity of the vendor.

32. Her Honour concluded that “it was more probable than not on those facts that there was no break in the causal connection, and that Mr D’Ettorre effectively introduced the vendor to the purchaser, and I so find”: at [99].

Submissions

33. Freedom relies upon two reasons, which are said to demonstrate error in her Honour’s findings that DRE effectively introduced the actual purchaser of the properties. The first is that her Honour applied the incorrect test in determining causation for the purposes of cl 7.1 of the agency agreement. The second is that her Honour’s finding of causation was wrong on the evidence.

Determination

34. The entitlement to commission under a written agency agreement directs attention first to the construction of the agreed term and this is followed by a factual question whether what the agent did falls within its meaning: Outerbridge (t/as Century 21 Plateau Lifestyle Real Estate) v Hall (2020) 102 NSWLR 921; [2020] NSWCA 205 at [2] (Leeming JA). See also LJ Hooker v Adams at 66 (Gibbs J). The process of construction may sometimes involve the implication of terms, as a matter of business efficacy, or in accordance with custom: Outerbridge at [2].

Construction of cl 7.1

35. Clause cl 7.1 of the agency agreement provided:

The Vendor acknowledges the Agent is entitled to Commission if during the Agency Period (Item A) the purchaser is effectively introduced by the Agent, regardless of whether the sale occurs after the termination of this Agreement.

36. The parties diverged as to whether the words “effectively introduced” refer to a causal connection between the agent’s efforts and the sale. Freedom says that those words refer to a causal connection between the agent’s efforts and the sale itself and require that the agent be the effective cause of the state of affairs by which the purchaser is introduced to the vendor and achieved an agreement as to the purchase of the property. DRE says that the words require no more than “acquainting the purchaser and the vendor in relation to the property” and there was no need for the primary judge to consider whether there existed a causal connection when “only an introduction was required”.

37. Although the term “purchaser” is not defined in the agency agreement, its natural meaning, read in context, is the person or entity who enters into a binding agreement to purchase the properties. That meaning is consistent with cl 7.3 which provides that the commission will be payable on settlement of the sale or, if cl 7.2 applies, on demand, and cl 7.2 which deals with the circumstance where a binding contract is entered into but not completed for various reasons. As Freedom correctly submitted, a failure to achieve an agreement as to purchase would mean that there is no purchaser, and the commission clause is not engaged.

38. Whilst DRE accepted that cl 7.1 presupposes a sale to a purchaser, a construction of the commission clause that requires no more than the agent acquainting the purchaser and the vendor in relation to the property would give no work for the words “effectively” in cl 7.1. The “effective cause” of a sale and the words “effectively introduced” are not identical concepts, however, both concepts involve a causal element. Thus, in T P Carroll Realty Pty Ltd t/as LJ Hooker Neutral Bay v Moyes [1997] NSWCA 321, which involved an express term of the agency agreement provided for commission if the agent, “effectively introduces to the principal a purchaser of the property who subsequently enters into a binding contract”, Gleeson CJ (Brownie and Clarke JJA agreeing) said:

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 LJ Hooker Ltd v 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).

39. Prestige Residential Marketing Pty Ltd v Depune Pty Ltd [2008] NSWCA 179 involved a commission clause in similar terms to that in T P Carroll. In Prestige, the agent did not submit that the effective introduction of the purchaser to the property within the meaning of the commission clause required no more than proof of the fact of introduction of the purchaser and of the subsequent contract. Bell JA (Beazley JA and Mathews AJA agreeing) proceeded on the basis that the agent was required to prove that it was an effective cause of the sale (at [57]), referring to LJ Hooker v Adams at 86 (Jacobs J) and 58 (Barwick CJ) and Moneywood Pty Limited vSalamon Nominees Pty Limited (2001) 202 CLR 351; [2001] HCA 2 at [30], [86] (McHugh J).

