ACN 120 452 744 Pty Ltd v Newham Business Brokers Pty Ltd & Anor
[2021] ACAT 37
•11 May 2021
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
ACN 120 452 744 PTY LTD v NEWHAM BUSINESS BROKERS PTY LTD & ANOR (Appeal) [2021] ACAT 37
AA 5/2020 (XD 1082/2017)
Catchwords: APPEAL – civil dispute – dispute over a commission for the sale of a business – assignment of the claim for commission – notice of assignment – effectively introduced the buyer – effective cause of the sale of the business to the buyer - claim against the second respondent as guarantor – assignment of rights and interests under an agency agreement – whether the agent brought about a state of affairs giving rise to the contractual right to the commission – Codelfa principles – where indemnity against liabilities arises from completion
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 79, 82
Conveyancing Act 1919 (NSW) s 12
Cases cited:Austino Wentworthville Pty Ltd v Metroland Australia Ltd [2013] NSWCA 59
B&T Constructions (ACT) Pty Ltd v Construction Occupations Registrar and the Owners – Units Plan 3324 [2013] ACTSC 219
Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117
Excel Intelligent Pty Ltd v Thomson [2018] ACAT 4
Giusida Pty Ltd v Commissioner for ACT Revenue [2016] ACTSC 275
Hadley v Baxendale [1854] EWHC J70
In the Matter of AB [2018] ACAT 18
LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52
Mio Art Pty Ltd as Trustee of Spencer Family Trust v Mango Boulevard Pty Ltd & Ors (No 6) [2015] QSC 116
Moneywood Pty Limited v Salamon Nominees Pty Ltd (2001) 202 CLR 351
Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18
Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd & Anor (No 2) [2020] ACAT 73
Tam v Du [2019] ACAT 94
Tribunal:Acting Presidential Member Prof. P Spender
Date of Orders: 11 May 2021
Date of Reasons for Decision: 11 May 2021
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AA 5/2020
BETWEEN:
ACN 120 452 744 PTY LTD
Appellant
AND:
NEWHAM BUSINESS BROKERS PTY LTD
Respondent
AND:
SOPHIA MALONE
Second Respondent
APPEAL TRIBUNAL: Acting Presidential Member Prof. P Spender
DATE:11 May 2021
ORDER
The Tribunal orders that:
1.The appeal is dismissed.
………………………………..
Acting Presidential Member Prof. P Spender
REASONS FOR DECISION
1.This matter concerns an appeal filed on 7 April 2020 from a decision of a Senior Member dated 17 March 2020 (the Original Decision).[1] In that decision the Senior Member ordered that the respondent pay the applicant a commission pursuant to their contract dated 9 April 2015. In a subsequent decision dated 17 September 2020,[2] the Senior Member quantified the applicant’s claim and ordered the respondent to pay the sum of $25,300 to the applicant for the commission payable.[3]
Reasons for decision
[1] Newham Business Brokers Pty Ltd v ACN 120452744 Pty Ltd& Anor [2020] ACAT 18
[2] Newham Business Brokers Pty Ltd the ACN 120452744 Pty Ltd & Anor (No 2) [2020] ACAT 73
[3] See also the earlier decisions in this matter: Newham Business Brokers Pty Ltd v Joy Miller Pty Ltd as Trustee for the Miller Family & Anor [2018] ACAT 57 and Newham Business Brokers Pty Ltd v Joy Miller Pty Ltd as Trustee for the Miller Family & Anor [2019] ACAT 21
2.The reasons below explain why the Tribunal has made the orders set out above. In the reasons below, a reference to ‘ACAT’ or ‘tribunal’ refers to the ACT Civil and Administrative Tribunal generally, whereas ‘Tribunal’ or ‘Appeal Tribunal’ refers to the current panel. When referring to the first instance decision, the Tribunal uses the expression ‘Original Tribunal’, ‘original proceedings’ or the ‘first instance’ proceedings/decision.
3.The orders made on 24 April 2020 in the appellate proceedings state that the appeal was to be conducted by way of review of the original decision pursuant to section 82 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act). Pursuant to section 79(3) of the ACAT Act, a party to the original application may, by application, appeal the decision to the tribunal on a question of fact or law.
4.The case law has interpreted section 79(3) of the ACAT Act to mean that the appellant must show an error of fact or law in the decision under appeal and that the error affected the result.[4] In Excel Intelligent Pty Ltd v Thomson,[5] the tribunal distilled some important principles[6] that were discussed by Burns J in B&T Constructions (ACT) Pty Ltd v Construction Occupations Registrar and the Owners – Units Plan 3324.[7] These principles were discussed in the context of an appeal by way of rehearing but they apply mutatis mutandis[8] to an appeal by way of review. The principles are stated as follows (with some paraphrasing to apply the principles to the present context):
(a)An appeal tribunal must determine whether the decision appealed against is wrong because… an original tribunal fell into an error of law, made a finding of fact that is clearly wrong or exercised a discretion on a wrong principle or in a way that is clearly wrong.
(b)Ordinarily, if there has been no further evidence admitted or no relevant change in law, an appellant tribunal in entertaining an appeal… can exercise its appellate powers only if satisfied that there was an error on the part of the original tribunal below.
(c)The appeal tribunal will give proper allowance to the advantage of the original tribunal who saw and heard the witnesses, so that, ordinarily, facts found based on the assessment of witnesses will not lightly be overturned.
(d)The appeal tribunal is obliged to conduct a real review of the reasons of the original tribunal.
(e)Once error below has been found (after making proper allowance for the advantages of the original tribunal), the appeal tribunal can substitute its own decision based on the facts and the law as they now stand.[9]
[4] Tam v Du [2019] ACAT 94 at [22] citing Giusida Pty Ltd v Commissioner for ACT Revenue [2016] ACTSC 275 at [29]–[39]; Excel Intelligent Pty Ltd v Thomson [2018] ACAT 4 at [46]–[55]; In the Matter of AB [2018] ACAT 18 at [41]
[5] [2018] ACAT 4
[6] [2018] ACAT 4 at [53]
[7] [2013] ACTSC 219 at [13] ff
[8] This is a Latin term for ‘once the necessary changes have been made’
[9] Excel Intelligent Pty Ltd v Thomson [2018] ACAT 4 at [53]
5.These principles have guided the Appeal Tribunal when reviewing the first instance decision and reaching its conclusion. The Appeal Tribunal has concluded that the appellant has not demonstrated the requisite error to overturn the first instance decision. The appeal is therefore dismissed.
Background
6.The relevant transaction in this matter concerned a sale of business. The original respondent (now the appellant in this appeal), under its former name Granite Transformations Canberra (Granite Transformations or the Seller) engaged two brokers over a period of time to sell a business. A sale of business agreement (SOBA) was executed on 18 November 2016 between Granite Transformations and a buyer, Atarashii Stone Pty Ltd (the Buyer).[10] The first broker, now the first respondent, Mr Newham (Newham) claimed a commission on the sale of the business. The primary dispute concerned whether the alleged commission to Newham was payable. The second respondent in the appeal is Ms Malone (Malone) who was a guarantor of the Buyer’s obligations under the SOBA.[11] A secondary dispute arose because Granite Transformations sought to rely upon various clauses in the SOBA where an indemnity had been given by the Buyer to Granite Transformations,[12] and a guarantee of the indemnity had been given by Malone. Malone was joined as a third party in the original proceedings. She is referred to in these reasons as ‘Malone’ or the ‘second respondent’.
