Aspire PG Pty Ltd v Dao & Co Pty Ltd
[2024] VCC 449
•22 April 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-22-02888
| ASPIRE P.G PTY LTD (ACN 618 080 738) | Plaintiff |
| V | |
| DAO & CO PTY LTD (ACN 614 199 665) | First Defendant |
| and | |
| JACK CHRAPOT | Second Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26-27 July 2023, written submissions filed 18 and 25 August 2023 | |
DATE OF JUDGMENT: | 22 April 2024 | |
CASE MAY BE CITED AS: | Aspire PG Pty Ltd v Dao & Co Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 449 | |
REASONS FOR JUDGMENT
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Subject:CONTRACT – REAL ESTATE
Catchwords: Real estate agent seeking commission under exclusive sales authority – whether compliance with s49A(1)(d) of the Estate Agents Act 1980 – sale of lots did not proceed – inconsistent terms about when liability to pay commission fell due – joint liability of signatory considered
Legislation Cited: Estate Agents Act 1980; Sale of Land Act 1962; Corporations Act 2001 (Cth)
Cases Cited:CA and CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd (2017) 55 VR 62; Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160; Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Deputy Commissioner of Taxation v Austin (1998)16 ACLC 1555; Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; DPP v Acme Storage Pty Ltd (a Pseudonym) [2017] VSCA 90; FAI General Insurance Company Ltd (in liq) v Parras & Ors [2002] NSWCA 334; Funston v CCSS Pty Ltd [2021] VSC 24; Grimaldi v Chameleon Mining NL (No 2) [2012] 200 FCR 296; Hamilton Finley Pty Ltd v Aojia Investment Pty Ltd [2017] VSC 319; Idylic Solutions Pty Ltd; Re; Australian Securities and Investments Commission (ASIC) v Hobbs [2012] NSWSC 1276; Oliver Hume (Australia) Pty Ltd v Land Source Australia Pty Ltd [2015] VSC 77; Re Valleys Rugby League Football Club Ltd [1997] 2 Qd R 645; TJ Board & Sons Pty Ltd v B&G Pollard Pty Ltd [2000] VSC 497; TW Timber Treatment Pty Ltd v Giddings [2022] VSCA 147
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Blunt | Cohen Veshut |
| For the First and Second Defendants | Dr K Weston-Scheuber | Jeremy Johnson & Associates |
HER HONOUR:
1The plaintiff (“Aspire”) is a real estate agency. The first defendant (“Dao”) is a property developer and the former owner of lots 105 to 109 at 2 and 16 Hermes Road, Weir Views, Victoria (“the property”). Dao was intending to build townhouses on the property (“the development”). However, the development ultimately did not proceed as Dao sold the property in May 2022.
2The second defendant (“Chrapot”) acted as Dao’s agent and project manager in the development.
3By way of an exclusive sales authority (“ESA”) executed on 24 February 2022, Dao engaged Aspire to sell the property. Chrapot signed the ESA on behalf of Dao.
4By this proceeding, Aspire seeks to recover unpaid sales commission from the defendants in the sum of $122,500, inclusive of GST, together with interest of $22,921.45.[1] The total amount sought is $145,421.45 [2] as a debt, for which the defendants are said to be jointly and severally liable.
[1]Interest is claimed under clause 3 of the ESA, at a rate of 4% per annum higher than the current rate fixed under the Penalty Interest Rates Act 1983
[2]As calculated on page 29 of Annexure A to the plaintiff’s closing submissions. The plaintiff did not persist at trial with an alternative claim for unjust enrichment; Transcript (“T”) 5, Lines (“L”) 27-28
5Aspire claims it is entitled to be paid commission because it sold the five lots in question. On its construction of the ESA, commission was due to be paid in two stages: 50 percent was payable upon a contract of sale being signed and a 10 percent deposit paid to the developer, with the balance of commission to be paid at settlement. Aspire does not press for the second half of the commission.
6The defendants accept the five lots comprising the property were sold by Aspire. Despite this, the defendants contend Aspire is not entitled to any commission because it did not comply with s49A(1)(d) of the Estate Agents Act 1980 (“the Act”). This subsection requires an estate agent to give a signed copy of the ESA to the relevant person (in this case, Dao) before any payment of commission can be obtained. As the signed ESA was not given to Dao, Aspire breached s49A(1)(d). Consequently, Aspire is prohibited from suing for or recovering any commission under s50 of the Act.
7There is a factual dispute as to whether Aspire gave a signed copy of the ESA to Chrapot on 24 February 2022. Assuming Chrapot was given a copy of the signed ESA, then an issue arises as to whether that means of delivery satisfied the requirements of s49A(1)(d).
8The defendants’ alternative defence depends upon the proper construction of the terms of the ESA. They say that Dao’s obligation to pay Aspire only arose upon settlement of the lots and actual receipt by the developer of the 10 percent deposit payable. As neither of these steps occurred, no commission is payable.
Factual narrative
9Aspire specialises in the sale of medium density houses and vacant blocks of land. Mr Ran Oren (“Oren”) is a licensed real estate agent and director of Aspire.
10Around August and September 2021, Mr Steven Ferren (“Ferren”), a friend of Oren’s, introduced Oren to Chrapot. Some preliminary discussions took place about Dao engaging Aspire’s assistance in selling lots in the development, although nothing was concluded at this stage.
11On 22 January 2022, Oren attended a meeting with Chrapot, Mr Amit Sharma (“Sharma”), a director of Dao, Mr Carmine Futsco and Ferren at Chrapot’s office located at 48 Nicholson Street, Abbotsford. The purpose of the meeting was to discuss Aspire selling lots in the development. According to Oren, Chrapot presented himself as a director of Dao and told him that Sharma was his business partner. The defendants dispute this evidence. Ferren agreed in cross-examination that Chrapot never referred to himself as a director of Dao. Chrapot said he never referred to himself as a director of Dao or as a business partner of Sharma’s. He said he would not have described himself as a director because it was not true. Chrapot has never been a director of Dao. Sharma also said that Chrapot never referred to himself as director of Dao. He did not consider Chrapot to be a director of Dao, nor his business partner. He described Chrapot as being the project manager for the development. Sharma accepted that Chrapot was authorised by Dao to negotiate and sign documents on behalf of Dao in connection with the project.
