Advisory Services Pty Ltd (trading as Ray White St Albans) v Augustin & Anor

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2017 0111

ADVISORY SERVICES PTY LTD
(TRADING AS RAY WHITE ST ALBANS) (ABN 63 053 790 971)

Applicant

STELLA AUGUSTIN (by her litigation guardian Michael Baczyk)

and

CAROLINE AUGUSTIN

First Respondent

Second Respondent

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JUDGES:	SANTAMARIA, McLEISH and NIALL JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	2 March 2018
DATE OF JUDGMENT:	19 April 2018
MEDIUM NEUTRAL CITATION:	[2018] VSCA 95
JUDGMENT APPEALED FROM:	[2017] VCC 1195 (Judge Marks)

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SALE OF LAND – Estate agents – Regulated estate agent authority – Estate Agents Act 1980, s 49A disclosure requirements – Where agent barred from commission and liable to penalty if authority noncompliant – Authority required by s 49A(4)(c) to state that agent not entitled to retain any rebate or to charge for expenses above their cost – Whether statement required if authority states agent will not be entitled to receive any rebate and provides for no expenses to be charged by agent – Purpose of provision to protect consumers before entering agreement – Estate Agents Act 1980, ss 4, 48A, 48B, 49A, 50.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr R Hay QC with Mr M I Ravech	Alderuccio Solicitors
For the Respondents	Mr I W Upjohn QC with Mr W Rimmer	Webb Korfiatis Family Law

SANTAMARIA JA

McLEISH JA
NIALL JA:

Introduction and background

The applicant Advisory Services Pty Ltd operates as a Ray White real estate agency in St Albans. The first respondent owned the property known as 382 Greens Road, Keysborough and had appointed the second respondent as her attorney and agent. In that capacity, the second respondent signed an exclusive sale authority on behalf of the first respondent appointing the applicant as the real estate agent for the sale of the property. The applicant sold the property but the purchaser defaulted under the contract. The property was sold again, not by the applicant but, it asserted, during the period of the exclusive sale authority. A dispute arose and the applicant sued the respondents in the County Court for commission in respect of both sales, in the total amount of $385,000.[1]
[1]The claim against the second respondent was brought on the basis of an alleged term of the authority or alternatively for alleged breach of warranty of authority.

The respondents’ defence at trial was, among other things, that the applicant was not entitled to sue them for commission by reason of s 50 of the Estate Agents Act 1980 (‘the Act’), which was said to be engaged because the sale authority under which the applicant was appointed did not comply with s 49A(1) of the Act. Specifically, the authority was said not to contain a ‘rebate statement’ as required under s 49A(4)(c), stating that the agent was not entitled to retain any rebate and must not charge the client an amount for any expenses that was more than their cost.

The trial judge determined, as a preliminary matter, the question whether the applicant was entitled to be paid commission notwithstanding that the authority did not contain the precise wording of s 49A(4)(c). The judge found that the applicant had not complied with s 49A(1) and that the authority was therefore unenforceable pursuant to s 50 of the Act. That finding disposed of the proceeding. Accordingly, judgment was given in favour of the respondents.

The applicant seeks leave to appeal. For the reasons that follow, leave should be granted but the appeal should be dismissed.

Relevant terms of the Act and the exclusive sale authority

Section 50 of the Act relevantly states:

50 Commission

(1) An estate agent is not entitled to sue for or recover or retain any commission or money in respect of any outgoings for or in respect of any transaction unless—

…

(b) the agent has complied with section 49A(1) with respect to the engagement or appointment to undertake the transaction and is not in breach of section 49A(2) with respect to the engagement or appointment; and

…

Section 49A of the Act relevantly states:

49A Offence not to give certain information about commission

(1) An estate agent must not obtain, or seek to obtain, any payment from a person in respect of work done by, or on behalf of, the agent or in respect of any outgoings incurred by the agent unless—

(a) the agent holds a written engagement or appointment that is signed by the person (or the person’s representative); and

(b) before obtaining the person’s signature to the engagement or appointment, the agent … informed the person (or the person’s agent or representative) that the commission to be paid to the agent under the engagement or appointment and any money to be paid by the person in respect of outgoings were subject to negotiation; and

(c) the engagement or appointment contains—

(i) details of the commission and outgoing that have been agreed; and

…

(iii) a rebate statement that complies with subsection (4); and

…

Penalty: 100 penalty units.

