Real Estate Dynamics P/L v Wallrose P/L

[2010] QMC 14

MAGISTRATES COURTS OF QUEENSLAND

CITATION:

Real Estate Dynamics P/L v Wallrose P/L [2010] QMC 14

PARTIES:

REAL ESTATE DYNAMICS PTY LTD

(plaintiff)

v

WALLROSE PTY LTD

(defendant)

FILE NO/S:

M1636/08

DIVISION:

Magistrates Courts

PROCEEDING:

Claim

ORIGINATING COURT:

Magistrates Court at Brisbane

DELIVERED ON:

26 March 2010

DELIVERED AT:

Brisbane

HEARING DATE:

12 February 2010

MAGISTRATE:

Springer B

ORDER:

Claim dismissed. Judgment for the defendant.

CATCHWORDS:

TRADE PRACTICES – REAL ESTATE AGENTS – agency contract – whether agency found buyer of property

CONTRACTS – INTERPRETATION – real estate agents – agency contract

COUNSEL:

P Kronberg for plaintiff

D Love (solicitor) for defendant

SOLICITORS:

Archibald & Brown for plaintiff

Dale & Falu for defendant

Introduction

[1]  The defendant company was a franchisee and operated under the name of PRD Rosewood/Walloon. It had been wanting to sell the business that it operated which included the business of the Real Estate agency and the rent book or rent roll that related to the various properties under management by the company. The defendant engaged the plaintiff as its agent to find a buyer of its business. Eventually, the real estate agency and rent roll were sold to CBML Pty Ltd as Trustee for the Scott Family Trust.

[2]  The plaintiff claims the sum of $16,500.00 as a debt due and owing or in the alternative that amount as damages for breach of contract or such other amount as the Court considers just.

The appointment of the plaintiff as the defendant’s agent

[3]  The defendant engaged the plaintiff to attempt to find a purchaser for the business. The Plaintiff (through Jaclyn Zieth) forwarded the Property Agents and Motor Dealers Act 2000 (the PAMD Act) Form 21A to the defendant by email dated 4 May 2007. The email also included a paragraph which read: “You will receive by email the rent roll valuation schedule and rent roll information schedules which we will require you to complete”.

[4] Mr Burton, the director of the defendant, thereafter executed a Form 21A titled “Appointment of Real Estate Agent” under the PAMD Act. That Form shows that it was signed by Mr Burton on 7 May 2007. On page 1 of the Form, the “property/business details” to be sold is stated as “Sale of Real Estate Rent Roll or Real Estate Business”, with the last four words being handwritten additions.

[5]  The “material facts annexure” attached to the Form 21A includes the following handwritten notation –

The agent acknowledges that the seller has already contacted most real estate agents in the Ipswich, Laidley and Gatton regions and agrees to exclude any agents and sales staff working in these regions from this agreement, as well as Steve and Margaret Waterman from “That’s Property”. The agent agrees that any sale to anyone covered under this list organised directly between the buyer and the seller will not result in payment of any commission.

[6]  At trial, a large bundle of agreed documents was tendered. They include among other things emails referring to steps taken by Mr Burton on behalf of the Defendant to sell the business prior to his engaging the Plaintiff. It is clear that there were significant efforts by the Defendants to attempt to sell the property prior to its engagement of the Plaintiff.

[7]  The Form 21A[1] provided for an exclusive agency for the period 8 May 2007 to 8 June 2007, with the agency to continue as an open listing up until 31 October 2007.

[1]Document 1 in the bundle of agreed documents (“the bundle”)

[8]  The terms of appointment attached to the Form 21A include Clause 9. Of particular relevance are the following sub-clauses –

“9.1The client agrees Commission as detailed in the Appointment will be due if the Client enters into an enforceable contract of sale when such contract becomes unconditional and payable on settlement of the sale.

9.2Should an enforceable contract be entered into but not completed due to:

a.Any act or omission of the client or

b.The client as seller releasing the purchaser from the Purchaser’s contractual obligations or

…

the client agrees the Commission is payable to the agent forthwith.