12During the meeting, Chrapot asked whether Aspire was able to sell five units during Stage 1 of the development, and after that, a number of further units during Stage 2. Oren said yes, but on the condition that a commission of $40,000 to $45,000 plus GST would be paid for each lot, with at least 50 percent of the commission to be paid following Dao’s entry into a contract of sale with each given purchaser. Oren said Chrapot had no issue with these terms and expressed an interest in engaging Aspire courtesy of its network of sub-agents who could move the lots in the development. Oren said the meeting ended with Chrapot offering to show him the development.
13On 9 February 2022, Oren met Chrapot at his office. They then drove to the development site where they met with Sharma and another director of Dao, Mr Sam Gayawali. While there, Chrapot told Oren that Dao was due to commence civil works in the coming months. Following a brief viewing of the development site, Oren and Chrapot drove back to the latter’s office, where they reconvened with Sharma.
14At the second meeting on 9 February 2022, Oren recalls he told Chrapot and Sharma that Aspire would attempt to sell five units in the development for a net price of $454,000 each. As for commission, Oren said anything above $454,000 was to be treated as commission payable to Aspire, with payment to be split into two 50 percent payments. The initial commission payment of 50 percent would be paid to Aspire following Dao and a purchaser successfully signing a contract of sale and on Dao receiving a 10 percent deposit. The second and final commission payment of 50 percent was to be paid on settlement of the relevant lot. Oren claims that Chrapot and Sharma agreed to these terms.
15Following the second meeting on 9 February 2022, Oren emailed Chrapot at 4.14pm setting out various points from their earlier meeting including:
“3. Commission payment will be done in two parts, 50% upon signing an unconditional contract and 10% paid to developer, the balance is at settlement.”
16On 11 February 2022, Chrapot replied to Oren’s email, copying in Sharma. Chrapot made notations in red on Oren’s email of 9 February 2022. He marked “AGREED” next to point 3, being the term proposed by Oren relating to commission.
17On 21 February 2022, Oren prepared a first draft of the ESA as between Aspire and Dao. A copy was emailed to Chrapot on the same day.
18Sharma agreed that Oren had been pressing for 50 percent on signing and 50 percent on settlement. He initially said they did not agree at their meeting to Oren’s terms, but then later accepted in cross-examination they had agreed. But once he saw Oren’s draft ESA, he was not willing to proceed on that basis. Sharma said he was adamant that it was 100 percent on settlement. Sharma said that was the reason why Chrapot subsequently made handwritten amendments to the general conditions to reflect Dao’s position that the whole of the commission was to be paid at settlement.
19On 22 February 2022, Chrapot emailed an amended draft of the ESA to Oren (“Second Draft”). This draft contained Chrapot’s handwriting under the term “General Conditions” on the second page of the document which stated:
“(1) Commission will only be paid as follows:
(a) On the settlement of the projects.
(b) Assuming 10% deposit has been paid.”
20Chrapot did not recall discussing the handwritten amendments with Oren before sending them through. Oren said he did not discuss the handwritten amendments with Chrapot. Oren asked his wife to read out the handwritten amendments to him as he could not read the handwriting. He noticed that Chrapot had missed a signature on one of the pages. He also noticed that the price range on the front page did not match Annexure A.
21On 24 February 2022, Oren rang Chrapot to tell him they were missing a signature, the price range needed to be fixed and there was a new Annexure A that he wanted Chrapot to sign as well. Chrapot asked Oren to correct the Second Draft and visit him later that evening to finalise the ESA over a glass of whisky.
22On the same day, Oren prepared a further amended draft of the ESA (“Third Draft”) with the following alterations:
(a) Page 1: changed the sale range for each lot from $465,000 to $505,000 to $454,000 to $505,000; and
(b) Annexure A: amended Annexure A to include the following words:
· “50% of the commission will be paid upon contract signed and 10% deposit has been paid to the developer.
· Balance of commission to be paid at settlement.”
23Oren said he amended Annexure A to insert the two additional bullet points above to reflect the split they had agreed upon. He prepared two counterparts of the ESA at his brother’s office which he then placed into two plastic sleeves.
24On the evening of 24 February 2022, Oren visited Chrapot at his home in Ormond, bringing with him two copies of the Third Draft. Oren recalls Chrapot signing a missing signature on page 8 of both copies and Annexure A. Oren countersigned the two counterparts and placed each of them into a separate plastic sleeve. He put one in his briefcase and left the other on Chrapot’s kitchen benchtop.
25Chrapot said he did not believe he was left with a copy of the signed ESA because he would have taken it to the office the next day and filed it in an arch-lever folder in keeping with his usual practice. Chrapot did not have a copy so he assumed he did not receive it. He doubted that Oren had left a copy at his home but accepted when pressed, that he did not know.
26By the terms of the ESA, Aspire was retained to sell five lots in the development for Dao “off the plan” for a minimum price of $454,000. Aspire was entitled to be paid commission, calculated by reference to the sale price for each lot sold.
27Between 28 February 2022 and 29 April 2022, Aspire sold lots 105 to 109 in the development for the total sum of $2,515,000, inclusive of GST. The 10 percent deposits paid by the purchasers for the five lots were placed into the trust account of Dao’s lawyers, Herbert Smith Freehills. Oren said he was aware that the 10 percent deposits had to be placed into a trust account given the development was off-the-plan. Sharma gave evidence about this topic as well. He confirmed that as the development was off-the-plan, the deposits could not be released to the vendor under s27 of the Sale of Land Act 1962 until registration of the plan of subdivision.[3]
[3] See s27(11) and s9AA(1)(a)(i) of the Sale of Land Act 1962
28Aspire issued tax invoices to Dao for the sale of lots 105 to 109 between 4 and 29 April 2022. The total sum sought was $122,500 inclusive of GST.
29Oren had various communications with Chrapot in early May 2022 chasing up payment of the invoices.
30On 19 May 2022, Oren emailed a copy of the signed ESA to Chrapot. Oren said he sent Chrapot a copy of the ESA because Chrapot had requested a copy after the two men had spoken at a neighbouring dog park on 18 May 2022. Oren said Chrapot told him he would sort out the payments in response to Oren’s queries as to what was going on. He claimed that Chrapot said: “I can’t find the sales authority. Do you mind emailing it to me?”. Chrapot said he did not ask Oren to send him a copy of the ESA. He admitted receiving the email of 19 May 2022, but said this was the only time he was given a copy of the signed ESA.
31In May 2022, Dao terminated the contracts of sale it had entered into with the purchasers of lots 105 to 109. The deposits paid by the purchasers of the five lots were refunded to them. The property was part of the development which was sold in globo. The possibility that might Dao sell the property before the development could take place was a matter which was discussed during the parties’ negotiations.