…

(4) A rebate statement complies with this subsection if it is in a form approved by the Director and it contains—

(a) a statement of whether or not the agent will be, or is likely to be, entitled to any rebate in respect of—

(i) any outgoings; or

(ii) any prepayments made by the person engaging or appointing the agent (the client) in respect of any intended expenditure by the agent on the client's behalf; or

(iii) any payments made by the client to another person in respect of the work; and

(b) if such an entitlement will, or is likely to, occur, details of—

(i) the goods or services to which the rebate relates; and

(ii) the name of the person providing the rebate; and

(iii) the amount of the rebate that will be attributable to the engagement or appointment, or if that amount is not known at the time the statement is made, an estimate (in dollars) of the amount; and

(c) a statement that the agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses; and

(d) any other statements or details required by the regulations.

…

Further provisions of the Act are set out later in these reasons.

The authority appointing the applicant did not contain a statement in the exact words set out in s 49A(4)(c). The relevant language in the authority was based on one of two forms approved by the Director of Consumer Affairs Victoria and available for download by real estate agents. One of those forms contained the words in s 49A(4)(c) and the other did not.[2] In accordance with the latter form, the authority used in the present case stated, as item 6:
[2]The instructions for use of the latter form were amended after the decision of the trial judge in the present matter.

Item 6: Rebate Statement – No Rebate will be received

*The Agent will not be, or is not likely to be, entitled to any rebate. A rebate includes any discount, commission, or other benefit, and includes non-monetary benefits.

