APD Technology Pty Ltd v Maximo Developments Pty Ltd

Case [2022] FCAFC 141

FEDERAL COURT OF AUSTRALIA

APD Technology Pty Ltd v Maximo Developments Pty Ltd [2022] FCAFC 141

Appeal from:

APD Technology Pty Ltd v Maximo Developments Pty Ltd [2021] FCA 678

APD Technology Pty Ltd v Maximo Developments Pty Ltd (No 2) [2021] FCA 858
File numbers: NSD 727 of 2021
NSD 746 of 2021
Judgment of: MOSHINSKY, HALLEY AND O'SULLIVAN JJ
Date of judgment: 25 August 2022
Catchwords:

EQUITY – fiduciary duty – real estate agent – where the appellant (APD) was a vendor of land – where the first respondent (MD) acted as APD’s agent for the sale of the property – where the sale price at completion was $24 million plus GST – where the commission charged by MD and paid by APD was $12 million plus GST – where APD contended on appeal that MD breached its fiduciary duty to APD under an agency contract dated 12 October 2016 by procuring APD to enter into an agency contract dated 5 November 2016, under which the commission was greater – where APD contended on appeal that MD failed to disclose material matters to APD before it entered into the 5 November 2016 agency contract – whether APD’s contentions represented a new case on appeal – if so, whether APD should be permitted to run that new case

EQUITY – estoppel – real estate agent – where the appellant (APD) was a vendor of land – where the first respondent (MD) acted as APD’s agent for the sale of the property – where APD and MD entered into an agency contract that specified a particular commission – where MD sent an email to APD setting out the commission it proposed to charge (being $12 million plus GST) – where APD replied by email that it agreed – where MD subsequently charged and APD subsequently paid a commission of $12 million plus GST – where primary judge held that APD was estopped from contending that the commission was other than as set out in the email exchange – whether the primary judge erred in so holding

INSURANCE – professional indemnity insurance – where insuring clause provided cover for civil legal liability for “any claim for compensation” in specified circumstances – where claims were made against the insureds for contravention of ss 18 and 21 of the Australian Consumer Law and breach of fiduciary duty – where insureds sought indemnity for liability in respect of these claims and for defence costs – where the claims against the insureds failed at trial and on appeal – where the primary judge held that the insurer was liable for the insureds’ defence costs – where the insurer argued that the claims against the insureds were properly characterised as claims for restitution or debt – whether defence costs covered by insuring clause

Legislation:

Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, ss 18, 21, 236

Federal Court Rules 2011, rr 25.01, 25.14

Cases cited:

Barnes v Addy (1874) LR 9 Ch…

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APD Technology Pty Ltd v Maximo Developments Pty Ltd [2022] FCAFC 141
Case
[2022] FCAFC 141
Decision Date

CaseChat Overview and Summary

In the case of APD Technology Pty Ltd v Maximo Developments Pty Ltd, the appellant, APD Technology Pty Ltd, appealed against the decisions of the primary judge in the Federal Court of Australia, which dismissed their claims against the respondents, Maximo Developments Pty Ltd. The appellant, a vendor of land, engaged the first respondent, a real estate agent, to act as their agent for the sale of the property. The sale was completed at a price of $24 million plus GST, with the commission charged by the first respondent amounting to $12 million plus GST. The appellant contended that the first respondent breached its fiduciary duty under an agency contract by procuring the appellant to enter into a subsequent agency contract with a higher commission and failed to disclose material matters before the execution of the contract. The appellant also argued that they were estopped from contending that the commission was other than that set out in an email exchange. Lastly, the appellant sought indemnity for their defence costs under a professional indemnity insurance policy, which the insurer denied. The court had to decide whether the appellant’s contentions represented a new case on appeal, if so, whether the appellant should be permitted to run that new case, if the primary judge erred in holding that the appellant was estopped from contending that the commission was other than as set out in the email exchange, and if the defence costs were covered by the insuring clause in the insurance policy.

The court found that the appellant’s contentions did not represent a new case on appeal as they were based on the same facts and legal principles as those considered by the primary judge. The court held that the primary judge did not err in finding that the appellant was estopped from contending that the commission was other than as set out in the email exchange, as the exchange clearly set out the commission to be charged. Lastly, the court determined that the defence costs were covered by the insuring clause in the insurance policy, as the claims against the appellant involved civil legal liability for any claim for compensation arising from a breach of professional duty in the conduct of their professional business.

Both appeals were dismissed, with costs to follow the event. The court gave the parties the opportunity to seek a variation of the costs orders if they so desired. The court concluded that there was no apparent reason why costs should not follow the event, and that there should be no order as to costs for the interested party. The parties were given the opportunity to make submissions if they sought a different costs order.

Orders

Orders of the court

1. The appeal be dismissed.

2. Subject to paragraph 3, the appellant pay the respondents’ costs of the appeal.

3. If any party seeks a variation of the costs orders, they may file and serve a written submission (of no more than two pages) within seven days. In that event, the other parties may file and serve a responding written submission (of no more than two pages) within a further seven days, and the issue of costs will be determined on the papers.

[Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]

Background

Background to the litigation

For the reasons that follow, we have concluded that both appeals should be dismissed.BACKGROUND FACTS The following statement of the background facts is substantially based on the Reasons at [1], [5]-[6], [9], [13] and [21]-[64], supplemented by documents to which we were taken during the hearing of the appeal.Key companies and people APD’s manager, and the principal person who acted on its behalf in the events that are relevant, is Mr Doan. The director of APD is Mr Doan’s wife, Mrs Nhan Hong Doan. The Doans are based in Sydney. Maximo Developments is a real estate agent registered in Queensland. It operates on the Gold Coast. The principal person involved in the events that are relevant to this case on behalf of Maximo Developments is Mr Rahmani. Mrs Rahmani is also a director of Maximo Developments. The Rahmanis are based on the Gold Coast. Another agent, Mint Property, was a “conjunction agent” with Maximo Developments in relation to the sale of the Property. The representative of Mint Property was Mr Tony Yan. Mr Arcuri, a solicitor from the Gold Coast, was appointed by Mr Doan on behalf of APD to act on the latter’s behalf in relation to the sale of the Property. Mr Chiang Sheng Hsiung (referred to in the proceeding at first instance as Johnson) and Mrs Jane Lee Hsiung (referred to in the proceeding at first instance as Jennifer) were joint venture partners, as trustees for a family trust, with APD in the Property. They therefore had an interest in any payment realised on the sale of the Property. Their joint venture interest was 5%.The period from 2009 to September 2016 In 2009, APD purchased the Property, being a vacant parcel of land at 14 Lake Street, Varsity Lakes on the Gold Coast for $2,310,000 including GST. Mr Doan had the intention of developing the Property by constructing a substantial building containing apartments, restaurants, shops and commercial premises. APD entered into joint venture arrangements with regard to the purchase and possible development of the Property, including with Mr and Mrs Hsiung. In July 2010, APD obtained an initial development consent permitting the construction of 121 apartments in the proposed building. In October 2014, APD obtained an amended approval, increasing the number of permitted apartments to 203. Mr Doan testified at trial that he was unable to obtain the requisite construction funding, explaining that the project became too big for APD, so he resolved that he had no alternative but to sell the Property. Mr Doan and Mr Rahmani had had a close personal and commercial relationship for nearly 30 years. They had on many occasions entered into real estate agency contracts on behalf of corporations that they represented, with Mr Rahmani marketing for sale and selling properties on behalf of Mr Doan. On 21 July 2015, Mr Doan had APD enter into the first of several agency contracts, known as a Form 6, with Mr Rahmani’s company, Maximo Developments. The latter was appointed as APD’s exclusive agent for a period of two months to sell the Property. The agreed list price was $15 million. The commission, inclusive of GST, was recorded as 2.75% up to and including a purchase price of $15 million, and that for any price above $15 million the commission would be 2.75% of $15 million plus 88% of the difference between the contract price and $15 million. The contract recorded, as an example, that if the contract price is $16 million, the commission would be $1,292,500 including GST. On that example, the effective commission would be 8.1%. No sale eventuated.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

We therefore reject each of Hamilton’s grounds of appeal.CONCLUSION For the above reasons, the first appeal is to be dismissed. In relation to costs as between the appellant and the respondents, there is no apparent reason why costs should not follow the event. In relation to the costs of the interested party, our provisional view is that there should be no order as to costs. We will give the parties the opportunity to seek a variation of these costs orders. Further, for the above reasons, the second appeal is to be dismissed. There is no apparent reason why costs should not follow the event. We will make a costs order to that effect, but will give the parties an opportunity to make submissions if they seek a different costs order.

Ratio Decidendi

Legal Principle Established

Consistently with the way that the parties presented their cases, it is convenient to deal with the three grounds of appeal together.Consideration Hamilton contends, in summary, that the primary judge erred in holding that the claims brought by APD against the Maximo Parties were claims for civil liability for compensation. Hamilton submits that the claims were, in effect and in truth, claims for restitution of monies had and received or for restoration of an unconscientiously gained benefit, such that the claims were not indemnifiable under the defence costs coverage provision of the Policy. In advancing this submission, Hamilton refers to the terms of the Policy as set out above, characterising the Policy as an indemnity policy and referring to statements by Devlin J (as his Honour then was) in West Wake Price v Ching [1957] 1 WLR 45 at 49; [1956] 3 All ER 821 at 825 and Brett LJ in Castellain v Preston [1883] 11 QBD 380 at 386 as to the nature of such a policy requiring the insured to suffer a loss. There is no dispute about those principles in the description of the Policy as an indemnity policy. Hamilton submits that the “loss” the subject of indemnity is that set out in paragraph 1 of the insuring clause, namely “civil legal liability for any claim for compensation”, with that liability arising from a “breach of professional duty on the part of the Insured” and “incurred in the conduct of the Insured’s Professional Business.” It continues by submitting that, by paragraph 2 of the insuring clause, the insurer agrees to indemnify the insured for “civil legal liability for any claim for compensation” in terms of trade practices and other legislation. On that basis, it submits that paragraph 2 must be read in the context of paragraph 1, and that the rest of the Policy applies only in respect of such a claim which involves a breach of professional duty in the conduct of the insured’s professional business for which the insurance was proposed. There are some immediate difficulties with that submission. First, there is nothing in paragraph 2 of the insuring clause to link the cover extended by that clause with paragraph 1 of the insuring clause. Secondly, the “civil legal liability for any claim for compensation” made against the insured, referred to in paragraph 2, relates to claims under, what may fairly be described as, consumer protection legislation. That legislation, which includes (relevantly in the context of this appeal) ss 18 and 21 of the Australian Consumer Law, is not limited to a breach of professional duty, although it may be accepted that in a number of cases it is likely that there will be a commensurate breach of professional duty along with a breach of the statute in question. Hamilton submits that, as the primary judge accepted, the insurer is not bound by the way in which the claimant has chosen to formulate the claim. Hamilton submits that, in the present case, the true nature of APD’s claims against the Maximo Parties was as follows: a claim as to conduct which was not in good conscience; a breach of fiduciary duty; a claim based upon Barnes v Addy (1874) LR 9 Ch App 244 principles; and unjust enrichment requiring restitution.