32Despite demand, the defendants have not paid any commission to Aspire and deny they have any obligation to do so.
Witnesses
33Oren, Mr Yoav Oren (Oren’s brother) and Ferren gave evidence on Aspire’s behalf. Chrapot and Sharma were the witnesses for the defendants.
34While there were some differences in recollections of what happened at various meetings, I formed the view that each of the witnesses were doing their best to assist the Court and were honest.
Issues for determination
35The parties agreed on the following key issues for determination:[4]
(1) did Aspire give Dao a signed copy of the ESA for the purposes of s49A(1)(d) of the Act;
(2) does the ESA, properly construed, allow for the payment of any amount of commission and interest to Aspire when settlement of the sales of Lots 105 to 109 did not take place; and
(3) if Dao is liable to pay Aspire an amount of commission and interest under the Agreement, is Chrapot also liable to pay that amount to Aspire?
(1) Did Aspire give Dao a signed copy of the ESA for the purposes of s49A(1)(d) of the Act?
[4]The parties had originally identified four key issues but the defendants conceded at trial that issue no.2 relating to s48 of the Act was no longer pressed
Aspire’s submissions
36Aspire accepts it must show it complied with the requirements of s49A(1)(d) of the Act. To do so, it needs to demonstrate:
(a) that it gave a copy of the signed ESA to Chrapot; and
(b) by giving a copy of the ESA to Chrapot, Aspire gave a copy of the ESA to Dao.
37Section 49A(1) of the Act provides:
“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 (or an agents' representative employed by 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 outgoings that have been agreed; and
(ii) if a fee is to be calculated on a percentage basis, a statement of that fee expressed as both a percentage and as the dollar amount that would be payable on the reserve price or any other relevant amount set out in the engagement or appointment; and
(iii) a rebate statement that complies with subsection (4); and
(iv) a statement in a form approved by the Director as to where a complaint concerning any commission or outgoings in the engagement or appointment can be made; and
(v) anything else required by the Director; and
(d) the agent (or an agent's representative employed by the agent) gave the person a copy of the signed engagement or appointment.
Penalty: 100 penalty units.”
38Aspire notes that “the person” in s49A(1) is not defined in the Act, arguing the proper construction means the person, be it an individual, a group of individuals, a company, a superannuation fund, an estate et cetera who engaged the estate agent under a “written engagement or appointment”. Aspire says there is no controversy that “the agent” is Aspire, “the person” is Dao and the “written engagement or appointment” is the ESA.
39Aspire says it satisfied the requirements of s49A(1)(d) because Oren gave a copy of the signed ESA, being an original counterpart, to Chrapot at the latter’s home on 24 February 2022. An electronic copy of one of the counterparts was later sent to Chrapot by email on 19 May 2022. As Chrapot was an agent or authorised representative of Dao, then receipt by Chrapot was sufficient for the purposes of s49A(1)(d). Sharma confirmed that Chrapot was authorised by Dao to negotiate, sign and take receipt of a copy of the ESA.
40Aspire argues there is nothing to suggest that Parliament intended for the words “gave the person” to exclude circumstances where the person has authorised another person to receive a copy of the written engagement on its behalf.
41According to Aspire, s49A(1)(d) has not been the subject of substantive judicial consideration within a factual matrix like the present case. In Hamilton Finley Pty Ltd v Aojia Investment Pty Ltd,[5] Elliot J found there was no evidence of the relevant agent giving “the person” a copy of the signed engagement or appointment, and said there were “sound policy reasons” as to why the Act would require the agent to give the relevant documents to the person.[6] His Honour determined that an estate agent must give a copy of the ESA to the person as a matter of fact to comply with the requirements of s49A(1)(d).
[5] [2017] VSC 319 (“Hamilton”)
[6] Hamilton at [126]-[128]
42Section 50 of the Act provides as follows:
“(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—
(a) at all material times in relation to the transaction he or she is the holder of an estate agent’s licence; and
(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; …”
43Aspire says s50 is also relevant, but only to the extent that if a finding is made that a copy of the ESA was not given to Chrapot on 24 February 2022. Aspire then argues that a contravention of s49(1)(d) is capable of rectification as a signed copy was later sent by email to Chrapot on 19 May 2022.
Defendants’ submissions
44The defendants’ case is straightforward. They say the evidence shows the ESA was not given to Dao, as was required. In those circumstances, commission was not payable and Aspire cannot sue given s50 of the Act.
45The ESA could have been given to Dao by delivery to its registered address, or by delivery of a copy personally to a director of Dao residing in Australia. Delivery was not effected by either of these methods and the requirement of personal service is not satisfied by effecting service on a party’s agent.[7]
[7]FAI General Insurance Company Ltd (in liq) v Parras & Ors [2002] NSWCA 334 (per Hodgson JA) at [10]-[11] and [20] , (with Meagher JA agreeing), [51]-[53] per Young CJ in Equity
46Chrapot is not the vendor, nor is he an officer of the vendor. Chrapot said he did not receive a copy of the ESA, despite Aspire’s submission that it fulfilled its obligation by leaving a copy of the ESA at Chrapot’s house.
47Section 49A(1) of the Act refers to a person’s “agent or representative” in ss(a) and (b). There is a clear distinction between these provisions allowing actions to be taken by the vendor or its agent or representative in contrast to s49A(1)(d) which requires something to be given “to the person”. The principle of noscitur a sociis (the meaning of a word is judged by the company it keeps)[8] operates to require a reading of s49A(1)(d) in the context of the other subparagraphs. The proper interpretation is that delivery could only occur to the person, which is Dao.
[8]Or “words of a feather flock together” per Spigelman CJ in Deputy Commissioner of Taxation v Dick (2007) NSWCA 190 at [12] - [13]
48It is not to the point to consider whether or not Chrapot was authorised to accept service on behalf of Dao when the legislation requires personal service. Section 49A(1)(d) does not permit a copy of an ESA to be given to a person’s agent or representative.
49The defendants referred to the following authorities. In Hamilton, Elliot J said that “Sound policy reasons are readily envisaged as to why the statute would require the agent to actually give the relevant document to ‘the person’”.[9]
[9] Hamilton at [127]
50In Funston v CCSS Pty Ltd,[10] Quigley J noted that the natural and ordinary meaning of s49A should not be restrained, and it was not permissible to seek to import words of primacy that are not in the provision.[11]
[10] [2021] VSC 24 (“Funston”)
[11] Funston at [46]
51In CA and CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd,[12] the Court of Appeal observed that contravention of s49A may lead to harsh results, but that is a consequence of the legislation that must be accepted. The identity, sophistication and capability of vendors to look out for themselves does not diminish the agent’s statutory disclosure obligations.
