Acting with authority

Stepping outside the scope of your agency agreement to assist a foreign purchaser can have serious implications. Here’s how one agent found themselves in court.

By Nancy Rainbird

Real estate is a service-oriented industry and, more and more, selling agents now find themselves working closely with potential purchasers to nurture them through the transaction. It benefits the vendor by facilitating a smooth transaction and it creates a positive foundation for a future relationship with the purchaser. After all, today’s purchaser becomes tomorrow’s vendor.

A recent Victorian case demonstrates how things can get tricky if a foreign purchaser seeks advice and assistance from the selling agent as they seek to navigate their way through the transaction and understand the rules and their obligations when purchasing property in Australia.

Contract conditional upon FIRB approval

In Hong v Tsambikos [2015] VCC 1401, the vendors entered into an agreement to sell their property to the purchasers. The purchase was conditional upon the purchaser obtaining approval from the Foreign Investment Review Board (FIRB) by a particular date. The purchaser did not obtain approval by that date, and subsequently sought to rescind the contract and have the deposit returned.

The vendors claimed that the purchaser was not entitled to rely upon non-compliance with the condition as they had failed to take reasonable steps to obtain the FIRB approval.

Realcover became involved in the case when the agent was joined in the proceedings. The purchaser alleged that the agent had made representations to the effect that he would apply for FIRB approval on their behalf, which would be obtained by the relevant date.

Only act within the limits of your authority

The Court found that while the agent had agreed to assist the purchaser with their FIRB application, they had not actually agreed to make the application on behalf of the purchaser. So there was no actionable misrepresentation that could be relied upon by the purchaser.

But what if the agent had in fact agreed to assist the purchaser with their FIRB application and the purchaser relied on that representation in order to satisfy the contract’s condition? Would the agent have been liable for the loss caused by their failure to act in a manner that was consistent with the representation?

The Court was not satisfied that assisting the purchaser with their FIRB application fell within the scope of the agent’s ostensible authority, so any liability arising from the application would have been the responsibility of the agent. The agent would not be able to assert that they were acting on behalf of the purchaser by assisting with the application.

Independent advice is a must

Ultimately the purchaser was able to avoid the contract as the Court found that it was unlikely they would have received FIRB approval. However, this case is a timely reminder to agents to always act within the scope of their agency agreement. If a claim is made against you and you are found to be in breach of your actual or ostensible authority, you may be found liable for any damage flowing from the breach.

In today’s market, many agents find themselves dealing with foreign purchasers on a daily basis and it’s not at all uncommon for questions about the FIRB application process to arise. Be mindful that the scope of your engagement by the vendor does not extend to advising and assisting potential purchasers with FIRB applications.

The key message here is to know the limits of your authority and always advise potential foreign purchasers to seek their own independent, expert advice and make a written record when you do so.


While care has been taken in preparing this article, and the information in it has been obtained from sources that Realcover believe to be reliable, Realcover does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose that the article may be used. Realcover accepts no liability for any loss or damage (whether caused by negligence or not) resulting from the use of this article.

Foreign investment laws

New foreign investment laws came into force on 1 December 2015. The reforms provide for stronger enforcement and a better resourced system with clearer rules for foreign investors. Third parties, including real estate agents, will also be subject to strong civil and criminal penalties if they knowingly assist a foreign investor to breach the rules.

For more information, go to