Funston v CCSS Pty Ltd
[2021] VSC 24
•29 January 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2019 05453
| RICHARD ARTHUR FUNSTON | Appellant |
| v | |
| CCSS PTY LTD (ACN 145 034 788) T/AS ASCEND REAL ESTATE | Respondent |
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JUDGE: | Quigley J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 November 2020 |
DATE OF JUDGMENT: | 29 January 2021 |
CASE MAY BE CITED AS: | Funston v CCSS Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2021] VSC 24 |
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APPEAL – Magistrates’ Court of Victoria – Estate Agents Act 1980 (Vic) ss 48B, 49A and 50 – Appeal of final order pursuant to Magistrates’ Court Act 1989 (Vic) s 109 – Statutory interpretation – Agent’s claim for marketing expenses – Whether recovery barred by failure to meet disclosure obligations – Whether an agent can recover expenses that are not ‘outgoings’ as defined in the Estate Agents Act 1980 (Vic) s 4 – Agent’s obligation to inform of right to negotiate – Whether a reserve price must be used to calculate commission or other relevant amounts can be used – Whether strict or substantial compliance with statute is required – Held – Appeal dismissed – Advisory Services Pty Ltd (trading as Ray White St Albans) v Augustin & Anor [2018] VSCA 95 applied – Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 29 CLR 165 and – HamiltonFinley Pty Ltd v Aojia Investment Pty Ltd [2017] VSC 319 considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr I.W. Upjohn QC with Ms Shanta Martin | Belleli King & Associates |
| For the Respondent | Mr T. Greenway | Shayne Daley & Associates |
HER HONOUR:
Background
The appellant, Mr Funston engaged the respondent, CCSS Pty Ltd, trading as Ascend Real Estate (the Agent) to act as his agent in selling his property located at 36A Sheehans Road, Blackburn.
Initially, the engagement was formalised by a General Sale Authority dated 24 October 2017. This General Sale Authority indicated a vendor’s price of $2.6 million and the agent’s estimated of selling price (ESP) of between $2.5 and $2.6 million.
Subsequently, Mr Funston decided to auction the property and the General Sale Authority was replaced on 14 November 2017 with an Exclusive Auction Authority (the Auction Authority). The Auction Authority indicated an ESP of between $2.1m and $2.2m and a vendor’s reserve price was nominated as ‘TBA’. The Auction Authority provided for marketing expenses of $7,479 payable on the written request of the Agent.
Prior to the signing of the Auction Authority, the Agent had incurred marketing expenses in relation to newspaper advertising of $600 and photography in the amount of $176.
The property went to auction on 16 December 2017 and was passed in on the vendor’s bid of $2.35 million. Mr Funston rejected offers of $2.15 and $2.16 million following the auction.
On 14 March 2018, the Agent filed a complaint against Mr Funston in the Magistrates’ Court of Victoria. The Agent sought payment of $7,479 for reimbursement of outgoings pursuant to the Auction Authority and tendered into evidence an invoice for that amount dated 20 December 2017.
Mr Funston denied having received any invoice for marketing expenses and denied liability to make payment of the amount claimed based on the Agent’s alleged underquoting and other breaches of the Estate Agents Act 1980 (Vic) (the Act) in particular of ss 48B and 49A(1).
The Magistrates’ Court proceeding was heard as an arbitration on 21 and 23 October 2019. On 1 November 2019 the learned Magistrate made a final order and provided an oral statement of reasons. His Honour was not satisfied on the balance of probabilities that the Agent had engaged in underquoting, and found in favour of the Agent with regard to the other alleged breaches of the Act. His Honour excluded from the amount awarded the two amounts incurred prior to the singing of the Auction Authority, of $600 and $176, and he made an order that Mr Funston pay CCSS Pty Ltd $6,643 and costs of $1,833.
It is from this order that Mr Funston brings this appeal pursuant to s 109 of the Magistrates’ Court Act 1989 (Vic). Pursuant to this section a party to a civil proceeding in the Magistrates’ Court may appeal to the Supreme Court, on a question of law, from a final order of that Court.
Whilst the sum involved is very modest, counsel for the appellant submitted that the appeal is an important test case of the interpretation of several provisions of the Act, specifically ss 48B(1), 49A(1)(b), 49A(1)(c)(ii) and 50.
Apart from the allegations of underquoting which formed quite a focus of the claim below, Mr Funston defended the claim on the basis that the Agent had engaged in the following contraventions of the Act and was thus precluded by s 50 of the Act from suing for any moneys. He alleged:
(a) contrary to s 49A(1)(c)(ii):
(i) the Agent failed to include in the Auction Authority the fee calculated on the dollar amount that would be payable on the reserve price, despite the reserve price being orally communicated to the respondent;
(ii) alternatively, the Agent failed to calculate the fee on the dollar amount of ‘any other relevant amount set out in’ the Auction Authority;
(b) contrary to s 48B(1) the Agent sought to obtain from Mr Funston an amount that exceeded the ‘outgoings’ as defined in s 4 of the Act;
(c) contrary to s 49A(1)(b) the Agent did not inform Mr Funston before entering into the Auction Authority that any money to be paid in respect of outgoings was subject to negotiation; and
(d) contrary to s 49A(1)(a) and/or illegality the Auction Authority was entered into in a manner that was not compliant with the Act and/or for an unlawful purpose, viz under quoting.
The learned Magistrate did not find breaches of ss 49A(1) or 48B of the Act. His Honour found that some of the expenses claimed by the Agent were not recoverable under common law or under the Act. This included two invoices for expenses that were not authorised under the General Sale Authority and predated the Auction Authority.[1] The sum awarded to the respondent was adjusted to reflect the deletion of these two invoices.
