When Is A Real Estate Agent Really Entitled To Commission?

14 May, 2015

Two recent cases in the NSW Court of Appeal (NSWCA) highlight the circumstances where equity – the court of conscience – will step in to protect injured parties who did not have a contract to rely upon and acted to their detriment in reliance on a non-contractual promise in circumstances where the other party’s departure from that promise would be unconscionable.

While the facts of each of the cases are unique, both cases concern property interests brought about in a family context where it can be common place for parties to trust in, and depend upon, another party’s honour without the security of a binding or enforceable contract.

That’s my burial plot!

The first case of Arfaras v Vosnakis [2016] NSWCA 65 involved a burial licence for two people for a burial plot that was held by the applicant, Mrs Arfaras. Following her daughter’s death:

  1. Mrs Arfaras made successive offers to her son-in-law, Mr Vosnakis, who was also the executor of her daughter’s estate, that he could use the burial plot to bury his late wife/her daughter (the Offer); and
  1. Mrs Arfaras promised to transfer the burial licence to Mr Vosnakis so that in the future he could also be buried with his wife/her daughter in the plot (the Promise).

Mr Vosnakis accepted the Offer unconditionally and relied on the Promise by nominating the burial plot as his wife’s burial place. However, after the burial Mrs Arfaras refused to honour her promise to transfer the burial licence to him.

At first instance

Mr Vosnakis was successful in his proceedings against Mrs Arfaras in the Supreme Court of NSW where it was ordered that the burial licence should be transferred to Mr Vosnakis.

The Court held that:

  1. The Offer was in effect a gift from Mrs Arfaras that was accepted unconditionally by Mr Vosnakis. The Promise was unsupported by consideration and there was no objective intention to create legal obligations. As a result, there was no legally binding contract between the parties, despite the serious nature of the subject matter; and
  1. Despite there being no legal binding contract, Mrs Arfaras was estopped from denying that Mr Vosnakis was entitled to the burial licence as all of the requisite elements for an equitable estoppel in the nature of a proprietary estoppel by encouragement were made out by Mr Vosnakis.

Mrs Arfaras the appealed the decision alleging that the primary judge had made an error in finding that the essential elements of equitable estoppel had been established.

On appeal

The NSWCA upheld the decision and confirmed that the elements of proprietary estoppel by encouragement had been satisfied as follows:

  • Creation or encouragement of assumption: Mrs Arfaras made the Offer and the Promise to Mr Vosnakis, and then induced him to adopt an assumption that she would perform the Promise through her conduct. This included repeating the Promise in the presence of a funeral parlour representative and accompanying Mr Vosnakis to her home to collect necessary documents for Mr Vosnakis to follow through with the burial arrangements.
  • Detrimental reliance: Mrs Arfaras made the Offer and the Promise to Mr Vosnakis with an intention that he would rely on the Promise when deciding where to bury his wife. Mr Vosnakis relied on the Promise to his detriment because once Mr Vosnakis buried his wife, he had no ability to nominate that his wife be buried in a different resting place. He also had no way of controlling the ‘second right of nomination’ for the burial plot and therefore did not have the the ability to be buried next to his wife.
  • Unconscionability: While Mrs Arfaras argued that it would be open for Mr Vosnakis to not exercise the right to be buried in the grave, the NSWCA confirmed that “the question of unconscionability is to be determined at the time of departure from the promise.” It was also considered that the lengths to which Mr Vosnakis had gone to enforce the Promise indicated that he wanted to ensure that he would be buried in the same plot as his wife and the decision to require Mrs Arfaras to honour the Promise was not disproportionate relief in the circumstances.

 A promise is a promise

The second case of Doueihi v Construction Technologies Australia Pty Ltd (CTA) [2016] NSWCA 105 involved an appeal of a Supreme Court of NSW decision previously reported on by McCabes, where equity had also stepped in to aid a victim of a broken non-contractual promise (see

In considering the grounds of appeal, the NSWCA reinforced the findings of the primary judge that the elements of proprietary estoppel had been made out and that the appellants were bound by a proprietary estoppel requiring them to execute a written lease of the premises in favour of CTA.

Importantly, the NSWCA found that:

  • An estoppel can be established even if a promise is lacking in detail;
  • The primary judge had not erred in giving greater weight to the family context of the tenancy than its commercial nature when assessing the adequacy of the assurance given and the reasonableness of CTA’s reliance on the assumption that it would be granted an interest where the family’s practice was not to enter into formal leases; and
  • The appellants were not assisted by the lack of any concluded agreement or intention to enter into a ‘particular legal relationship.’ Rather, it was the informality of the arrangements between the parties which in the circumstances of this case justified the intervention of equity.

Lessons learnt

  1. Never assume that a promise will be honoured based on verbal assurances or encouragement. Protect yourself by entering into a legally binding contract that clearly sets out each party’s rights and obligations. This is just as important in the context of familial relationships as it is in commercial arms-length transactions. A properly drafted contract will provide parties with protection and clarity about their rights and will hopefully avoid costly litigation.
  2. If a promise has been made and no contract exists, equity may come to your assistance. Equity may bind a party to their conduct if all the essential elements of equitable estoppel can be established. These are:
  • creation or encouragement of an assumption by party A that ‘a particular legal relationship’ would be established or that an ‘interest’ would be granted;
  • detrimental reliance by party B; and
  • if it would be unconscionable for party A to depart from the assumption relied upon.
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Canadian Court elevates thumbs-up emoji to signature status

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After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." 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Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
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Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

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The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. 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Published by Leighton Hawkes
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Litigation and Dispute Resolution

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