Harvard Securities (Aust) Pty Ltd v Westgarth Development Pty Ltd - [2002] FMCA 88

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HARVARD SECURITIES (AUST) PTY LTD v WESTGARTH DEVELOPMENT PTY LTD & ORS

[2002] FMCA 88

MISLEADING AND DECEPTIVE CONDUCT – Claim for estate agent’s commission – primary liability clause in contract for signatory of contract – misleading and deceptive conduct not made out – contract claim for commission established – counter-claim not proved.

Applicant:

HARVARD SECURITIES (AUST) PTY LTD

Respondent:

WESTGARTH DEVELOPMENT PTY LTD

Second Respondent:

DOMINIC FOLLACCHIO

Third Respondent

DAVID KENNETH BAKER

File No:

MZ 673 of 2001

Delivered on:

5 June 2002

Delivered at:

Melbourne

Hearing Dates:

27 & 28 March, 19 April 2002

Judgment of:

Phipps FM

REPRESENTATION

Counsel for the Applicant
on 27 & 28 March 2002:

Ms Chrissy Mavroudis

Counsel for the Applicant
on 19 April 2002:

Mr James D Catlin

Solicitors for the Applicant:

Mason Sier Turnbull

Counsel for the Respondents:

Mr Alan Marshall

Solicitors for the Respondents:

G C F Mier & Associates

ORDERS

That the first and second Respondent pay the Applicant the sum of $43,714.00.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ673 of 2001