(*If entitled to a rebate, complete and attach the rebate statement approved by the Director of Consumer Affairs Victoria, at the time of signing this Authority. The statement can be downloaded at type="1">
Item 8 of the authority provided, under the heading ‘Agent’s role’, that the ‘Agent will advertise, market, and endeavour to sell’ the property.
In the Particulars of Appointment that formed the front page of the authority, there appeared a section headed ‘Marketing Expenses’. Under that heading were the words ‘Advertising’, ‘Other Expenses’ and ‘TOTAL’, with a dollar symbol and space after each expression. Each of these spaces was filled in with a handwritten dash, which the parties agreed meant that the dollar amount in each instance was zero.
The reasons of the trial judge
The applicant submitted at trial that it had strictly complied with the Act and, in the alternative, that it had substantially complied with it and that substantial compliance was all the Act requires. It contended that s 49A(4) should be read in context so that the rebate prohibition statement in s 49A(4)(c) is not required to be included where the agent will not receive any rebate. Similarly, it contended that where, as in the present case, there are no expenses which the agent is to pass on to its client, s 49A(4)(c) is superfluous and the statement as to expenses it identifies is not required.
The trial judge considered the consumer protection purposes of ss 49A and 50 of the Act and authorities to the effect that they were to operate strictly so as to preclude claims of the type the applicant made against the respondents in the case of non-compliance.[3] The judge found that the Act was to be construed strictly in favour of consumers so as to advance its consumer protection objectives. The Act required that consumers be advised of their rights, including that agents are not entitled to retain any rebate, before entering into the contract.[4] The trial judge found that, whether or not an agent is entitled to a rebate, s 49A(4)(c) applies.[5]
[3]Advisory Services Pty Ltd v Augustin [2017] VCC 1195 [24]–[35] (‘Reasons’), citing Icon Property Pty Ltd v Wood [2008] VSCA 123 [73], Maxwell v Moorabool Developments Pty Ltd [2004] VSC 392 [210] (‘Maxwell’), and Oliver Hume (Australia) Pty Ltd v Land Source Australia Pty Ltd [2015] VSC 77 [38]–[39], [48] (‘Oliver Hume’).
[4]Reasons [57]–[61].
[5]Ibid [43]–[45].
The trial judge found that substantial compliance with the Act — by reasonably conveying the intended message of s 49A(4)(c) — would have sufficed. However, she found that the applicant had not substantially complied with the Act, because the authority did not convey the information that:[6]
the estate agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses. The information required to be conveyed by s 49A(4)(c) is the agent is prohibited from retaining any rebate or charging the client more than the amount charged to the agent for any expenses, and that it must not do so. This is different from a statement (whether express or implied) that it is not in fact retaining any rebate in circumstances where no outgoings have been paid by the agent to which a rebate relates.
[6]Ibid [54], emphasis in the original.
The judge rejected a further argument advanced by the applicant, that a rebate statement would comply with s 49A(4) if it was in a form approved by the Director or if it contained the words in sub-section (4)(c). She held that the word ‘and’ indicated unambiguously that both requirements needed to be satisfied.[7]
[7]Ibid [48]–[49], [62]–[67].
The judge also found that the clear language of the section meant that the principle of legality (said to apply to prevent abrogation of the applicant’s right to payment for work done) had no role to play in its interpretation.[8]
[8]Ibid [68]–[71].
The trial judge also found that, in any event, the authority did not make it clear that no rebate could arise. Section 49A(4)(a) dealt with different ways in which an agent might receive a rebate. Only sub-para (i), which referred to outgoings being paid by the agent, was covered by the Particulars of Appointment (indicating that no marketing or other expenses would be charged to the vendor). Subparagraphs (ii) and (iii) referred to alternative ways an agent might receive a rebate, and these were not dealt with in the authority.[9]
[9]Ibid [43].
The judge therefore concluded that the authority did not contain the rebate statement required by s 49A(4) and so the applicant had failed to comply with s 49A(1). As such, s 50 barred it from suing for, recovering or retaining commission.[10]
[10]Ibid [72]–[73].
Proposed grounds of appeal
The applicant’s proposed grounds of appeal are as follows:
Ground 1
(a)The trial judge erred in law in the construction of subsection 49A(4) in holding that the effect of that subsection is that the Applicant is not entitled to sue for or recover or retain the Commission because the Authority does not comply with subsection 49A(1) since it does not contain a statement, under subsection 49A(4)(c), that the Applicant is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses.
(b)The trial judge should have held that the Applicant is entitled to sue for, recover and retain the Commission as the Authority does comply with subsections 49A(1) and 49A(4) because:
(i)it contains a rebate statement in a form approved by the Director which contains a statement, under section 49A(4)(a), that the Applicant will not be entitled to any rebate; and
(ii)the requirement under subsection 49A(4)(c) that a rebate statement contain the additional statement that the agent is not entitled to retain any rebate is enlivened only where the rebate statement contains a statement under subsection 49A(4)(a) that the Applicant will be, or is likely to be entitled to any rebate; and
(iii)the Authority contains a statement that the Applicant will not be entitled to any rebate and therefore the Authority was not required by subsection 49A(4)(c) to also include the statement that agent is not entitled to retain any rebate; and
(iv)the requirement under subsection 49A(4)(c) that a rebate statement contain a statement that the agent must not charge the client an amount for any expenses that is more than the cost of the expenses is enlivened only where the rebate statement contains details of an agreement that outgoings will be incurred (subsection 49A(4)(c)(i)); and