[1]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 1 November 2019) 6 [24]–[28].
This appeal challenges the rejections by his Honour of the statutory defences set out in sub-paragraphs (a) to (c) above. The illegality defence set out at (d) was not pursued in this appeal.
The appellant sought an order setting aside the learned Magistrate’s order made 11 November 2019 and in lieu an order in his favour. Alternatively, the matter be remitted for determination in accordance with law.
The questions of law
This appeal was based on the following questions of law:
(a) Is it contrary to ss 48B and 50(1) of the Act for an agent to sue for or recover any money in respect of any outgoings in respect of a transaction if the agent seeks to obtain an amount for an expense that was not an ‘outgoing’ within the meaning of s 4 of the Act?
(b) Does s 49A(1)(b) of the Act require an agent to have in fact informed the person of the matters set out therein before obtaining the person’s signature to the engagement or appointment?
(c) Is an orally communicated reserve price required to be used by the agent under s 49A(1)(c)(ii) of the Act?
(d) Can a dollar amount that is neither the reserve price, the ESP nor any other amount otherwise contained in the engagement or appointment, constitute a ‘relevant amount set out in the engagement or appointment’ for the purposes of s 49A(1)(c)(ii) of the Act?
(e) Must the requirements of s 49A(1)(c)(ii) of the Act be strictly complied with or is substantial compliance sufficient?
The only amount in issue between the parties is the amount in respect of outgoings which the learned Magistrate found owing to the Agent. There is no claim for commission as the property did not sell.
There was no dispute between the parties that in order to recover monies for commission or outgoings estate agents are required to comply with the relevant provisions of the Act, and that the Act and Part IV in particular, has a consumer protection purpose.[2]
[2]Richard Arthur Funston, ‘Outline of Submissions for the Appellant’, Submission in Funston v CCSS Pty Ltd, S ECI 2019 05453, 3 June 2020 [47]; Transcript of Proceedings, Funston v CCSS Pty Ltd (Supreme Court of Victoria, S ECI 2019 05453, Quigley J, 12 November 2020) 6 (Mr Upjohn); Transcript of Proceedings, Funston v CCSS Pty Ltd (Supreme Court of Victoria, S ECI 2019 05453, Quigley J, 12 November 2020) 26-28 (Mr Greenway).
The issues in dispute in this appeal were the proper statutory construction, in particular of ss 49A(1) and 48B and the application of the correct interpretation to the relevant facts.
For the reasons which follow, the appeal will be dismissed as no error of law by the learned Magistrate has been established. His Honour correctly construed the provisions of the Act, in particular, ss 48B and 49A and correctly applied s 50.
Estate Agents Act 1980 (Vic)
The following provisions of the Act are relevant to the determination of this appeal.
4 Definitions
(1) In this Act unless inconsistent with the context or subject matter –
outgoings means any monies spent by an estate agent on his principal’s behalf for which the estate agent is at common law entitled to be reimbursed;
rebate includes any discount, commission or other benefit;
48B Rebates must be factored into costs of expenses
(1) An estate agent must not seek to obtain from the client an amount for any outgoings or proposed outgoings (the expenses) that is more than the amount paid, or payable, by the agent for those expenses.
Penalty: 60 penalty units
(2) In determining the amount paid, or payable, by the agent, any amount of rebate received or receivable by the agent in respect of the expenses must be taken into account by the agent.
(3) If it is not possible to determine the final amount paid, or payable, for the expenses at the time the agent seeks payment for those expenses, the agent may estimate the amount.
(4) If an estimate is made and paid, and the agent becomes aware that the amount paid in respect of the expenses is less than the estimate, the agent must immediately pay the difference between the estimate and the amount paid by the agent to the client.
Penalty: 60 penalty units
(5) …
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, 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 agent’s 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 is subject to negotiation; and
(c)the engagement or appointment contains –
(i) details of the commission and outgoings that have been agreed to; and
(ii) if a fee is to be calculated on a percentage, 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.
(2) An estate agent or agent’s representative must not destroy any document required by this section and must retain any such document for the prescribed period.
Penalty: 100 penalty units.
…
50 Commission
(1) An estate agent is not entitled to sue for or recover or retain any commission or money in respect of any outgoings for or in respect of any transaction unless –
(a) at all material times in relation to the transaction he or she is the holder of 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; and
(c) the agent has complied with sections 48A and 48B with respect to the engagement, appointment or transaction.
…
Entitlement to sue for commission or recover outgoings under Part IV of Estate Agents Act – the Decision at first instance
Section 50 of the Act provides that an estate agent is not entitled to sue for or recover any commission or money in respect of outgoings in respect of any transaction unless certain conditions are met. It is common ground between the parties’ submissions that consistency with s 50 was a statutory precondition for an agent to be able to sue and recover any amount from a vendor.[3] The respondent maintained that there was sufficient compliance such that there was no breach of s 50.
[3]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 23 October 2019) 6 [21]–[26], 34 [7]–[18].
Relevantly, in addition to being the holder of an estate agent’s licence, to be entitled to commission or recovery of outgoings the agent must comply with ss 49A(1), 49A(2), 48A and 48B with respect to the engagement or appointment to undertake the transaction.
Section 49A(1) requires the entry into a written engagement and certain information to be provided. There was no issue as to this requirement and the Exclusive Auction Authority signed on 14 November 2017 was the relevant signed authority.
Compliance with s 49A(1) requires that:
(a) the agent must have informed the person prior to the signing of the appointment or engagement that the commission to be paid and any monies to be paid by the person in respect of outgoings were subject to negotiation;
(b) the engagement must contain details of the commission and outgoings that have been agreed; and
(c) where a fee is to be calculated on a percentage basis a statement that the fee expressed as both a percentage and as a dollar amount payable on the reserve price or any other relevant amount must be set out in the engagement.