Chronology
[10] Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020 at Tab 3
[11] Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 3 at clause 15
[12] Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 3 at clause 8
7.The relevant transactions and surrounding facts are as follows:
(a)9 April 2015 – An agency agreement was executed between Jodie Miller (Miller) on behalf of Granite Transformations and Wilcox on behalf of Finn Franchise Brokers – Sydney West ABN 12 166 205 787 (Finn Franchise Brokers)[13] (the Agency Agreement).
[13] Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020 at Tab 4
(b)19 May 2015 – A franchise agreement was executed between Wilcox on behalf of Finn Franchising Australia Pty Ltd ACN 139 242 676 (Finn Franchising Australia Pty Ltd) and Newham (the Franchise Agreement).[14]
[14] Exhibit 1; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020 at Tab 5
(c)23 December 2015 – Newham allegedly introduced Malone (acting on behalf of the Buyer) to Granite Transformations.
(d)2 July 2016 – Miller terminated the Agency Agreement with Wilcox and retained the services of a second broker – Mr Walmsley (Walmsley). Newham wrote to Miller/Granite Transformations providing a list of people allegedly introduced to Granite Transformations by Newham.
(e)8 November 2016 – A SOBA was executed between Granite Transformations and the Buyer.
(f)Early 2017 – Newham made a demand for his commission under the Agency Agreement.
(g)8 September 2017 – Newham brought proceedings in ACAT claiming his commission.
Grounds of appeal
8.As stated above, the respondent to the original application lodged an application for appeal of the first instance decision on 7 April 2020.
9.The grounds of the appeal are that the Original Tribunal had erred with respect to the following findings:[15]
[15] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020 at Tab 6
(a)The claim for the commission had been validly assigned to Newham (Ground 1 – the Assignment of the claim for commission).
(b)Newham had effectively introduced the Buyer or was otherwise an effective cause of the sale of the business to the Buyer (Ground 2 – Effective introduction/effective cause of sale).
(c)Malone was not liable to pay the commission as guarantor for the Buyer’s obligations under the SOBA (Ground 3 – Claim against the second respondent as guarantor).
Ground 1 - the Assignment of the claim for commission
10.As stated above, the Original Tribunal found that the claim for the commission had been validly assigned to Newham. In challenging that finding, the appellant contended first that no assignment had occurred because the Original Tribunal wrongly identified the parties to the alleged assignment and secondly that notice of the assignment is required under section 12 of the Conveyancing Act 1919 (NSW) and no notice was given to the debtor or other person liable for the chose in action.
Identification of the parties to the assignment
11.The appellant contended that the Original Tribunal erred by wrongly identifying the parties to the alleged assignment of the Agency Agreement.[16]
[16] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [18]-[19]
12.The Original Tribunal stated as follows in the relevant paragraphs:
18. The assignment occurred in the context of a franchise agreement between Finn and the applicant that operated on a referral basis. The applicant traded under its own name. Finn referred all ACT and surrounding NSW business to the applicant who paid Finn a general franchise fee and paid Finn for any administrative work it did in any assigned matter. Beyond this, the applicant was solely entitled to its commission on any sale it effected.
19. Mr Ferguson and Mr Walmsley of Finn gave evidence of the assignment to the applicant, albeit no formal assignment was tendered in evidence. There was no suggestion that the assignment was by way of charge only, or Finn had any right of redemption in relation to work performed by the applicant under the franchise agreement. The fact that the applicant paid Finn for some administrative services and paid a franchise fee for the franchise generally, does not mean that the applicant was not absolutely entitled to the commission for any sale it effected.
20. The Tribunal finds that the assignment from Finn to the applicant in relation to the right to commission on the respondent’s sale was an absolute one.
13.The appellant challenged the findings of the Original Tribunal that Finn (as described in the extracted paragraphs) had assigned its rights and interest under the Agency Agreement. The appellant stated that the Agency Agreement was entered into by Granite Transformations and an entity controlled by Mr Andrew Wilcox, known as ‘Finn Franchise Brokers – Sydney West ABN 12 166 205 787’ (Finn Franchise Brokers, as named above). The Franchise Agreement however was entered into between Newham and a different entity – Finn Franchising Australia Pty Ltd ACN 139 242 676 (Finn Franchising Australia Pty Ltd, as named above). In these reasons, the broad business conducted by Finn is described as the ‘Finn Group’.
14.The appellant argued that there was no legal relationship between Finn Franchising Australia Pty Ltd and Granite Transformations in the Agency Agreement and that “those obligations would ordinarily vest between the Respondent and Applicant if the agency agreement was lawfully assigned”.[17] The Tribunal takes this last quote to mean that the appellant is arguing that there would need to be direct obligations between Granite Transformations (the respondent in the original proceedings) and Newham (the applicant in the original proceedings) if the Agency Agreement was lawfully assigned. The appellant asserted that the Original Tribunal erred in its reasoning that the assignment occurred in the context of the Franchise Agreement between Finn and Newham and that the Original Tribunal’s reasons were based on the wrong observation that the franchisor was capable of effecting an assignment of the chose in action (which constituted the entitlement to the commission under the Agency Agreement).
Notice of the assignment
[17] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 1 at [1.5(3)]
15.The appellant further contended that even if an assignment was possible, no notice was given, which was a requirement of section 12 of the Conveyancing Act 1919 (NSW).
16.The relevant part of section 12 of the Conveyancing Act 1919 (NSW) states as follows:
12 Assignments of debts and choses in action
Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of trustees.
17.The appellant argued that no evidence was provided to the Original Tribunal to support a finding that notice of the assignment was provided to Granite Transformations. As stated by the appellant, “[c]onduct’ of the applicant is not notice provided by the Assignor”.[18]
Ground 2 - Effective introduction/effective cause of sale
[18] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 1 at [1.5(2)]
18.There were three elements to the appellant’s arguments on this ground.
(a)The Original Tribunal had erred in applying the contractual provisions (in clause 8.3 of the Agency Agreement) which entitled the agent to claim a commission where he or she had ‘effectively introduced’ the buyer. On this argument, the test that should have been applied is the common law test that the agent was the ‘effective cause of sale’. The appellants relied upon the comments of Gummow J in Moneywood Pty Limited v Salamon Nominees Pty Limited[19] (Moneywood) that the “essential issue is whether the agent brought about a state of affairs giving rise to the contractual right to the commission”.[20]
(b)The evidence in the original proceedings was insufficient to support a finding that Newham was an effective cause of sale.
(c)The Original Tribunal was in error in concluding that the second agent, Walmsley, was not the [sole] effective cause of the sale and, in reaching that conclusion, the Original Tribunal had failed to give appropriate weight to the evidence adduced about this issue in the original proceedings.