(v)the Authority contains details of an agreement that no outgoings will be incurred and makes it clear that the agent is not charging the client any expenses.
Ground 2
(a)The trial judge erred in finding that it is not apparent from reading the Authority as a whole that no rebate could arise concerning:
(i)any prepayments made by the person engaging or appointing the agent (the client) in respect of any intended expenditure by the Applicant on the client’s behalf (see subsection 49A(4)(a)(ii)); or
(ii)any payments made by the client to another person in respect of work done by, or on behalf of, the Applicant (see subsection 49A(4)(a)(iii)).
(b)The trial judge should have found that it is apparent from reading the Authority as a whole and, in particular, the Particulars of Appointment, Item 6 and the definition of ‘Marketing Expenses’ contained in General Condition 1.8 of the Authority, that no rebate could arise in respect of any of the matters referred to in subparagraph 2(a) above.
It can be seen that the grounds relate, first, to the question of construction of s 49A(4) (ground 1), and secondly to the question whether, if the applicant’s construction is correct, it complied with the provision as so construed on the facts of this case (ground 2). The applicant needs to succeed on both grounds in order to have the judgment against it set aside.
Consistently with these proposed grounds, it was not in dispute before us that:
(a) compliance with s 49A(4) requires a rebate statement both to be in a form approved by the Director and to contain the specified statements; and
(b) the consequence of non-compliance with s 49A(1)(c)(iii) (failure to include a rebate statement complying with s 49A(4)) is that the agent may not sue for, recover or retain any commission (and not just any money in respect of outgoings).
We therefore assume, without deciding, that those conclusions of law are correct.
Ground 1 — construction of s 49A(4)
The applicant’s submissions drew a distinction between the two statements in s 49A(4)(c): the statement that the agent is not entitled to retain any rebate (the first statement) and the statement that the agent must not charge the client an amount for any expenses that is more than their cost (the second statement).
The applicant submitted that s 49A(4)(c) must be read in the light of the paragraphs preceding it. In particular, it submitted that an engagement or appointment is not required to contain the first statement where that engagement or appointment contains, pursuant to s 49A(4)(a), a statement that the agent will not be entitled to any rebate. Further, it said, an engagement or appointment is not required to contain the second statement where the engagement or appointment contains, pursuant to s 49A(1)(c)(i), an agreement between the agent and the client that no outgoings will be incurred.
As to the first statement, the applicant submitted that the words ‘any rebate’ in para (c) of s 49A(4) have the same meaning as they do in para (a) and therefore refer to the particular rebate, if any, referred to in the statement required by para (a). Where the statement required by para (a) says that the agent will not be entitled to any rebate, there is no rebate for the purposes of para (c) and the first statement is not required.
As to the second statement, the applicant contended that where there is an agreement pursuant to s 49A(1)(c)(i) that no outgoings will be incurred, the requirement to include the second statement is not enlivened. It submitted that for the purposes of s 49A(1)(c)(i) ‘outgoings’ encompasses expenses, since ‘outgoings’ is defined in s 4(1) to mean ‘any moneys spent by an estate agent on his principal’s behalf for which the estate agent is at common law entitled to be reimbursed.’
The applicant contended that the authority stated, under Item 6, that the agent would not be entitled to any rebate, as required by the first statement in s 49A(4)(c). It submitted that the statement in the Particulars of Appointment that there would be no ‘Marketing Expenses’ embraced all outgoings within the meaning of the second statement in s 49A(1)(c).[11] It was said that the applicant was not entitled to obtain any payment from the first respondent in respect of any ‘outgoings’ and ‘expenses’ incurred by the applicant, so that there would be no relevant expenses for the purposes of s 49A(4)(c). As such, there was no need to provide either of the statements in s 49A(4)(c).
[11]‘Marketing Expenses’ was defined in the authority as ‘the advertising and other expenses of the Agent specified in the Particulars of Appointment’.
The applicant submitted that the interpretation for which it contended would not conflict with the purpose of the Act, which it accepted was to protect consumers. It submitted that its interpretation would retain the benefit to consumers in requiring the first and second statements where the agent will be (or is likely to be entitled) to a rebate and where the agent will be charging the client for expenses, respectively. The applicant submitted that requiring these statements to be included in every case provided no additional protection to consumers, was potentially confusing, and served no discernible purpose of the Act.
The applicant submitted that the judge should have adopted the interpretation for which it contended because the Act imposes a civil penalty for breach of s 49A.[12] Therefore, the provision should be interpreted in favour of the applicant,[13] particularly as this could be done without undermining the beneficial purpose of the provisions. To similar effect, the applicant repeated its argument that the principle of legality supported its construction, by virtue of an agent’s common law entitlement to be paid for the work in question.
[12]The parties both used the expression ‘civil penalty’ to describe s 49A, notwithstanding that the heading to the section describes contravention as an ‘offence’. Section 95 of the Act provides that only the Director or a person authorised by the Director can bring proceedings for an offence against the Act. Nothing turns for present purposes on the designation of the penalty as ‘civil’ or otherwise.
[13]R v Adams (1935) 53 CLR 563, 567–8; Beckwith v The Queen (1976) 135 CLR 569, 576 (Gibbs J).