In respect of the requirement that the agent must have informed the person that the outgoings were subject to negotiation, there was an issue of interpretation and application of what was required in order to meet this obligation. The evidence before the learned Magistrate was contested, Mr Funston having initially agreed that he had read the agreement before signing it, acknowledging that he accepted that everything was negotiable and then in later evidence in part recanting his position and indicating he did not read the document in detail, in particular cl 10.1. The learned Magistrate found that in any event Mr Funston had signed the document and by operation of the principle in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,[4] that a person who signs a document is bound by its terms, was satisfied on the balance of probabilities that this requirement of s 49(1)(b) had been satisfied.[5]
[4](2004) 219 CLR 165.
[5]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 1 November 2019) 7 [5]–[16].
Secondly, it was alleged that the engagement was deficient in that the details of the commission and outgoings were not correctly or appropriately set out, in contravention of s 49A(1)(c)(ii).
The learned Magistrate was not satisfied that the details required for the calculation of the commission were insufficient, in particular that the reserve price when identified must be used. He rejected the argument that the reserve price was the only figure which could be used for the calculation. He was satisfied that the midway point between the agent’s estimated price and the minimum price identified by the vendor was a ‘relevant’ figure which could be used to calculate the commission in accordance with the Act.
Additionally, it was argued that the claim for outgoings did not comply with s 49A(1)(c)(i) because part of the outgoings had already been incurred prior to the engagement being entered into.
‘Outgoings’ are defined in s 4 of the Act as ‘monies spent by the agent on his principal’s behalf for which the estate agent is at common law entitled to be reimbursed’. Clearly there was no agreement for reimbursement under the Auction Authority as the two separate expenses, being $176 for photography of the property and $660 for newspaper advertisements had already been incurred prior to the entry into any agreement. There being no agreement to pay for these two expenses there was no liability at common law to reimburse the agent. These expenses were not outgoings as defined by s 4 because they predated any agreement.
In respect of the detail of outgoings, save for the expenses which predated the entry into the Auction Authority, the learned Magistrate found that the balance of the expenses in the amount of $6,643 was properly incurred and reimbursable pursuant to the Auction Authority.
An interpretation of the legislation which favoured the consumer was urged upon the Court. It was argued that the provisions in the Act were aimed at the protection of the consumer and that strict compliance was required. An interpretation which favoured this policy outcome ought be preferred where there was ambiguity in the meaning of the words of the text. It was argued that whilst this may deliver what might be seen as a harsh outcome in respect of the outgoings the subject of this proceeding, the intention of the legislature was clear and an interpretation which favoured consumer protection was Parliament’s intention. This inevitably tied the provisions in respect of commission and those in respect of outgoings and a breach of one part would lead to a disentitlement to recover in respect of the other.
Reliance was placed on a number of decisions of the Victorian courts, in particular Advisory Services Pty Ltd (trading as Ray white St Albans) v Augustin[6] (both the initial decision of Judge Marks and the Court of Appeal decision); Oliver Hume (Australia) Pty Ltd v Land Source Australia Pty Ltd[7] (where the court accepted that the purpose of the provision was to protect consumers before entering an agreement); and the obiter comments of Justice Elliott in HamiltonFinley Pty Ltd v Aojia Investment Pty Ltd.[8]
[6][2017] VCC 1195; Advisory Services Pty Ltd (trading as Ray White St Albans) v Augustin & Anor [2018] VSCA 95 (‘Advisory Services’).
[7][2015] VSC 77.
[8][2017] VSC 319 (‘Hamilton Finley’).
Principles of statutory interpretation
The primary object of statutory construction is to ascertain the intention of Parliament construing the provisions consistent with the language and purpose of the statute as a whole.
The starting point is the text itself and the ordinary natural meaning of the words used. A court construing a statutory provision must give meaning to every word of the provision and provision(s) as a whole. Except in extremely limited circumstances it is not for the Court to fill a gap in a statute or otherwise read in words the legislature has not used. Historic considerations and extrinsic materials cannot be relied upon to displace the clear meaning of the text.[9] However, where there is ambiguity in the meaning of the text consideration of the context, including the general purpose and policy of the provision, in particular the mischief it is seeking to remedy, are to be considered.[10] Legislation must be construed to advance a meaning which is consistent with the purposes and objects of the legislation, such purposes and objects being ascertained from consideration of the legislation as a whole.[11]
[9]Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) (2009) 239 CLR 27 [47].
[10]Ibid.
[11]Commissioner of State Revenue v EHL Burgess Properties Pty Ltd [2015] VSCA 269 [47].
In respect of this Act, the Court of Appeal has provided guidance on the purpose of Part IV of the Act, which contains the relevant provisions in question in this appeal.[12]
A strong and consistent theme of consumer protection runs through pt IV. Its provisions are directed to the conduct of the estate agents in their dealings with both clients and third parties such as prospective purchasers. The provisions are concerned with standards of conduct and transparency as to that conduct. As has been seen, s 50 provides for significant sanctions for breach of some of the provisions and s 49A(1) itself provides for a penalty. It is evident that these provisions are directed to the general protection of persons, including clients, dealing with estate agents.
[12]Advisory Services (n 6) [39].
The legislation, in particular Part IV, has a clear theme of consumer protection. Consequently, in respect of ambiguity and interpretation, where a choice is to be made, the interpretation which favours the consumer is to be favoured.