[19] (2001) 202 CLR 351; [2001] HCA 2
[20] Moneywood Pty Limited v Salamon Nominees Pty Limited (2001) 202 CLR 351; [2001] HCA 2 at [86]
19.In this second ground of appeal, the appellant argued that the Original Tribunal erred in applying the contractual provisions in the Agency Agreement to conclude that the respondent had ‘effectively introduced’ the Third Party to the business,[21] thereby entitling Newham to a sales commission.[22] The Tribunal takes this reference to ‘Third Party’ to mean the Buyer, with correlative responsibilities owed by Malone as guarantor under the SOBA. The appellant argued that the Original Tribunal had made an error of law because the Senior Member applied clause 8.3 of the Agency Agreement, which provided that the commission will be payable where the agent effectively introduced the business to a buyer. Clause 8.3 states as follows:
…The Client will also be liable to pay the Sales Commission where the Agent effectively introduced the buyer to the client… during the Term of this Agreement and a contract of sale is entered into between the buyer and the Client within twelve (12) months of the end of the Term.[23]
[21] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [31]
[22] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 3 at [1.6](1)]
[23] Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 4 at page 10
20.The appellant said that clause 8.3 is “unlawful”[24] and the approach of the Senior Member is in conflict with the general law that requires the agent, in order to claim the commission, to be an effective cause of sale.[25] The appellant contended that Newham is “not entitled to a sales commission because his conduct fell short of the legal requirement that an agent effectively causes the sale. Effectively introducing a buyer to the business provides him no such entitlement”.[26]
[24] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 4 at [1.6(6)]
[25] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 3 at [1.6(1)]
[26] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 3 at [1.6(7)]
21.Further, the appellant contended that Newham tendered no evidence in the original proceedings to suggest that his efforts “continue[d] to influence the purchaser in its eventual decision… or that his initial efforts flowed through to the buyer, thus causing the ultimate sale”.[27] The latter is a paraphrased quote from the New South Wales Court of Appeal in Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd[28] (Emmons) where the issue before the court was the ‘effective cause of the sale’. The New South Wales Court of Appeal in Emmons was, in turn, quoted by the Original Tribunal as follows:
What the respondent [the agent claiming commission] has to show is that his efforts continued to influence the purchaser in its eventual decision to buy. In effect, the agent has to prove that his initial efforts flowed through to [the buyer] thus causing the ultimate sale.[29]
[27] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 4 at [1.6(2)]
[28] [2005] NSWCA 117
[29] [2005] NSWCA 117 at [39]
22.In addition to the elements of the second ground of appeal that may be characterised as errors of law, the appellant also argued that the Original Tribunal had made various errors of fact, in particular, contrary to the findings of the Original Tribunal, the second broker (Walmsley) had effectively caused the sale because his efforts had given the Buyer confidence to enter into the sale agreement for the business.[30] Second, the appellant argued that the Original Tribunal failed to give appropriate weight to Walmsley’s evidence about the financial information he had provided to progress the transaction. The Original Tribunal found that Walmsley “did no more than provide updated financial information to an already interested purchaser”.[31] The appellant argued that this approach failed to give appropriate weight to the significant professional services provided by Walmsley to Bencmarc accountants and to the Buyer’s accountants when undertaking due diligence of the books and records of the business.[32]
Ground 3 – Claim against the second respondent as guarantor
[30] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 4 at [1.6(3)]
[31] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [28]
[32] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 4 at [1.5(5)]
23.As stated above, the appellant made a claim against Malone as third party in the Original Proceedings due to the guarantee in the SOBA. The appellant argued that Malone was liable for any commission payable pursuant to the sale of the business, including the commission that is claimed by Newham.[33] The appellant did not seek to join the Buyer as third party; instead it relied upon Malone’s alleged liability under the guarantee. Malone’s alleged liability, as third party, arose from Clause 8.1 of the SOBA (also referred to below as the indemnity clause) as follows:
8.1 The Buyer indemnifies and holds harmless the Seller against all Liabilities and the cost of all demands, actions and other proceedings against the Seller (including legal costs on a solicitor and own client basis) arising from Completion in relation to the Business or arising directly or indirectly as a result of or in connection with, any breach or non-performance by the Buyer of the obligations of the Buyer…[34] [Emphasis added]
[33] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 3, page 5 at [1.7]
[34] Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 3 at page 13
24.Malone’s obligations arose under clause 15 of the SOBA as follows:
15.2 The Guarantor unconditionally and irrevocably guarantees to the Seller the Buyer’s compliance with the Buyer’s obligations in connection with this Agreement, including each obligation to pay money. lf the Buyer does not comply with those obligations on time and in accordance with this Agreement, then the Buyer’s Guarantor agrees to comply with those obligations - on demand from the Seller. A demand may be made whether or not the Seller has made demand on the Buyer.[35]
[35] Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 3 at page 16
25.At first instance, the Senior Member held that the indemnity in clause 8.1 only applied to liabilities that arise from completion of the sale of business from the Seller to the Buyer. In this case, the Seller’s liability under the Agency Agreement with Finn and Newham predated completion of the SOBA.[36] The Senior Member recognised that the Seller’s liability under the Agency Agreement may have been “contingent” between the inception of the Agency Agreement up until the execution of the SOBA “but it still existed” and the “completion of the sale to the third party was the only act that made the contingent liability actionable”.[37]
[36] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [35]
[37] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [35]
26.On appeal, the appellant argued that there was no “temporal guillotine”[38] in clause 8.1 of the SOBA because there would be no liability for the Seller to pay a sales commission but for the completion of the sales of the business.[39] Further, the appellant contended that the Original Tribunal erroneously found that the liability to pay the commission arose from the inception of the Agency Agreement rather than the completion of the sale because the liability to pay a sales commission under the Agency Agreement required completion of the sale.[40] The appellant argued that the claim made by Newham was covered by the indemnity clause because on the wording of that provision it was a demand that had arisen after completion.[41]
[38] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 5 at [1.7]
[39] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 5 at [1.7(1)]
[40] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 5 at [1.7(2)]-[1.7(3)]
[41] Transcript of proceedings (Appeal Tribunal) 20 November 2020 pages 46, 49.
27.Further, the appellant submitted that the Original Tribunal erred in the Original Decision by observing that:
(a) no reasonable and commercial construction of clause 8.1 could give rise to the purported liability of the third party;
(b) by no stretch of the Codelfa principles could it be found that the third party had impliedly agreed to such a liability; and
(c) by no stretch of the principles in Hadley v Baxendale was the loss arising from the respondent’s actions a foreseeable one on the part of the third party when the contract for the sale of the business was entered.[42]
[42] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [36]
28.The appellant elaborated on these arguments as follows. First, the appellant relied on the High Court judgment in Darlington Futures v Delco Australia Pty Ltd[43] (Darlington) regarding whether clause 8.1 could be interpreted by reference to a “reasonable and commercial construction” of that provision.[44] During the appeal, this submission focussed upon the reasonableness criterion rather than the commercial construction.[45] The appellant said that that the tribunal cannot reject the operation of clause 8.1 on the basis of perceived unreasonableness because the High Court in Darlington had accepted the principles established by Lord Diplock in Photo Production Ltd. v. Securicor Transport Ltd[46] (Photo Production) that “the court is not entitled to reject the exclusion clause however unreasonable the court itself may think it is, if the words are clear and fairly susceptible of one meaning only”.[47] Hence, the appellant argued, the Original Tribunal’s emphasis that it would not be ‘reasonable’ to hold Malone liable for Newham’s claim is an error in the application of the law as observed by the High Court in Darlington.
