Challenger Group Holdings Ltd v Concept Equity Pty Ltd

[2008] NSWSC 801

CITATION:	Challenger Group Holdings Ltd v Concept Equity Pty Ltd [2008] NSWSC 801
HEARING DATE(S):	21, 22 July 2008
JUDGMENT DATE :	7 August 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Plaintiff's claim dismissed. Verdict for the defendant for $2,051,500 plus interest.
CATCHWORDS:	CONTRACTS [105]- Implied terms- Construction of introduction agreement- Agreement expressed two situations in which commission is payable, only one of which expressly included an element of causation- Whether implied term for the situation that does not expressly require causation that commission only payable if defendant's introduction an effective cause of transaction- Held that no such term is implied given inconsistency with express agreement. WORDS & PHRASES- "Carrying on business"- Single transaction ordinarily does not amount to carrying on business. WORDS & PHRASES- "Negotiate"- Held that introducing a party or transaction does not amount to negotiation for the sale, purchase or exchange or any other dealing with or disposition of businesses or professional practices.
LEGISLATION CITED:	Auctioneers, Stock and Station and Real Estate Agents Act 1941, s 3 Property, Stock and Business Agents Act 1941, ss 3, 42 Property, Stock and Business Agents Act 2002, ss 3, 8, 9, cll 3, 14 of Schedule 1
CASES CITED:	Adams v Cape Industries plc [1990] BCLC 479 Brian Cooper & Co v Fairview Estates (Investments) Ltd (1987) 282 EG 18 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303 David Leahey (Aust) Pty Ltd v McPherson's Ltd [1991] 2 VR 367 Esber v The Commonwealth (1992) 174 CLR 430 Farrell v Bannister (1952) 52 SR (NSW) 73 Fitzgerald v Masters (1956) 95 CLR 420 Free Lanka Insurance Co Ltd v Ranasinghe [1964] AC 541 G F Heublein & Brother Incorporated v Continental Liquers Pty Ltd (1962) 109 CLR 153 Green v Bartlett (1863) 32 LJ CP 261; 14 CB (NS) 681; 143 ER 613 Hills v University College Hospital Board of Governors [1956] 1 QB 90 Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 Maxwell v Murphy (1957) 96 CLR 261 Mercer v Dalley [1934] VLR 14 Midgley Estates Ltd v Hand [1952] 2 QB 432 Millar v Radford (1903) 19 TLR 575 Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 Okura & Co Ltd v Forsbacka Jernverks Aktiebolag [1914] 1 KB 715 Re Mac Gowan [1891] 1 Ch 105 Republic of Costa Rica v Erlanger (1876) 3 Ch D 62 Sims v Gawne [2005] NSWSC 750 The County Homesearch Co (Thames & Chilterns) Ltd v Cowham [2008] 1 WLR 909 Total (Australia) Ltd v Registrar of Companies [1969] VR 821 Tribe v Taylor (1876) 1 CPD 505 Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31
PARTIES:	Challenger Group Holdings Ltd (P) Concept Equity Pty Ltd (D)
FILE NUMBER(S):	SC 2090/05
COUNSEL:	J E Marshall SC and G Lucarelli (P) N Hutley SC and R Carruthers (D)
SOLICITORS:	Minter Ellison (P) K P Farmer & Associates (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Thursday 7 August 2008

2090/05 – CHALLENGER GROUP HOLDINGS LTD v CONCEPT EQUITY PTY LTD

JUDGMENT

1 HIS HONOUR: The basic point for decision in this case is whether the plaintiff is liable to pay the defendant commission. That liability is said to arise from a letter of 30 April 1997 signed by a then director of the plaintiff and by Mr M H Rose who at all material times has been a director of the defendant. The defendant alleges that because of an introduction it brought about in 1999, and events which occurred in 2004, it is entitled to commission.

