Gransha Pty Ltd v Bourke - [2002] WADC 30

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: GRANSHA PTY LTD & ORS -v- BOURKE [2002] WADC 30

CORAM: BLAXELL DCJ

HEARD: 13 FEBRUARY 2002

DELIVERED : 20 FEBRUARY 2002

FILE NO/S: CIV 1287 of 2001

BETWEEN: GRANSHA PTY LTD
First Plaintiff
JEFFREY GORDON FORD
CHERRYL ANNE FORD
Second Plaintiffs
AND
JOHN GREGORY BOURKE
Defendant

Catchwords:

Practice and procedure - Appeal from order for summary judgment against defendant - Claim by plaintiff vendors against defendant real estate agent for failure to disclose non-payment of deposit by purchaser of property - Whether implied term of agency contract and/or duty of care on defendant to disclose to plaintiffs the fact of non-payment of deposit

Legislation:

Real Estate and Business Agents Act 1978

Code of Conduct for Agents and Sales Representatives

Result:

Appeal dismissed

Representation:

Counsel:

First Plaintiff                :     Mr S J Blyth
Second Plaintiffs           :     Mr S J Blyth
Defendant:     Mr C D Belyea

Solicitors:

First Plaintiff                :     Lewis Blyth & Hooper
Second Plaintiffs           :     Lewis Blyth & Hooper
Defendant:     Clayton Utz

Case(s) referred to in judgment(s):

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Evans Deakin & Co Pty Ltd v Kaiser Engineers & Construction Inc [1968] Qd R 379
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Longmuir v Prosser, unreported; FCt SCt of WA; Library No 9141, 7 November 1991
Roberts v Plant (1895) 1 QB 597
Theseus Exploration NL v Foyster (1972) 126 CLR 507
Webster v Lampard (1993) 177 CLR 598
Westpac Banking Corp v Thorpe, unreported; SCt of WA; Library No 970465; 18 September 1997

Case(s) also cited:

Chan v Zacharia (1984) 154 CLR 178
Dey v Victorian Railway Commissioners (1949) 78 CLR 62
Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41
MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 140 ALR 707
Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 120 ALR 16

BLAXELL DCJ: This is an appeal from the decision of a Deputy Registrar made on 26 October 2001 ordering that the plaintiffs have summary judgment against the defendant for damages to be assessed. The defendant seeks to have this order set aside and an order substituted that he be granted unconditional leave to defend the action.