[43] (1986) 161 CLR 500; [1986] HCA 82
[44] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6 at [4.1]-[4.2]
[45] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 6 at [4.2]
[46] (1980) AC 827
[47] Photo Production Ltd. v. Securicor Transport Ltd (1980) AC 827 at page 851
29.As regards the ‘Codelfa principles’, this is a reference to Codelfa Construction Pty Ltd v State Rail Authority of NSW.[48] The appellant argued that the Original Tribunal’s statement that the Codelfa principles could not support a finding that “the third party had impliedly agreed to such a liability”[49] was referring to an implied term in the SOBA. The appellant submitted that the terms which render the third party liable are comprised in clause 8.1 of the SOBA, these terms are express in nature and therefore not implied into the SOBA. Therefore, on this argument, the Original Tribunal erred in applying the principles in Codelfa.
[48] (1982) 149 CLR 337; [1982] HCA 24
[49] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [36]
30.The appellant relied on a further error made by a statement of the Original Tribunal that the appellant’s argument on this ground was “coloured with unconscionability”.[50] The appellant argued that this observation by the Original Tribunal is not relevant.
[50] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [37]
31.The solicitor acting for the second respondent argued that a proper construction of clause 8.1 means that one has to consider the ambit of the business that is bought and sold. For example, the definition of ‘business’ in the SOBA refers to granite bench tops and does not contemplate the Agency Agreement.[51] It follows that the words “in relation to the business” in clause 8.1 of the SOBA means “in relation to the renovations and retail sale business”.[52] In other words, said the second respondent, the indemnity relates to the ‘operations’ of the business, independent of the sale process. Thus, for example, the indemnity would cover a warranty claim that arose prior to completion.[53] In this sense the references to “arising from completion” and “prior to completion” simply set out the times from when the indemnities arise and do not create an independent right of indemnity. In this respect, the second respondent urged a “sensible interpretation” of clause 8.1 which was consistent with the buyer and seller of the business dividing up liabilities in relation to the business so that the seller was responsible for claims that might arise prior to completion and the buyer would be liable for claims arising after completion.[54]
[51] Second respondent’s submissions filed 17 November 2020 page 2 at [13]
[52] Second respondent’s submissions filed 17 November 2020 page 2 at [13]
[53] Second respondent’s submissions filed 17 November 2020 page 2 at [14]
[54] Transcript of proceedings (Appeal Tribunal) 20 November 2020 page 40
32.Accordingly, a claim that arises solely out of the SOBA and the Agency Agreement, is not “in relation to the business”.[55] In making these arguments, the second respondent relied on the general principles of contract law that are set out in Codelfa and expressly stated that she did not seek to argue that an implied term ought to be imposed.[56] The general principles relied upon by the second respondent were as follows:
a. When interpreting a contract, the court attempts to give effect to what the parties intended; but
b. What the parties intended is to be assessed objectively, not subjectively; and
c. The court should interpret terms in a contract with regard to what a reasonable person would understand those terms to mean.[57]
[55] Second respondent’s submissions filed 17 November 2020 page 2 at [16]
[56] Second respondent’s submissions filed 17 November 2020 page 2-3 at [17]-[18]
[57] Second respondent’s submissions filed 17 November 2020 page 3 at [17]
33.Applying these principles, the second respondent submitted that, looked at objectively, the intention of the parties was for them to follow the usual practice that the seller pays agent’s commission.[58] The second respondent further contended that the Tribunal ought to be slow to provide an interpretation of the clause in a contract that would be inconsistent with usual commercial practice, i.e. that the seller of a business (or other property for that matter) engages the agent to effect the sale and pays the agent’s commission.[59] The second respondent did not lead any evidence about the ‘usual commercial practice’ at first instance or in the appeal proceedings.
[58] Second respondent’s submissions filed 17 November 2020 page 3 at [19]
[59] Second respondent’s submissions filed 17 November 2020 page 3 at [20]
34.The second respondent further argued that to accept the argument made by the appellant would “defy commercial reality”.[60] This point was emphasised by the fact that Malone had no knowledge of any pre-existing arrangements between Granite Transformations, Finn and Newham.
[60] Transcript of proceedings (Appeal Tribunal) 20 November 2020 page 41
35.Regarding the interpretation of the words “arising from Completion” in clause 8.1 of the SOBA, the second respondent submitted that the word ‘arise’ is defined in the Macquarie Dictionary, relevantly as “to come into being, originate”. [61] The solicitor acting for the second respondent submitted that the cause of action did not originate at completion. While it is true that the commission was actually payable upon completion (when the total of the purchase price was paid over), it arose once the contract of sale became specifically enforceable (e.g. exchange).[62] This is emphasised by clause 9.3 of the SOBA which includes the warning: “[a] commission may be payable under this agreement even if the sale of the properly or business is not completed”.[63]
[61] Second respondent’s submissions filed 17 November 2020 page 4 at [23]
[62] Second respondent’s submissions filed 17 November 2020 page 4 at [24]-[25]
[63] Second respondent’s submissions filed 17 November 2020 page 4 at [25]
36.As regards the arguments made by the appellant that the Original Tribunal erred when using a reasonableness criterion and referring to Hadley v Baxendale, the second respondent said that the Original Tribunal was using the fact of unreasonableness as part of the material on which it relied to construe the clause. Looked at objectively, a party would not, without explanation, agree to an unreasonable clause in an agreement, so that a construction of that clause that does not include the unreasonableness is to be preferred. A similar point is made in relation to the Tribunal’s reference to Hadley v. Baxendale – “as a matter of common sense it is unlikely that a party would agree a clause that exposed them to potentially unforeseeable liability over which they had no control”.[64]
[64] Second respondent’s submissions filed 17 November 2020 page 5 at [50]-[51]
37.The second respondent also suggested that there may be an ambiguity in clause 8.1 and urged the Appeal Tribunal to apply a contra proferentum[65] construction in favour of the surety to support the proposition that the liability for the commission did not fall within the ambit of clause 8.1.[66] The second respondent further contended that no liability could arise because Malone was not privy to the Agency Agreement.[67]
[65] This is a Latin term for ‘interpreted against the party that relies on it’
[66] Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; [1986] HCA 82
[67] Second respondent’s submissions filed 17 November 2020 page 1 at [8]-[10]; Transcript of proceedings (Appeal Tribunal) 20 November 2020 page 45
38.In response to these arguments, the appellants asserted that the SOBA and the Agency Agreement were connected and therefore the demand by Newham was reasonably contemplated by clause 8.1 of the SOBA. They also argued that the contra proferentum rule is not applicable here.