2 The vital letter is on the defendant’s letterhead and, so far as is relevant, reads as follows:

“I am writing to confirm that Concept Equity Pty Ltd would like to introduce to you a number of merger/acquisition opportunities in the financial services sector, and to also provide its services which include the review of strategic directions and issues, the negotiation and structuring of agreements and the co-ordination of lawyers and accountants.
Concept would be pleased to introduce these parties and/or provide its services to you on the understanding that, in the event that Challenger (or any related or associated entity):
(1) forms a business relationship or makes a business agreement with any party introduced by Concept (including any related or associated entity of the introduced party); and/or
(2) uses Concept’s services which results in the formation of a business relationship or the making of a business agreement;
then Challenger will pay to Concept a fee based on the total consideration, value or benefit of the business agreement or business relationship formed …
With respect to any introduction, if, within a 30 day period prior to the date on which Concept introduces a party, Challenger has already entered into negotiations with that party, then Challenger will not be obliged to pay Concept the above fee. If this is the case we would request that you immediately notify us that Challenger has been previously negotiating with that party within the 30 day period.
If you would like to pursue these introductions and/or use our services on the terms outlined, could you kindly confirm your agreement and acceptance by executing where indicated and returning a copy to us by facsimile.”

That was done.

3 The plaintiff issued a summons on 23 March 2005 to commence these proceedings in which it claimed that it was under no liability to the defendant. The defendant filed a cross-claim seeking $2,051,500.00, its commission. There is no dispute as to the quantum of the claim. The trial was conducted on the basis that the defendant bore the onus and its evidence was presented first.

4 There are three issues presented for decision:

(A) Whether on the true construction of the letter of 30 April 1997 and in the events which have happened, the defendant is entitled to a fee where its introduction was not a cause of the 2004 deal.

(B) Can it be said that the agreement flowing from the letter of 30 April 1997 was abandoned or otherwise lapsed?

(C) Is the defendant’s claim defeated by the fact that the defendant did not have the appropriate licence to operate as a business agent in NSW or Victoria at the relevant time?

I will deal with these matters in turn.

5 (A) The plaintiff says that on the true construction of the agreement flowing from the letter of 30 April 1997 (I will in future merely call this “the agreement”), it is necessary for the defendant to show that it not only introduced the person with whom the plaintiff did the deal in 2004 (APG), but was also the effective cause of that deal being done.

6 The defendant says that there are two numbered paragraphs in the agreement setting out two different situations, situation (1) where there was an introduction, and later a business relationship, and situation (2) where the defendant was the effective cause of a deal. The presence of the second shows that causation was not a factor in the first.

7 Although a whole lot of material was placed before the Court both in affidavit form and documentary form, it is quite clear, indeed common ground: (a) that the defendant did introduce APG in 1999; and (b) that the defendant was not the effective cause of the deal in 2004.

8 The matter was heard before me on 21 and 22 July 2008. Mr J E Marshall SC and Mr G Lucarelli appeared for the plaintiff, and Mr N Hutley SC and Mr R Carruthers appeared for the defendant.

9 Mr Marshall put that there were a whole host of cases which showed that as a general rule, the court implied in an agreement to pay commission on introduction that the introduction was the effective cause of the subsequent contract. He acknowledged that the greater proportion of these cases involved real estate agents, but said that they were not so confined.

10 Mr Hutley, on the other hand, said that each contract must be considered on its terms and that no such implied term should be implied where one has a two part arrangement such as the present case. He also put that, even if this were not the case, the implied term relied on by Mr Marshall was virtually restricted to the case of a real estate agent and there was a very substantial difference between that situation and the situation of his present client.

11 There is no need to recite all of the numerous cases which Mr Marshall relied on for the proposition that ordinarily, unless the relevant contract of agency clearly specifies otherwise, where a real estate agent is involved, commission payable to an agent on the basis that he or she has introduced a purchaser is only payable if the purchaser completes the contract and the agent is the effective cause of the sale. One reason for this is that it is said that, commercially, people expect to pay the commission out of the proceeds of sale. In Midgley Estates Ltd v Hand [1952] 2 QB 432 at 435, Jenkins LJ said:

“So far as any general principle is deducible from the authorities, their effect may, I think, be thus summarised: The question depends on the construction of each particular contract, but prima facie the intention of the parties to a transaction of this type is likely to be that the commission stipulated for should only be payable in the event of an actual sale resulting. … “

12 Generally speaking (because individual contracts may make other arrangements), the mere fact that an agent has introduced a purchaser is not sufficient for him or her to gain commission: it is not sufficient to show that the introduction is a causa sine qua non. It is necessary to show that it is an effective cause in bringing about the sale: Millar v Radford (1903) 19 TLR 575; Joske and Lloyd, Remuneration of Commission Agents, 3rd ed (Law Book Co, Sydney, 1957) at p 27.