9.3The agent will be entitled to the Agreed Commission if the property is sold to a person introduced to the property:

a.During the period of an exclusive appointment or

b.During the period of a sole appointment except where the introduction is by the client or

c.After the conclusion of the agency the property is sold to a purchaser effectively introduced to the property by the agent during the agency.”

The relationship and dealings between the defendant and Mrs Scott prior to the first contract

[9]  The defendant company’s customers included Bronwyn and Christopher Scott. Over several years, Mr and Mrs Scott had had rental properties that they owned listed with the defendant, who managed those as rental properties. Further, the defendant had had dealings with Mrs Scott in the context of when she and her husband had purchased and sold rental properties.

[10]  For about one year prior to March 2007, the Defendant had been attempting to sell its business.  Bronwyn Scott became aware that the business was for sale. The evidence differs as to the approach that she made to the defendant, namely whether it was made to Mr Burton, the sole director of Wallrose Pty Ltd, or to his wife who also worked in the business, or to them jointly.

[11]  I accept the evidence of Mrs Burton that her discussion with Mrs Scott (at which the two women were the only people present) about the business being for sale occurred between 14 March 2007 and 31 March 2007. She is able to identify that time frame because of various events associated with one of Mr and Mrs Scott’s rental properties becoming vacant, and this was prior to her husband becoming aware of Mrs Scott’s interest.

[12]  After being made aware of Mrs Scott’s interest in purchasing the business, Mrs Burton told her husband about that. Mr Burton’s evidence was that his becoming aware of Mrs Scott’s interest in acquiring the business was one to two months prior to his engagement of the plaintiff. I accept his evidence on that point.

[13]  It is not in contest that Mr Burton referred Mrs Scott to Graeme Bagshaw, who was employed at the plaintiff’s office. Both Mrs Scott and Mr Burton agree that he said words to the effect that he wanted to keep an arms length distance between himself and any party in the transactions involving purchase of the business.

[14]  After her initial contact with Mr Burton, Mrs Scott had dealings with Mr Bagshaw and a contract was eventually signed (the first contract).

The steps taken by the plaintiff in dealings with Mrs Scott

[15]  The plaintiff took steps to organise advertisements in print media for the sale of the business although it is not suggested that Mrs Scott was in anyway persuaded by these.

[16]  The plaintiff obtained from Mr Burton details of the rent roll and collated that so that it could be provided to prospective purchasers.  The plaintiff prepared a document which was then available for distribution to prospective purchasers (subject to the signing of a confidentiality agreement).

[17]  The plaintiff provided to Mrs Scott the documents that it had prepared. These documents included a list of fixtures and fittings in Schedule 3 to the first agreement. Mrs Scott had not previously seen the documents provided to her by the plaintiff.

The first contract

[18]  The parties to the first contract[2] were the defendant trading as PRD Nationwide – as seller – and Christopher Douglass Scott and Bronwyn Maxine Scott as buyer. That contract was dated 20 June 2007.

[2]Document 2 in the bundle.

[19]  The special conditions in that contract included the following clauses:

5.The Seller, Robert Burton, shall remain as Licensee for the Agency for a maximum time period of six (6) months from the Date of Settlement. The Buyer shall pay all associated costs with regards to the Licensee, including Trust Account fees and charges, until the Buyer gains their full Real Estate Licence.

9.This Agreement is subject to the Franchisor approving the Buyer as a suitable Franchisee for the PRD Nationwide group within fourteen (14) days from the date of the Agreement. 

[20]  The statement of claim alleges at paragraph 17 that:

On or about 27 July 2007 the solicitors for the Defendant advised the Plaintiff that the first contract had been terminated by the defendant on the basis that the first purchasers had failed to advise whether finance had been obtained.

[21]  That paragraph was admitted in the defendant’s defence in paragraph 5, which admission was adopted by the plaintiff in the Reply.