[12] (2017) 55 VR 62 at [93]
52TJ Board & Sons Pty Ltd v B&G Pollard Pty Ltd,[13] concerned s49A(1)(b). Smith J noted the purpose of the provisions is to inform and empower potential clients of estate agents to negotiate commission and expense arrangements. A construction that would better achieve that purpose should be preferred.[14]
[13] [2000] VSC 497
[14] ibid at [12]
53Part IV of the Act emphasises consumer protection. The purpose of the legislation marries perfectly with the express wording in s49A(1)(d). The aim of the provision is to ensure that the person liable to pay commission, being the vendor, is provided with a record of what commission has been agreed. The legislative purpose is best served by ensuring that the person who is liable to pay commission receives the signed copy, including in circumstances where the person’s agent has signed on its behalf.
54Due to the construction of s49A(1)(d) of the Act, it was not possible for Dao to give actual authority to Chrapot to receive the ESA on Dao’s behalf. Even if a copy was provided to Chrapot at his home and left on the kitchen bench, as argued by Aspire and which Chrapot denies, this would not satisfy the provision.
55Section 50 of the Act requires compliance with all of s49A(1), not just subparagraphs (a) to (c). The reference in s50 to s49A(2), which contains a prohibition on destroying documents and imposes an obligation to retain documents for a prescribed period, clearly identifies a concern with post-contractual, as well as pre-contractual conduct of an agent.
Was Chrapot a de facto director of Dao?
56After the conclusion of the evidence, the Court raised as a potential issue whether Chrapot could arguably be regarded as being a de facto director of Dao. In light of that query, the parties filed submissions on the issue of whether Chrapot could be regarded as a de facto director.
57Aspire had opened its case on the basis that the provision of the signed ESA to Chrapot at his home on 24 February 2022, satisfied the requirements of s49A(1)(d), because he was the agent or representative of Dao. In the alternative, Aspire now argues the requirements of s49(A)(1)(d) were satisfied because Chrapot represented himself as a director of the defendant company.
58Section 9AC of the Corporations Act 2001 (Cth), defines “director of a company or other body” as:
“(a) a person who
(i) is appointed to the position of the director; or
(ii)is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position;
(b)unless the contrary intention appears, a person who is not validly pointed as a director if:
(i) they act in the position of a director; or
(ii)the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation).”
59There is no single or decisive test for determining whether a person is a de facto director or officer of a company. It applies to a person who takes an active part in directing the affairs of the company with the acquiescence of the de jure directors.[15] Whether a person acts as a director requires a consideration of the duties performed by that person in the context of the operations and circumstances of the particular company concerned.[16]
[15]ReValleys Rugby League Football Club Ltd, Re [1997] QdR 645 at [654]
[16]Deputy Commissioner of Taxation v Austin (1998)16 ACLC 1555
60In Grimaldi v Chameleon Mining NL (No 2),[17] the Full Federal Court provided extensive guidance on the elements that need to be established in determining whether a person is a de facto director. The Court noted that to be a de facto director, a person must be shown to have assumed or performed functions which only a de jure director or board can properly perform or which are the sole responsibility of a director or board of a company.[18]
[17] (2012) FCR 296
[18] ibid at 70
61More recently in Re ACN 092 745 330,[19] Barrett AJA drew on the decision of Arden LJ in Smithton v Naggar,[20] raising a number of practical points to consider when determining whether someone is a de facto director, namely:
“(a) whether the person has assumed responsibility to act as a director;
(b) the nature of the corporate governance structure and the position the person occupies within it;
(c) what the person actually did, as distinct from any job title;
(d) the cumulative effect of the activities relied on, with the whole of the circumstances being looked at “in the round”;
(e) whether the company regarded the person as a director and held him or her out as such;
(f) whether third parties considered that the person was a director; and,
(g) whether the person was consulted about or participated in directorial decisions.”[21]
[19] [2017] NSWSC 241 at [112]
[20] [2015] 1 WLR 1893; [2014] EWCA Civ 939
[21] Smithton v Naggar [2015] 1 WLR 1893; [2014] EWCA Civ 939 at [33]
62His Honour concluded that:
“The focus is thus upon the way the person operates within the particular corporate governance context, the degree of autonomy exercised and the appearance (and reality) of authoritative operation as a primary level decision-maker for the company.”[22]
[22] Re ACN 092 745 330 [2017] NSWSC 241 at [113]
63In Idylic Solutions Pty Ltd, Re; Australian Securities and Investments Commission (ASIC) v Hobbs,[23] Ward J said, at paragraph 1337:
“The term ‘director’, as defined in s 9 of the Corporations Act, includes a person who, though not validly appointed as a director, acts in the position of a director (a de facto director) or whose instructions or wishes are ones in accordance with which the directors of the company or body are accustomed to act (a shadow director). The term ‘officer’ is defined in s 9 of the Corporations Act as including a person who is a director (which, by reference to the earlier definition of director, includes a de facto or shadow director); who makes or participates in making decisions that affect the whole or a substantial part of the corporation's business; who has the capacity significantly to affect the corporation's financial standing; or in accordance with whose instructions or wishes the directors of the corporation are accustomed to act. There is room for overlap between persons occupying a de facto role (as director and officer) and those occupying a shadow role of that kind.”
[23][2012] NSWSC 1276
64Aspire submits that Chrapot was a de facto director of Dao in light of the evidence led at trial. Chrapot’s role went beyond that of a consultant. He did tasks and performed duties reasonably expected to be performed by a director or officer of a company. His role is one that could be performed by the directors of a defendant company. Chrapot led the initial in-person negotiations with Oren and was the sole negotiator for Dao up to the point of formation of the ESA. He had unconstrained authority to negotiate the terms of the ESA with Aspire, including financial terms. Sharma, a director of Dao, was openly uninvolved in the negotiations with the plaintiff and Dao, leaving this entirely to Chrapot. Both Sharma and Chrapot described their relationship and involvement in the development as a “team” and used “we” to describe decision making.
65In response to the suggestion the matter should be pleaded, Aspire noted it would be willing to amend the pleading if required by the Court, but then went on to argue that the matter was sufficiently raised. The parties had been able to argue the point without there being a need for formal amendment.