13 In Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 449, McHugh and Gummow JJ said that the terms that are sought to be implied in the instant case:

“… had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description.”

14 Gummow J took this expression up in his judgment in an estate agent’s commission case Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 at 374. At 375 his Honour said:

“The notion of ‘effective cause’ reflects the requirement expressed in a long line of cases that it is not enough that the engagement of the agent to find a purchaser or to introduce a purchaser was a step without the taking of which the sale would not have been effected. Something more immediate is required if the criterion of contractual liability is to be satisfied.”

15 His Honour relied, inter alia, on a decision that has been cited to me, the decision of the Court of Common Pleas in Green v Bartlett (1863) 32 LJ CP 261 (there is also a report although not as detailed in 14 CB (NS) 681; 143 ER 613).

16 Mr Hutley noted that Moneywood and all the cases cited by Mr Marshall were estate agent cases. He says that the present case is a case of agency sui generis.

17 Mr Hutley relied on the decision of Tadgell J, affirmed by the Appeal Division in Victoria, in David Leahey (Aust) Pty Ltd v McPherson’s Ltd [1991] 2 VR 367. In that case a business broker (Leahey) wrote to a company setting out the terms upon which it would act on the company’s behalf in the acquisition of companies or businesses and quoted a fee. That offer was accepted. This was in 1982. In 1982 Leahey introduced a prospect; however, nothing happened until 1987 when the business was acquired. Leahey sought commission. At 375 Tadgell J said that the plaintiff was not in the position of a selling agent or an agent of any kind. Its claim was entirely contractual and it was necessary to isolate the event provided for by the contract that gave rise to the obligation to pay commission. At 376 his Honour said that the case before him was not one where it could be said to be artificial to suppose that the parties intended that the plaintiff could earn a fee simply by introducing a company or business which independently of any further action by it, the defendant later decided to acquire. Indeed, that seemed to be precisely what the parties did contemplate.

18 Earlier on p 376 his Honour noted that Leahey had no authority to sell nor to buy; it had no power to be involved with any of the negotiations. Accordingly:

“ … The plaintiff might therefore be excluded, if the defendant chose, from all dealings between the defendant and the vendor of the company submitted or introduced to it by the plaintiff. In the light of this it is not in my opinion permissible to imply an additional prerequisite to the plaintiff’s earning a fee, namely that it should be the effective cause of accomplishing the acquisition.”

19 The Full Court (Peter Murphy, Fullagar and Vincent JJ) dismissed the appeal, Peter Murphy J saying at 388 that defendant’s counsel:

“ … submitted to this court that … the principle … is not confined to the common contract of an estate agent with a vendor of a property, but extends to all similar contracts, even to a contract for an introduction of capital into a business, as was to be seen in Tribe v Taylor (1876) 1 CPD 505.
It may, I think, be accepted that the principle does so extend, but each case must in the first place depend upon the terms of the contract made between the parties.”

However, his Honour held that the implication should not be made in Leahey’s case.

20 It seems to me with what the Full Court said and also with what the Common Pleas Division said in Tribe v Taylor that the principle on which Mr Marshall relies does extend beyond estate agents. However, that still leaves the question as to whether the present agreement is one in which the term should be included.

21 Mr Hutley says that Leahey’s case is against the plaintiff’s contention and that Leahey’s case is very close to the present case. There was a similar case in England: Brian Cooper & Co v Fairview Estates (Investments) Ltd (1987) 282 EG 18. That was a decision of the English Court of Appeal. Cooper was a firm of estate agents, Fairview wished to let out its new office building. The agreement with the agent was that the agent would get commission “should you introduce a tenant … who subsequently completes a lease.” The agent introduced a prospective tenant in 1982. The tenant lost interest; however, as a result of other people’s efforts, its interest was revived at the end of 1983 and it took the lease. The agent claimed commission.