HARVARD SECURITIES (AUST) PTY LTD

Applicant

And

WESTGARTH DEVELOPMENT PTY LTD

Respondent

DOMINIC FOLLACCHIO

Second Respondent

DAVID KENNETH BAKER

Third Respondent

REASONS FOR JUDGMENT

The Applicant is an estate agent. The first Respondent carried out a residential development in Northcote in 1998 and 1999. The second and third Respondents are the directors of the first Respondent.
The first Respondent constructed and sold residential units in Dominic Court and Westgarth Street, Northcote in two stages. The first stage consisted of 17 units and the second of 16 units.
On 22 January 1998 at a meeting between Mr Paul Curio and Mr Victor Altomare, directors of the Applicant and the second and third Respondents, an exclusive sale authority dated that day was signed appointing the Applicant exclusive agent for a period of 120 days for the sale of the units in Stage 1. A price list was attached, commission was 5 per cent. The Applicant was to pay all marketing expenses.
The Applicant’s directors had wanted commission of 6 per cent, being the commission they usually charged for sale of projects of this type, but it was negotiated down to 5 per cent.
Pursuant to this exclusive sale authority, five units were sold. There was then another meeting between the parties in March 1998. The Applicant’s representatives wished to increase the commission to 6 per cent and produced a new exclusive sale authority. The Respondents were unwilling to sign the exclusive sale authority but agreed to the increase to 6 per cent. A new pricelist for the remaining units in Stage 1 was produced showing increased prices.
The new exclusive sale authority was not signed and from then on each unit was sold pursuant to a general sale authority. What happened for both the balance of Stage 1 and Stage 2 was that Mr Curio would bring to one of the directors of the Applicant a contract of sale signed by a potential purchaser, a general sale authority which contained the selling price and the commission as a fixed amount not a percentage, and sometimes a deposit cheque. The contract of sale appointing the Applicant’s agent for the sale of that particular property was then signed.
The balance of the units in Stage 1 were all sold in this way and all except one of Stage 2 were also sold. Four of the Stage 2 sales did not proceed to settlement, the balance did.
Commission has been paid for all units settled except three - Units 8, 13 and 14 at 52 Westgarth Street, Northcote. It is not disputed that general sales authorities appointing the Applicant’s agent for the purpose of sale were signed for each of these units, each sale authority setting out sale price and commission, that the sales were all settled and balance of purchase price paid, and that apart from the counter-claim the Applicant is entitled to its commission. The amounts are $14,400.00 for Unit 8, $14,970.00 for Unit 13 and $14,370.00 for Unit 14 - a total of $43,740.00.
The defence is threefold. The Respondent’s allege that when the basis of the agreement was changed in March of 1998, it was agreed that the Applicant would receive 6 per cent commission only if it sold all units in both stages of the development, otherwise it would receive 5 per cent for all sales. Next it is alleged that the Applicant delayed settlement on Units 33, 38 and 39. Many, if not most of the units, were sold as investment properties. The purchases retained the Applicant as managing agent. Some units were not completed, or at least there was a dispute about their completion at the time of settlement. The Respondents say that Units 33, 38 and 39 required some plumbing and electrical work before completion. The plumber and the electrician were refusing to return because they claimed they were owed money by the builder. The first Respondent had a lump sum contract with the builder and so it was not its responsibility to pay the sub-contractors. Nevertheless, agreement was reached to pay the plumber an extra $5,000.00 and the electrician an extra $3,000.00, to be paid direct by the first Respondent, to have these units completed so that settlement could take place.
The Respondents allege that employees of the Applicant instructed the electrician and the plumber to carry out work on units which had already been settled. It was alleged that the Applicant had been appointed managing agent for the letting of these units. While sales had been settled it was said that units had not been completed, requiring electrical and plumbing work. The Respondents alleged that employees of the Applicant directed the plumber and the electrician to carry out work on these settled units and not on the unsettled units. As a consequence settlement on the unsettled was delayed. What is claimed is the $8,000.00 paid to the plumber and the electrician and $11,994.70 additional interest expended by the first Respondent as a result of the delay in settlement of the three units.
In relation to the 5 per cent claim, Mr Curcio’s evidence is that initially the Applicant wanted to charge 6 per cent commission. For this, it wanted an exclusive sale authority and it would pay all advertising expenses. The Respondents negotiated and 5 per cent was agreed upon. The exclusive sale authority, which included a pricelist, was signed.
In March 1998, after selling five units, Mr Curcio wished to renegotiate to receive 6 per cent. He produced a new exclusive sale authority and a revised pricelist.
Mr Curcio says that when he sought the increase to 6 per cent, the second and third Respondents at first resisted and then agreed, but wanted to keep open the option of retaining other agents. Mr Curcio had with him a new exclusive sale authority for the units in stage one, but it was not signed.
The second and third Respondents, on the other hand, alleged that the result of the March agreement was that 6 per cent was only to be paid if all units were sold, and the unsigned exclusive sale authority is evidence of this.
The version of the March conversation put by Mr Curcio is more probable than that of the Respondents. What Mr Curcio says was agreed on is in fact what happened. Each entitlement to commission from then on was by a separate general authority at a percentage which was not stated but a dollar amount inserted in the general authority which was in fact 6 per cent of the sale price.
None of the general sale authorities contained the condition that payment of the whole commission was dependent upon anything other than the terms contained within the general sale authority itself. There was no mechanism for repayment in the event that all units were not sold by the first Respondent.
There was no conversation subsequent to March 1998 that the payment of the whole of the commission was conditional. There is no coherent evidence from either the second or third Respondent of a conversation in March to the effect of the agreement they allege.
As already stated, the Respondents say that the unexecuted exclusive sale authority shows the agreement. Even if it had been executed, it cannot be interpreted in this way. It is a standard form of agreement which is designed for the sale of a single property. Its terms are drafted for a single event, that is the sale of a single property and the payment of commission on that sale. As produced by the Applicant, it had attached to it, and so forming part of it, a list of the units with the sale price for each. Agent’s fees are:
“the amount calculated as follows: 6 per cent of the list price (excluding those listed as sold).”
Clause 2 of the exclusive authority is:
“The vendor is obliged to pay the agent –
(a)the agent’s fees if the vendor sells the property during the currency of the agreement.”
The only interpretation of this document can be that as each unit is sold the agent becomes entitled to the agent’s fee calculated as 6 per cent of the listed price. There is no provision for repayment. If the exclusive sale authority had been executed, once each property was sold, the 65 commission was payable and that was the conclusion of that transaction.
Thus, even if the unexecuted exclusive authority is an agreement, the Respondents’ argument fails.
