Principal hit with six-figure fine for contract breach

Matthew Sullivan

In what the Real Estate Employers’ Federation of NSW (REEF) describes as a “shock decision”, a NSW principal has been ordered to pay $144,640 to a former property manager for breach of contract based on a verbal agreement.

“The property manager alleged that as part of the agreement for her to move across from one agency to another, she would be paid 20 per cent of the ‘value of the rent portfolio’ provided she remained employed for two years,” REEF said in a recent newsletter titled [email protected]

“The former property manager’s oral claim was supported by two witnesses – her brother and another former employee of the agency.”

The employer, who cannot be named due to legal reasons, adamantly denies any conversation or agreement taking place and the written contract did not provide details for the proposed entitlements.

Yet despite this, the District Court Judge awarded the case in favour of the employee and stated that “the Plantiff impressed me as an honest witness”.

According to the REEF report, the judge gave four factors that led to the conclusion that there had in fact been a breach of contractual agreement:

1.            The former property manager was a more impressive witness;

2.            The corroborating evidence from the property manager's brother and the other former employee about the existence of the bonus entitlement;

3.            The unlikelihood of the property manager leaving her then current position to join a totally new business with unknown prospects and for no extra benefit;

4.            The opportunity for the property manager to create a large rent roll with an attached benefit to her.

Speaking to Real Estate Business, Starr Partners chief executive Douglas Driscoll said the case stands as a costly reminder to all principals and licensees of the importance of written staff contracts and the dangers of verbal agreements.

“Benefit of the doubt must be given to the judicial system, irrespective of my view on the ruling. They are legal experts, and I am not,” Mr Driscoll said.

“But I have to ask, what intelligent employee wouldn’t insist on such a condition and/or incentive being put in writing from the outset?”

“This case really underlines how important it is for both employers and employees to insist on everything being formalized in writing, thus covering the interests of both parties. Organisations such as REEF are of genuine benefit to the industry, especially for those without a HR department.”

Darren Gorrel, NSW state manager at Gough Recruitment, hopes the case stands as a precedent for the industry and encourages wider use of written contracts as opposed to verbal agreements.

“We definitely encourage all our clients to sign a written contract prior to commencing their employment,” Mr Gorrel told Real Estate Business.

“Written contracts are important to all parties involved. The benefit of security is undeniable; everyone is aware of what is expected and what is owed during and post-employment.”

Matthew Sullivan

In what the Real Estate Employers’ Federation of NSW (REEF) describes as a “shock decision”, a NSW principal has been ordered to pay $144,640 to a former property manager for breach of contract based on a verbal agreement.

“The property manager alleged that as part of the agreement for her to move across from one agency to another, she would be paid 20 per cent of the ‘value of the rent portfolio’ provided she remained employed for two years,” REEF said in a recent newsletter titled [email protected]

“The former property manager’s oral claim was supported by two witnesses – her brother and another former employee of the agency.”

The employer, who cannot be named due to legal reasons, adamantly denies any conversation or agreement taking place and the written contract did not provide details for the proposed entitlements.

Yet despite this, the District Court Judge awarded the case in favour of the employee and stated that “the Plantiff impressed me as an honest witness”.

According to the REEF report, the judge gave four factors that led to the conclusion that there had in fact been a breach of contractual agreement:

1.            The former property manager was a more impressive witness;

2.            The corroborating evidence from the property manager's brother and the other former employee about the existence of the bonus entitlement;

3.            The unlikelihood of the property manager leaving her then current position to join a totally new business with unknown prospects and for no extra benefit;

4.            The opportunity for the property manager to create a large rent roll with an attached benefit to her.

Speaking to Real Estate Business, Starr Partners chief executive Douglas Driscoll said the case stands as a costly reminder to all principals and licensees of the importance of written staff contracts and the dangers of verbal agreements.

“Benefit of the doubt must be given to the judicial system, irrespective of my view on the ruling. They are legal experts, and I am not,” Mr Driscoll said.

“But I have to ask, what intelligent employee wouldn’t insist on such a condition and/or incentive being put in writing from the outset?”

“This case really underlines how important it is for both employers and employees to insist on everything being formalized in writing, thus covering the interests of both parties. Organisations such as REEF are of genuine benefit to the industry, especially for those without a HR department.”

Darren Gorrel, NSW state manager at Gough Recruitment, hopes the case stands as a precedent for the industry and encourages wider use of written contracts as opposed to verbal agreements.

“We definitely encourage all our clients to sign a written contract prior to commencing their employment,” Mr Gorrel told Real Estate Business.

“Written contracts are important to all parties involved. The benefit of security is undeniable; everyone is aware of what is expected and what is owed during and post-employment.”

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