Consideration
Ground 1 – Validity of the assignment of the claim for commission
39.As discussed above, the appellant submitted that the Original Tribunal made an error in finding that the chose in action (in the form of the claim for the agent’s commission under the Agency Agreement) had been validly assigned. First, it argued that the entity that was party to the Agency Agreement (Finn Franchise Brokers), was different to the entity that was party to the Franchise Agreement (Finn Franchising Australia Pty Ltd). The Original Tribunal identified the relevant protagonists as follows:
The applicant is a business broker in the ACT and is the ACT franchisee of Finn Franchise Broker in Sydney (Finn). On 9 April 2015 Finn entered a business agency contract with the Miller Family Trust to find a purchaser for its masonry business. The agency agreement contained clause 27 which permitted Finn to assign the benefit of that contract.[68] [Emphasis in original]
[68] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [2]
40.It is clear that separate entities were involved in the transactions that constituted the Agency Agreement and the Franchise Agreement. For example, the contracting party to the Agency Agreement appears to be a sole trader, whereas the contracting party for the Franchise Agreement was a company. The consequence of this (as contended by the appellant) was that no legal relationship existed between Newham (as an alleged assignee of the Agency Agreement) and Granite Transformations and that those obligations would ordinarily vest between Granite Transformations and Newham if the Agency Agreement was lawfully assigned.[69]
[69] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 1 at [1.5(3)]
41.The appellant submitted that the Original Tribunal committed the following errors:[70]
a) Mr Walmsley of Finn gave evidence of the assignment.[71]
This is clearly a typographical error in the reasons of the Original Tribunal which substitutes the name ‘Mr Walmsley’ to that of ‘Mr Wilcox’.
a) wrongly identified that Finn was the assignor.
[70] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6 page 2 at [1.5(6)]
[71] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [19]
As regards this alleged error, certainly Finn Franchising Australia Pty Ltd was party to the Franchise Agreement. However, the appellant’s grounds of appeal alleged that Finn Franchising Australia Pty Ltd could never have any rights that are presently in contention as it was merely a franchisor, not the assignor.[72] This assertion was not elaborated. The short answer to this point is that there were complex relationships within the Finn Group which contemplated that interests held in the agency agreements could be assigned by various participants.
[72] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6 page 2 at [1.5(5)]
42.This point is evidenced by the relevant provisions of the Agency Agreement that provided significant flexibility to Finn Finance Brokers (the original agent named in the Agency Agreement) regarding assignment. These provisions state as follows:
27 Assignment
27.1 The Agent may at any time assign, transfer, delegate or otherwise deal with some or all of its rights and responsibilities under this Agreement and the powers and benefits of the relevant parts of this Agreement shall be exercised and enjoyed by any delegate, transferee or assignee and any subsequent successors in title in accordance with the terms of the delegation, transfer or assignment.
27.2 The parties acknowledge that the Agent is itself a franchisee and the Client acknowledges and agrees that the Agent’s franchisor may provide notice of an assignment to itself or a nominee of the franchisor, in accordance with clause 27.1, pursuant to the terms of the franchise agreement between the Agent and the Agent’s franchisor.[73]
[73] Agency Agreement, Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 4 at page 13
43.In its grounds of appeal, the appellant challenged the observations made by the Original Tribunal that an assignment of the commission interest in the Agency Agreement had occurred in the context of the Franchise Agreement.[74] The appellant asserted that Finn Franchising Pty Australia Ltd never held any interest in the Agency Agreement. As stated above, there were clearly complex relationships within the Finn Group, which contemplated that interests held in the Agency Agreements could be assigned by various participants. For example, Part 7 of the Agency Agreement states that Finn Franchising Australia Pty Ltd is the franchisor of Finn Franchise Brokers and the commission is shared.[75] Other than the pure assertion by the appellant about a lack of interest held by Finn Franchising Australia Pty Ltd in the Agency Agreement, there was no further proof provided by the appellant on this ground. The appellant has not established an error of fact or law on this element of Ground 1.
[74] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [18]
[75] Agency Agreement, Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 4 at page 5
44.However, further arguments were made under Ground 1 by the appellant regarding the assignment of the chose in action (and whether Newham could claim the commission under the Agency Agreement). They were, first, whether an absolute assignment had occurred and secondly whether notice had been provided to Granite Transformations as a contracting party to the Agency Agreement or to Miller on behalf of Granite Transformations.
45.In its submissions, the appellant argued that the Original Tribunal:
…wrongly identifie[d] the assignor as Finn, it was the franchisor, therefore, the reasoning used in deciding that an assignment was absolute are based on wrongly identifying the parties to the assignment and the decision in the Reasons is fundamentally flawed.[76]
[76] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6 page 3 at [1.5(9)]
46.It is important to note the conclusions reached by the Original Tribunal about the assignment. In particular the material quoted above indicates that evidence was given by two participants in the Finn Group (being Mr Ferguson[77] and the person incorrectly named as Mr Walmsley who was actually Mr Wilcox) that an assignment had occurred, although no formal assignment was tendered in evidence.[78] Relying upon the evidence that was before the Original Tribunal, the Senior Member concluded that there was no suggestion that the assignment was by way of charge only or that there was any right of redemption in relation to the work performed by the applicant under the Franchise Agreement.[79]
[77] Witness statement of Len Ferguson dated 12 March 2018, Original proceedings MFI 12
[78] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [19]
[79] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [19]
47.On appeal, the appellant did not provide any persuasive arguments or evidence that rebutted the conclusion of the Original Tribunal that the assignment was not “by way of charge only”[80] or that ‘Finn’ had no “right of redemption in relation to work performed” by Newham under the Franchise Agreement.[81]
[80] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [19]
[81] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [19]
48.The appellant also asserted that the assignment of the Agency Agreement was not absolute because somehow Newham had agreed to share equally the commission payable under the Agency Agreement.[82] The Agency Agreement made express provision in Part 7 for the sharing of commission between Finn Franchise Brokers and Finn Franchising Australia Pty Ltd.[83] Even if the commission was shared or would be shared at some later time (which was challenged by Mr Newham during the appeal hearing[84]) the appellant did not explain how that would have the consequence that an absolute assignment had not occurred. The Senior Member concluded that an absolute assignment had been effected, relying upon the judgment of McMurdo J in Mio Art Pty Ltd as Trustee of Spencer Family Trust v Mango Boulevard Pty Ltd & Ors (No 6),[85] who in turn cited Barrett JA in Austino Wentworthville Pty Ltd v Metroland Australia Ltd.[86]
[82] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6 page 3 at [1.5(11)]
[83] Agency Agreement, Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 4 at page 5
[84] Transcript of proceedings (Appeal Tribunal) 20 November 2020 page 6
[85] [2015] QSC 116 (Mio Art) cited in Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [17]
[86] (2013) 93 ACSR 297; [2013] NSWCA 59 cited by McMurdo J in Mio Art [2015] QSC 116 at [12]
49.Although some confusion arose in the Original Tribunal’s reasons regarding the naming of the parties, the substance of the agreements (being the Agency Agreement and the Franchise Agreement) are clear and the Original Tribunal relied upon the testimony and witness statements of two participants in the Finn Group to establish that an assignment had occurred.[87] To quote Mason J in Clyne v Deputy Commissioner of Taxation,[88] an ‘absolute assignment’ in this context “signifies one which is unconditional”.[89] Such an assignment is not inconceivable in the context of the arrangements that were made between the Finn Group and Newham. It is clear that the Franchise Agreement transferred an interest between certain entities in the Finn Group and Newham and this arrangement was capable of amounting to an absolute assignment.