[22]  The first contract came to an end following a letter from Dale and Fallu, (solicitors for the Defendant) to Brown and Baker, solicitors for Mr and Mrs Scott on the 8 August 2007. The evidence identifies reasons for the termination, which differed slightly in the evidence of Mrs Scott and Mr Burton. Once such reason for non-completion was the lack of a licence held by Bronwyn Scott to operate the real estate agency and the reluctance by Mr Burton to remain working in the agency because of possible risks for him associated with that. Further, Mrs Scott did not wish continue the business as a PRD Franchisee.

[23]  It is clear from the evidence that following the termination of the first contract, Mr Bagshaw for the Plaintiff and Mrs Scott continued to interact because she remained interested in acquiring the business (see emails sent 14 August, 15 August). Mr Bagshaw, for the Plaintiff, communicated to the defendant Mrs Scott’s wish to continue with a purchase of the business.  In one email dated 17 August 2007 from Bronwyn Scott to Graham Bagshaw on that date,[3] she stated, inter alia: “the only contract that Chris and I would consider at this point would be …” and thereafter a list of conditions was included.

[3]Document 27 in the bundle.

[24]  An email, apparently sent on 18 August 2007 from Mr Burton to Mr Bagshaw reflected Mr Burton’s position that any further negotiations were not to involve Mr Bagshaw and that it was of no concern to Mr Burton if Mrs Scott wished to cease negotiation. That email stated: “As I said yesterday, any further negotiations with Bronwyn will be through my solicitor only. If she wants to withdraw her offer to purchase, then go ahead”.[4]

[4]See Tab number 28/29 in the bundle.

[25]  Mr Burton explained in his evidence that the email had been sent because of his disappointment with the first contract and his belief that the plaintiff was not competent in its dealings relevant to the defendant.  Mr Burton was critical of Mr Bagshaw’s conduct when, after some extensions of the scheduled settlement date under the first contract, there was very little communication between the two men and Mr Burton had lost his trust in Mr Bagshaw.

The second contract

[26]  After the earlier contract had been terminated, a subsequent contract was entered into. The second contract was dated 16 October 2007;[5] it was not prepared by the plaintiff. The form of the contract was different in that the second contact was in the form of a printed REIQ contract specifically designed for the sale of businesses (whereas the earlier contract was one which appears to have been drawn by the plaintiff and although purporting to record a sale of a business comprising the agency and the rent roll – at least according to the cover page – the definition of business did not reflect that).

[5]Document 3 in the bundle.

[27]  There were several differences between the first contract and the second contract, one being that the purchaser of the business in the second contract was CBML Pty Ltd as Trustee of the Scott Family Trust. This is a clear difference where Mr and Mrs Scott were the proposed purchasers under the first agreement in their personal capacity.

[28]  The purchase price differed from the amount of the purchase price in the earlier contract where the amount to be paid was not obvious.[6] However it is clear in the second contract that it is listed as a purchase price of $130,000 with a $10,000 deposit required. There was to be no transfer of the PRD franchise held by the Defendant under the second contract and the contract was subject to the seller (the defendant) obtaining a release from its franchise agreement (cl 17 of the special conditions).[7]

[6]In the first contract, a deposit of $1000 and an amount at settlement calculated by multiplying various factors (see cl 1.1.6 and 2.2.2.)

[7]Compare cl 9 of the first contract.

[29]  Further the rent roll attached to each of the two agreements differed, although cross examination of the Defendant’s director was aimed at eliciting concessions that the two rent rolls were in fact very similar. Such concessions were not made.

Consideration of the evidence and the law

[30]  Turning to the facts of this case Christopher Scott and Bronwyn Scott were known to Mr Burton and had been known for several years. I find that at a time no later than 31 March 2007, Bronwyn Scott was very familiar with the existence of the defendant’s business of PRD Rosewood and its availability for sale and she had conveyed an interest in purchasing that business to both Mr and Mrs Burton. That expression of interest pre-dated the signing by the defendant of the Form 21A.

