In June 2008 Anthony Hudson secured an appointment by way of a form 22a to conduct the sale by a deceased estate of a Pimpama property at list price of $2.4 million.
Clause 2.1 of the agency appointment terms – this time in REIQ format – obliged the seller to pay commission “if the contract of sale of the property is entered into with the buyer, whether within the term or after the term, where the relevant person as he effective cause of the sale within the term” but only if the contract is completed, if the seller defaults or if it is terminated by “mutual agreement”.
The solicitor – as is the custom of his profession – had deleted the sub-clause requiring payment of commission even in the event of default by the buyer.
Hudson negotiated a sale – which was signed up by the parties in July 2008, before the exclusive agency period expired later that month – subject to due diligence, with settlement due in February 2009.
He also negotiated with the seller – who was in fact the solicitor trustee of the estate – for a release of $6,600 from the deposit on account of his commission, once due diligence had been satisfied on terms that the advance was refundable in the event that settlement did not occur.
At the buyer’s request, settlement was extended until April 2009 on strict terms that no further extension request would be entertained.
Needless to say, a further extension was requested, this time until July. The seller refused but intimated he was prepared – after he had terminated the earlier contract on the basis of the buyers’ anticipatory breach – to enter into a further contract with a new deposit of $200k. The buyer would however, be required to sign an acknowledgement that the earlier contract was at an end and the $240k deposit paid thereunder, forfeited.
Andy Schwarz of the buyer company attended with Hudson at the solicitor-trustee’s office to sign the acknowledgement and also the new contract documents.
The new contract specified that the deposit could be released to the seller immediately and also that the buyer indemnify the solicitor-trustee, Dennis Standfield, against commission under that contract, a clause Standfield decided upon because he had by that time, concluded that Hudson was acting as agent for Schwartz, rather than for the deceased estate.
As settlement date under the second contract approached, the buyer requested vendor finance, which request was declined. The estate terminated the contract. The property as at the date of trial, remained unsold.
The agent sued for his commission on the earlier contract on the basis that it had been “terminated by mutual agreement” and thus, he claimed, it came within the appointment clause 2.1.
The agent pointed to the mutual plan to terminate the first contract – even though that was as a result of the buyer’s repudiation – and then enter into a new contract in place of the old.
“The inability to settle the first contract had been discussed and the plan had been put into place,” so Hudson’s argument ran. “The defendant had drafted the letter of repudiation for the buyer to sign as part of that plan, as he did the contract. There were no attempts to put the property back on the market to find a different buyer”.
Standfield on the other hand, pointed out that had there been a mutual agreement to terminate the first contract, there would have been a deed of rescission, a waiving of the cooling off period on the new contract and a stamp duty submission to comply with the “resale contracts of mutual termination” ruling. None of these occurred here.
The court didn’t doubt that the plaintiff “in his mind truly believes he has a legitimate right to the commission”.
But it did not accept events and conversations occurred in the manner Hudson described. He “was an extremely inaccurate historian and appeared confused, preferring to reconstruct events rather than give evidence of what he actually could recall occurring”.
In the absence of any evidence from Schwartz (who had since died); the buyer’s former solicitor; or Hudson’s partner and assistant Miss Pomytkina, of the conversations that Hudson alleged had occurred relating to a mutual termination, the court ruled they did not occur.
His Honour accepted that the first contract was terminated by reason of the breach of the buyer and it was the buyer’s inability to settle that caused that contract to come to an end.
That was enough to secure defeat for Hudson and his unfortunately named “Pot of Gold Real Estate Agency”, but Standfield had also resisted payment because, he claimed, the form 22a had not been properly presented and his attention had not been drawn as required under PAMDA sections 134A and 135 to the distinction between the nature of “sole” and “exclusive” listings.
This argument also found favour with the court which thus ruled: because the appointment itself was “deemed ineffective”, the agent “is not entitled to sue for, recover or retain a reward/expense for acting as a real estate agent”.
The defendant recovered the $6,600 advance on commission from the defendant plus interest until the date of trial.