It is a question of construction whether particular requirements to include statements or other information in certain agreements must be strictly complied with or whether substantial compliance will suffice. Where substantial compliance is sufficient, the statement or information in fact provided must not depart from the wording or form required by the legislation in any material respect. Any divergence which causes the statement to inform or convey less information than the legislation requires, or to confuse or mislead the class of persons the legislation is intended to protect as to matters required to be brought to their notice will not comply.[13]
[13]Equipment Investments Pty Ltd v M J Dowthwaite & Co Pty Ltd (1969) 16 FLR 23 [31] (‘M J Dowthwaite’); Westpac Banking Corporation v Tesoro [2012] VSC 182 [27]–[28].
Analysis
In determining this proceeding, I have considered the grounds raised in the following order. Grounds 4 and 5, which relate to the calculation of commissions pursuant to s 49A(1)(c)(ii), Grounds 1 and 2 dealing with the claim for outgoings under s 48B, and Ground 3 being the notification requirements of s 49A(1)(b).
Agent failed to use the reserve price to calculate commission, contrary to s 49A(1)(c)(ii)[14]
Did the Magistrate err in failing to determine whether a reserve price was communicated orally by the appellant, and if so, whether the reserve price ought to have been used to calculate commission set out in the Exclusive Auction Authority?
[14]Richard Arthur Funston, ‘Outline of Submissions for the Appellant’ (n 2) [60].
The appellant argued that in order to determine whether the Auction Authority was compliant with s49A(1)(c)(ii) of the Act, it was necessary for the Magistrate to make a finding of fact as to whether a reserve price had been communicated by the appellant to the respondent. It was argued that the learned Magistrate erred in failing to make a finding of fact as to whether or not a reserve was set prior to the signing of the Auction Authority.
This proposition assumes a construction of the section which requires that, where a reserve price has been communicated, that the reserve price must be used to calculate the agent’s fee. This was said to be based on the reference to the reserve price and its placement first and foremost in the text of the subsection indicating that the legislature intended the reserve price be the primary amount for the calculation. If the Legislature had not intended the reserve price to be the primary figure of relevance, the reference to it would be unnecessary.
It was argued by Mr Funston that when read with Part IV of the Act reference to the ‘reserve price’ must be given due weight. The term ‘reserve price’ appeared only twice in the Act.[15] What was said to be an equivalent term applicable to private sales – ‘the amount that the seller will accept’ – is used in s 47AF(3)(d) and each of these provisions is contained in Part IV of the Act which is directed at consumer protection.[16] The inclusion of the reference to reserve price was deliberate and reflects the consumer protection objectives of Part IV. Use of the reserve price as the basis for the calculation ensures the seller, as the consumer, knows the minimum fee payable if the property is sold above the seller’s acceptable price.
[15]Estate Agents Act 1980 (Vic) ss 47A(2), 49A(1)(c)(ii).
[16]Advisory Services (n 6) [38]–[39].
It was said that if a reserve price is communicated, the agent is bound to use that reserve price when calculating the fee under s 49A. It did not matter whether the communication was oral or in writing, rather the primary requirement was that if a reserve price exists, it must be used. It would only be if the learned Magistrate had determined that no reserve price was communicated he could consider whether any other amount could be used for the required calculation.
It was further submitted on behalf of Mr Funston that His Honour failed to take into account relevant considerations in respect of the documentary evidence that supported Mr Funston’s allegation that he had always considered a figure of $2.4 million as a minimum and consequently the reserve price.
The respondent argued that applying the ordinary, natural meaning of the statute and giving the meaning to the words as they are commonly grammatically used there was no room to read additional words into the statute. Fundamentally, it was argued that s 49A(1)(c)(ii) says that the dollar amount referred to is an ‘amount that would be payable on the reserve price or any other relevant amount set out in the engagement or appointment’. It is impermissible to read into this provision reference to an orally communicated reserve price. ‘Orally communicated’ does not appear in s 49A(1)(c)(ii).
The second impermissible gloss was said to be that the appellant sought to import words of primacy, or alternatively a cascading effect. This would mean that the Court is to read the provision as if, where a reserve price is communicated, that figure must be used.
I agree with the respondent’s submissions. To prefer the appellant’s interpretation would be to strain the ordinary natural meaning of the words used and to import words of primacy and an expectation of a process which does not appear in the section.
Use of the conjunction ‘or’ indicates that whilst it is clearly permissible to use the reserve price where one is given, it is also permissible to use ‘any other relevant amount’ set out in the appointment. Not only is this consistent with the ordinary meaning of the words, it is also consistent with the object and purpose of the Act, consistent with its consumer protection emphasis, to provide a concrete and apt example for the calculation of commission both as a dollar figure and percentage where a percentage if nominated.
I accept that there was a conflict in the evidence as to whether there had been communication of a reserve price prior to the signing of the Auction Authority.[17] I do not consider the resolution of this factual issue would change my conclusion.
[17]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 1 November 2019) 3 [29], 3 [31]-[34], 4 [25], 5 [6]; Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 23 October 2019) 46 [19], 45 [7], 58 [10]–[24].
As a consequence of this construction, I do not accept that there was an obligation on the Magistrate to make a finding that a reserve price had been communicated and that his reasoning was not deficient in this regard, including that he was not in error in failing to make a finding based on all of the evidence with respect to the communication by Mr Funston of a reserve price.
I accept that the Act has as its intention to ‘even the playing field’ between the consumers of real estate agents’ services and the agents. Part of this objective is the provision of information to enable a person to understand the price to be paid for the services and to enable the person to be in a position to negotiate the terms upon which the services are to be provided.