40. LJ Hooker v Adams and Moneywood both involved an agent’s claim for commission under an implied term. In LJ Hooker v Adams, Jacobs J, although in dissent in the result, said of such a case (at 86) that “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 be described as a cause of the ensuing sale. The factual inquiry is whether a sale is really brought about by the act of the agent”. Gibbs J said (at 67) that an agent is not entitled to recover commission simply because the agent expended considerable time and energy in the interests of the principal and found a person ready, willing and able to buy and indeed brought that person to the very brink of the sale. What the agent must show is that a sale was actually effected; it must also establish the necessary causal relationship between its actions and the sale, or in other words, that the sale was brought about through its agency. His Honour noted (at 68) that, “[l]ike all questions of causation this is ultimately a question of fact”.

41. It is not necessary to determine whether Prestige is correct in treating the “effective cause” of the sale and the words “effectively introduced” as identical concepts: cf T P Carroll. In many cases, there will be no difference between those concepts on the facts. Nothing turns on any difference in the present case.

42. In my view, to be an “effective introduction” of “the purchaser” within the meaning of cl 7.1 there must be a sufficient causal nexus between the “introduction” of the purchaser and the ultimate sale of the property to the purchaser. What is a sufficient connection is a question of fact in each case. Adapting the language of Jacobs J in LJ Hooker v Adams, the factual inquiry is whether a sale is really brought about by the act of the agent in introducing the purchaser. This “requires a consideration and evaluation of all circumstances which may have some causal relationship with the sale”: Berben v Hedditch [1982] ANZ Conv R 535 at 537 (Moffit P), a case involving a claim for commission under an implied term (see the unreported judgment of Mahoney JA which is not fully reported at 538).

43. Given that causation is a question of fact, there is little guidance to be found in the authorities. As Moffitt P cautioned in Berben at 537:

Accordingly each case requires consideration on its own facts and cannot be decided upon some preconception of a general kind as to the causative effect of any introduction. Decisions in another case that, on the facts in that case, the introduction was an effective cause of the sale does not establish that this result follows as a matter of law and, of course, cannot provide a precedent of fact.

The factual enquiry

44. Freedom says that DRE ceased to be involved with the properties and the prospective purchaser in mid-January 2020, and it was Mr Ippolito’s conduct which brought about the sale.

45. DRE says that if the words “effectively introduced” require a causal connection between the introduction and the sale, then her Honour correctly applied that test to the facts in this case. It is said that although the prospective purchaser did not buy the properties, the ultimate sale was due to Mr D’Ettorre’s introduction of Ben Ingham to the properties. According to the submission, the prospective purchaser and the actual purchaser were “affiliated” because Ben Ingham was a common director of both companies, and he gave a guarantee of the actual purchaser’s obligations in the nomination deeds.

46. Contrary to DRE’s submission, an inference of causal continuity cannot be drawn between DRE’s introduction of Ben Ingham to the properties in November 2019 and the ultimate sale in February 2020 to a corporate purchaser nominated by John Ingham merely because Ben Ingham was a common director of the actual purchaser or gave a guarantee in the nomination deeds.

47. The difficulty with the “affiliation” submission is that it conflates Ben Ingham’s distinct positions qua director and guarantor of the actual purchaser with him having an ownership interest directly or indirectly in the actual purchaser. One does not follow from the other. Plainly, he could be a director of the actual purchaser without having a direct or indirect ownership interest in the properties. Moreover, there is no evidence that Ben Ingham is a beneficiary of the Wansey Rd Randwick Trust.

48. Turning to the significance of the giving of the guarantees, it can be inferred from the circumstances that the actual purchaser knew that Ben Ingham intended to guarantee its obligations in the nomination deeds and acquiesced in the provision of the guarantees for its benefit, and thus Ben Ingham had, at least, an implied right of indemnity against the actual purchaser: Hopper v D J Sincock Pty Ltd (2012) 107 NSWLR 153; [2021] NCWCA 305 at [25]. However, there is no evidence that Ben Ingham required or received any additional consideration for giving those guarantees to Freedom (such as an interest as a beneficiary of the Wansey Rd Randwick Trust), beyond the stated consideration in the nomination deeds, being Freedom’s agreeing to enter into the nomination deeds (cl 21.1).