[31]  The Property Agents and Motor Dealers Act 2000 sets out the difference between exclusive agency and sole agency in section 19 and the meaning of open listing in section 16. At the time that each of the first and second contracts were signed, (the first which was not completed and the second which was) the Plaintiff was operating under an open listing. Section 16 subsection (2) provides –

Under the agreement—
(a) the seller retains a right—

(i)     to sell the seller’s property during the term of the agreement; or

(ii)to appoint additional real estate agents and pastoral houses as selling agents to sell the property on terms similar to those under the agreement; and

(b) the appointed selling agent is entitled to remuneration only if he or she is the effective cause of sale; and

(c) the appointment of the selling agent can be ended by either the seller or the selling agent at any time.

[32]  The relationship between the plaintiff and the defendant – at least from the defendant’s perspective – had deteriorated prior to the execution of the second contract. As noted, Mr Burton’s evidence was that he lost trust in Graham Bagshaw and hence with the Plaintiff. Curiously, however, at no stage did he take decisive steps to terminate the agency that had been created by the Property Agents and Motor Dealers Act 2000 Form 21A. There is no doubt that at the time of the second contract being entered into, the agency between the plaintiff and the defendant was on foot as an “open listing”.

[33] The issue for determination in this matter involves a relatively simply proposition which may be shortly put: did the Plaintiff introduce a person “to the property” and was that person the person to whom the property was ultimately sold during the agency? If so, that would give rise to the entitlement to commission under clause 9 of the Form 21A. In my view, that clause must be read in conjunction with section 16(2) of the PAMD Act cited above.

[34]   In the decision of Hooper v Bradbury 15 May 1957, reported at [1957] QWN 39 the then Full Court of the Supreme Court in a judgment delivered by Justice Philp said:

the mere appointment of a man as a commission agent to sell a property does not entitle him to commission if the property be sold; he must show that he was the effective cause of sale. Usually he shows that by proving that he introduced a purchaser ready and willing to buy. … A commission agent’s mere attendance at negotiations between principals does not make him the effective cause of an agreement for sale made by them.”

[35]  A more recent consideration of the issue in Queensland is in Ross McCartin Reality v Chard Holdings Pty Ltd (No. 2) [1991] 1 QR 182 Justice Kelly delivering the decision of the Court said (at p190) –

… it may be said that although there was a substantial difference in the mechanism whereby the eventual bargain was effected as compared with that which the agent was retained to achieve, there was no such difference in relation to the benefits of the respective parties. The ultimate question is as to whether the agent was an effective cause of the arrangement which was ultimately carried into execution and this must necessarily depend on the facts of the particular case.

[36]  That case seems to be authority for the proposition that if the happening contemplated by the retainer, (that is the retainer of the Plaintiff by the Defendant), was brought about in consequence of the Plaintiff’s agency the agent is entitled to its commission on that basis alone notwithstanding the form of the final transaction may be different. If the transaction in the form in which it was ultimately completed is properly to be regarded as one which carried out the original transaction albeit with a different mechanism but still effecting the same results (in this case the sale of the agency and rent roll by the Defendant) the right to commission is established.

[37]  Although the second agreement has, as I have found, several significant differences to that of the first, using the approach taken in Ross McCartin Reality and Chard Holdings, the sale ultimately achieved to CBML Pty Ltd as Trustee for the Scott Family Trust was a disposition of the property albeit with a different mechanism but still producing the same results. Here (as was found to be the case in Chard Holdings) there was no clear break in the negotiations between the parties.

[38]  In this case, I would have had little difficulty in concluding that, if the plaintiff had been the party responsible for introducing Mrs Scott to the property, despite her not being the ultimate purchaser (as distinct from a company under her control) the entitlement to commission would have been made out. However, for the reasons which follow, that does not assist the plaintiff.