22 The leading judgment was given Woolf LJ. His Lordship held that there was no necessity to imply a term and that the language of the contract was inconsistent with the implication of a term imposing an additional implied requirement that the agent must be at least an effective cause for the lease being granted. His Lordship relied on what had fallen from Viscount Simon LC in Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 119:

“There is, I think, considerable difficulty, and no little danger, in trying to formulate general propositions on such a subject, for contracts with commission agents do not follow a single pattern and the primary necessity in each instance is to ascertain with precision what are the express terms of the particular contract under discussion, and then to consider whether these express terms necessitate the addition, by implication, of other terms. … “

23 That decision was recently followed by the Court of Appeal in The County Homesearch Co (Thames & Chilterns) Ltd v Cowham [2008] 1 WLR 909. That was a case where there was a real estate agent advising a purchaser rather than a vendor. The leading judgment was given by Longmore LJ with whom Clarke MR and Richards LJ agreed. At 914 Longmore LJ said there was little doubt that the usual implied term had to be implied unless the contract indicates otherwise. He then looked to see the rationale of such an implied term. He said at 915 [14] that it appeared to be to avoid the client having to pay two lots of commission: (a) to the agent who introduced; and (b) to the agent who was the effective cause of the sale. That rationale did not apply where a purchaser instructed an agent. Indeed, the instant contract seemed to indicate (though it did not say so expressly), that there would not be any other agent involved. When one read the contract’s express terms, there were terms inconsistent with the implication and accordingly it should not be drawn.

24 The state of the authorities appears to be that the implication suggested by Mr Marshall is prima facie drawn, but in reported cases outside the area of vendors’ real estate agent, the few reported cases indicate that courts are not slow to find inconsistency which will preclude the implication.

25 It was with this background then that I turn to the actual words of the current contract. As one would expect with a letter sent by one commercial person to another, it is not the model of precision. The word “introduce” or “introduced” or “introductions” is used seven times in the letter. The first use refers to an introduction of merger/acquisition opportunities. This flavour also seems to permeate through the first line of the penultimate paragraph and the first line of the ultimate paragraph, though this is a little ambiguous. However, the second paragraph talks about introducing “these parties”. There has been no reference to “parties” previously. However, in (1) being part of the second paragraph, there is again reference to making a business agreement with “any party introduced by Concept”.

26 Mr Marshall puts that the document must be construed as containing a causal nexus between an opportunity introduced about a merger/acquisition and the making of a business arrangement. He thus says that on a proper construction of the document, there is causation in both limbs, and that any doubt should be resolved against the defendant by application of the contra proferentem rule.

27 Mr Hutley reads the introductory paragraph as involving introductions to people who may wish to merge, and that this fits in with the words “these parties” in the second paragraph. There are therefore two situations where commission is payable: situation 1, where there is (a) an introduction; and (b) later the formation of a business relationship or agreement (no causation); and situation 2, where the defendant’s services are used and the use of those services result in the formation of a business relationship. It is put that if it is not read in this way, situation 2 is really otiose. Moreover, if it is read in this way, then the reference to causation in (2) indicates that it is not an element of (1). It is to be noted that the two limbs are linked with the bastard conjunction “and/or”. Whatever the exact significance of this, it shows that there are two distinct heads of liability.

28 It is odd that an experienced businessman such as the person who was the CEO of the plaintiff in 1999 would have added his name to a letter which is so phrased and which could expose his company to millions of dollars in commission. However, no argument has been put to me that the document should be interpreted otherwise than on its wording, nor was any argument put that it was void for uncertainty.

29 Although both constructions are open, in my view, bearing in mind the way courts have construed this sort of agreement in the past, the indications are that Mr Hutley’s approach is the correct one. There are two situations in which commission is payable, only one of which involves an element of causation. Even though what occurred in making the deal took place five years after the agreement and between corporations which were governed and constituted quite differently from when the agreement was made, the corporate entities were the same and the plaintiff must abide by its contract.

30 Accordingly, subject to what is discussed in headings (B) and (C) the defendant is entitled to succeed.

31 (B) Two defences were called into play by the plaintiff in addition to illegality, the defence which I will deal with in section (C). The two defences were: (i) that the agreement had lapsed; and (ii) that it had been abandoned.