49. Next, DRE says that Mr Criola was the “glue” between the prospective purchaser and the actual purchaser and consequently, the sale to the actual purchaser was not a new and independent transaction to DRE’s introduction of Ben Ingham to the properties. It is said that Mr Criola was the common factor between the prospective purchaser and the actual purchaser and that it should be inferred that he negotiated with Mr Ippolito on the sale to the actual purchaser. This submission cannot be accepted. On the unchallenged evidence of Mr Ipploito, (a) he met Mr Criola in February 2020 and obtained confirmation that Mr Criola had no objection to him seeking to find another buyer for the properties, specifically John Ingham, and (b) Mr Criola was not involved in the subsequent negotiations between John Ingham and Mr Ippolito in February 2020.

50. The evidence does not support DRE’s submission that there was causal continuity between Mr D’Ettorre’s introduction of Mr Criola and Ben Ingham to the properties in November 2019 and Mr Ippolito’s introduction of John Ingham to the properties in February 2020.

51. Alternatively, it is said by DRE that whether or not Mr Criola introduced John Ingham to the properties “or however that worked out” did not matter. It is sufficient that there was continuity in Mr Criola acting on behalf of Ben Ingham with respect to the prospective purchaser and in giving instructions on behalf of the actual purchaser to its solicitors, JDK Legal. This submission conflates the role of Mr Criola as an agent of the directors of the actual purchaser in dealing with its solicitors on the conveyancing transactions, with Ben Ingham having a direct or indirect interest in the purchase as a beneficiary of the Wansey Rd Randwick Trust. As indicated, there is no evidence that he was a beneficiary of that trust.

52. Another way that the continuity submission was put was that it is said that Mr Criola was the “client” of JDK Legal, the solicitors for the actual purchaser, because he primarily dealt with JDK Legal in giving instructions on behalf of the directors in relation to the draft contracts for sale and the nomination deeds. The premise of the submission seems to be that Mr Criola, as the client, was acting on behalf of an undisclosed principal, Ben Ingham. There is no evidence of the solicitor’s retainer letter, which might support this submission. Other evidence is inconsistent with the submission, for example: the sales advice issued by Mr Ippolito, identified JDK Legal as the solicitor’s acting for the actual purchaser; the invoices for legal fees were issued by those solicitor’s to in the name of the actual purchaser; and the purchaser’s solicitor’s trust account statement was issued in the name of the actual purchaser. The proper inference to be drawn from the documents in evidence from the solicitor’s file is that the client was the actual purchaser.

44. Nor is it to the point, as her Honour found at [96], that Ben Ingham represented the actual purchaser to the extent there needed to be negotiations. This is a reference to negotiations in relation to the terms of the nomination deed to which Ben Ingham was a party as guarantor. It cannot be inferred from his participation in giving those instructions to the purchaser’s solicitors, that Ben Ingham had a direct or indirect interest in the purchase as a beneficiary of the Wansey Rd Randwick Trust.

45. Contrary to DRE’s submissions, the facts of this case are not similar to those in Prestige where the prospective purchaser introduced by the first agent was later the actual purchaser through a different agent and the Court was satisfied that there was a continuing effect of an initial introduction to the property. Here, the prospective purchaser introduced by DRE was not the actual purchaser. Nor was there any continuing effect of the initial introduction by DRE because the ultimate sale was a new and independent transaction following Mr Ippolito’s introduction of John Ingham to the properties.

46. Relying on the reasoning of Moffitt P in Berben at 536-537, DRE submitted that the uniqueness of the properties – which it said was to be inferred from Freedom’s initial difficulty in finding a buyer – favoured the conclusion that DRE was responsible for the sale. In Berben, Moffitt P said (at 536):

The introduction may be the critical factor in some cases, as where the sale is of an unusual nature in which the vendor’s problem was to find a person who may be interested in the particular property.