The background to the plaintiffs' claim

From the contents of the affidavits before me it would appear that the facts material to the issue of liability are largely common ground.
At all material times the second plaintiffs (who are husband and wife) were the sole directors and shareholders of the first plaintiff which operated the family farming business. The first plaintiff was also the registered proprietor of their farm which was situated at Upper Kalgan approximately 32km north east of Albany.
The defendant was at all material times a real estate agent licensed pursuant to the Real Estate and Business Agents Act 1978 ("the Act") carrying on business under the name of "Elders Real Estate Albany".
On 25 August 1999 the second plaintiffs on behalf of the first plaintiff entered into a written agreement with the defendant appointing him as agent to sell the farm property. That agreement specified an initial listing price of $700,000 and also authorised the defendant to accept the deposit paid by any purchaser and to hold it as stakeholder.
On 12 October 1999 the defendant presented the plaintiffs with a written offer from one N B Levinson ("the purchaser") to purchase the land for $700,000, which offer was accepted by the second plaintiffs on behalf of the first plaintiff. The contract required the purchaser to pay a deposit of $70,000 to the defendant, of which $1,000 was to be paid forthwith, and the balance of $69,000 within 37 days of acceptance of the offer. Settlement of the purchase was to take place on 25 February 2000. It is relevant to note that the defendant asserts that at the time the plaintiffs accepted the offer he informed the male plaintiff "that he should not change his normal work patterns until settlement".
The defendant duly received the initial $1,000 part payment of the deposit, and on about 18 November 1999 received a cheque for $69,000 from the purchaser in payment of the balance. The defendant deposited this cheque into his trust account, but later received notice from his bank dated 26 November 1999 advising that the same had been dishonoured. Soon afterwards the defendant also received a letter dated 29 November 1999 from Messrs Moss Bradley solicitors (who had been nominated as the plaintiffs' "conveyancer" in the offer and acceptance) in the following terms:
"We note a deposit of $70,000 should have been paid to you and your selling fee is $19,000.
Would you please confirm the deposit has been paid and forward to this office the deposit less your commission, in the amount of $51,000."
At all material times the defendant's negotiations with the purchaser were conducted by his sales representative, Mr Ron Wilson. There is evidence before me to show that Mr Wilson contacted the purchaser concerning the dishonoured cheque, and was assured that the balance of deposit would be forthcoming within a very short time. Subsequently, the purchaser made a succession of promises to the defendant to the effect that payment would be made by specified dates, but none of these were fulfilled.
It was not until 1 February 2000 that the defendant received further moneys from the purchaser. The purchaser paid not the full balance of deposit but the sum of $10,000 by way of a cheque which was duly cleared. Accordingly, by the due date of settlement on 25 February 2000 a total of only $11,000 part payment of the deposit had been made.
The defendant did not at any time prior to 21 February 2000 inform the plaintiffs of these difficulties, nor did he respond to Moss Bradley's letter. This was a deliberate omission on the defendant's part, and as I understand the explanation given in his affidavit, he did not wish to worry the male plaintiff with the matter because of concerns that he had about the latter's finances and health.
In the meantime the plaintiffs had taken substantial steps towards resolving their affairs in anticipation of the settlement of the sale proceeding. On 20 ‑ 23 January 2000 (and according to the plaintiffs, after consulting with a representative of the defendant) they sold all of their livestock at the Albany sale yard. On 1 February they sold a tractor and other items, and on 19 February 2000 conducted a clearance sale of all of their remaining plant and equipment.
On 13 February 2000 the second plaintiffs (who at all material times had intended to retire from farming) also entered into an unconditional contract to purchase for the sum of $255,000 a residential property in Albany. It was their intention to pay for that purchase out of the proceeds of their farm property.
On 21 February 2000 the male plaintiff enquired of the defendant as to "how are things going" and learned for the first time that the deposit had not been paid in full. According to the male plaintiff, the defendant also said that he nevertheless could not see "why the contract won't proceed on time".
This statement is consistent with the defendant's assertion in his affidavit that he believed at all times up until 25 February 2000 that settlement would proceed. In this regard he accepted the reassurances from the purchaser as conveyed to him by Mr Wilson. This was so notwithstanding some difficulties being experienced by the defendant in having the purchaser execute the transfer of the property prior to settlement.
When the date for settlement passed, Moss Bradley were instructed to send a letter to the purchaser attaching a notice to remedy default. The default was never remedied and the plaintiffs' land was eventually resold to new purchasers for $660,000. Settlement of this sale took place on 13 December 2000.
Prior to then the second plaintiffs were obliged to proceed with the purchase of the residential property in Albany, and in the absence of funds from the sale of their farm property, had to make arrangements for bridging finance.