32 Submission (i) is inspired by the words of Tadgell J in Leahey’s case at page 377 line 35 where his Honour said:

“It might very well be that, if the defendant did not acquire the company or business within a reasonable time of its submission or introduction by the plaintiff, the parties should be assumed to have agreed by implication either to treat the submission or introduction as having lapsed or as being inoperative under the agreement, or that each party might have a right to elect that the agreement should not apply to the submission or introduction.”

As Tadgell J indicated at p 378, this gets very close to a submission that the consummation of the deal had to take place within a reasonable time.

33 Mr Hutley says that because indeed the deal was consummated, it shows that a reasonable time had not expired. With respect, I consider that is a little too glib. However, the onus of proving that something did not take place within a reasonable time or that the parties should be imputed with the intention that introductions would only be operative for a certain while and then lapse, is on the plaintiff.

34 I do not consider that there is sufficient material there to show that there was any such intention or if there was, more than a reasonable time had elapsed.

35 I might note here that there were over 3,000 pages of material tendered and a large number of affidavits, but the effect of most of the plaintiff’s evidence was that by 2003, there had been a fair turnover of the high executives of the plaintiff and that no one had in their mind any thought that such an agreement could exist rather than knowing it did exist, but thinking that it expired.

36 Accordingly, in my view, this defence does not run.

37 (ii) As to abandonment, as I understand it, the current theory is that abandonment of a contract comes about when one party of the contract says, expressly or by implication: “I offer to put an end to the contract” and the other party says “I accept”. The offer and acceptance may be by implication, even implication from long silence. As Dixon CJ and Fullagar J said in Fitzgerald v Masters (1956) 95 CLR 420 at 432:

“What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … ‘the matter is off altogether’.”

As Chitty on Contracts (28th ed, 1999) says at [23-027], noting considerable authority in the footnote:

“The party seeking to establish abandonment of a contract must show that the other party so conducted himself as to entitle him to assume, and that he did assume, that the contract was agreed to be abandoned sub silentio.”

There is not that evidence here.

38 (C) The parties agreed that the proper law of the contract is NSW. Although the defendant is a Victorian company and its Chief Executive Officer resides in Victoria, the introductions were made in NSW. It would seem to me that the whole question as to whether there was any illegality in the contract as performed must be judged by the law of NSW. There was a very late amendment made to the defence to cross-claim to plead illegality as performed by the law of Victoria but I consider that I can just put that aside as irrelevant.

39 In the period 1999 to 2004, the activities of business agents in NSW were restricted by first the Property, Stock and Business Agents Act 1941 and more latterly by the Property, Stock and Business Agents Act 2002.

40 The 1941 Act was originally called the Auctioneers, Stock and Station and Real Estate Agents Act. Prior to 1957 there was also the Business Agents Act 1935. In 1957 the 1935 Act was repealed and combined with the 1941 Act. However, in 1957 the definition from the 1935 Act was not carried across into the 1941 Act as amended. As at 1957 (see Red Statutes Vol 1, p 174), “business agent” was defined as meaning:

“Any person (whether or not such person carries on any other business) who for reward (whether monetary or otherwise) exercises or carries on business as an agent for performing any of the following functions, namely:-
(a) selling, buying or exchanging or otherwise dealing with or disposing of; or
(b) negotiating for the sale, purchase or exchange or any other dealing with or disposition of,
hotel businesses, residential businesses, boarding-house businesses, store keeping businesses, manufacturing businesses or any trading businesses whatsoever or any share or interest in or concerning or the goodwill of or any stocks connected with any of such businesses, but does not include a business sub-agent in his capacity as such.”

41 The definition remained the same down to the words “or disposition of,” in (b) and in its final version continued as follows:

“or
(c) compiling for publication or compiling and publishing a document that contains a list relating solely or substantially to the acquisition or disposal by any person of,
businesses or professional practices or any share or interest in or concerning or the goodwill of or any stocks connected with businesses or professional practices.”

42 “Real estate agent” as at 1957 was defined as meaning:

“A person (whether or not such person carries on any other business) who for reward (whether monetary or otherwise) carries on business as an agent for -
(a) the sale, purchase, exchange, letting or taking on lease of land, other than land used for agricultural or pastoral purposes; or
(b) the collection of rents payable in respect of any lease or letting of land other than land used for agricultural or pastoral purposes.”