66The defendants argue that Chrapot was a consultant for Dao. There was no evidence that he took an active part in directing the affairs of Dao or had capacity to affect, significantly, the corporation’s financial standing, nor was he responsible for the day-to-day management of Dao. They claim Chrapot’s work was confined to general counselling and preliminary legal advice. This can be contrasted against cases where a person who has attended regular director’s meetings and voted on resolutions can be considered to be a director. Chrapot did attend some negotiation meetings for the development in his capacity as agent or project manager. Nothing can be relied upon by the use of the terms “we” or “team” to prove that he was in fact acting as a de facto director.
67Dao accepts that Chrapot was Dao’s agent for the purposes of the development. Sharma gave evidence that Chrapot was authorised to do certain things on behalf of Dao, including taking receipt of a copy of the ESA. The authority given to Chrapot was to act as its agent. Chrapot was never given authority to act as a director of Dao.
68The Court should reject the evidence that Chrapot introduced himself as a director of Dao and business partner of Sharma. Both Chrapot and Sharma were present during conversations with Oren in January and February 2022, and both denied this occurred.
69The defendants submitted a pleading amendment would be required to raise the allegation that Chrapot was a de facto director and it is now too late for Aspire to amend its pleadings to so allege. This deficiency would not be addressed by the plaintiff consenting to the leading of further evidence by the defendants, as suggested at paragraph 72 of Aspire’s submissions. The evidence in the hearing is closed and the matter falls to be determined on the pleadings and evidence before the Court in the absence of an application by a party for re-opening of the hearing.
70The defendants also argue that Aspire alleging Chrapot is both an officer of Dao, being a de facto director, and an agent for Dao is contradictory.
Consideration
71There is no dispute on the evidence that Aspire did not physically give Dao a copy of the signed ESA. It was not sent to Dao’s registered address, nor was it given to a director of Dao. Sharma gave evidence that he was not sent a copy of the signed ESA and that Dao did not receive a copy.
72There is a factual dispute as to whether a signed copy of the ESA was given to Chrapot after it was signed at the latter’s home on 24 February 2022. Oren’s recollection was clear. He was adamant that he left a signed copy on the kitchen bench at Chrapot’s home. By contrast, Chrapot’s recollection was rather vague and he was unsure about what had happened. He believed he did not receive the ESA because if he had done so, he would have filed it away in his office and he did not have a copy in his records. When pressed in cross-examination, Chrapot said he did not know whether a copy was left on his kitchen bench. On the whole, I accept and prefer Oren’s evidence to Chrapot’s account about this issue. I am satisfied that Oren did leave a signed copy of the ESA on the kitchen benchtop at Chrapot’s home on the night in question.
73Sharma gave evidence that Chrapot acted as Dao’s agent in respect of the development. He accepted that Chrapot was authorised by Dao to negotiate, sign and receive a copy of the ESA on behalf of Dao. However, receiving the document in his capacity as agent does not amount to compliance with s49A(1)(d), which requires the ESA to be given to the person to be charged with the obligation to pay commission. I consider there is force in the submission made by the defendants that s49A(1)(d) is in a separate category to ss49A(1)(a) and 49A(1)(b), which permits steps to be taken by a person or the person’s agent or representative. It is significant that s49A(1)(d) refers only to “the person” and does not include the additional words “the person’s agent or representative”.
74Self-evidently for consumer purposes, it is a statutory requirement that the signed authority must be given to the person who has the liability to pay commission. The section cannot be circumvented simply by giving the document to an agent or representative of the person, as that would be contrary to the express wording contained in ss49A(1)(d). I accept the defendants’ argument that it is not open to Aspire to seek to cure its own failure to give a signed ESA to Dao by claiming that the service could be effected upon Dao’s agent or representative. As noted in the case law above, the obligations in s49A(1) are strict and must be complied with, failing which s50 of the Act prevents an agent from suing for or recovering commission.
75Additionally, the matter was not then cured by Oren sending Chrapot a signed copy of the ESA by email on 19 May 2022, such that the breach of s49(1)(d) was rectified. The email was sent after the invoices seeking payment were sent so that the contravention had already occurred. But again, the fundamental problem is that the signed copy was forwarded to an agent or representative of Dao, and not to Dao itself. Consequently, this omission was not later rectified simply by forwarding a signed copy of the ESA by email to Chrapot.
76Chrapot was not a director of Dao at the time of the events in question. Aspire sought to argue that he was a de facto director. In my view, this was a matter which ought to have been pleaded and it did not fall within the scope of the pleadings relied upon at trial. No amendment was sought by Aspire to allege this alternative claim. Additionally, had leave been sought, then as foreshadowed by the defendants, an argument would be raised that the proposed amendment was inconsistent and contradictory and therefore, should not be permitted.
77But assuming the matter could be raised in the absence of a pleading amendment, I was not persuaded on the evidence that Chrapot should be regarded as a de facto director of Dao. Chrapot was retained to act on behalf of Dao as its project manager and representative in respect to the development, according to the evidence of Sharma. He did play a role in the negotiations and attended meetings at which Sharma was also present. He negotiated the terms of the ESA and suggested amendments directly with Oren. Chrapot signed the ESA on behalf of Dao, as he was permitted to do under s49A(1)(a) of the Act. But these acts are insufficient for him to be treated as a director under s9AC of the Corporations Act. There was no evidence that Chrapot was engaged in any way, shape or form in the management of the company. He was not authorised to make decisions on its behalf. It was also clear from the evidence that Sharma was directing him in terms of what was agreed, in particular, the handwritten amendments which confirmed Dao’s stance that commission would only be payable upon settlement of the properties in question. I am satisfied there is no adequate evidentiary basis upon which the Court could make a finding that Chrapot acted as a de facto director of Dao.
78Additionally, I accept the evidence of the defendants’ witnesses to the effect that they never told Oren that Chrapot was a director of Dao. They were clear about this. It is also highly unlikely that Chrapot would make such a representation which he knew to be untrue. I consider that Oren incorrectly made this assumption merely because of Chrapot’s extensive involvement in their negotiations, as opposed to there being a positive representation by Chrapot or anyone else to this effect.
79I find that Aspire did not give Dao a copy of the signed ESA, as was required under s49A(1)(d). The provision of the signed ESA to Dao’s agent or representative was insufficient as the signed copy of the ESA had to be given to the person, being Dao. As a result of this breach, Aspire is prevented from suing or recovering commission under s50 of the Act. This finding is fatal to Aspire’s claim. For the sake of completion, I will however deal with the remaining two key issues.
(2) Does the ESA, properly construed, allow for the payment of any amount of commission and interest to Aspire when settlement of the sales of Lots 105 to 109 did not take place?