A further consideration is that the unexecuted authority is for units then unsold in Stage 1. The fees for which the Applicant sues are for units in Stage 2. Again, if the unexecuted exclusive sale authority is an agreement, and if it can have implied into it, or attached to it, a condition that 6 per cent is payable only if the units are sold by the Applicant, the Respondents’ argument fails. The Applicant sold all the units in Stage 1. It sold all the units which were the subject matter of the unexecuted exclusive sale authority. If it contained a condition as alleged, that condition was satisfied.
The other part of the Respondents’ counter-claim is the alleged delay in settlement of Units 13, 14 and 8. The counter-claim alleges that a person named Hammond instructed an electrician and a plumber who were sub-contracted to perform work on the units to perform work on other units which had already been settled, and so causing the sale of the units which had not been settled to be delayed.
Helen Klietu gave evidence that she was a property manager employed by the Applicant. She said that the only time she spoke to an electrician was when she found that getting the electricity connected on properties was a problem with CitiPower. She said that CitiPower had told her that the paperwork forwarded was incorrect.
She was put on to the electrician who was initially uncooperative, saying he was owed money and was on another job in Richmond. Ms Klietu said she took the paperwork to the electrician in Richmond, had it signed and so electricity was connected. This was on units after settlement.
The evidence given by the second and third Respondents was not in relation to Ms Hammond Klietu but another employee of the Applicant whose first name is Leah. The second and third Respondents gave evidence of discussions concerning settlement and of arrangements they said were made direct between builder and owners for appliances to be installed after settlement. They said this was done because the builder was reluctant to install them before settlement because of the risk of theft.
The Respondents also gave evidence of the arrangements they have had to make with plumber and electrician, already referred to, to have work performed on the three units – 13, 14 and 8. Mr Baker gave evidence of a conversation with the person called Leah, who was a property manager employed by the Applicant. This conversation was by telephone which concerned work done on already completed units where the Applicant had been appointed leasing agent. Mr Baker said that the substance of his conversation with Leah was that she would not allow settlement on any more units till work was done on the already completed units. The nub of the Respondents’ complaint is that the plumber and the electrician who had been paid direct to complete the unsettled units were diverted by the Applicant, or by Leah on behalf of the Applicant, to do work on already settled units.
Neither the plumber, the electrician nor the purchasers of units 13, 14 and 8 gave evidence. How it was that anyone on behalf of the Applicant was able to divert the plumber and the electrician from working on some units to other units is not apparent. If in fact they had been paid by the first Respondent to work on units 13, 14 and 8, then that was the contract which the first Respondent could enforce.
The person called Leah was not called; no explanation for her absence was given, and so there can be more confidence in accepting Mr Baker’s evidence of the conversation. However, even if the Applicant, through an employee or agent, diverted the plumber and the electrician from work on the settlement of units, the link between that and delay in settlement is difficult to see. It may be assumed that there is an implied term of each of the general authorities that the agent act in the best interests of its principal. The agent’s obligation was to find a purchaser. It had no contractual obligations behind that. The Applicant was acting as leasing agent for owners of some units, including settled units. Under those contracts, it had a duty to act in the interests of those owners.
The evidence of the second and third Respondents was that arrangements had been made direct between owner and builder for appliances to be installed immediately after settlement. These would require installation by an electrician in the case of electrical appliances, and a plumber in the case of gas appliances. If the person called Leah insisted that plumbers and electricians carry out these obligations, it is difficult to see how that can be a breach of any undertaking or implied obligation of the Applicant to act in the interests of the first Respondent. The first Respondent had a contract with the plumber and the electrician to finish the unsettled units. It should have enforced that contract. It is not alleged that the Applicant somehow induced a breach of that contract.
Consequently, the counter-claim fails. The Applicant puts its case against the Respondent as both a contractual claim and a claim under s.52 of the Trade Practices Act 1975 for misleading and deceptive conduct. The Applicant alleges that the Respondent represented to it that it would pay commissions on Units 8, 13 and 14 and that acting upon those representations the Respondent entered into the general sales agreements.
Even if that is correct, for the Applicant to succeed on this claim it would have to show that the first Respondent through the second or third Respondents, when it made the representation, did not intend to comply with it. There is no evidence of this. In fact the evidence is to the contrary. Commission was paid on all units except the three in dispute. The disputes which have arisen are those in the counter-claim and they did not arise until well after the general authorities in respect of each of Units 8, 13 and 14 were signed. The evidence points to the Respondent, through the second and third Respondents, intending to pay commission at the time those authorities were signed.
A claim is made against the second and third Respondents alleging that they were involved in the contravention within the meaning of s.79 of the Trade Practices Act. Since there was no contravention by the first Respondent, the second and third Respondents cannot be liable on this basis.
Each of the general sale authorities for Units 8, 13 and 14 contained a clause, Clause 6, as follows:
“Any signatory for a proprietary company vendor shall be personally liable for the due performance of the vendor’s obligations as if the signatory was the vendor. If required by the Agent, the signatory shall procure the execution by all vendor company directors of a guarantee to be prepared by or on behalf of the Agent.”
Each of the authorities was signed on behalf of the first Respondent by the second Respondent. The Applicant seeks an order against the second Respondent pursuant to Clause 6.
At the time he signed each of the agreements, the second Respondent was, as a matter of subjective intention, only intending to sign on behalf of the first Respondent. He gave no evidence of whether or not he read the authorities. The inference to be drawn from the evidence is that he was not aware of the clause until well after the event There is no allegation that there was any misrepresentation made to him about the nature of what he was signing. Indeed, by the time Units 8, 13 and 14 were signed for, there had been a number of similar sales authorities signed by the second Respondent. There is nothing to displace the normal conclusion that a person is bound by what he or she signs.
There is then an issue of the basis on which the second Respondent might be liable. Provisions such as clause 6 may be a guarantee or might impose personal liability. The distinction between a guarantee and personal liability is well understood. It depends on the meaning of the words used. The wording of this clause is clear. It imposes personal liability on the signatory. Consequently, the second Respondent is personally liable for the debt. Of $43,740.00.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: