When a "Boozy Lunch" Leads to a Legal Battle: Lessons for Real Estate Agents
O*NO! Ever wondered if a handshake over a boozy lunch could land you in court? That’s exactly what happened in the case of White Pointer Investments Pty Ltd v Creative Academy Group Pty Ltd [2023] NSWSC 817. It’s a fascinating example of how licensing compliance, informal agreements, verbal contracts, and alcohol-fuelled conversations can create significant legal headaches. Let’s break it down, and what this means for you.
The Background
In 2017, White Pointer Investments (White Pointer) and Creative Academy Group (CAG) entered into a verbal agreement at a long, boozy lunch. The deal? White Pointer’s director, Mr. Hilton Hedley, would help CAG identify and lease sites for childcare centres in NSW and the ACT. For his efforts, White Pointer would be paid $2,000 (plus GST) per approved childcare placement. White Pointer acted as an “introducer”, but did not claim to be a real estate agent.
Fast forward to 2021, and White Pointer was suing CAG for unpaid fees totalling around $800,000. CAG, among other legal issues, denied the existence of a binding contract, claiming the informal setting of the agreement (hello, Bistro Moncur’s wine list) and the influence of alcohol meant there was no enforceable deal. Separate to this, CAG also argued that White Pointer was exercising the functions of a real estate agent – which is important because White Pointer were not licensed to do so!
What Happened at the Lunch?
During the lunch, CAG’s director asked Hedley what he’d charge to source childcare sites. Hedley quoted his fee structure, and the Director responded, “If you source childcare centres for us, we will pay you those fees.” No written confirmation followed, but payments for the first few deals seemed to affirm the arrangement.
CAG’s Argument: The agreement wasn’t enforceable because alcohol impaired the parties’ judgment. And even if it was enforceable, White Pointer wasn’t entitled to their fees because by introducing childcare centres to CAG, they acted as a real estate agent without being licensed.
Court’s Response: While the lunch was indeed “boozy and lengthy,” there was no solid evidence (like a receipt showing how much was drunk) that anyone was so impaired they couldn’t form a genuine agreement. Without proof of significant intoxication, the Court wasn’t buying the argument. The Court on appeal also found that it wasn’t clear cut whether acting as an “introducer” amounted to acting as a real estate agent. In NSW, the Court was confident that White Pointer had to be licensed and therefore could not claim their fee for the sites located in that State. However, in the Australian Capital Territory, the legislation was not so clear. On appeal, the Court dug into White Pointer’s involvement in the negotiations and found that White Pointer did act as a real estate agent in relation to four sites in the ACT, so White Pointer was not entitled to their fee for those sites.
The Importance of Post-Verbal Actions
Courts love written contracts, however they aren’t opposed to looking at verbal agreements either, and in both cases, they’re also big fans of evidence showing how parties acted after making an agreement. Here’s what sealed the deal for White Pointer:
Emails and Invoices: Correspondence referred to CAG as “my client” and included invoices for sourcing fees that were partially paid.
Consistent Payments: CAG paid fees for initial deals, signalling they acknowledged the agreement.
Long-Term Conduct: Over several years, both parties behaved as if a contract existed, with no disputes raised about the verbal arrangement until much later.
The Decision
The Court found that an oral contract did exist and awarded White Pointer $747,650 in damages for unpaid fees. The “boozy lunch” wasn’t enough to void the contract because there was no evidence that alcohol significantly impaired either party and subsequent actions supported the existence of a binding agreement. However, White Pointer could not claim their commission for four sites in the ACT due to not being licensed.
How You Can Avoid Similar Legal Headaches
Imagine this: the Court decides that the “boozy lunch” deal wasn’t valid because everyone’s judgment was a little too impaired. White Pointer could’ve ended up without a leg to stand on and lost the $747,650 they were chasing. Here are tips to ensure you don’t end up in a similar situation:
Always Put Agreements in Writing: Verbal agreements can be risky, especially when large sums of money or ongoing obligations are involved. A written contract leaves no room for doubt about what was agreed upon, protecting both parties.
Stay Professional During Negotiations: Avoid discussing key contractual terms in informal settings, especially when alcohol is involved. Casual environments can blur lines and lead to misunderstandings about whether an agreement was truly formed.
Follow Up with Documentation: If discussions take place informally, immediately follow up with an email or document summarising the terms. For example: “Just confirming the terms we discussed over lunch…” This creates a record and allows for corrections if there’s a miscommunication.
Maintain Proper Licenses: You should consider carefully whether your role requires a license. This varies State by State, and can depend on exactly what you’re doing. Operating without a necessary license can make contracts unenforceable and potentially lead to legal issues.
Understand the Impact of Post-Contract Conduct: Once you’ve entered into an agreement, your actions should align with the terms. Correspondence, invoicing, and even casual remarks can be used as evidence to establish that a contract existed or that you acknowledged certain terms.
Key Takeaways:
Relying on verbal agreements, especially made in informal or alcohol-fuelled settings, can lead to major disputes. Always put agreements in writing to eliminate ambiguity and protect all parties.
Know whether you need to be licensed.
Courts require strong evidence of significant impairment to rule a contract unenforceable due to intoxication. A boozy lunch isn’t enough unless it can be proven that judgment was genuinely impaired.
Actions like paying invoices, email correspondence, and consistent behaviour can strongly support the existence of a verbal contract, even in the absence of written documentation.
To avoid disputes, stay professional during negotiations, document terms immediately after informal discussions, and always operate with the proper licenses if your role requires them.
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