The respondents submitted that s 49A(4) uses the conjunctive ‘and’ between each paragraph, indicating that the requirement to include the statements in s 49A(4)(c) is independent of and distinct from the other requirements in that subsection. The respondents accepted that s 49A(4)(c) must be read in the context of the sub-section as a whole, but submitted that doing so meant that a rebate statement must meet all of the requirements in s 49A(4) cumulatively: it must be in a form approved by the Director, and include each of the statements required by paras (a), (c) and (d). Only the statement in para (b) was conditional, starting with the words ‘if such an entitlement [by the agent to a rebate] will, or is likely to, occur’. In contrast, para (c) operated unconditionally. They submitted that the applicant’s construction did violence to the structure of the provision and was contrary to its plain and unambiguous meaning. Further, the applicant’s construction impermissibly read into para (c) the very condition that appeared at the start of para (b) but was conspicuously absent from para (c).

Accordingly, the respondents submitted, if the content required by s 49A(4)(c) is not included in the engagement or appointment then that engagement or appointment does not contain a rebate statement as required by s 49A(4) and therefore fails to comply with s 49A(1), whether or not the agent is entitled to a rebate or has agreed not to charge for outgoings.

The respondents submitted that the construction for which the applicant contended, by which the first statement in s 49A(4)(c) is not required if the engagement or appointment states that the agent will not be entitled to any rebate, is unsustainable. They submitted that such a construction would impermissibly give a different meaning to the words ‘any rebate’ as they appear in para (a) compared to para (c),[14] the former meaning any benefits falling within the definition of ‘rebate’ and the latter meaning those rebates specifically identified in a statement made pursuant to para (a). The respondents contended that such a construction would require the reading in of words to para (c) so that it effectively reads ‘any rebate referred to in a statement made under paragraph (a)’, which approach they submitted is impermissible where the words of a statute are unambiguous.[15]
[14]Craig,Williamson Pty Ltd v Barrowcliff [1915] VLR 450, 452; Registrar of Titles (WA) v Franzon (1975) 132 CLR 611, 618 (Mason J; Barwick CJ and Jacobs J agreeing).
[15]Reasons [49], citing Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1, 21 [72], 22 [75].

The respondents submitted that the construction for which the applicant contended, by which the second statement in s 49A(4)(c) is not required if the engagement or appointment contains an agreement that no outgoings will be incurred, is similarly unsustainable. They submitted that this construction again requires reading words in to para (c) where no ambiguity justifies doing so and the structure of the provision indicates that para (c) operates unconditionally. They also submitted that nothing in the wording of s 49A(4)(c) or its context indicates that the phrase ‘any expenses’ is qualified or restricted to ‘outgoings’.

The respondents submitted that the judge was correct to find that a rebate statement will be compliant only where it conveys the information that the agent is prohibited from retaining any rebate or charging the client more than the agent was charged for any expenses and that it must not do so. They submitted that s 49A(4)(c) required that clients be advised of prohibitions on agents’ conduct found elsewhere in the Act. This construction was said to enhance the consumer protection objectives of the Act by conveying consumers’ rights to them before a contract had been entered into, and ensuring that consumers were aware of their rights at the time of negotiating the contract — or if, as happened here, an agent subsequently sought payment for expenses when the original engagement or appointment had not contemplated such payment.[16] By way of further example, a vendor could not be left with the impression that an agent charging a relatively high commission was being generous in offering not to charge any mark-up on expenses.
[16]See Reasons [60].

