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Benchmark - Real Estate Cases & Commentary
Professional misconduct
    •  Fiduciary duty
        -  Breach



Breach   

Mr Lee was registered as an agent’s representative by the Agents Licensing Board of the Northern Territory. In this role, he would negotiate the sale of property on behalf of real estate agents. He entered into an agreement with Litchfield Realty to represent them in this way.

A prospective purchaser wanted to buy a property that Litchfield Realty was selling through Mr Lee. Because Mr Lee did not promptly return the prospective purchaser’s phone call, the prospective purchaser dealt directly with Litchfield Realty, and concluded the sale with them.

Mr Lee was also a solicitor, and was retained as the vendors’ solicitor on the sale.

Mr Lee considered that he was the only agent entitled to sell the property, and that, under his contract with Litchfield Realty, he was entitled to 50% of the commission. Litchfield Realty considered that, as Mr Lee had not actually sold the property, under his contract with them he was only entitled to 20% of the commission.

Litchfield Realty prepared an invoice to the vendors for the full commission, and prepared an invoice to itself on behalf of Mr Lee for 20% of the commission. Mr Lee requested that the invoice on his behalf be for 50% of the commission.

Mr Lee, in his capacity as the solicitor for the vendors, prepared a settlement statement which directed the purchasers to provide part of the settlement monies in the form of a bank cheque payable to him. The amount of the bank cheque was the 50% of the commission that he claimed.

Litchfield Realty made complaints of professional misconduct to both the Northern Territory Law Society and the Agents Licensing Board.

The Agents Licensing Board found that Mr Lee had been guilty of professional misconduct, and suspended and fined him.

Mr Lee appealed to the Local Court of the Northern Territory, which substituted a penalty of only a fine.

Mr Lee then appealed to the Supreme Court of the Northern Territory.

The Supreme Court held that the Board and the Local Court had been wrong in holding that Mr Lee had breached his fiduciary duty to Litchfield Realty. He may have breached his fiduciary duty to the vendors, but this was a matter for the Law Society, not the Agents Licensing Board. At the time he received the commission, he was no longer the agent for Litchfield Realty, and did not owe them a relevant fiduciary duty.

The appeal was allowed, and the decisions of the Board and the Local Court were set aside. 

Lee v The Agents Licensing Board [2011] NTSC 7