[87] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [18]-[20]
[88] (1981) 150 CLR 1; [1981] HCA 40 at [22]-[25] (Mason J)
[89] Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1; [1981] HCA 40 at [22]-[25] (Mason J) cited by in Mio Art [2015] QSC 116 at [12] (McMurdo J)
50.The next question is whether the assignment was perfected by the giving of notice. The Original Tribunal dealt with this issue as follows:
Mr Wilcox from Finn gave evidence that he notified the respondent by mail and email of the assignment. The Tribunal accepts this evidence. Mr Newham gave evidence that he also notified the respondent of the assignment as part of his introduction. Ms Miller on behalf the respondent concedes that after the date of the assignment she dealt only with Mr Newham, and that he communicated with her on his email and letterhead showing the applicant company and not Finn. At no stage did the respondent question why this was. There is no substance in the respondent’s assertion that she was never notified of the assignment.[90]
[90] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [21]
51.The appellant argued that the respondent’s conduct did not amount to the provision of actual written notice in accordance with the requirement of section 12 of the Conveyancing Act 1919 (NSW). In its grounds of appeal the appellant stated that at no material time did the respondent or Finn provide any evidence to the tribunal to support their position that notice of the assignment was provided to the respondent. The Original Tribunal relied upon the oral testimony and witness statements of Ferguson[91] and Wilcox[92] of Finn. Based on this evidence, the Original Tribunal concluded that an assignment had occurred and that notice had been given to Miller.[93] The appellant was given ample opportunity, both at first instance and on appeal, to tender further documents that might rebut the evidence given by Ferguson and Wilcox that was relied upon by the Senior Member in concluding that notice had been given. The appellant did not provide any further documents and therefore has not established the requisite error of law or fact in the approach adopted by the Senior Member in the Original Tribunal.
[91] Witness statement of Len Ferguson dated 12 March 2018, Original proceedings MFI 12
[92] Witness statement of Andrew Wilcox dated 6 March 2018, Original proceedings MFI 13; Transcript of proceedings (Original Tribunal) 5 June 2019 page 98 ff
[93] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [18]-[20]
52.The appellant has not established an error of fact or law on Ground 1.
Ground 2 – Effective introduction/effective cause of sale
53.As stated above, the appellant argued that the Original Tribunal erred in finding that Newham was entitled to the commission because it applied the wrong test of ‘effectively introduced’ relying on the contractual provisions of the Agency Agreement, rather than the ‘effective cause of sale’ test under the general law when reaching this conclusion. The appellant also argued that the Original Tribunal had erred by concluding on the facts that Walmsley was not the sole effective cause of sale.
54.The following quote from the first instance decision sets out the relevant facts pertaining to this ground.
7. The initial introduction by the applicant occurred on 23 December 2015 with a follow up meeting between the parties on 25 February 2016 and various correspondence in between. No agreement for the sale was reached. Ms Malone’s evidence was to the effect that she put the decision to purchase the business on hold whilst she considered other options. On 2 July 2016, the respondent terminated the broker contract with Finn and hence the contract with the applicant.
8. On the same day Mr Newham wrote to the respondent and provided a list of people he asserted he had introduced as potential purchasers of the business in relation to whom a commission would arise from any sale within the next 12 months. The list included the representatives of
Ms Malone’s company.9. The respondent then retained the broking services of Mr Walmsley of Capital Commercial Business Brokers.
10. Subsequently Ms Malone’s company had a change of mind and decided to revisit the purchase. She was directed by the respondent to do so through Mr Walmsley. Negotiations ensued in which Mr Walmsley played his part that led to completion of the sale on 12 December 2016 by providing updated financial information concerning the business.
11. The applicant only became aware of the sale in July 2017. The applicant then made a demand on the respondent for the commission. [94]
[94] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [7]-[11]
55.The Original Tribunal provided the following reasoning when concluding that Newham was entitled to the commission:
The effective introduction issue
23. The respondent contends that the new broker was the ‘effective cause of the sale’ and the efforts of the applicant were spent when Ms Malone decided not to proceed with the purchase.
24. The Tribunal notes that clause 8.3 does not speak of the ‘effective cause of the sale’ but rather whether the applicant ‘effectively introduced’ Ms Malone to the respondent.
25. The respondent cited Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117 where the issue was the ‘effective cause of the sale’. The Court said at [39]:
What the respondent [the agent claiming commission] has to show is that his efforts continued to influence the purchaser in its eventual decision to buy. In effect, the agent has to prove that his initial efforts flowed through to [the buyer] thus causing the ultimate sale.
26. In the present case the test is whether the applicant ‘effectively introduced’ the ultimate buyer. It is not disputed that the applicant ‘introduced’ the buyer. The dispute appears to hang off the word ‘effectively’ and what it means in this context. The respondent’s argument appears to take ‘effectively’ to be synonymous with ‘the effective cause of the sale.’
27. The respondent argued that there can only be one effective cause of the sale at law and that was Mr Walmsley. This submission does not appear consistent with the obiter from the High Court in Moneywood Pty Limited v Salamon Nominees Pty Limited [2001] HCA 2 at [86] or in LJ Hooker Ltd v WJ Adams Estate Pty Ltd [1977] HCA 13. There can be more than one effective cause of a sale. There can be more than one commission payable.
The general approach to deciding if an agent was the effective cause of the sale
56.This question involves the courts determining “the causal relationship”[95] between the work done by the agent pursuant to his or her engagement by the vendor and the sale that was ultimately completed.[96] The appellant argued that the correct approach to determining whether an agent was an effective cause of sale was set out by the High Court in Moneywood:
85. That is how the matter was understood by Jacobs J in LJ Hooker, where his Honour said […]:
“‘Effective cause’ means more than simply ‘cause’. The inquiry is whether the actions of the agent really brought about the relation of buyer and seller and it is seldom conclusive that there were other events which could each be described as a cause of the ensuing sale.”
86. Questions respecting the sufficiency of a causal connection usually will arise, as was the case in LJ Hooker, where the question is whether the agent introduced to the principal the party who eventually purchased the land; or where the question is whether the intention of the purchaser to purchase the land was brought about by the actions of the agent; or in the situation considered hypothetically by Jacobs J in LJ Hooker where two agents separately introduce the same … purchaser. In all of these cases the essential issue is whether the … agent brought about a state of affairs giving rise to the contractual right to the commission.[97]
[95] LJ Hooker Ltd v WJ Adams Estates Pty Ltd [1977] HCA 13(1977); 138 CLR 52 at page 67 (Gibbs J) and page 83 (Jacobs J)
[96] LJ Hooker Ltd v WJ Adams Estates Pty Ltd [1977] HCA 13 (1977); 138 CLR 52 at page 58 (Barwick CJ) and page 86 (Jacobs J)
[97] Moneywood Pty Limited v Salamon Nominees Pty Limited (2001) 202 CLR 351; [2001] HCA 2 at [85]-[86] (Gummow J)
57.In Moneywood, the agent claimed its commission for an introduction to a purchaser where only part of the original parcel of land was ultimately sold to that purchaser. The High Court found that the agent had been an effective cause of sale.