Aspire’s submissions
80Aspire submits that Annexure A and other terms of the ESA dealing with its entitlement to commission should take precedence over the handwritten “General Condition” on page 2 of the ESA, as contended for by Dao.
81The test to be adopted is what a reasonable businessperson would have understood the relevant terms of the ESA to mean. Firstly, the terms must be construed objectively and in light of the context and purpose of the ESA. To identify the purpose, the Court may have regard to the transaction, its background and the market at the time. Unless the contrary intention appears, the Court is entitled to approach its task on the assumption that Dao and Aspire intended to produce a commercial outcome.
82If the language of the ESA is deemed ambiguous or to hold multiple meanings, the Court may have regard to the surrounding circumstances of the ESA to assist.[24] Aspire contends that evidence of prior negotiations is receivable if they establish objective background facts known to both parties.
[24] Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at [352]
83Aspire submits that a reasonable businessperson in the position of Dao and Aspire at the time of the formation of the ESA, would have understood that Aspire was to be paid a commission in two instalments of 50 percent. The construction is plain for the reasons that follow:
(a) in the box next to the word “commission” on page 1 of the ESA, reference is made to Annexure A of the ESA, not to the handwritten “General Condition” on page 2;
(b) Item 1 on page 4 of the ESA provides that Dao agrees to pay Aspire commission on the terms of the ESA if the lots are sold; “Sold” referring to when Dao forms a binding contract with a purchaser to sell a particular lot in the Development, not when settlement of the sale of the relevant lot occurs;
(c) on page 8 of the ESA, Dao acknowledged that it was obliged to pay Aspire commission in accordance with Item 1 on page 4 of the ESA;
(d) the language of the second and third dot points in Annexure A provide for payment of commission to Aspire in two instalments;
(e) the market in which Dao and Aspire were operating at the time of formation. The market context is consistent with the text of the second and third dot point in Annexure A;
(f) the handwritten “General Condition” on page 2 of the ESA can be read consistently with the language of the second and third dot points in Annexure A; and
(g) the Court should take the approach that Dao and Aspire intended to produce a commercial result. Ignoring the text in the second box next to the word “commission” on page 1, the second and third dot points in Annexure A and Item 1 on page 4 would produce an uncommercial result in the circumstances.
84If the above does not resolve the conflict, Aspire says the Court can by receive evidence of the surrounding circumstances, limited to the objective facts known to both parties, at the formation of the ESA.
85Aspire argues its construction is supported by such objective facts, namely:
(a) Oren, Ferren, Sharma and Chrapot gave evidence that Oren said, in meetings between December 2021 and February 2022, that he would try and sell the lots if he was paid commission in two 50 percent instalments; and
(b) the handwritten “General Condition” on page 2 of the ESA was added to Chrapot’s draft on 22 February 2022. After noticing the handwritten “General Condition” was inconsistent with what Oren had agreed to do, he updated the ESA with Annexure A.
86Aspire submits the Court should delete the handwritten “General Condition” on page 2 of the ESA in its entirety. To do the opposite, as contended for by Dao, would require the Court to undertake “a greater surgery” to the ESA.
87Aspire notes that the defendants’ proposition that the handwritten “General Condition” on page 2 of the ESA operates as an “overarching control” or otherwise provides an “absolute position”, is not supported by authority.
88While Aspire agrees in cases of inconsistency, a “special” term is to be given precedence over that of an inconsistent “general” term, this principle is of no assistance in the present case. The reason being that both the note on page 2 of the ESA and the language of “Annexure A” fall within the category of a “special” term.
89Aspire notes the ESA does not include an express order of term. Unless either the handwritten term or Annexure A are characterised as “general”, the Court must construe those terms by reference to what a reasonable businessperson would have understood the terms of the ESA to mean.
Defendants’ submissions
90The defendants argue the Court should accept that the combined effect of the handwritten “General Condition” and the condition in Annexure A is that:
(a) commission is only payable if the contract settles;
(b) no commission is payable earlier, as any deposit received is not paid “to the developer”, but held by a stakeholder pursuant to s24 of the Sale of Land Act; and
(c) in the event that commission was paid earlier, and in the event of the contract not settling, it would need to be returned.
91This interpretation allows the handwritten “General Condition” and Annexure A to be read together consistently. The handwritten “General Condition” is to operate as an overarching control on when commission is ultimately payable.
92The terms are to be construed by what a reasonable businessperson would have understood them to mean, taking into consideration the language used by the parties, the surrounding circumstances known to them, and the commercial purpose to be secured by the contract.[25]
[25] cf Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]
93The defendants note that when the ESA was signed, Oren was aware that the ESA contained the handwritten “General Condition” that commission was payable at settlement and did not raise or query this with Chrapot or Dao.
94Where a contract is in standard form, subject to added special conditions, unless provided otherwise, the special conditions are to be given greater weight. If there is a conflict between a general and special condition, the latter ought to prevail. The defendants submit that the two clauses under consideration relating to commission are “specially negotiated clauses” and therefore take precedence over standard term provisions. Ordinarily, special conditions are to be given greater weight and if there is a conflict between a general and special condition, the latter will prevail. [26]
[26] Bedroff Pty Ltd v Rennie [2002] NSWSC 928 at [59]
95Dao maintains that it is standard practice in the property industry for commission to be refunded if sales targets for a development are not reached and finance cannot proceed. It was agreed in evidence that it would be reasonable for a developer to want to protect its position by having an arrangement where commission was only payable on settlement.
96Even if the Court finds that Annexure A prevails over the handwritten “General Condition”, the basis for 50 percent of the commission to be paid never arose. The developer never received the deposits. Instead, the deposits were held into Dao’s solicitor’s trust account as stakeholder and returned to the purchasers upon termination of the contracts.
97The defendants argue its interpretation of the contract is supported by the first page of the ESA, which provides for sale upon payment of the full purchase price or upon terms of payment and a 5 percent deposit. The ESA therefore expressly allows the agent to sell upon receipt of the 5 percent deposit. In those circumstances, even if the payment into the solicitor’s trust account was deemed to be payment “to the developer”, there would not be a threshold payment of the required 10 percent deposit which would trigger the payable 50 percent commission which Aspire seeks. Dao argues that the existence of this condition on the front page of the ESA supports its interpretation that liability to pay commission does not arise until settlement.