The asserted uniqueness in this case was that Freedom had obtained development approval for the construction of a boarding house. The “uniqueness” submission overlooked the evidence of Mr Ippolito that John Ingham had expressed to him an interest in developing a boarding house as he had recently missed out on a property at Glebe. On the evidence, John Ingham’s interest in purchasing a property for development as a boarding house was independent of DRE’s earlier efforts to find a buyer for the properties.

56. Adopting the words of Brereton J in Baker v Leonard Oades Pty Ltd [1964-5] NSWR 1745, it is said by DRE that “the yeast” of Mr D’Ettorre was still working and that what he did flowed through to the eventual purchaser. By reference to cases where the efforts of a second agent built on the first agent’s earlier efforts with the same prospective purchaser, it is said that DRE’s initial efforts flowed through to the actual purchaser, thus causing the ultimate sale: Moneywood at [44]; Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117 at [39]. These cases are distinguishable.

57. In both Moneywood and Emmons the prospective purchaser and actual purchaser were the same. The issue in Moneywood was whether the agent was entitled to commission having introduced the purchaser who entered a contract which fell through and later entered a new contract for a substantial part of the same land without the intervention of an agent. The issue in Emmons was whether the efforts of the second agent were independent of the first agent or simply built on the first agent’s earlier efforts where the prospective purchaser and actual purchaser were the same. By contrast, Mr Ippolito’s participation resulted in the introduction of a new buyer which made a (slightly) higher offer on price and Mr Ippolito agreed to a substantial reduction in his commission. Taken together, the higher offer by $20,000 and reduction in commission by about $65,000, resulted in a financial betterment for Freedom in the order of $85,000, together with salvage rights to a kitchen.

58. Finally, it is said by DRE that an agent can still be the effective cause of a sale even if the sale is made to a different entity than the one with whom the agent negotiated. Reference was made to LJ Hooker v Adams at 68 where Gibbs J referred to Burchell v Gowrie and Blockhouse Collieries Ltd [1910] AC 614 at 623, 625, noting that the sale in that case was effected to “agents or co-adventurers” of the person introduced by the agent, acting in the same interest as the person originally introduced, and continued at 68-69:

It was held [in Burchell’s Case] that the acts of the agent were an effective cause of the sale which actually took place. The case shows that an agent may be instrumental in bringing about a sale notwithstanding that his negotiations have been with one person and that the sale is made to a different person… It would be equally true to say that if the agent's efforts with A result in a sale to B, the agent has earned his commission. Illustrations of this latter proposition may be found in two Canadian cases, Stratton v Vachon & Wilson (1911) 44 SCR (Can) 395 (where the purchase was made by associates of the person introduced by the agent, although the latter person took no part in the purchase) and McBrayne v Imperial Loan Co (1913) 13 DLR 448 (where the purchase was by a company with which the person introduced by the agent was associated).

59. So much can be accepted but there is no analogy with the present case. Thus, in McBrayne v Imperial Loan Co (1913) 13 DLR 448, the second Canadian case referred to by Gibbs J, the agent’s entitlement to commission was found to be engaged by the sale of the property to a company in which the person originally introduced had a direct interest as a shareholder and a role in founding: at 450. Here, there is an absence of evidence that John Ingham was an agent or co-adventurer of the prospective purchaser acting in the same interest as Ben Ingham, the person originally introduced by Mr D’Ettorre.

60. Nor is this a case of the type referred to by McHugh J in Moneywood at [30] where the person introduced by Mr D’Ettorre nominates another person to buy the property – at all events where the person introduced directs the property to be transferred into the name of the actual purchaser. Mr John Ingham, not Mr Criola, directed the property to be transferred into the name of the actual purchaser.

61. For the above reasons, the conclusion by her Honour that the ultimate sale was brought about by the acts of DRE is unsupportable. DRE did not effectively introduce the actual purchaser to the properties or to Freedom. It played no part in influencing the actual purchaser to enter into binding contracts for sale and nomination deeds. Her Honour erred in finding that DRE was entitled to commission.

