Estate Agent Escapes Nation-wide Publicity On Unwarranted Commission Claim

Tim O’Dwyer

OPINION
by Tim O’Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au

Six months after successfully settling a sale to private buyers, Paul & Janet Goodfellow were shocked to receive a solicitors’ letter enclosing a $14,355 invoice.  The solicitors represented Goodfellows’ former agent, Acme Realty.   The invoice was for Acme’s commission on Goodfellows’ sale to their buyers, John and Jill Scott.

The letter recited that in May 2008 Goodfellows appointed Acme as their sole agent to sell their home, how Acme was reappointed in October 2008 under an open listing and that Acme introduced Scotts to Goodfellows’ property in February 2009.  Acme allegedly represented Goodfellows in several further negotiations with Scotts and, because Goodfellows had sold to Scotts, Acme was entitled to commission as the “effective cause of the sale”.

Camera crew

Rather than returning to the solicitor who had prepared their sale contract and handled the conveyance, Goodfellows sought my advice.

They agreed that Acme had, in March 2009, informed them of an offer on their home.  They declined this low offer but at no time, they claimed, did Acme ever say who the offerers were. When negotiating later with Scotts, after a friend’s introduction, Goodfellows did not think to ask about any prior dealing with Acme.   Needless to say, Scotts volunteered nothing.

While Goodfellows described Acme’s reference to subsequent negotiations on their behalf as “an absolute lie”,  Scotts themselves  confirmed that, after their one-off email offer,  later dealings with Acme concerned only other properties.

I replied to Acme’s solicitors that Goodfellows had no moral or legal obligation to pay commission:  “They fail to see how Acme can claim a full commission for a sale (it did not make) on the basis of one less-than-fully-disclosed dealing many months earlier.”  I then argued that Acme  had not been properly appointed, and any purported appointment was “void for uncertainty”.   Moreover, Acme had culpably breached an implied legal obligation to provide its clients with details of buyers introduced to the property.  “Otherwise,” I asked, “how would Goodfellows ever know of any possible entitlement to commission on account of an alleged introduction?”   This claim would, I concluded, be “strenuously and publicly defended”.  Acme’s solicitors were unmoved.

My next letter summaried the case law:   “Your client was not the effective cause of the ultimate sale because your client’s actions did not effectively bring about the relation of buyer and seller.  It would be artificial to suppose anyone intended an agent should earn commission simply by finding (undisclosed) persons who, independently of further effective actions, later agree to buy a property”.

“The notion of effective cause,” I continued, “clearly presupposes that more is required than finding an (undisclosed) buyer.  Your client must establish the necessary causal relationship between its actions and the sale, prove that  this belated sale was brought about through its agency and show how it was involved with skill and effort in getting the final deal over the line”.

I reitterated that Acme was particularly disentitled to commission because it failed its critical fiduciary duty to disclose the most fundamental of material facts to its clients: names of persons introduced to the property.   Goodfellows, I added, would not only (“strenuously and publicly”) defend Acme’s now threatened legal action  but also counterclaim damages for the opportunity  lost to negotiate a price which took into account commission liability.

When Goodfellows were next given seven days to pay, I contacted Channel 9’s A Current Affair about running a nation-wide story on this not uncommon “real estate ambush”.  “How soon are you and your clients available?”  asked an enthusiastic producer, but Goodfellows went camera-shy.  “Lets make Acme an offer they can’t refuse,” Paul suggested instead.  So I offered that, to avoid the risks and costs of litigation, Goodfellows would pay Acme $3,600 with both parties bearing their own legal expenses.  Common sense prevailed, a deal was done and (regrettably) no tabloid television story ensued.

Along the way I  advised Goodfellows that, whatever any litigation result might have been, they had good cases against not only Scotts for misrepresentation (by silence) but also their solicitor  for negligence.  A competent solicitor, I explained, would not prepare a private sale contract without first considering  commission risks, asking about prior listings with agents, and enquiring whether any agent had earlier introduced the buyers.

(This article first ran in Australian Property Investor Magazine. Real names are not used.)