58.The Original Tribunal in the present case relied upon the reasoning of the New South Wales Court of Appeal in Emmons. To repeat this reasoning:
What the [the agent claiming commission] has to show is that his efforts continued to influence the purchaser in its eventual decision to buy. In effect, the agent has to prove that his initial efforts flowed through to [the buyer] thus causing the ultimate sale.[98]
[98] Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117 at [39]
59.This formulation by the Original Tribunal has not only received judicial approval, it is entirely consistent with the High Court’s reasoning about causation in several cases where agents have claimed a commission in based on similar facts. For example, Barwick CJ commented in LJ Hooker Ltd v WJ Adams Estates Pty Ltd[99] (LJ Hooker):
It is true that an agent to procure a purchaser of property in stated terms may earn the commission payable to him in various ways. But the commission is not fully earned unless there is a sale which has resulted wholly or partially from the efforts of the agent. The most common way of performing the agent’s task is to introduce to the principal a person who becomes the purchaser under a binding contract of sale. In terms of causation, the agent has thus been an effective cause of the sale.[100]
[99] (1977) 138 CLR 52; [1977] HCA 13
[100] LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; [1977] HCA 13 at [15] (Barwick CJ)
60.Further in Moneywood, Gleeson CJ stated:
That judgment was not based upon any misapprehension of legal principle. It turned upon an assessment of the causal relationship between the work done by the appellant pursuant to its engagement as the respondent’s agent and the sale… which was ultimately completed. Such an assessment is commonly required in disputes concerning an agent’s commission. The process of reasoning which led to the finding in the present case was orthodox, and amply justified by the evidence.[101]
[101] Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351; [2001] HCA 2 at [8] (Gleeson CJ)
61.The Original Tribunal in the present case applied a test of whether the sale purchase would have occurred ‘but for’ the involvement of Newham.[102] This is a slight divergence from the tests adopted by the New South Wales Court of Appeal in Emmons and by some formulations by the High Court e.g. by McHugh J in Moneywood,[103] which the appellant relied upon during the appeal,[104] but it is consistent with the broad tests of causation used in the cases referred to above.
[102] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [28]
[103] (2001) 202 CLR 351; [2001] HCA 2 at [30] (McHugh J)
[104] Transcript of proceedings (Appeal Tribunal) 20 November 2020 pages 22-23
62.The Appeal Tribunal finds no error in this approach.
‘Effective introduction’ versus ‘effective cause of sale’
63.The Original Tribunal found that Newham ‘effectively introduced’ the third-party purchaser and that Mr Newman was entitled to his commission. Although the Original Tribunal traversed the case law in superior courts which considered the ‘the effective cause of sale’ test, the Original Tribunal did not actually apply the ‘effective cause of sale’ test to the facts of the case, instead relying upon the ‘effectively introduced’ criterion in clause 8.3 of the Agency Agreement. As stated above, the appellant argued that this approach was erroneous because it was necessary to apply the general law i.e. the ‘effective cause of sale’ test rather than the contractual provision of ‘effective introduction’ in clause 8.3.
64.The Appeal Tribunal makes several points about this approach. First, the High Court has expressly rejected the ‘generalised approach’ in Moneywood, therefore the contractual terms are still relevant to the question of whether the agent can claim the commission. As stated by Gummow J in Moneywood:
… Salamon Nominees’ submission that, as a matter of law, it is incorrect to say that an agent earns its commission “by introducing a buyer” should be rejected. That submission moves away from the task of construing and applying the terms of the agency agreement in question by substituting some generalised proposition as a rule of the common law. The true question in the present case is whether the agent was an effective cause of the arrangement which was ultimately carried into execution and whether it was entitled to a commission in respect of that arrangement.[105]
[105] Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351; [2001] HCA 2 at [79] (Gummow J)
65.Therefore, the contractual terms are relevant to the question of whether the agent was an effective cause of sale if the agent’s introduction of the buyer maintained its momentum so as to be an effective cause of the arrangement which was ultimately carried into execution. This is established by the comments of Barwick CJ in LJ Hooker which are set out above and repeated here:
The most common way of performing the agent’s task is to introduce to the principal a person who becomes the purchaser under a binding contract of sale. In terms of causation, the agent has thus been an effective cause of the sale. [106]
[106] LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; [1977] HCA 13 at [14]-[15] (Barwick CJ)
66.In the case law, ‘effective cause of sale’ is a broader term which contemplates wider inputs that may be more complex than a direct relationship between the introduction of the buyer and the sale. As stated by Stephen J in LJ Hooker:
The concept of effective cause has often been called in aid to entitle an agent to commission in cases where, instead of the straightforward case of the introduced party becoming the purchaser, a more complex fact situation has arisen.[107]
[107] LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; [1977] HCA 13 at [17] (Stephen J)
67.The present appeal is a straightforward case – there is no need to have recourse to the more complex scenarios referred to by Stephen J above. In this case, the Senior Member found that Newham effectively introduced the Buyer which led directly to the sale. Although there was a period between 25 February 2016 and late 2016 when Malone was considering other options,[108] this timing did not break the link between Newham’s introduction and the execution of the SOBA. This falls within the contractual provision in clause 8.3 and the general law test because there was both an introduction and an effective cause of sale.
[108] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [7]
68.This conclusion is also supported by a reading of the High Court judgments in Moneywood,[109] and LJ Hooker,[110] where judges commented that there can be more than one effective cause of sale, and correspondingly more than one commission payable.
Factual questions about Walmsley’s contribution to the sale
[109] Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351; [2001] HCA 2 at [86] (Gummow J)
[110] LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; [1977] HCA 13 at [23] (Barwick CJ)
69.The next element of this ground of appeal concerns a question of fact and that is whether Walmsley was the sole effective cause of the sale. The word ‘sole’ is used because of the dicta referred to in the previous paragraph contemplates that there may be more than one effective cause of sale so Newham would only be disentitled to the commission if Walmsley somehow ousted Newham’s contribution to the sale. As stated above, the Original Tribunal concluded that Newham had effectively introduced the third party purchaser and he was therefore entitled to his commission.[111] The Original Tribunal also found that Walmsley had done no more than provide updated financial information,[112] but this conclusion was not intended to imply that Walmsley was not also entitled to his commission.[113] The appellant argued on appeal that the Original Tribunal did not give proper weight to the evidence which demonstrated that Walmsley was the only effective cause of the sale.[114]
[111] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [31]
[112] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [28]
[113] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [32]
[114] Amended Annexure A to the Application for Appeal filed 26 October 2020; Appellant’s Index of Documents for the Appeal Hearing filed 13 November 2020, Tab 6, page 4 at [1.6(2)]-[1.6(5)]
70.During the argument on appeal, Newham said that he gave the buyer “interest” which allowed her to move forward and gave a “huge amount of information” which gave her the confidence to proceed and therefore he was an effective cause of sale.[115] Malone, who was a representative of the Buyer, also gave evidence in the original proceedings that Newham was an effective cause of sale.[116] The appellant responded to this clear testimony provided by the representative of the Buyer by alleging that Malone was an unreliable witness. Clearly, the Original Tribunal considered that Malone was a reliable witness and it would be inappropriate for the Appeal Tribunal to second guess decisions about the credit of such a witness. This approach is consistent with that adopted in Excel, which emphasised that the Appeal Tribunal should (as quoted above) “give proper allowance to the advantage of the original tribunal who saw and heard the witnesses, so that, ordinarily, facts found based on the assessment of witnesses will not lightly be overturned”.[117]
[115] Transcript of proceedings (Appeal Tribunal) 20 November 2020 page 29
[116] Transcript of proceedings (Original Tribunal) 5 June 2019 pages 85-86
[117] Excel Intelligent Pty Ltd v Thomson [2018] ACAT 4 at [53]
71.The Appeal Tribunal therefore can find no error in the weight that the Original Tribunal gave to the evidence regarding Walmsley’s and Newham’s contributions to the sale.