Misleading conduct claim

62. At trial, DRE’s misleading conduct claim was pressed in relation to two alleged misrepresentations by Mr Fernon on behalf of Freedom: the first, on 15 January 2020 that Mr Fernon said to Mr D’Ettorre that he had a Chinese buyer who would pay $11.3 million for the properties (the Chinese buyer representation), and second, on 22 March 2020 that Mr Fernon said to Mr D’Ettorre that the buyer was “Johnny” (the buyer representation).

63. As to the Chinese buyer representation, the unchallenged findings by her Honour at [46], [48] and [74]-[75] are:

[46]   The evidence about the Chinese buyer is more extensive than that suggested by the plaintiff. Chinese investors had made an offer of $11.15 million in mid-November 2019. They were offered the draft nomination deeds, option deeds and contracts for the property but they did not take the matter any further. Mr Fernon said, “we had a discussion with Richard [Richard Fing, the CEO of the business] and he said he spoke to a number of his investors, but since they had just purchased another site in Dee Why they weren’t in a hurry to buy another site”. Mr Fernon said that they said to him, “’we want a, a due diligence period and exclusive due diligence’ but because I was talking to a number of other purchasers I was unwilling – unwilling to give that so I provided all of the documents to them and they said ‘we’ll go and try and work with our investors, get them over the line. When we’re ready we’ll come back to you’ and I said I was at the time dealing with other agents and they, they respected that and understood that”.

…

[48]   I will review the parties’ conduct up to this point:

(1)   A Chinese investor and institutional investors (unnamed) had been interested in the property during mid-2019. The institutional investors seem to have dropped away but the Chinese buyer had purchased elsewhere and was no longer interested in the property. Mr Fernon prevaricated somewhat when asked about this in cross examination but eventually conceded that he spoke to Mr D’Ettorre about the Chinese buyer in January and although the question of price came up, he did not say that he had an offer of $1.3 million.

…

(4)   Mr D’Ettorre’s subsequent conduct was consistent with his own version of events: he could not find someone to match the price – that is, $11.3 million – and took the view that the deal had fallen over.

…

[74]   Mr Criola was becoming frustrated with the various delays the reasons for which, I might add, are opaque, and apparently resolved to rescind the agreement. His communications to this effect (that he was “out”) occurred at or about the same time that, according to Mr D’Ettorre, Mr Fernon told him that he had another buyer (the ‘Chinese buyer’) who had offered to pay a significantly higher price.

[75]   Mr Fernon was obliged to admit that he did not in fact mention the Chinese buyer at that time, but said that it was in the context that he was still in contact with the buyer in December/January and that he may have discussed price with Mr D’Ettorre. (Emphasis in original.)

64. The pleaded case on reliance and causation was that as a result of the contravening conduct, DRE was unaware of the true identity of the purchaser, unaware of the true position as to its entitlement to commission based on the actual purchaser being effectively introduced to Freedom by DRE, and/or unable to demand and/or receive payment of the commission at settlement or otherwise take any steps to protect its right to protect or enforce its rights to commission (statement of claim, [39]).

65. Her Honour did not address the Chinese buyer representation. It is common ground that her Honour mistakenly took the view that this claim was not pressed. DRE seeks to uphold the Chinese buyer representation by ground 3 of its notice of contention.

66. Addressing the second claim, her Honour found that the buyer misrepresentation had been made by Mr Fernon, and in fact, led Mr D’Ettorre into error in believing that he had no entitlement to commission, giving the following reasons at [102]-[103]:

[102]   As to the second, that Mr Fernon disclosed to Mr D’Ettorre that the director of the actual purchaser was Johnny Ingham but failed to mention that Ben Ingham was also a director and guarantor. He said that he could not say more in case he “jeopardised the settlement”. In doing so, it was argued that he misrepresented the true position. I agree. His answer to Mr D’Ettorre, I infer, was a direct attempt to divert Mr D’Ettorre’s investigation into the sale. In my view it was misleading and it in fact misled Mr D’Ettorre into believing that he had no entitlement to a commission, and I so find.