This provision is not a contractual provision but a statutory one aimed at providing information to the vendor. In an auction situation there can be no guarantee prior to the auction what actual sale price will result. Consequently, consistent with the consumer protection purposes of the legislation and the provision of information of use and relevance to the vendor on a price which is relevant and realistic but not necessarily the reserve price, this interpretation is consistent with s 49A(1)(c) as the learned Magistrate determined.
I further agree with the submissions of the respondent that the Act is concerned with real estate agents complying with the duty to provide information that is specified in the Act to their clients, but that this is not a test of perfection. What is required is whether the information was reasonably conveyed by the agent’s conduct; there is no room for a Court to read words into the statute as the interpretation urged by the appellant seeks to do in this instance. The Court is entitled to look at the object and purpose of s 49A.
Use of an idiosyncratic midway figure not set out in engagement for calculation of fee[18]
Can a dollar amount that is neither the reserve price, the estimated sale price or any other amount otherwise contained in the engagement or appointment, constitute a ‘relevant amount set out in the engagement or appointment’ for the purposes of s 49A(1)(c)(ii)?
[18]Richard Arthur Funston, ‘Notice of Appeal’, Submission in Funston v CCSS Pty Ltd, S ECI 2019 05453, 29 November 2019, 3.
Instead of determining whether a reserve price was communicated and using that as the basis for the calculation required in s 49A(1)(c)(ii), his Honour made a finding that a different amount, being $2.3 million, could be used for the purposes of the section.
The appellant argued this was a misapplication of the section and unless and until the Court below made a determination as to whether a reserve price existed, it was not open to consider whether there was any other relevant amount set out in the Auction Authority upon which a calculation could be validly made for the purposes of s 49A(1)(c)(ii).
It was submitted that the words of this section require that the ‘other amount’ must be both relevant and set out in the engagement or appointment. What constitutes a ‘relevant amount’ when read in the context of the provision as a whole must be relevant in the same way a reserve price would be relevant if it had been communicated. In circumstances where the provision is aimed at consumer protection, what makes a reserve price relevant is an amount that the vendor knows and wants. If the vendor does not intend to sell below the reserve, then determining the commission on the reserve price is a comprehensible and logical point for the calculation.
No doubt this is a good rationale for choosing to use a reserve price. However, it is equally open to identify other relevant amounts for the purposes of informing a consumer as to the calculation or amount to be expected to be paid for commission. The two are not mutually exclusive.
It was submitted that where no reserve has been communicated but an engagement sets out an ESP as required under s 47A(1) it would be logical and coherent for a consumer to be told the dollar amount of the agent’s commission based on the ESP.
It was suggested that this is supported by the observation made by Elliott J in Hamilton Finley Pty Ltd v Aojia Investments Pty Ltd[19] that if it were otherwise an agent might be able to comply with the Act by providing an estimate of commission based on a figure which bears no resemblance to any likely realistic sale price.
[19]Hamilton Finley (n 8) [125].
Further reliance was placed on Director of Consumer Affairs v Johnson (Review and Regulation)[20] in which an agent was prosecuted for breaches of s 49A(1)(c)(ii). It was said that a ‘relevant amount’ refers to ‘another amount in the Authority which can be used to indicate a likely commission dollar figure’ and that ‘in the absence of an agreed figure or a fixed reserve, a dollar figure is to be inserted based on the estimated price range which has been included in compliance with s 47A(1)’.
[20][2019] VCAT 1063 [73], [75].
In my view these observations do no more than require a figure which is logically associated with either the ESP or the reserve set but not necessarily only those two options without variation. As exemplified by the facts in this case at the time the Auction Authority was entered into there was no conclusive evidence before the Magistrate that a reserve price had been set. Rather, the Auction Authority on its face notes that in terms of the reserve ‘TBA’ was inserted. No doubt this is a commonplace occurrence when an Auction Authority is entered into as it may not be until closer to the date of the auction that a vendor, with advice from the real estate agent and soundings as to the market at that time and the personal circumstances of the vendor, will lead to the vendor setting a reserve price for the purpose of the day and time of the auction.
I have little doubt that there will be many occasions where an Auction Authority is signed where no reserve price has been set but discussions on the range of the ESP and the expectations of a vendor will have occurred. Those discussions are not necessarily any more than that.
It is necessary to consider the purpose of requiring information for the calculation of commission to be set out in the Auction Authority. If it is fairly to be seen as provision of information as long as that information is not misleading and not one that to use the words of Elliott J, bears no resemblance to any likely realistic sale price, it will fulfil the requirement of the provision of information for the purposes of s 49A(1)(c)(ii).[21]
[21]Hamilton Finley (n 8) [125].
I do not accept that what is provided in the Auction Authority offends the provision as there is a logic to the figures used. The agent gave evidence and the Magistrate accepted that the figures used reflected the upper figure of the ESP and $2.4 million, being the figure at which the incentive commission commenced. There can be little doubt on Mr Funston’s evidence before his Honour that Mr Funston required the estimate of commission to be expressed in terms that it was, being an agreement for 2% up to $2.4 million at which point the incentive commission came into play. In these circumstances it is exceptionally difficult to accept that the figures used in the circumstances were not any other relevant amount as set out in the engagement or appointment.
This analysis is also consistent with authorities such as M J Dowthwaite[22] and the decision of Judge Marks in Advisory Services[23] that where there is information required as set out in legislation it is a question of statutory interpretation as to whether the provision of information is consistent with the legislation’s expectations.
[22]M J Dowthwaite (n 13).
[23]Advisory Services (n 6).
What is required is where a fee is to be calculated on a percentage that the percentage be expressed in the document and the dollar amount based on the reserve price or any other relevant amount set out in the appointment. I accept that the purpose behind this particular section is to provide the vendor with pertinent and understandable information and this includes providing a relevant and understandable example of what commission would be payable.
