In the recent case of Tan v Russell  VSC 93 the Victorian Supreme Court had to determine whether a contract for sale was validly terminated during a three day cooling off period provided for by section 31 of Sale of Land Act 1962 (Vic) (Act). In reaching Her Honour’s decision, Cameron J considered the principles of agency in determining whether a seller’s real estate agent was an agent of the seller for the purposes of receiving a notice of termination pursuant to section 31 of the Act.
In 2014, Mr Russell, the registered proprietor of the land (Seller) entered into an exclusive auction authority appointing Marshall White Real Estate as estate agents for the sale of the property and Mr Gibbons (Selling Agent) was allocated the property.
Mr Tan and Dr Lo (Buyers) inspected the property on 29 March 2014 and 1 April 2014. Between 3 April 2014 and 9 April 2014 the Buyers and the Selling Agent communicated extensively by text message about the property.
Following a private auction held on 4 April 2015, the Buyers entered into a contract for the sale of the property for $4.48 million.
On 9 April 2014 the Buyers sent an email and a text message to the Selling Agent notifying the Selling Agent that the Buyers had decided not to proceed with the purchase of the property with immediate effect. The Buyers also left the Selling Agent a voicemail message to the same effect.
On 1 July 2014 the Seller’s solicitor served a notice of default on the Buyers due to their failure to pay the balance of the deposit by the due date.
Subsequently, at a public auction held on 30 August 2014, the Seller entered into a contract for the sale of the property with a new buyer for the purchase price of $4.07 million.
Section 31(2) of the Act provides that:
Where a purchaser under a contract for sale of land signs that contract he may at any time before the expiration of three clear business days after he has signed the contract give notice to the vendor that he wishes to terminate the contract and where he has signed that notice and given it in accordance with the provisions of this section the contract shall be terminated.
Section 31(3) of the Act provides that:
A notice under subsection (2) shall be given to the vendor or his agent at the address for service of the vendor specified in the contract or the address of his agent three business days after the purchaser has signed the contract.
The Buyers commenced proceedings against the Seller seeking (among other things) a declaration that the contract was validly terminated by the Buyers on 9 April 2014.
In determining whether or not the Buyers validly terminated the contract on 9 April 2014, the Court had to determine whether the Selling Agent was the agent of the Seller for the purposes of receiving a notice of termination during the cooling off period pursuant to section 31 of the Act.
The Buyers contended the following:
In particular, the Buyers relied on the fact that the Selling Agent’s email address was included in the contract. The Buyers argued that this could only be to enable the purchaser of the purchaser’s representative to contact the Selling Agent as agent for the vendor for the purposes of the contract.
The Seller’s principle contention was that ordinarily, a real estate agent is not the agent of their vendor and does not have authority to make a contract for the sale of land or bind the principal in the sale of property. The Selling Agent was retained to market and sell the property only.
Cameron J determined that the Buyer’s contention that “agent” in this context will include an estate agent (as opposed to may) was not supported by the clear words of the statute, nor is supported by authority.
At  Cameron J said:
It may be, and I accept, a common occurrence in commercial life for parties to assume that a real estate agent is an agent for the vendor of a property for all purposes. However, this is not necessarily the case.
Cameron J also made the following comments:
What the Buyers needed to establish was that, on the facts, there was something in the present case that indicated that the selling agent had authority that went beyond the established authority usually granted to an estate agent by a vendor client.
It was not sufficient for the Buyers to establish that the alleged agent was “held out” as having the requisite authority to receive a notice of termination. The Buyers must establish that the principal did so.
In summary, the Cameron J held that:
Although there is no Western Australia equivalent to section 31 of the Act, this decision is a reminder to both purchasers and sellers be aware of who each party’s representatives are with respect to the relevant contract for sale.
Parties to a contract should ensure that the contract clearly specifies each party’s representatives. In practice it is often the case that offer and acceptance forms are not fully completed when the parties sign the sale contract. It is often the case that the seller’s and the buyer’s representatives panels are left blank or are not fully completed.
This case is also a reminder to selling agents to ensure that they understand the scope of their engagement. A failure to do so may result in serious consequences for all parties involved in the transaction.