Finally, the respondents submitted that the clear and unambiguous wording of the provision meant that neither the provision for a penalty in s 49A nor the principle of legality was of any assistance to it. They pointed to the clear intention expressed in s 50(1) of the Act to bar the agent’s entitlement to claim commission, whether founded on contract or otherwise, where the agent does not comply with any of the requirements in s 49A(1).[17]
[17]See Reasons [31], quoting Maxwell [2004] VSC 392 [210]; Reasons [32], quoting Oliver Hume [2015] VSC 77 [38]–[39], [48].

Ground 2 — application of s 49A(4) to the facts

The applicant’s second proposed ground went to the judge’s finding that, in any event, the applicant had not complied with s 49A(4) even on its preferred construction. First, the judge found that the authority made it clear that no rebate could arise as a result of an outgoing paid by the agent and then passed on to the vendors as contemplated by s 49A(4)(a)(i). However, the judge found that the authority did not cover alternate ways an agent might receive a rebate, namely through prepayments made by the vendor for intended expenditure by the agent or payments made by the vendor to other persons in respect of the agent’s work, as contemplated by ss 49A(4)(a)(ii) and (iii) respectively.[18]
[18]Reasons [43].

The applicant submitted that it was apparent from the authority, read as a whole, that no rebate could arise in the manner contemplated by ss 49A(4)(a)(ii) and (iii). That was because the Particulars of Appointment stated that there would be no ‘Marketing Expenses’ and because Item 6 contained a statement that no rebate would be received, confirming that a rebate included any discount, commission, or other benefit and included non-monetary benefits. Moreover, Item 8 required the agent to advertise and market the property, by implication at its own expense. As such, the applicant submitted, there was no scope for any rebate.

The respondents disputed that the authority contained a statement that the applicant was not entitled to retain any rebate. They agreed that the Particulars of Appointment on the first page of the authority made it clear that there were no marketing expenses so that the applicant would not obtain any rebate in respect of outgoings it had paid being reimbursed by the vendor. However, they submitted that the authority said nothing as to whether any pre-payments of expenses by the vendor or payments directly to third parties at the request of the agent would be paid, which could give rise to rebates of the kind referred to in s 49A(1)(a)(ii) and (iii). Since such rebates could arise, even on the applicant’s construction a statement that the agent ‘must not charge’ for expenses beyond the costs of those expenses was required. The fact that the applicant could receive rebates of some kind therefore meant that s 49A(4)(c) was not satisfied on either construction.

Analysis

It is convenient to commence examining the question of construction by referring to some further provisions of the Act. The purposes and objects of the Act are not specifically stated but may be ascertained from the Act’s substantive provisions. In short, pt III of the Act provides for a system of licensing of estate agents and prohibits a person from acting as an estate agent without a licence. Section 29B imposes duties on a licensed estate agent who carries on an estate agency business, including to take reasonable steps to ensure that employees of the business comply with the Act. Section 25 makes provision for inquiries into estate agents, including as to whether an estate agent is a fit and proper person to hold a licence, as a result of which the Victorian Civil and Administrative Tribunal may take action including to impose conditions on a licence or to suspend or cancel a licence. Part VI provides for the monitoring of estate agency businesses and their trust accounts.

Part IV of the Act, in which the provisions relevant to the present matter are found, is entitled ‘Agents and agents’ representatives’. It contains a range of provisions governing the conduct of estate agents (and their representatives). Among other things, it regulates advertising (s 42), an estate agent’s estimate of the selling price (ss 47A–47AF), the making of false representations to sellers or prospective sellers (s 47B) or to prospective purchasers (s 47C), advice to clients as to commission sharing arrangements (s 48), the treatment of rebates (ss 48A–48E) and the provision of information about commission and rebates (s 49A).

