A sales agent with an open listing who was denied commission on a $10 mil property when it was sold by a competitor has sued his client – the seller – for falsely stating he had received a far higher offer.
Freedom Development – the party sued – held call options to acquire two adjoining Sydney properties that entitled it to introduce a third party to call for the sale and proceed to settlement.
It obtained development approval for the Randwick site in September 2019 and engaged a number of real estate agencies to on-sell the properties.
With no buyers to be found as the exercise period was soon to expire, it reduced its price expectations from around $14 mil to $11.5 mil and listed it widely among agents.
One of the agencies to whom it provided an open listing – requiring it to pay commission if the agent “effectively introduced” a purchaser – was D’Ettorre Properties (DRE).
In December 2019 Mr D’Ettorre introduced Ben Ingram and his company IFM which agreed on a $10.2 mil price and then to increase its offer to $10.33 mil to cover Freedom’s cost of extending the exercise period.
The holiday period intervened and delayed the preparation and completion of paperwork for the deal.
It was then that Mr Fernon of Freedom notified D’Ettorre that he had an offer from a Chinese buyer who was prepared to pay $11.33 million. The agent tried to secure a matching offer from IFM and when that didn’t occur, gave up.
In February 2020 a second agent – Steffan Ippolito – conveyed a $10.35 million offer to Freedom’s Mr Fernon from Ben Ingram’s nephew John.
Fernon accepted the offer – which when put on paper was from WRR Pty Ltd of which both John and Ben were directors – on the basis that Ippolito accept a reduced commission.
The deal was signed up with John and Ben both providing personal guarantees to secure WRR’s performance.
When D’Ettorre learned of the sale, he contacted Fernon to enquire of the identity of the buyer and was told it had been “Johnny”.
When it discovered Ben’s connection to the company, DRE filed a lawsuit claiming the commission under its agency agreement on the basis that DRE had “effectively introduced” WRR to the property via Ben Ingram.
DRE also claimed damages against Freedom pursuant to ACL s 18 by reason of its misleading and deceptive statements firstly that there had been a higher offer from a Chinese buyer at $11.3 million and secondly that the ultimate sale had been to “Johnny”.
The judge at first instance agreed that DRE had – by introducing Ben to the property – established its entitlement to the $154,000 commission. Her Honour also concluded there had been no offer from the Chinese buyer at the time Fernon had claimed to have received one.
Freedom and Fernon appealed.
The appeal judges found that DRE had not effectively introduced the purchaser and reversed the ruling that it was entitled to commission. “Merely acquainting a director of a company with the property was an insufficient causal nexus to the ultimate sale in February 2020”, they ruled.
The fact that Ben Ingham was a director of the actual purchaser and gave a guarantee was “not commensurate with him having an ownership interest directly or indirectly in the actual purchaser”.
They agreed the first representation concerning the supposed offer from the Chinese buyer was false and that it had a tendency to mislead Mr D’Ettorre into error in believing he would need to have got his buyer to substantially increase its offer to secure the property.
That might have been enough to score a win against the Seller for the commission it was denied. Unfortunately though, DRE’s case was incorrectly pleaded and it did not allege that it had been prevented – by reason of such misleading and deceptive conduct – the opportunity to conclude a deal with IFM.
Unable to prove any loss as a result of having been misled, no damages were awarded for Fernon’s false statement.
Fernon’s response to Mr D’Ettorre’s enquiry as to the identity of the buyer by saying “it was Johnny” – was not in the circumstances – misleading.
Freedom Development Group Pty Limited v D’Ettorre Properties Pty Limited T/as D’Ettorre Real Estate [2023] NSWCA 81 Gleeson JA Leeming JA Kirk JA, 26 April 2023 Read case
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