[39]  In the decision Max Christmas Real Estate v Schumann Marine Pty Ltd [1987] 1 QR 325 at p329, Chief Justice Andrews considered there that the case before the Court had to be decided:

… according to the interpretation of the contract of agency, which is the authority to sell dated 21 September 1983. Such contracts are to be interpreted according to ordinary rules of construction. In a case such as this there is a need to identify and construe the terms of the contract to see whether it specifies the need of a causal relationship between the sale in respect of which the agent’s commission is claimed and an act upon the which the entitlement depends namely in this case the making known to the ultimate purchaser of the availability of the relevant property for sale.

[40]  I respectfully adopt the statement of principle stated by Andrews CJ, (although in that case there was a deeming provision as to the meaning of introduction namely “the property shall be deemed to have been introduced to a person if the fact that the said property is available for purchase is made known to that person”).

[41]  In the matter before me, the parties to the agency agreement had clearly turned their attention to the previous dealings that the defendant (through Mr and Mrs Burton) had had with other agents in their earlier attempts to sell the defendant’s business, but it seems that the parties did not consider the scenario of a person outside those referred to in the ‘material facts annexure’ who was familiar with the business coming forward and seeking to purchase the business. It is trite that they could have done so and included a provision which made clear whether or not commission would be payable in that situation.

[42]  In my view, in determining when the right to commission arises, one must have regard to the whole of clause 9 of the Form 21A, which is quoted above. My interpretation of that clause is that clause 9.3 sets out the threshold before any right to entitlement arises, namely that there must have been an introduction to the property by the Agent (here the plaintiff). It is only after it is established that there had been that requisite ‘introduction’ do clauses 9.1 and 9.2 have a role in describing the entitlement to commission.

[43]  In relation to both the first and second contracts, I am not persuaded that the plaintiff introduced the purchaser to the property. I accept that the plaintiff was involved in the creation of documentation for distribution to prospective purchasers (including Mrs Scott) and provided that to her; further, the plaintiff acted as a conduit between the defendant and Mrs Scott for the purposes of conveying information and offers. However, in the circumstances of this matter, that was not sufficient to give rise to an entitlement to commission.

[44]  For the reasons set out above as to how I construe clause 9 of the PAMD Form 21A, it is not necessary for me to determine the enforceability of the first contract.  In any event, on the admissions made on the pleadings, the first contract was never unconditional, and accordingly, I am not persuaded in relation to the first contract that it was an ‘enforceable contract’ for the purposes of clauses 9.1 and 9.2 of the Form 21A. Consequently, the entitlement to commission which may have flowed from the defendant releasing Mr and Mrs Scott from the first contract (an arrangement which was mutually agreed to by the defendant and Mr and Mrs Scott), did not arise.

[45]  In my view the Plaintiff must fail for the following reasons –

a.Prior to the signing of the Form 21A, Mrs Scott had independently ascertained that the defendant’s business was for sale and on the evidence it had been so for some time.

b.She was a client of the defendant’s business, having current and previous rental properties listed in the defendant’s rental property management roll.

c.She contacted the plaintiff at the instigation of Mr Burton on behalf of the defendant.

d.For the purpose of the agency agreement, ‘the property/type of business” was the real estate business and the rent roll.

e.The Plaintiff cannot be said to have introduced the purchaser (whether in the guise of Mr and Mrs Scott personally or CBML Pty Ltd as trustee) to the property comprising the real estate agency and the rent roll.

f.Mr Bagshaw’s ongoing interactions with Mrs Scott after termination of the first contract equates to the “mere attendance at negotiations between principals [but] does not make him the effective cause of an agreement for sale made by them” (see Hooper v Bradbury cited above).

g.I am not satisfied that the plaintiff introduced the property to the ultimate purchaser, nor can it be said that the Plaintiff’s actions were the effective cause of sale as required by section 16(2)(b) of the Act.

[46]  The plaintiff’s claim is dismissed. Judgment for the defendant.