72.The appellant has not established an error or fact or law on Ground 2.
Ground 3 - Claim against the second respondent as guarantor
73.To reiterate, on this ground the appellant argued that Malone was liable under clause 8.1 of the SOBA for any commission payable pursuant to the sale of the business, including the commission that is claimed by Newham. On the wording of that provision, the Buyer was liable to indemnify the Seller for Newham’s commission because Newham’s demand for the commission arose from completion of the agreement and Malone had guaranteed the liabilities of the Seller under the SOBA.
74.The appellant also submitted that the Original Tribunal had erred in interpreting clause 8.1 by reference to a “reasonable and commercial construction” of that provision.[118] During the hearing this submission was narrowed to a complaint about the reasonableness rather than the commercial construction.[119] The appellant also objected to the Senior Member’s comments at first instance that the appellant’s arguments on this ground were “coloured with unconscionability”.[120]
[118] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [36]
[119] Transcript of proceedings (Appeal Tribunal) 20 November 2020 pages 34, 42
[120] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [37]
75.The solicitor acting for the second respondent argued that a proper construction of clause 8.1 means that one has to consider the ambit of the business that is bought and sold and the definition of ‘business’ in the SOBA does not contemplate the Agency Agreement.[121] The second respondent urged a “sensible interpretation”[122] of clause 8.1 which was consistent with the buyer and seller of the business dividing up liabilities so that the seller was responsible for claims that might arise prior to completion and the buyer would be liable for claims arising after completion.[123] Further, to accept the argument made by the appellant would “defy commercial reality”[124] because Malone had no knowledge of any pre-existing arrangements between Granite Transformations, Finn and Newham.
[121] Second respondent’s submissions filed 17 November 2020 pages 2-3
[122] Transcript of proceedings (Appeal Tribunal) 20 November 2020 page 40
[123] Second respondent’s submissions filed 17 November 2020 page 2 at [15]
[124] Transcript of proceedings (Appeal Tribunal) 20 November 2020 page 41
76.At first instance, the Senior Member held that Granite Transformations’ liability for Newham’s commission under the Agency Agreement with Finn and Newham did not arise from completion of the SOBA and therefore the Buyer was not liable for the commission and neither was Malone as guarantor of the Buyer’s obligations under the SOBA.[125]
[125] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [35]
77.In the language of Mason J in Codelfa, when contemplating which of two possible meanings should be given to a contractual provision, we must consider the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting.[126] This approach is broadly consistent with the submissions made by the second respondent regarding the general principles of contract law set out in Codelfa.
[126] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 at [21]-[24] (Mason J)
78.An interpretation of clause 8.1 of the SOBA would consider the objective framework of facts within which the contract came into existence and the parties’ presumed intentions when executing the SOBA under the Codelfa principles. When considering the objective framework of facts, the Appeal Tribunal is persuaded by the arguments made by the second respondent about the ambit of the business that was bought and sold and the ‘sensible interpretation’ of clause 8.1 which was consistent with the buyer and seller of the business dividing up liabilities so that the seller was responsible for claims that might arise prior to completion and the buyer would be liable for claims arising after completion.
79.As regards the parties’ presumed intentions, an important fact is that Malone had no knowledge of any pre-existing arrangements between Granite Transformations, Finn and Newham.[127] She would not contemplate that clause 8.1 would include an obligation that arose on the part of the Seller that preceded any contact between the Seller and the Buyer or under the negotiations which led to the SOBA and of which the Buyer had no knowledge. Certainly, if the Buyer had contemplated the question of who would be responsible for the agent’s commission she would have said that it was the Seller’s responsibility because the arrangements between the Seller and the agent preceded the acts of Newham in introducing her and the Buyer to the business, even if the claim by Newham post-dated the SOBA. One might have anticipated a discussion about the inclusion of the Seller’s agent’s commission in the price if the parties contemplated the Buyer’s responsibility for this commission[128] but no evidence was led about this aspect or the general practice followed in agreements of this type during the first instance hearing.
[127] Witness statement Sophia Malone dated 25 June 2018, Original proceedings MFI 17
[128] See the discussion by Mr Christensen, Transcript of proceedings (Appeal Tribunal)80.The Appeal Tribunal is not persuaded by the appellant’s submissions that a proper construction of clause 8.1 of the SOBA contemplates that the Buyer would be liable for the claim made by Newham. The Appeal Tribunal is persuaded by the second respondent’s submissions that the reference to ‘arising from completion’ sets out the time when the indemnity arises and therefore the claim by Newham did not arise from completion.
81.The Tribunal agrees the appellant’s arguments that it is not necessary to have recourse to the contra proferentum rule because there is not necessarily an ambiguity in clause 8.1. Further, the Tribunal does not need to express a view on the privity argument because, as discussed below, it has concluded that the appellant has not demonstrated an error of fact or law on this ground.
Did the Original Tribunal err on this ground?
82.The appellant argued that the Original Tribunal erred by using a reasonableness test when construing clause 8.1 and by referring to the appellant’s arguments at first instance as “unconscionable”. Regarding the reasonableness test, the Original Tribunal stated that it applied a “reasonable and commercial construction”[129] of Clause 8.1. It is not an error per se for the Senior Member to refer to the reasonableness criterion. For example, the High Court referred to reasonableness in construing the terms of the contract in Codelfa.[130] However, a close reading of the Original Tribunal’s reasoning indicates that the Senior Member applied an orthodox construction of clause 8.1, making use of cases such as Codelfa and Hadley v Baxendale[131] to determine the objective intention of the parties. Although the Senior Member phrased the inquiry as whether Malone had “impliedly agreed” to such a liability on the Codelfa principles, there was no statement about the implication of terms therefore the language of the Original Tribunal is consistent with the approach to construction adopted by the Appeal Tribunal that is set out above.
[129] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [36]
[130] (1982) 149 CLR 337; [1982] HCA 24
[131] Hadley v Baxendale [1854] EWHC J70; Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [36]
83.Similarly, although the Senior Member referred to the “unconscionability” of the appellant’s arguments regarding the indemnity clause, this reasoning was “in addition to” the Senior Member’s conventional reasoning on the construction of the clause. Although the comments regarding unconscionability were perhaps unnecessary, they did not contribute to the conclusion reached by the Original Tribunal.
84.In this respect, the Appeal Tribunal agrees with a general reasoning adopted by the Original Tribunal in [35] and [36] of the first instance decision[132] and considers that the reasoning in [37],[133] while perhaps unnecessary, did not operate to affect the conclusion reached by the Senior Member.
[132] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [35]-[36]
[133] Newham Business Brokers Pty Ltd v ACN 120 452 744 Pty Ltd& Anor [2020] ACAT 18 at [37]
85.The appellant has not demonstrated an error of fact or law on Ground 3.
Conclusion
86.The appellant has not shown an error of fact or law in the decision under review. The appeal is therefore dismissed.
………………………………..
Acting Presidential Member Prof. P Spender
Date(s) of hearing 20 November 2020 Solicitors for the Applicant: Mr D Carden, Eastwoods Legal
Mr C Marques, Eastwoods Legal
Solicitors for the Respondent: Mr P Christensen, Peter Christensen Solicitors
20 November 2020 page 41
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