In this case, the evidence was that Mr Funston had negotiated with the agent a commission structure which provided an incentive over a certain price. The calculation of the commission was in two parts, both of which provided for a percentage which was stated. An example of the calculation as a dollar figure is required. The legislation does not require a series of calculations to be provided. I am satisfied what is intended is that an example of the application of the percentage to a relevant figure is what is required. In this case a figure which is halfway between the upper range of the ESP in the authority and the $2.4 million figure which is an incentive component if the property is sold over the particular figure was used. A figure of $2.3 million was inserted into the authority as an example of the likely and relevant sale price.
Whilst the comments by Elliott J in Hamilton Finley v Aojia Investments Pty Ltd are obiter (his Honour was not called upon to determine this particular point), this conclusion is consistent with his observation below:
…suffice to say there appears to be some merit in Aojia’s contention that the figure to be used for the purposes of calculating the commission should bear some relevance to the figures the subject of the vendor’s price, that is the reserve price, or the agent’s estimate. If it were otherwise, an agent might be able to comply with the Estate Agents Act by providing an estimate of commission based on a figure which bears no resemblance to any likely realistic sale price.[24]
[24]Hamilton Finley (n 8) [125].
I agree that the figure of $2.3 million was relevant to this particular sale because it draws reference from the ESP of $2.2 million and the incentive commission at $2.4 million.
The agent sought an amount including unauthorised invoices contrary to s 48B(1)[25]
Is it contrary to ss 48B(1) and 50(1) of the Act for an agent to sue for or recover ‘any money in respect of any outgoings’ in respect of a transaction if the agent sought to obtain an amount for expenses that were not ‘outgoings’ within the meaning of s 4 of the Act?
[25]Richard Arthur Funston, ‘Notice of Appeal’ (n 18), 2.
The appellant argued that the respondent breached s 48B(1) by seeking payment of $7,479 (which included the two invoices which predated entry into the Authority) and therefore is precluded by s 50 of the Act from recovering any money in respect of outgoings related to the marketing an auction of the property.
It was submitted that as s 50(1) uses the word ‘transaction’ as being something in respect of which there may be multiple ‘outgoings’, ’transaction’ is therefore not to be equated with any particular ‘outgoing’. It is used as a synonym for ‘engagement’ or ‘appointment’ in s 50(1)(c). It was said that the obligation to have complied (past tense) with s 48B applies with respect to the entire arrangement between the agent and person, not just an individual item of expenditure. It follows that if the respondent had not complied with s 48B in respect of the arrangement to market and auction the property it could not sue for recovery of any outgoings relating to the marketing and auction of the property.
The appellant argued that on its proper construction s 48B(1) prohibits an agent from seeking ‘an amount’ (singular) that is more than the amount paid, or payable, by the agent for ‘any outgoings’ (plural) which must be ‘money as spent by an estate agent on his principal’s behalf for which the estate agent is at common law entitled to be reimbursed’. If the amount sought includes moneys for which the agent is not entitled to be reimbursed at common law, then the agent is in breach of s 48B(1). If the agent is in breach of s 48B(1) then by reason of s 50 the agent is not entitled to sue for, or recover or retain any money for any outgoings.
The amount claimed was the sum of $7,479. However, this amount included the unauthorised invoices for which the learned Magistrate found the respondent was not entitled to be reimbursed at common law.
The appellants argued that on a proper interpretation of s 50 the learned Magistrate should not have found that the respondent was entitled to sue for or recover any money in respect of any outgoings in respect of the transaction. It was not permissible to exclude the two unauthorised invoices.
It was said that whilst this result may appear harsh, the effect of s 50 caused any breach of ss 48A, 48B, 49A(1) or 49A(2) to result in the inability of the agent to recover any monies. This was precisely the effect intended by the legislature. Section 50 provided the incentive to compel agents to comply with the Part IV consumer protection provisions of the Act, and to do so strictly.[26]
[26]Advisory Services Pty Ltd v Augustin [2017] VCC 1195 [32] (Marks J), upheld by the Court of Appeal in Advisory Services Pty Ltd (trading as Ray White St Albans) v Augustin & Anor [2018] VSCA 95 (Santamaria, McLeish and Niall JJA); Oliver Hume (Australia) Pty LCD v Land Source Australia Pty Ltd [2015] VSC 77 [38]-[39]; [48], upheld by the Court of Appeal in CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd [2017] VSCA 11; 55 VR 62; Hamilton Finley Pty Ltd v Aojia Investment Pty Ltd [2017] VSC 319 [19] referring to CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd [2017] VSCA 11; 55 ER 62 [93].
The respondent’s analysis of s 48B commenced with the observation that s 48B was headed ‘Rebates must be factored into costs of expenses’ and the words of s 48(1) made it clear that an agent cannot claim a rebate. The agent cannot seek to recover more than the amount that was actually paid for the outgoing itself and that this point was made clear when the other subsections of s 48B, in particular when subsection 2, is considered. The respondent argued that the appellant’s argument in this case about outgoings is misconceived. Section 48B read as a whole made it clear that the section was dealing with the issue of rebates and the obligation for an agent to pass on any rebates received and to disclose such an arrangement. The court being required to read the section as a whole and not to simply isolate the word ‘outgoings’ and say some unauthorised outgoings were claimed, prevented authorised outgoings from being recovered pursuant to s 50.
The respondents submitted that s 48B(1) does not contain a prohibition on seeking to obtain payment of unauthorised expenses. The key words of the section are directed to prohibiting an agent from seeking to recover a greater amount than what was in fact paid. The plain object of s 48B(1) is to require agents to disclose any rebate payable to them on expenses and to ensure the amount of the rebate is included in the agent’s determination of the final amount to be paid. No rebate was claimed by the agent and the agent did not seek to obtain a greater amount than what was paid on behalf of Mr Funston.
