Property seller narrowly
avoids paying two sales commissions on one property
A real estate agent is entitled to sales commission if they
sell a property. But what if one agent introduces a buyer,
the buyer goes away, and another agent ends up selling the
same property to that buyer? Must the seller pay sales
commission to the first agent as well as to the second
The Court of Appeal, Supreme Court of New South Wales has
shed new light on this situation.
The decision is Outerbridge trading as Century 21 Plateau
Lifestyle Real Estate v Hall  NSWCA 205 (3 September
2020) (Beech-Jones J, Leeming JA and Emmett AJA agreeing).
The Property – The property was relatively unique. It was a
55-acre property situated in Brooklet, NSW “having panoramic
views of Lennox Head and the Byron Bay hinterland”. It had a
prestige house and was “a working macadamia plantation with
a number of thousands of mature trees”. The sellers had
purchased the property in January 2008 and had paid $4.18
The Agency Agreement – The sellers (the “Principal”) signed
a “Sales Inspection Report and Open Selling Agency
Agreement” with Century 21 Plateau Lifestyle Real Estate on
10 August 2015. Clause 3.1 provided for an agent’s
commission of 2.2% of the final sale price to be payable as
3.1 Remuneration – The Licensee shall be entitled to the
remuneration … (where the
Licensee is the effective cause of
(a) If a person has been effectively introduced to the
Principal or the Property by the Licensee during the Agency
Period … and that person … enters into a contract to
purchase the property...
The agent’s estimate of selling price in the Agency
Agreement was $5 million, the minimum price the seller
The Purchaser’s introduction by Century 21 – The purchaser
contacted Century 21 on 4 December 2017. She conducted due
diligence – the seller supplied soil tests, equipment lists,
grower summary reports, a map, the irrigation licence and
farm management agreement.
On 21 December the purchaser offered $4.5 million. The
seller counter-offered $4.8 million. The purchaser
counter-offered $4.7 million. The seller accepted, but on 25
December withdrew their acceptance as the price was too low.
On 27 December, the purchaser attempted to contact Century
21 to arrange a meeting with the seller but was told by the
agent’s staff that the agent was overseas on holiday, that
he would return in a few weeks, and that there was no one
else who could attend a meeting.
The Court found that this left “the potential purchaser
doubting the seller’s bona fides and concluding the
transaction was over”.
The Purchaser’s introduction by Unique Real Estate – Unique
Estates Australia were appointed to sell the property in
November 2012. Their agency agreement had continued as an
open (non-exclusive) agency. The property was to be offered
for sale at a price of “$5 million plus”. They had shown the
property to 12 potential purchasers since their appointment.
On 28 December 2017, the purchaser contacted Unique. After
price negotiations, on 30 December 2017, the price was
agreed at $4,913,000 for the land and $200,000 for the plant
and equipment. This was $413,000 more than the sale price
agreed in principle on 22 December.
Unique issued a sales advice on 2 January 2018. Contracts
were exchanged on 11 January 2018 and completion took place
on 15 March 2018. Unique received its sales commission.
The commission claim - Century 21 claimed $108,086 for sales
commission from the sellers.
The primary judge decided that Century 21 “were not the
effective cause of the sale of the Property and therefore
under the agency Agreement they were not entitled to the
commission on the sale of the property in circumstances
where [Unique] …brought about the sale”.
The primary judge ordered the proceedings be dismissed with
costs. Century 21 appealed that decision.
The Court of Appeal
The Court of Appeal focused on the two key phrases in clause
3.1, effective cause of the sale and effectively introduced.
The Court’s reasoning was as follows:
- What does effectively introduced to the Principal mean?
The Court decided that clause 3.1(a) required more than an
introduction: “the mere introduction of a purchaser is
usually … insufficient”. It must be effective: “Unless an
‘introduction” was the, or an, ‘effective cause of the sale’
then it was not an ‘effective introduction’.” [Judgment,
paragraphs 59 & 80]
- Was it enough to demonstrate that an agent’s actions were
‘an effective cause of the sale’ or must they be ‘the
effective cause of the sale’? The Court decided “it does not
mean the sole cause … it is possible that two agents acting
independently of each other can both be an effective cause
of a sale” (if there is a ‘chain of causation’). [Judgment,
- In this case, it was accepted that Unique did a relatively
small amount of work. But the amount of work did not matter:
a claim for commission “cannot be disposed of … simply by
comparing the amount of work which each agent may have done
towards bringing about the ultimate sale”. [Judgment,
- The Court said that facts of Emmons Mount Gambier Pty Ltd
v Specialist Solicitors Network Pty Ltd  NSWCA 117
“are broadly analogous to this case”.
The facts were that first agent introduced a potential buyer
for a hotel and provided trading figures and occupancy rate
information. The potential buyer offered $25 million. The
seller wanted $30 million. The first agent was unsuccessful
in bridging the gap and ceased. Shortly afterwards, a second
agent brokered a purchase by the potential buyer for $29.7
- The Court observed that in Emmons, the first agent had
given up on the issue of price; the second agent had bridged
the gap. The first agent’s introduction was not an effective
cause of sale because there was no evidence that the first
agent’s efforts flowed through to the purchaser; the second
agent’s introduction of the buyer to the property was
independent of the first agent. [Judgment, paragraph 63]
- The Court applied Emmons to the facts in this case:
Unique’s actions were not “some form of intervening act
breaking the chain of causation” between the purchaser’s
introduction and the sale. The Court found that: the Century
21 agent’s “introduction was effectively exhausted at least
so far as consummating a sale was concerned” because he was
overseas and uncontactable, and had not arranged for anyone
from his office to assist on the sale in his absence.
[Judgment, paragraphs 65, 66, 67 & 72]
The Court concluded with this statement of the law:
This case was not simply a scenario where one agent
introduced a potential buyer to a relatively unique
property, generated their interest in the property, secured
an offer and another agent then completed the negotiations
to the point of sale.
Instead, it was a case where, before the intervention of the
second agent, the first agent left the country and could not
be contacted leaving the potential purchaser doubting the
seller’s bona fides and concluding the transaction was over.
The second agent did not just continue the negotiation; they
resurrected the transaction, restored trust between the
parties and bridged a significant price gap.
The Court of Appeal rejected Century 21’s claim for
commission and dismissed the appeal with costs.
The Court of Appeal said that a person must be more than
introduced, they must be effectively introduced. By doing
so, the Court took a commercial approach – to effectively
introduce, the agent must not only find a potential buyer
but must also play a role in the negotiations to conclude
(or as the Court put it, ‘consummate’) the sale.
Therefore, in situations where a potential buyer has
inspected a property through a first agent, but goes on to
purchase the property through a second agent, the first
agent must demonstrate they did more than record the
potential buyer’s details on their list of people who had
inspected the property.
The first agent must have submitted an offer to purchase by
the potential buyer to the seller and be ready to continue
and conclude the negotiations. If so, they may be considered
to have effectively introduced the buyer and be entitled to
their sales commission.
Century 21 did submit offers but failed in its claim for
commission because they were not available to continue and
conclude the negotiations.
The advice for real estate agents is to record every
offer put to the seller. If the offer is verbal, confirm it
by SMS or email. That written record will be invaluable in
proving an effective introduction, and therefore an
entitlement to commission if the property is sold through
another real estate agent. And, the agent must stay
contactable and be ready to continue and conclude the
The advice for vendors is to include a special
condition in the Contract for Sale which provides that the
purchaser warrants they have not been introduced to the
property through another real estate agent and indemnifies
the vendor in the event of a claim for commission.