Consideration
98The resolution of the second key issue involves consideration of the terms of the ESA. The principles relating to the construction of contracts are well known and summarised in cases such as Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [27] and Blakely v CGU Insurance Ltd.[28] These were summarised by the Court of Appeal more recently in Adaz Nominees Pty Ltd v Castleway Pty Ltd [29] and are set out below:
[27](2015) 256 CLR 104 at [46]-[51]
[28](2017) VSCA 378 at [166]
[29][2020] VSCA 201 at [70] per Whelan and McLeish JJA and Riordan AJA
“the Court asks ‘what a reasonable businessperson would have understood those terms to mean.’ To answer that question, ‘the reasonable businessperson [is] placed in the position of the parties,’ and the Court applies the following principles:
(ll) The terms are construed objectively, and the subjective intentions of the parties are irrelevant.
(mm) The objective approach requires reference to the text and its ordinary meaning, together with:
(i) the context, being the entire text of the contract including matters referred to in the text; and
(ii) the purpose.
These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words.’ Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.
(nn) Unless a contrary intention appears in the contract, the court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result, and should construe it so as to avoid a commercial nonsense. However, the court does not weigh the commerciality of the agreement, and business common sense is a topic on which reasonable minds may differ.
(oo) If, after completion of this process, the language used in the contract ‘is ambiguous or susceptible of more than one meaning,’ then evidence of surrounding circumstances external to the contract is admissible to assist with interpretation of the language in question.
(pp) However, ‘evidence of the parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible. Although evidence of prior negotiations is admissible to establish objective background facts known to both parties and the subject matter of the contract, evidence of negotiations reflective of actual intentions and expectations is not receivable.
(qq) Post-contractual conduct is inadmissible to construe the terms of the contract. However, the parties’ subsequent communications may be relevant to determine whether the parties intended to enter into a binding contract.”
99By the terms of the ESA, Aspire was to endeavour to sell lots 105 to 109 in the development for Dao at a price of not less than $454,000, inclusive of GST. The agent’s estimate of the selling price is between $454,000 and $505,000 on page 1. The vendor’s asking price referred to on page 1 of the ESA is stated “As per annexure A”. Annexure A lists the net price for each lot at $454,000 with a retail price of $495,000. For each sale, the commission payable is stated in the sum of $41,000, being the difference between the net and retail prices.
100Aspire sold 4 of the 5 lots for $505,500 and one for $495,000. It invoiced Dao the sum of $122,500 applying the actual sale prices achieved against the net price, representing 50 of the total commission payable. Dao challenged this calculation and said that the amount of commission was capped under Annexure A at $41,000 per lot. In response, Aspire disputed this and said the amounts was not capped and the retail figures in Annexure A were indicative only. As a matter of construction, Annexure A does not say that the retail price is indicative only but Aspire says this is consistent with the price range listed on the first page. Had there been a contractual cap, then there would have been no need to specify a price range. This is yet another example of the imprecise drafting contained in the ESA in my view. But on balance, I consider that Aspire’s construction should be preferred, namely, that the figures for the retail prices set out in Annexure A are indicative only and that Aspire was entitled to claim commission by reference to the price range set out on page 1 of the ESA. Whilst I have found that Aspire is not entitled to commission because it breached s49A(1)(d), had it been necessary to do so, I would have found in Aspire’s favour for the amounts claimed.
101The obligation to pay commission is set out in Item 1 on page 4 of the executed ESA. [30] The vendor acknowledged on page 8 that it was obliged to pay the agent the agent’s commission in accordance with Item 1, if the vendor sells the property during the Exclusive Authority Period.[31]
[30] See CB 97, page numbered 2 of the ESA is in fact page 4 of the document
[31] CB 101
102Under the heading “General Conditions”, on page 2 of the ESA appear the handwritten amendments made by Chrapot as set out in paragraph 19 above. The parties agreed that the handwritten term under the heading “General Conditions” and the term as drafted by Oren in Annexure A can be described as special conditions, being conditions that were inserted and did not form part of the standard document.
103On the face of it, there is inconsistency between these two terms. The reason for that became apparent during the course of the evidence. Oren pressed for, and continued to press for, an arrangement whereby he would be paid 50 percent of the commission upon sale of the property and 10 percent of the deposit being paid. Sharma would not agree to this proposal and insisted upon the full commission being payable at settlement. It is somewhat curious that neither of the parties discussed the proposed handwritten amendments to the ESA with each other. Nor did they discuss the additional bullet points in Annexure A, as inserted by Oren to reflect his stance. Despite this potential lack of agreement about an essential term, the fact remains the parties signed a contract and it is this document which the Court is asked to construe objectively, putting to one side the parties’ subjective intentions.
104The handwritten amendment is in the body of the contract under the heading of General Conditions. The handwritten term provides that commission will only be paid on the settlement of the projects assuming a 10 percent deposit has been paid. The part about the 10 percent deposit is arguably otiose as settlement would not occur unless all moneys were paid, including any deposit. But the clause is unambiguous that commission will only be paid on settlement. In my view, the handwritten term qualifies Item 1 to impose a requirement that settlement must take place before commission is payable.
105The handwritten term is inconsistent with last two bullet points in Annexure A which refer to the 50 percent split. The first 50 percent is to be paid upon the contract being signed and a 10 percent deposit has been paid to the developer. Despite the parties’ submissions that these clauses can be read consistently with each other to support their respective stances, I am not persuaded that the two clauses can be read consistently. The two clauses are irreconcilable and it is impossible to read the two clauses together.
106Dao submitted that the obligation to pay commission did not arise under Annexure A in any event because the 10 percent deposits were never paid to the developer. It is undisputed that the deposits were held in the trust account of Herbert Smith Freehills and were subsequently returned to the purchasers when Dao terminated the relevant contracts of sale for the five lots. As the parties noted, the deposits could not be released in an off-the-plan development until such time as a plan of subdivision was approved. Aspire introduced the words “paid to the developer” in Annexure A. The handwritten term drafted by Chrapot says “assuming 10% deposit has been paid.” Both parties were aware of the obligation relating to stakeholders under s24 of the Sale of Land Act. In my view, a reasonable business person would understand that payment to the developer/vendor of the deposit would inevitably mean a payment to be held on trust on the latter’s behalf, subject to the applicable provisions of the Sale of Land Act. Therefore, I reject the defendants’ argument that the obligation to pay never arose in any event just because the deposits funds were not paid directly into the developer’s hands.