43 As at the time just before the Act was repealed the definition had expanded considerably and in its final form read as follows:

“Real estate agent means a person (whether or not the person carries on any other business) who, for reward (whether monetary or otherwise), carries on business as an agent for:
(a) inducing or attempting to induce or negotiating with a view to inducing any person:

· to buy, sell, exchange, lease, assign or otherwise dispose of any land, or

· to make an offer to buy, sell, exchange, lease, assign or otherwise dispose of any land, or

· to accept an offer to buy, sell, exchange, lease, assign or otherwise dispose of any land, or

· to enter into a contract for the buying, selling, exchanging, leasing, assigning or other disposal of land, or

(b) buying, selling, exchanging, leasing, assigning or otherwise disposing of any land, whether or not an auction is involved, or
(c) collecting rents payable in respect of any lease of land, or
(d) compiling for publication or compiling and publishing any document that contains a list relating solely or substantially to the acquisition or disposal by any person of land,
but does not include a person who carries on business as such an agent in respect of any parcel of land used for agricultural or pastoral purposes with an area of more than 2.5 hectares.”

44 The 2002 Act contained reworded definitions of both business agent and real estate agent. The problem with the 1941 Act for the defendant is that section 42 provides that no person is entitled to recover any commission as a business agent unless he or she was the holder of a business agent’s licence at the time of performing the service (s 42(1)(c)).

45 If the 2002 Act applies, then s 9(2) provides that a corporation is not entitled to bring any proceedings to recover any commission, fee, gain or reward for any service performed by the corporation as an agent unless it was licensed at the time of performing the service. The 1941 Act was repealed and the 2002 Act came into force on 1 September 2003.

46 In Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303, Lindgren J held that where a person carries on the business of a real estate agent, if he or she negotiates, it matters not that that person has no power to enter into a contract. The words “as an agent for others” in the legislation mean at least “not as party principal”.

47 Mr Hutley basically has four points as to why neither Act affects his client, namely:

1. The defendant has not been shown to be a person who carries on business in NSW;

2. The transaction was not concerned with businesses or professional practices;

3. The 1941 Act has been repealed; and

4. The 2002 Act did not have any retrospective effect.

48 I will deal with each of these matters in turn. However before I do so, I must note that Mr Hutley compared the changes that were made to the definition of “real estate agent” which were not correspondingly made to the definition of “business agent”. I was interested in this line of thinking, but in the end I do not consider that it assists me in construing the definition of “business agent”.

49 Mr Hutley also made submissions as to the non-applicability of the corresponding Victorian legislation.

50 1. At all material times the defendant operated from Melbourne. It is clear that the mere fact that some dealings in the course of business life happen outside a home state does not of itself mean that the corporation is carrying on business outside the home state.

51 Mr Hutley referred to Mercer v Dalley [1934] VLR 14, where Lowe J said at 16 that whilst a single act may be sufficient to show that a person is carrying on business if it is done in circumstances which indicate an intention that other acts will follow, by itself it is not sufficient. In Farrell v Bannister (1952) 52 SR (NSW) 73, the Full Court reached the same view, that is, that a single transaction ordinarily does not amount to carrying on the business of a real estate agent. Lindgren J in Colbron’s case took the same view.

52 There are a whole host of cases dealing with when a company based overseas is present here for the purpose of serving it here and in the old days as to when a foreign company needs to be registered in the state. It is not necessary to refer in detail to these cases, but I will mention some and the basal proposition that flows from them. In Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31, Wilcox J held that continuity was fundamental to the action of carrying on business. In Okura & Co Ltd v Forsbacka Jernverks Aktiebolag [1914] 1 KB 715, it was held that a situation whereby a permanent agent in England who had no authority to enter into contracts of sale received orders which he passed on to head office was not carrying on business in England. In Adams v Cape Industries plc [1990] BCLC 479 at 506, Slade LJ, who gave the judgment of the Court of Appeal, summarised the law by saying that an overseas corporation will be considered as present in England if it has established a fixed place of business in England, and for more than a minimal period of time it carried on its own business from those premises or its representative has for more than a minimum period of time been carrying on the company’s business from some fixed place of business.