[103]   For that reason, and to the extent that it is necessary given my earlier findings, I find that Mr Fernon’s conduct was misleading and deceptive and was designed to be thus.

67. DRE accepts that her Honour erred in finding that Mr Fernon disclosed to Mr D’Ettorre that the director of the actual purchaser was Johnny Ingham. DRE seeks to uphold the buyer representation by ground 2 of its notice of contention.

Chinese buyer representation

68. The appellants say that the Chinese buyer representation was a statement as to a future matter and that this was not pleaded, nor did it form any part of DRE’s case. At trial, the parties did not address the operation of the procedural provision in s 4 of the ACL which places an evidentiary burden on a defendant who is alleged to have made a representation as to a future matter that is misleading. Given this issue was not pleaded or raised at trial, it is appropriate to proceed on that basis, as was common ground at trial, that the Chinese buyer representation was a statement of present fact.

69. Conduct will be misleading or deceptive if, viewed as a whole, it has a tendency to lead a person into error: ACCC v TPG Internet Pty Limited (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ). The required analysis is objective: Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; [2004] HCA 60 at [111] (McHugh J); requiring analysis of all the circumstances: Butcher at [37] (Gleeson CJ, Hayne and Heydon JJ).

70. Mr Fernon gave evidence of an offer by a Chinese buyer in November of $11.1 million and that the documents sent to that prospective buyer were never signed. There was no evidence of any renewed interest or offer by that prospective buyer in January 2020. As is evident from her Honour’s findings, there was no evidence of a Chinese buyer offering $11.3 million in mid-January 2020: see [63] above.

71. In commercial dealings, like the present case, the characterisation of the conduct has regard to its circumstances and context. Factors such as the sophistication of the parties, the practices of the parties and the traditional secretiveness of negotiations are important: Miller & Associates Insurance Broking Pty Limited v BMW Australia Finance Limited (2010) 241 CLR 357; [2010] HCA 31 at [20]-[21] (French CJ and Kiefel J), [91] (Heydon, Crennan and Bell JJ). Mr D’Ettorre was an experienced estate agent. The Chinese buyer representation was made by Mr Fernon in the context that he was speaking to Mr D’Ettorre as the effective vendor. Having secured an extension of the call options, Mr Fernon sought to take advantage of his improved bargaining position. The question is what message was conveyed to Mr D’Ettorre by the Chinese buyer representation.

72. Whilst it was not misleading or deceptive for Mr Fernon to say to Mr D’Ettorre that he wanted a higher price for the properties, the reason he gave was incorrect. As at mid-January 2020, Mr Fernon did not have a Chinese buyer who would pay $11.3 million for the properties. Viewed as a whole, I would conclude that Mr Fernon’s conduct on behalf of Freedom had a tendency to lead Mr D’Ettorre into error; specifically, into believing that the prospective purchaser would need to substantially increase its price to secure the properties.

73. Turning to the issue of causation, DRE’s claim for compensation relying on s 237 of the ACL must fail if DRE cannot establish causation of actual or likely loss or damage. This is the ultimate issue, and reliance is not a substitute for the fundamental question of causation: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [143] (Gummow, Hayne, Heydon and Kieffel JJ). The issue is consequently to identify the probable counter-factual had the conduct not occurred. That counter-factual is approached on the basis that the parties were already in a contractual relationship, and it was for DRE to prove what it would have done. DRE’s pleaded case on reliance and causation (see [64] above) did not rise any higher than its contract case, which has been rejected above. Causation was not made out on the pleaded case.

74. DRE did not address the question of causation in its written submissions. In oral argument, counsel for DRE advanced two related arguments, assuming the contractual claim for commission failed. First, it is said that but for the contravening conduct, Mr D’Ettorre would have tried to get the deal across the line with the prospective buyer and DRE lost the opportunity to earn the commission payable under the agency agreement if the prospective purchaser had increased its offer in mid-January 2020 to an amount acceptable to Mr Fernon.