The claimed causes of action

The statement of claim pleads a variety of causes of action, each giving rise to damages. Each cause of action is based upon the same fact, namely the failure of the defendant to promptly notify the plaintiffs of the dishonouring of the purchaser's cheque received in payment of the balance of the deposit.
The first pleaded cause of action is breach of a "fiduciary duty to act in good faith to protect and advance of the interests of the plaintiffs … and to communicate promptly to the plaintiffs all material facts relating to the purchaser's performance of the purchaser's obligations pursuant to the contract" (paragraph 7.1). However, the plaintiffs' counsel has conceded during the course of hearing of the appeal that this purported cause of action is not available.
The second pleaded cause of action is breach of the defendant's statutory duty pursuant to s 2 of the Code of Conduct for Agents and Sales Representatives, made under the Act ("the Code"), to act in the best interests of his principal except where it would be unreasonable or improper to do so (paragraph 7.2).
The statement of claim also pleads a further cause of action based upon breach of a statutory duty pursuant to s 8(2) of the Code, "upon ascertaining a fact which was material to a transaction in which the agent's principal was involved, to promptly communicate that fact to any person who might be affected by it unless it was clear that that person was already aware of the fact" (paragraph 7.3).
Finally, the statement of claim pleads causes of action in either contract or tort being breach of "a contractual duty to exercise reasonable care and expedition in the conduct of the plaintiffs' said mandate or alternatively a duty of care to a similar effect" (paragraph 7.4).
There are essentially three heads of damages claimed. The plaintiffs firstly seek damages in respect of the costs of bridging finance which they were obliged to obtain in order to settle their purchase of the Albany property (in the sum of $16,364.95). They secondly claim damages for loss of earnings from cattle farming operations on the property from 17 December 1999 until 13 December 2000 less agistment income (calculated at $34,373.10). Lastly they claim solicitor's costs and other incidental expenses in relation to the aborted sale of the land (in a sum approaching $7,000).

The principles to be applied in the present appeal

As the order for summary judgment was made by the Deputy Registrar in the exercise of delegated jurisdiction, the present appeal involves a complete review de novo. The evidence that I am to take into account is not only that which was before the Deputy Registrar, but also the evidence in further affidavits which have been tendered before me and which have not been excluded on any basis (Hazart Pty Ltd v Rademaker (1993) 11 WAR 26).
The application for summary judgment is required to be supported by an affidavit "verifying the facts on which the claim is based". What must be verified are "such facts as are necessary to establish a good cause of action; it will not be sufficient if (the affidavit) verifies only a portion of the cause of action, leaving out some essential part of it" (Roberts v Plant (1895) 1 QB 597, 605). It is not necessary that every particular of the plaintiffs' case be proved, but the essential elements of the cause of action must be verified (Evans Deakin & Co Pty Ltd v Kaiser Engineers & Construction Inc [1968] Qd R 379).
It is also a condition precedent to the exercise of the jurisdiction to grant summary judgment that there has been service of a statement of claim which discloses a cause of action against the defendant (Longmuir v Prosser, unreported; FCt SCt of WA; Library No 9141, 7 November 1991). It is enough that a cause of action is apparent from the statement of claim notwithstanding that the pleading might be in a form which will be unacceptable if the action is to proceed. Put another way, the question is whether there is a want of form or a want of substance in the statement of claim. The former may not necessarily be fatal. The latter will always be so (Westpac Banking Corp v Thorpe, unreported; SCt of WA; Library No 970465; 18 September 1997, Sanderson M).
The applicant bears the burden of persuading the Court that the claim made is a good one, that there is no valid defence, and that summary judgment should be granted. In this regard the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99). If a version of the facts is put forward by the defendant which is not inherently incredible, then given the absence of any opportunity for cross‑examination, the Court should proceed on the assumption that those facts may ultimately be accepted at trial (Webster v Lampard (1993) 177 CLR 598, 608). In cases which involve difficult and substantial questions of law which cannot be determined without full argument, it is entirely proper for the Court to refrain from ordering summary judgment and to give leave to defend (Theseus Exploration NL v Foyster (1972) 126 CLR 507, 514-5).