53 It would seem to me on the authorities that if the present was the only transaction in which the defendant was concerned, then it could not be said that the corporation was carrying on business in NSW. Just what the business of the defendant was only appears from the affidavits of Mr Rose. He says that he has advised and acted on behalf of a number of Australian international companies and has been responsible for a number of mergers, acquisitions and takeovers over the past 25 years. The letter of agreement was drawn up because it was contemplated between the parties that there would be a few opportunities coming up. Challenger was Concept’s primary client from 1997 until 2001. There were, in the period 1997 to 1999 quite a number of deals which were put up by the defendant to the plaintiff and, as far as one could see, they were put up to the plaintiff in NSW where the plaintiff’s office was. The plaintiff was the defendant’s main customer. Even if there had been one transaction, the conversation which brought about the “blanket appointment” (which was how the present agreement was described) showed that the parties intended a series of introductions.

54 It seems to me on the paucity of evidence I have, Concept was at all material times carrying on business in NSW.

55 2. It will be remembered that under the 1935 Business Agents Act, the type of conduct that was being controlled was, inter alia, negotiating for the sale, purchase or exchange of hotel businesses, residentials, boarding house businesses, store-keeping businesses, manufacturing businesses or any trading business whatsoever. That definition was transferred into the 1941 Act in 1957. Later on, the specific reference to the types of business in the definition was replaced with the words “businesses or professional practices”.

56 “Business” is a fairly flexible word and it obviously extends beyond hotels, shops etc. Clearly it includes transactions with the sale of accountants and solicitors practices. However, the word is not one which extends to all activities. Stroud’s Judicial Dictionary, 7th ed, Vol 1 at p 334 shows the width of the operation of the word. For instance business includes running a hospital: Hills v University College Hospital Board of Governors [1956] 1 QB 90.

57 The words “businesses or professional practices” again indicate a relatively small affair.

58 I have very much doubt as to whether the merger of two large financial entities by way of scheme of arrangement is within the concept of dealing with or disposing of businesses or professional practices.

59 However, it is not necessary to go that far.

60 The action sued upon is the action of introducing. There was never any power in the defendant to sell, buy, exchange or otherwise dispose of property. Nor was there any compiling for publication of any list. Accordingly, if the 1941 Act is to apply it is because Concept was negotiating for the sale, purchase or exchange or any other dealing with or disposition of businesses or professional practices. Lindgren J in the Colbron case makes some observations as to the extent of the term “negotiation” without coming to any conclusion. In its present context, the word usually means the arrangement of a sale and purchase, that is obtaining and finally settling all the terms and conditions and the price; see Re MacGowan [1891] 1 Ch 105. That is not the sort of task that the defendant was involved in. All that the defendant did or was expected to do was to introduce a party or transaction and need do nothing further. This is not negotiation.

61 Accordingly, it would seem to me that one did not need a business agent’s licence to do what the defendant did in this case.

62 3 and 4. It is accordingly unnecessary to deal with the question of repeal. The argument centres on whether, on the repeal of the 1941 Act, there was an accrued right or privilege. However, there is also the problem of the wording of Part 2 of Schedule 1 of the 2002 Act. Clause 3 of Schedule 1 is headed “Licences and certificates of registration under repealed Act” and provides as follows:

“(1) A person who was the holder of a licence or certificate of registration under a provision of the repealed Act immediately before its repeal is taken to be the holder of the corresponding licence or certificate of registration under this Act.
(2) The corresponding licence or certificate of registration:
(a) is taken to have been issued subject to the same conditions to which it was subject under the repealed Act, and
(b) remains in force for the remainder of the period for which it was issued.
(3) Section 8 applies in respect of a service performed by a person before the commencement of that section as if a reference in that section to a licence included a reference to the corresponding licence under the repealed Act.”

63 However, the 2002 Act splits licences into two categories, namely s 8 which deals with natural persons and s 9 which deals with corporations. Mr Hutley says that for some reason or other, the legislature has in clause 3.3 dealt with the situation where there is no licence in the case of an individual where the relevant act was done before the 2002 Act came into force, but has never dealt with the situation where it was a corporation that is involved. Accordingly, s 9 cannot apply under the circumstances.