75. Second, it is said that “there doesn’t have to be ‘reliance’ in order for there to be causation, there can be indirect causation, …”, which is sufficient to establish causation because the prospective purchaser was also affected by the misrepresentation and, “as a result, they gave up and they thought [Freedom] was too hard to deal with”.

76. These arguments raise a new point on appeal. At trial, DRE adhered to its pleaded case in its opening and closing submissions. No case was advanced at trial based on an alleged loss of opportunity by DRE to obtain a financial benefit with respect to the commission payable under the agency agreement if the prospective purchaser had entered binding contracts for sale. Specifically, this case was not put to Mr Fernon in cross-examination, nor was any evidence led by DRE as to the likely response of the prospective purchaser to Freedom seeking a higher price, assuming the Chinese buyer representation had not been made.

77. DRE should not be permitted to run a new case as it could have been met by further evidence at trial: Whisprun Pty Ltd v Dixon Pty Ltd (2003) 234 CLR 492; [2003] HCA 48 at [51]. Nor is this an exceptional case where a party should be permitted to run a new case on appeal which was not pleaded or run at trial: University of Wollongong v Metwally (1984) 158 CLR 447; [1984] HCA 74.

The buyer representation

78. Mr D’Ettorre’s evidence was that Mr Fernon told him on 22 March 2020:

The buyer is Johnny. I cannot say anymore as settlement is in about three months and I don’t want to jeopardise settlement.

79. DRE accepts that her Honour erred insofar as she found at [102], that Mr Fernon disclosed to Mr D’Ettorre that the director of the actual purchaser was Johnny Ingham. DRE says the finding which should have been made is that Mr Fernon did not disclose to Mr D’Ettorre that a director of the actual purchaser was Johnny Ingham.

80. The buyer statement was immediately qualified by Mr Fernon’s explanation that this was all he wanted to say as he did not want to jeopardise settlement. Mr D’Ettorre was an experienced real estate agent. He accepted in cross-examination that he understood that the identity of the purchaser was being kept confidential until settlement at which time the purchaser would be disclosed. That was consistent with Mr Fernon’s affidavit evidence that he told Mr D’Ettorre on 29 February 2020 that he could not provide details of the buyer due to confidentiality. Viewed as a whole, the buyer statement conveyed the message that the reference to “Johnny” as the buyer was necessarily qualified and incomplete as to the identity of the actual purchaser. Given the circumstances and context, Mr Fernon’s statement did not have the tendency to lead Mr D’Ettorre into error as to the identity of the actual purchaser.

81. In any event, as counsel for DRE candidly acknowledged in this Court, there are substantial difficulties in DRE establishing reliance or causation. As to reliance, assuming DRE was not entitled to commission based on the agency agreement, Mr D’Ettorre did not give any evidence of how he relied on the buyer representation to his detriment, which was made after exchange of contracts with the actual purchaser.

82. Further, her Honour made no finding on causation. That is unsurprising as no submissions on causation were advanced by DRE at trial. Nor did DRE advance any submission in this Court identifying any causal connection between the buyer representation and the pleaded loss or damage suffered by DRE being the loss of commission on the ultimate sale relying on the agency agreement.

83. Her Honour erred in not dismissing the misleading conduct claims against Freedom. In the circumstances, no issue of accessorial liability arises.

Conclusion and Orders

84. For the above reasons the appeal has succeeded. There is no reason why the respondent should not pay the appellants’ costs: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

85. I propose the following orders:

1. Appeal allowed.

2. Set aside orders 1 and 2 made in the District Court on 27 July 2022, and orders 1, 2 and 3 made in the District Court on 1 September 2022.

1. In lieu, order that the proceedings in the District Court be dismissed and the plaintiff pay the defendants’ costs.

2. The respondent pay the appellants’ costs in this Court.

86. LEEMING JA: I agree with Gleeson JA.

87. KIRK JA: I agree with Gleeson JA.

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Decision last updated: 26 April 2023