A strong and consistent theme of consumer protection runs through pt IV. Its provisions are directed to the conduct of estate agents in their dealings with both clients and third parties such as prospective purchasers. The provisions are concerned with standards of conduct and transparency as to that conduct. As has been seen, s 50 provides for significant sanctions for breach of some of the provisions and s 49A(1) itself provides for a penalty. It is evident that these provisions are directed to the general protection of persons, including clients, dealing with estate agents.

Section 49A(4) can also be seen to have a more specific purpose. Its concerns as to disclosure regarding rebates and expenses reflect earlier substantive provisions. More particularly, ss 48A and 48B make provision as to rebates and expenses, relevantly as follows:

48A Agent must not retain any rebate
(1)An estate agent who is engaged or appointed to do any estate agency work for a person (the client) is not entitled to retain any amount the agent receives from another person as a rebate in respect of—
(a)any outgoings; or
(b)any prepayments made by the client in respect of any intended expenditure by the agent on the client's behalf; or
(c)any payments made by the client to another person in respect of the work.

(2)On receiving any amount of rebate referred to in subsection (1), the agent must immediately pay the amount to the client.
Penalty:60 penalty units.
(3)Despite subsection (2), the agent does not have to pay to the client an amount of rebate if the agent, in anticipation of receiving the rebate, has already given that amount to the client either directly or by reducing the amount charged for the outgoing or prepayment to which the rebate relates.
48BRebates must be factored into costs of expenses
(1)An estate agent must not seek to obtain from the client an amount for any outgoings or proposed outgoings (the expenses) that is more than the amount paid, or payable, by the agent for those expenses.
Penalty:60 penalty units.
(2)In determining the amount paid, or payable, by the agent, any amount of rebate received or receivable by the agent in respect of the expenses must be taken into account by the agent.
…
(5)For the purposes of this section, an amount of rebate is receivable by an agent only if the agent has an accrued right to receive the amount at the time the agent seeks payment in respect of the expenses in respect of which the rebate is to be received—the amount is not receivable if at that time the receipt of the rebate is contingent on the happening of an event that has not occurred.

The expression ‘rebate’ is defined in s 4(1) to include ‘any discount, commission or other benefit’. The word ‘expenses’ is defined in s 48B(1) itself, as ‘outgoings or proposed outgoings’. Section 4(1) defines ‘outgoings’ to mean ‘any moneys spent by an estate agent on his principal’s behalf for which the estate agent is at common law entitled to be reimbursed’.

Sections 48A and 48B are explicit prohibitions on certain conduct by estate agents. Section 48A prohibits the retention of rebates in respect of outgoings, prepayments and payments by the client to third parties, the three kinds later described in s 49A(4)(a). Section 48B prohibits an agent from charging for outgoings an amount greater than the agent paid for those outgoings. It can be seen that the statement in s 49A(4)(c) amounts to a paraphrase of these statutory prohibitions.

Viewed in that light, the requirement that the statement be contained in the engagement or appointment can be seen as ensuring that the client is advised as to the existence of the prohibitions. The question is whether the legislation requires notice to the client in circumstances where the prohibitions cannot, by virtue of the particular arrangements between the estate agent and the client, be breached in any event.

It is significant that the notice is required to be in the engagement or appointment which is itself required to be signed by the client under s 49A(1)(a). This indicates an intention that the client have an opportunity to read the statement before, rather than after, signing the engagement or appointment. Section 49A(1)(b) calls for the agent to have informed the client before signature that the commission and payment in respect of outgoings are subject to negotiation. It is apparent that Parliament intended that the client be aware of the existence of the prohibitions in the context of being able to negotiate the terms of commission and payments in respect of outgoings.

In those circumstances, it would be surprising if the obligation to provide the client with notice as to the substantive obligations resting upon the estate agent were not to apply unless it transpired that the arrangement ultimately made between the parties provided for the possibility of rebates being received or expenses being charged, thereby raising the potential for those substantive obligations to be breached. If that were the position, it would not be possible to decide whether the agent was obliged to provide the client with the information in s 49A(4)(c) until the terms of the arrangement were agreed. Yet the period of negotiation of the arrangement, up until its signature, is the very time when the client might be thought to benefit from the information in question.