64 Mr Marshall says that that cannot be right, it is too artificial a way to approach the clause. First he says there is a clear error that one must read clause 3.3 as referring both to ss 8 and 9. However, even if one does not take that bold step, clause 14 in Schedule 1 (“unless the context otherwise indicates or requires, a provision of this Act extends to any act or omission occurring before the commencement of the provision”) and sub-clauses 1 and 2 of clause 3 can only be read as meaning that if one did not have a corresponding licence at the time of the relevant conduct, then one cannot sue.

65 I have very much sympathy for the plaintiff’s position, but the legislation is penal legislation. Even apart from criminal penalties, a defendant like the present one would lose some $2 million if it could not maintain this action. Accordingly, one has to be fairly conservative and literal in the way in which one approaches the section.

66 My attention was called to the decision of Hamilton J in Sims v Gawne [2005] NSWSC 750. That case considered whether a partnership agreement to conduct a real estate agency was affected by either the 1941 or 2002 legislation. The basal problem was that one of the partners had not quite got his licence at the time when the agreement was entered into. Hamilton J considered the approach was, in the light of clause 14, to look at the legislation as requiring a seamless transition so that if a licence was acquired under one Act, one was in good stead under the later Act, and vice versa.

67 The decision does go in Mr Marshall’s favour. However, apart from the matters that I have already said incline me to go the other way, the fact is that Hamilton J was not referred to sub-clause 3 of clause 3 of Schedule 1 of the 2002 Act.

68 Section 42 of the 1941 Act operated to stop a person bringing any proceeding in any court to recover commission. It was purely a procedural section. Ordinarily, as Mellish LJ said in Republic of Costa Rica v Erlanger (1876) 3 Ch D 62 at 69:

“No suitor has any vested interest in the course of procedure, nor any right to complain, if during the litigation the procedure is changed, provided, of course, that no injustice is done.”

This passage was applied by the High Court in the well-known case of Maxwell v Murphy (1957) 96 CLR 261 at 267.

69 In Pearce and Geddes, Statutory Interpretation in Australia, 6th ed (LexisNexis, Australia, 2006) the learned authors comment at [6.8] that the Interpretation Act only preserves “rights” and then quote from what Lord Evershed said, when giving the judgment of the Privy Council in Free Lanka Insurance Co Ltd v Ranasinghe [1964] AC 541 at 552 that:

“The distinction between what is and what is not ‘a right’ must often be one of great fineness.”

70 Cases such as Total (Australia) Ltd v Registrar of Companies [1969] VR 821 seem to indicate that the present case is on the wrong side of the line, that is that the protection from suit is not “a right” in the sense that term is employed in this branch of the law.

71 In the Total (Australia) case, no fee was payable for lodging a certain return under the Companies Act 1958 before the enactment of the then current companies legislation. Had the return been filed on time no fee would have been payable. However, a fee was payable under the new Act and no right to file the document without fee was held to have accrued.

72 I do not consider there is much use in referring to other authority, but I would note that I have been referred to two decisions of the High Court, G F Heublein & Brother Incorporated v Continental Liqueurs Pty Ltd (1962) 109 CLR 153, 160-1 and Esber v The Commonwealth (1992) 174 CLR 430, 440.

73 Accordingly, the 1941 Act does not impose a barrier on the defendant recovering.

74 If one turns to the 2002 Act, the prohibition is in s 9(2) to which I have already referred. As it was not possible to hold a licence, the section cannot apply.

75 In my view if any legislation as to “business agents” applied it would be NSW legislation. Mr Marshall relied on Victorian legislation as a back up submission. There is no possibility to my mind that any Victorian legislation could be relevant in this case.

76 Accordingly, the defendant is entitled to succeed. The plaintiff’s claim must be dismissed and a verdict given for the defendant for $2,051,500 plus interest.

77 I was asked not to say anything about costs. This means that I should just publish these reasons and stand the matter over to 19 August 2008 at 9.30am for short minutes to be brought in, and if there is to be a lengthy contentious argument about costs, a date can be set for that. If costs can be dealt with within a short time I will deal with costs on that occasion. Of course, if that date is unsuitable to counsel but some other can be arranged with my Associate at least the week before, then the date can be changed.

***************************