His Honour excluded the amounts which were incurred before the signing of the Authority and his Honour said, in rejecting the same arguments which were put to this Court, that in his opinion s 48B(1) refers to claims in excess of the amount paid or payable to the supplier and that the section had not been breached on the facts of this case. The two amounts excluded were not authorised at the time and in accordance with the Act could not be claimed because they were unauthorised.
His Honour said:
The plaintiff relies on the marketing schedule initialled by the defendant and the exclusive auction authority signed 14 November 2017, an invoice dated 2 November 2017 from the Pacific Times for $660 marked payment strictly within seven days and an invoice dated 13 November 2017 for photography in the sum of $176.
Those expenses were incurred prior to the signing of the exclusive option (sic) authority. The General sale authority dated 24 October 2017 has “marketing expenses” struck through. In my view, there was no express or implied authority in that document to incur outgoings.
In the course of his Honour’s oral decision he referred to the common law principles of agency and the statutory definition of ‘outgoings’:[27]
Under s 4 of the Act, “outgoings” is defined to mean any monies spent by an estate agent on his principal’s behalf for which the estate agent is at common law entitled to be reimbursed. In ‘Estate Agency Law and Practice in Victoria,’ JJ Hockley 1985 at p.191, under the heading “Reimbursement and Indemnity”, the author states:
The principal has a duty to indemnify the agent in respect of any losses, liability and expenses incurred in the performance of the contract of agency”. The duty may be an express term of the agency agreement and may be written or oral. More frequently, the duty is an implied term of the agency agreement. Estate agents engaged in property management may incur legal and repair costs in the course of performing the agency agreement. The burden is on the estate agent to prove that the expenditure claim was properly incurred in the course of the agency.
And he refers to Eisentrager v Lyneham [195] StR Qd 232. That, of course, was prior to the amendments to the Real Estate Agents Act and can only be statement of the common law.
[27]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 1 November 2019) 6 [1]–[17].
As argued by the respondent s 48B is directed to remedying the mischief which previously occurred whereby agents retained rebates and typically did not pass these savings on to the vendor. It is quite clear on a plain reading of the whole of s 48 that this provision is directed to that practice. It is not a fair reading of s 48B to draw any other conclusion.
The amount claimed of $7,479 was made up of individual amounts which reflected a series of disbursements or outgoings. It is quite clear that two of the invoices were unauthorised in any manner. However, the balance of the invoices did not fall into this category.
I do not accept the appellant’s analysis is the correct interpretation of the effect of ss 48B and 50 and the application of those sections to the facts here. I agree with the learned Magistrate that s 48B(1) refers to claims in excess of the amount paid or payable to the supplier and that section has not been breached.
There is no dispute that the legislation is intended to protect the consumer from practices which had severely and adversely affected consumers of real estate services. These included the practices of underquoting, retaining rebates and lack of transparency in calculation of commission and other fees and charges. It is also clear that s 48B is directed to the payment and disclosure of rebates and that from a contractual and statutory point of view there was no authorisation for the payment of outgoings prior to the entry into the Authority on 14 November 2017.
The learned Magistrate was not in error in his construction of ss 48B and 50 and their application to the facts in this case.
The appellant should have been informed by the respondent before signing that he could negotiate outgoings[28]
Does s 49A(1)(b) of the Act require an agent to have in fact informed the person of the matters set out therein before obtaining the person’s signature to the engagement or appointment?
[28]Richard Arthur Funston, ‘Notice of Appeal’ (n 18), 2.
It was submitted on behalf of the appellant that it is consistent with the consumer protection purposes of ss 49A and 50 that the agent must have informed (past tense) the person of the matters contained in s 49A(1)(b) and that this process of informing must have been completed before the person signs the engagement. It was said that these requirements are substantive, not merely of form and must be strictly complied with.
It was argued by the appellant that the requirement to inform cannot be satisfied by merely replacing words into the engagement, which can only be deemed to have effect at the earliest upon signing.
The appellant argued that the information required by s 49A(1)(b) requires the agent to provide to the consumer what outgoings are expected to be reimbursed by the consumer. It was said that it was clear from s 4 of the Act not all money expended by an agent will constitute ‘outgoings’. An agent has a regulatory obligation to have a working knowledge of the law.[29] Accordingly, it is the agent who is best placed to inform a vendor or as to what expenses would or would not meet the definition of outgoings when informing the vendor of his right to negotiate in respect of payment of outgoings.
[29]Estate Agents (Professional Conduct) Regulations 2018, reg 6.
The wording of s 49A was said to be unambiguous as to the time when the agent must provide the information. The agent must have completed the process of informing before the person signs. This is consistent with consumer protection purposes of the Act. The statutory temporal requirement distinguishes it from circumstances where, absent a statutory provision, a person may be bound by the terms of a signed contract at common law, regardless of whether those terms were read.
In Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd, the Court commented that there had been a steady trend in legislation to confer on Courts the capacity to ameliorate in individual cases hardship caused by the strict application of legal principle to contractual relations.[30] It was submitted on behalf of the appellant that consumer protection legislation such as the Act being considered here is the type of legislation that is invoked to give the court reason to depart from strict application of the principles enunciated in Alphafarm and that only in the absence of such legislation will the courts apply the principle strictly.
[30]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 29 CLR 165.