Whether there should be summary judgment

Although the statement of claim pleads each cause of action collectively on behalf of all plaintiffs, it is clear that it is only the first plaintiff that can have any contractual claim. This is because the first plaintiff was the registered proprietor of the land, and the second plaintiffs entered into the agreement with the defendant on their company's behalf. On the basis of the facts as verified by the male plaintiff, the causes of action available to the second plaintiffs can only be those pleaded in tort.
Although the statement of claim can be fairly described as a very sparse pleading, it does in my view disclose the essentials of causes of action in both contract and tort. With regard to the cause of action in contract the statement of claim does not particularise whether the relevant "duty" was express or implied, but having regard to the written agreement annexed to the plaintiffs' affidavit, such a duty could only exist if it was to be implied.
It is trite law that before a term can be implied in a contract it must satisfy certain conditions. Those conditions are:
"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 404)
In the present instance the first plaintiff seeks to imply a term in its contract with the defendant to the effect that the latter would "exercise reasonable care and expedition in the conduct of the plaintiffs' said mandate" (paragraph 7.4 of the statement of claim). Although the preceding paragraphs of the statement of claim do not specifically plead any "mandate", this expression obviously refers to the authority given to the defendant to sell the first plaintiff's property.
Given that the essential complaint against the defendant is his failure to notify the plaintiffs of the dishonoured cheque, the manner in which the implied term has been pleaded in paragraph 7.4 amounts to a defect in the statement of claim. Nevertheless, I consider that defect to be a matter of form rather than substance, and in my view it does not bar any exercise of the jurisdiction to grant summary judgment.
The contract between the parties expressly contemplated that the defendant might receive the deposit from any purchaser on behalf of the first plaintiff. The subsequent offer and acceptance as negotiated by the defendant required that he be paid the deposit under that agreement. In all of the circumstances it was obviously a matter of great importance to the first plaintiff to know whether or not that deposit was in fact paid. In my view (and applying the Codelfa criteria) there was of necessity an implied term of the contract between the parties that in the event that the defendant did undertake to receive a deposit he would promptly notify the first plaintiff if in fact it was not paid.
The defendant undoubtedly breached that implied term, and I am unable to see any basis on which the explanation offered by the defendant in his affidavit can provide a defence. Similarly the fact that the defendant may have told the plaintiffs "not to change their work practices prior to settlement" is not a matter that can go to liability. Accordingly, I find that there is no real issue to be tried in respect of the liability of the defendant for the contractual claim by the first plaintiff.
As it was the first plaintiff who conducted the farming business at all material times, the contractual cause of action gives rise to the damages claimed for loss of earnings (although the quantum is obviously going to be a very live issue). Depending upon the particular facts, the first plaintiff may also be able to claim the damages sought in respect of solicitors' costs.
The remaining head of damages relates to the second plaintiffs' claim in respect of bridging finance costs on their new home. This claim can only be based in tort whether for breach of statutory duty or for negligence.
Insofar as the plaintiffs claim damages for the alleged breaches of statutory duty, I consider that there is a real issue to be tried. That issue is a matter of law, and concerns the question whether the relevant provisions of the Code can be construed as conferring a civil right of action for their breach. In this regard, it is relevant to note that the Code has been promulgated for the purposes of disciplinary proceedings before the Real Estate and Business Agents Supervisory Board.
Within the limits of the presently pleaded statement of claim the only remaining cause of action is in negligence. Having regard to the surrounding circumstances there was clearly a relationship of "proximity" between the parties which required the defendant to take reasonable care to avoid acts or omissions which he could reasonably foresee would be likely to injure the second plaintiffs.
With regard to the question of foreseeability, although the plaintiffs have not deposed that they told the defendant they were intending to retire to a house in Albany, it would have been obvious to the defendant that they could not continue to live on their property once it was sold. He therefore ought to have been aware that the second plaintiffs would take some steps to secure an alternative residence prior to settlement of any sale of the farming property.
On his own admission, the defendant also knew that the second plaintiffs had recently experienced some difficult financial circumstances, and it follows that he ought to have been aware that they might need to use the sale proceeds to pay for a replacement residence.
In these circumstances the defendant clearly owed the second plaintiffs a duty of care to promptly notify them of any event which might interfere with settlement of sale of the farm. The defendant breached that duty of care by failing to notify the second plaintiffs prior to 21 February 2000 of the purchaser's default in payment of the deposit. By 21 February 2000 the second plaintiffs had committed themselves to the purchase of their new residence, and the need for bridging finance thus became inevitable.

Although there are shortcomings in the manner in which this cause of action is pleaded in the statement of claim, I consider that these are defects of form rather than substance. In my view there is no real issue to be tried in respect of the defendant's liability to the second plaintiffs in negligence.
For all of these reasons it is appropriate that the plaintiffs should have summary judgment for damages to be assessed. It follows that the appeal should be dismissed.