This is borne out by some of the examples which the respondents advanced in argument. For instance, a client negotiating with an agent about commission might be under the mistaken impression that the agent was offering an advantageous deal, despite the commission being higher than that offered by a rival, on the basis that the agent had offered not to charge any amount for expenses. On the applicant’s argument, no statement under s 49A(4)(c) would be required, but in ascertaining the value of the agent’s offer not to charge for expenses, the client would not have been told that, had the agent charged for expenses, the agent’s greater purchasing power was likely to mean that it could secure a more generous deal from a third party than the client could obtain, which benefit would then have to be passed on in full to the client. This might lead the client to overvalue the agent’s forbearance from charging for expenses. To take a different example, a client would be equipped by notice of the obligations of an estate agent in respect of rebates and expenses to respond to any proposed variation regarding those matters that might arise in the course of the performance of the contract.

In this way, the purpose of s 49A(4) is not served by the applicant’s suggested construction. The objection that the provision of information irrelevant to the arrangement between the parties might be confusing disappears once it is seen that the information is to be provided before that arrangement is finalised.

Moreover, the text and structure of the sub-section is contrary to the applicant’s construction. Section 49A(4)(c) is expressed as a statement about the agent’s entitlement and obligation in respect of rebates and expenses, in general terms. Those terms mirror the substantive provisions already referred to. It is not, in terms, confined to rebates and expenses for which the particular engagement or appointment provides. The use of the word ‘any’ to describe both the rebates and the expenses tells against the applicant’s submission that ‘any rebates’ in para (c) refers only to such rebates as have been specified as ones to which the agent is entitled, under para (a). As the respondents pointed out, the structure also tells in their favour. It would have been a simple matter to add conditional language to para (c), comparable to that in para (b), had it been intended that the obligation to provide the two statements only apply where an entitlement to a rebate was, or was likely to, occur or where the agent was entitled to charge for expenses, respectively.

For the above reasons, in our opinion the correct construction of s 49A(4)(c) is that the statements it describes must be contained in the rebate statement required by s 49A(1) irrespective of whether the agent will be, or is likely to be, entitled to any rebate or to charge any amount by way of expenses. That construction emerges from the text, context and purpose of the provision and is sufficiently clear so as not to be affected by the fact that s 49A(1) provides for a penalty, or by the principle of legality.

This conclusion is fatal to the proposed appeal. The authority simply did not say that the agent was not entitled to retain any rebate. Despite the heading ‘No rebate will be received’, the text went on to say, as s 49A(4)(a) contemplates, only that no rebate would be, or was likely to be, received. This fell well short of saying that a rebate could not be retained. There was no statement at all in respect of the agent’s obligation with respect to expenses. The rebate statement therefore did not contain the information required by s 49A(4)(c). As a result, s 49A(4) was not satisfied and s 50 was attracted. It follows that the appeal must fail.

It is therefore not strictly necessary to deal with proposed ground 2. It suffices to say that, even if it were the case that s 49A(4)(c) did not require an engagement or appointment to contain a statement that the agent is not entitled to retain any rebate in cases where the engagement or appointment provided that there could be no possibility of such a rebate, that was not this case.

It is true that the authority provided that there were to be no outgoings, in the statutory sense of moneys spent by an estate agent on the principal’s behalf for which the estate agent is at common law entitled to be reimbursed. It is also true that the authority provided for the applicant to advertise and market the property and not to charge for such expenses. But the authority did not exclude the possibility that prepayment had been made by the client in respect of such expenditure or the possibility that the client could pay for additional services of that nature if the agent did not wish to do so. The possibility therefore existed of a rebate as contemplated under s 49A(4)(a)(ii) or (iii) respectively.

As such, it could not be said to be apparent from the authority that there could be no rebate, and the premise upon which the applicant’s construction would deny the need for the statement in para (c) is not established.

Conclusion

While leave to appeal should be granted, the appeal must be dismissed.

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[2018] VSCA 95

19 April 2018