The evidence before the learned Magistrate was that Mr Funston had read the document and had signed it, although later in his evidence he recanted and said that he had not read in detail clauses 10.1 and 10.2. It was submitted on his behalf that the general common law rule that binds a party to a legal document they had signed is not absolute and that it was well established that if there were vitiating factors a party will not be so bound.[31]
[31]Ibid [54].
It was submitted that such vitiating factors exist in this case. In particular, the fact that two invoices were unauthorised – that being for the advertising in The Pacific Times dated 2 November 2017 and an amount of $176 dated 13 November 2017 for photography.[32] The appellant’s evidence was that he was not aware of the individual invoices until 21 October 2019, being the day before the hearing in the Magistrate’s Court[33] and it is quite clear in these circumstances that there could be no negotiation in respect of these outgoings as they had been incurred prior to the agreement had been signed. Accordingly, it was submitted that his Honour erred in concluding that it was irrelevant whether the appellant had read the Auction Authority having signed it and was therefore bound by clauses 10.1 and 10.2 within the contract.[34]
[32]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 1 November 2019) 6 [20]–[28].
[33]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 21 October 2019) 52 [7]–[11].
[34]Transcript of Proceedings, CCSS Pty Ltd v Funston (Magistrates’ Court of Victoria, J10701649, Magistrate McGrane, 1 November 2019) 7 [13].
The respondent argued that s 49A ought be read in the context of the Act to require an agent to provide information to a consumer that enables the consumer to understand what the agent is permitted by the Act to recover from the consumer. This information would enable the consumer to be in a better position to negotiate in respect of those matters.
The respondent argued that the learned Magistrate was not in error in respect of his interpretation or application of s 49A(1)(b). The requirement that the agent has informed the person that the commission to be paid and any money to be paid by way of outgoings was subject to negotiation could be satisfied in a number of ways. The manner in which the informing of a person is to take place is not specified. It was submitted that there are numerous bases for the Court to conclude that the appellant was informed of his right to negotiate.
His Honour had found that the relevant Authority, in particular clauses 10.1 and 10.2, set out acknowledgements made by the defendant upon signing the authority. He said that:
In my view, it is irrelevant whether the defendant read the document, he having signed it. In any event, his evidence initially was that he had read the document. It follows in my opinion, no breach of section 49A(1)(i)(b) has been proved.
Cl 10.1 of the Authority is in the following terms:
The Vendor acknowledges:
10.1 being informed by the Agent the commission and Marketing Expenses are negotiable and having read item 1 at page 2 before signing this authority.
It was further submitted that even if the appellant was bound by the contract because he had read and signed it, the learned Magistrate failed to take into account another relevant consideration. This was that the conduct prior to signing of the contract precluded the respondent from relying on the terms of clauses 10.1 and 10.2. In fact the respondent had already placed an order for advertising in the Pacific Times for $660 and had incurred photography expenses. In the circumstances, the contract signed on the basis of the agent’s representation and conduct was said to be misleading and deceptive. Thus even if the learned Magistrate had found the appellant had read all the terms of the Auction Authority including clauses 10.1 and 10.2 (each the appellant disputed) his Honour should have taken into account the conduct of the respondent in order to find that Mr Funston was not bound by those terms.
The Magistrate found the respondent provided the appellant a marketing schedule. The uncontested evidence was that this schedule was provided prior to the signing of the Auction Authority.
I do not agree that the learned Magistrate was in error in not taking into account the inaccuracy of the marketing schedule in that there had been two amounts already incurred prior to the signing of the Authority, and that advertising costs had been incurred in a different publication. I agree that the Magistrate’s analysis was correct in that there was no common law right to recover these two invoices and they were properly excluded. The definition of ‘outgoings’ in s 4 of the Act precludes amounts which were not recoverable at common law and these two invoices fell into that category.
In my view, there is an obligation on the agent to inform the person of his or her right to negotiate. The manner in which this is communicated is not stated. An acknowledgement in the document signed by a person may not be conclusive in all cases of the fulfilment of this obligation. However, signing a document which includes acknowledgements of information provided cannot be ignored as part of the evidence that was before the learned Magistrate. It appears to me from the transcript of the evidence and his Honour’s oral decision that he took into account the oral and written documentary evidence before him and formed a view overall that Mr Funston had been informed of his right to negotiate. It is clear from the transcript[35] that Mr Funston was aware of his right to negotiate and such negotiations took place.
[35]Transcript of Proceedings, Funston v CCSS Pty Ltd (Supreme Court of Victoria, S ECI 2019 05453, Quigley J, 12 November 2020) 54 [1]–[21].
Mr Funston’s evidence was that he negotiated everything. In respect of the commission not only was there a form of negotiation; he successfully dictated the outcome.
There is an obligation to advise a person of their right to negotiate. So much is clear from the words of the section. His Honour was satisfied on the balance of probabilities that obligation had been satisfied. I am not satisfied that the learned Magistrate was in error in his analysis of s 49A(1)(b) and its application to the evidence before him.
Conclusion
In view of the reasoning set out above on the grounds argued by the appellant I conclude that no error of law has been demonstrated and that the learned Magistrate’s decision is upheld.
The legislation has various provisions which require information to be communicated to a party. The provision of this information is to assist a party to understand the basis and likely amount due to the agent as a result of the services provided. These are not contractual provisions but information or disclosures required by reason of the Act. Where such information is required to be provided substantial compliance will be sufficient as long as the information contained is accurate and not misleading.
The Act has as its purpose and objective the protection of consumers in their dealings with agents. However, in this matter the learned Magistrate’s analysis of the provisions and application of them does not disclose legal error.
On the facts before his Honour the information requirements contained in the Act had been lawfully complied with and his Honour’s interpretation of ss 49A, 49B and 50 is not impugned.
The appeal is dismissed.
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