107If regard is had to the objective circumstances, the evidence relating to the prevailing market practice was inconclusive with support for each approach being given. On the one hand with off the plan developments, commission could be split or on the other, paid at settlement depending on the individual deal struck. Whilst an estate agent would wish to be paid for its efforts, conversely, a developer might wish to avoid having to pay commission when a development did not proceed to settlement. Both approaches are commercially reasonable. Oren had previously agreed to an arrangement involving 100 percent of commission being payable in respect of contracts involving properties in Truganina. Sharma said the commission in question would equate to up to 10 percent of the purchase price and it would be nonsensical for a developer to pay that sum without knowing whether the sale would settle or not. As a real estate agent, he said it is worth taking the risk of not being paid due to the volume of projects that might be proceed with higher commissions.
108I am not inclined to accept Aspire’s argument that the proper approach would be to delete the handwritten amendments written by Chrapot as a means of appropriate “surgery” as a last resort. Such a drastic step is not warranted or justified in my view.
109In my view, the handwritten clause should prevail and override the conflicting terms contained in Annexure A. The handwritten clause forms part of the General Conditions in the body of the contract as opposed to being contained in an annexure and should be given precedence for that reason. It appears first in the document and is the dominant provision. Therefore, I consider the appropriate way to construe the ESA is for the wording in Annexure A to give way to the hand written condition. [32] The hand written clause qualifies Item 1 in the ESA by setting out a precondition for the payment of commission, namely, only upon settlement and not otherwise.
[32] Heydon on Contract, Lawbook Co 2019 at [8.640]
110Consequently, I find that the ESA properly construed imposed an obligation upon Dao to pay commission only upon settlement of the lots in question. As settlement did not occur, it follows that Aspire’s entitlement to be paid commission did not arise.
(3) If Dao is liable to pay Aspire an amount of commission and interest under the Agreement, is Chrapot also liable to pay that amount to Aspire?
Aspire’s submissions
111Aspire claims that Chrapot is personally liable for the unpaid commission as a signatory under clause 4 of the general conditions of the ESA.
112Clause 4 provides as follows:
“Any signatory for a proprietary company Vendor shall be personally liable for the due performance of the Vendor’s obligations as if the signatory was the Vendor. If required by the Agent the signatory shall procure the execution by all Vendor company directors of a guarantee to be prepared by or on behalf of the Agent.”
113Whether Chrapot intended to be bound is a matter to be determined objectively. The Court can have regard to the subject matter of the ESA, the status of the parties and also the ongoing relationship between the parties.
114Aspire notes that Chrapot negotiated, amended drafts of, executed, and signed the ESA in eight different places. Chrapot also received a copy of the ESA.
115Considering Chrapot’s legal and business background, Aspire argues that Chrapot would be aware of the inherent risks involved in the position he placed himself in by signing the ESA.
116Aspire maintains that Chrapot’s claim that he did not read clause 4 of the ESA, that it was not brought to his attention, and that he did not understand that he was potentially taking on personal liability for Dao, is inconsistent with the evidence Chrapot gave under cross-examination.[33]
[33] T58, L27-28; T59, L1-10
Dao’s submissions
117The defendants submit that the word “signatory” in clause 4 of the ESA remains undefined. As a result, Chrapot cannot be the signatory for a proprietary company vendor. Dao contends that Chrapot acted as an agent of Dao in relation to the transaction. For Chrapot to act as a signatory, he would be required to be a director of the company.
118The proper approach is to inquire whether there is an intention that the signatory be personally bound. This intention is to be found objectively, taking into consideration the whole contract and surrounding circumstances. Dao submits it is unlikely that Chrapot would willingly agree to take on the obligations of Dao, in which he held no interest as a stakeholder or otherwise. Objectively interpreted, an agent would not agree to be personally liable for the obligations of a company. This is in the context of an authority that will routinely be signed by agents who have no financial or other interest in the company for which they act as agents.
119Chrapot did not read clause 4 of the ESA and it was not brought to his attention. He did not understand that he was potentially taking on any personal liability for Dao. Nor was the clause positioned prominently in such a way as to serve no other purpose than to make him personally liable.[34] Therefore, Dao argues Chrapot did not understand the potential risk he was taking on and should not be found liable.
[34] cf TW Timber Treatment Pty Ltd v Giddings [2022] VSCA 147 [53], [55]
Consideration
120As I have already found, Aspire is not entitled to recover commission in circumstances where it did not comply with s49(1)(d) of the Act. I have further found, as a matter of construction of the ESA, that any entitlement to be paid commission had not yet arisen because settlement did not take place. Consequently, Chrapot cannot be held liable for commission when none is payable by Dao to Aspire. But if I am wrong about these earlier findings, I would not have been persuaded that Chrapot was personally liable to pay commission to Aspire for the following reasons.
121The issue of whether a director was liable as signatory under a guarantee was recently considered by the Court of Appeal in TW Timber Treatment Pty Ltd v Giddings.[35] The Court of Appeal described the approach as follows:
“… [t]he proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound.”[36]
[35][2022] VSCA 147
[36]ibid at [49] (referring to Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160)
122The evidence demonstrated that Chrapot was the project manager engaged by Dao in respect to the development and acted as its agent or representative in the negotiations with Aspire. He was not a director of Dao, nor did he hold any interest or shareholding in the company. Although he signed the document as signatory pursuant to clause 4, it is clear that he was not doing so in the capacity of a director of a proprietary vendor company but as its agent.
123As the case law dictates, the mere fact that Chrapot signed the document as signatory does not necessarily mean he is therefore personally bound. He was able to sign the ESA in his capacity as an agent or representative for Dao in accordance with s49A(1)(a) of the Act. It would be a curious outcome if the agent or representative of a vendor would agree to accept personal liability of the obligation to pay commission to the estate agent when the person signing received no benefit at all in respect of the transaction. As a matter of construction of the ESA as a whole, there is nothing to suggest that Chrapot was objectively agreeing to take on a personal liability to Aspire.
124Having regard to the matter objectively, I am not satisfied Chrapot intended to be legally bound by signing the ESA in circumstances where he was merely acting in his capacity as Dao’s representative or agent for the purposes of the Act and did not stand to gain any benefit in doing so.
125Overall, I am not persuaded that Chrapot is jointly and severally liable to pay commission in accordance with clause 4, on the assumption that Dao was also liable. Therefore, the claim against Chrapot was not made out.
Conclusion
126For the foregoing reasons, Aspire failed to establish an entitlement to be paid commission with the result that its claim will be dismissed.
127Subject to hearing from the parties, I propose ordering that Aspire pay the defendants’ costs of and incidental to the proceeding, including any reserved costs on the standard basis, to be taxed in default of agreement.
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Certificate
I certify that these 33 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 22 April 2024.
Dated: 22 April 2024
Associate to Her Honour Judge A Ryan
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