Indeco Pacific Pty Ltd v Geneva Investments Pty Ltd
[2012] VSC 621
•20 DECEMBER 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CIVIL LIST
No. 08915 of 2009
| INDECO PACIFIC PTY LTD (ACN 135 598 982) | Plaintiff |
| v | |
| GENEVA INVESTMENTS PTY LTD & OTHERS (ACCORDING TO THE ATTACHED SCHEDULE OF PARTIES) | Defendants |
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JUDGE: | VICKERY J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 7, 9, 12-14 NOVEMBER 2012 | |
DATE OF JUDGMENT: | 20 DECEMBER 2012 | |
CASE MAY BE CITED AS: | INDECO PACIFIC PTY LTD v GENEVA INVESTMENTS PTY LTD & ORS | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 621 | |
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AGENTS AND AGENCY – Sale of land - Agreement by vendor to pay commission to purchaser’s agent – Non-disclosure of agreement by vendor – Secret commission – Right of purchaser to recover commission from vendor.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr PJ Riordan SC with Mr G Parncutt | Kiatos & Co |
For the First and Fifth Defendants | Mr S Wilmoth | Neill Ogge Lawyers |
| For the Second Defendant and Third Defendants | Mr Collins appeared in Person | |
| For the Fourth Defendant | Mr Irawan appeared in Person |
HIS HONOUR:
This proceeding arises from an allegation that a party, the Second Defendant (“Collins”), took a secret commission in the course of a transaction involving the sale of a property situated at 104 Mount Street, Heidelberg (the “Heidelberg Property”). The Heidelberg Property was owned by the First Defendant, Geneva Investments Pty Ltd (“Geneva”), a company associated with the Fifth Defendant, Greg O’Shea (“O’Shea”), who was a director.
The Heidelberg Property was a commercial property which had a number of short-term commercial tenancies. It had potential for residential development to include approximately 105 apartments spanning nine levels.
By a contract of sale dated 11 March 2009, the Heidelberg Property was sold to the Plaintiff, Indeco Pacific Pty Ltd (“Indeco”), a company associated with an Indonesian businessman and investor, Indra Suyono Djong (“Djong”). Djong was the Managing Director and a shareholder of Indeco.
O’Shea and Collins have known each other since about 2003. Collins is not a licensed real estate agent, but nevertheless has, from time to time, brokered land transactions for others and himself.
Background Facts
A little time needs to be devoted to explaining the background facts surrounding the sale of the Heidelberg Property.
The story unfolds from about 2004, when Collins arranged the sale of the majority of the lots owned by O’Shea, or companies associated with him, in Armytage Street, Lorne. This property was situated behind 264 Mountjoy Parade, Lorne. Collins was paid a commission by O’Shea on this sale in the order of about 1.5% on a sale price of approximately $4 million. Collins had originally been part of a group of investors but the investors proceeded with the purchase in the absence of Collins.
In around 2004 or 2005, Collins arranged for the sale of another property owned by O’Shea in Vine Street, Heidelberg (the “Vine Street Property”) for $4.2 million. Again the sale was negotiated with a group of investors which included Collins. O’Shea paid Collins about 1.5% commission on the sale price of the Vine Street Property. Once again Collins was part of the proposed joint venture but, in the middle of the negotiations he withdrew from the transaction and the other investors proceeded without him.
In approximately August 2008, Collins was introduced to the Fourth Defendant (“Irawan”). Irawan is an Indonesian national living in Melbourne who has business contacts in Indonesia. At the time, Irawan was attempting to find investors in a development in Victoria called Martha Cove on the Mornington Peninsula. Martha Cove is a residential marina development situated at the foot of Mount Martha[1] opposite Safety Beach (formerly Shark Bay). In addition, Collins discussed with Irawan the possibility of Irawan facilitating the sourcing of Indonesian investors for property transactions for other projects in Australia. In particular, Collins was interested in sourcing investors for a project on Magnetic Island in Queensland (the “Magnetic Island Project”). There were discussions about Collins agreeing to pay to Irawan a consultancy fee of between 1% to 10% of the total amount of the investment.
[1]Mount Martha was named after Martha Lonsdale, the wife of Captain Lonsdale, an administrator who supervised the founding of the official settlement at Port Phillip, where Melbourne stands today. Mount Martha was named by officers of HMS Rattlesnake in 1837, the vessel which brought to Lonsdale’s to the district. The name for Mount Martha used by the indigenous peoples of the area was “Bygully Barring”. See: “Mornington in the Wake of Flinders”, Moorehead, Leslie M., Shire of Mornington, 1971.
In October 2008, Mr Anan Widjaja (“Widjaja”), who was also known as “Mr Kang” (or Pak Kang), entered the scene. Widjaja is a Feng Shui[2] architectural design consultant. He was variously referred to in the correspondence as the “Grand Poobar”, no doubt after the character “Pooh-Bah” in Gilbert and Sullivan's opera The Mikado (1885).[3] However, beyond being a property investor and a Feng Shui expert, the evidence does not reveal any other “hats” assumed by Widjaja that were a hallmark of the original character. Widjaja had known Irawan for about 15 years. He introduced Irawan to Djong, who was a former client of Widjaja. Irawan suggested an opportunity to export aluminium and glass construction materials to Australia. This was Mr Djong’s line of business. A resort development on Magnetic Island, near Townsville, Australia was discussed. Irawan told Djong that he had an interest in the Magnetic Island Project with a partner, Collins.
[2]A Chinese system of geomancy believed to use the laws of both Heaven (Chinese astronomy) and Earth to help one improve life by receiving positive qi.
[3]Act 1 Scene 1 The Mikado:
On 12 November 2008, O’Shea retained a Mr O’Beirne (“O’Beirne”), a real estate agent of East Coast Property Services on behalf of the Geneva, to sell the Heidelberg Property it owned. The authority was to sell the property for $6.5 million or any other price agreed by the vendor. Mr Christo (“Christo”) of East Coast Property Services was engaged as the agent to handle the sale. He was instructed that O’Shea’s asking price was around $6 million. O’Shea had told O’Beirne that he had obtained a valuation for the Heidelberg Property of $5.7 million.
On 28 December 2008, Djong, his wife and two children travelled from Indonesia to Melbourne. They were picked up at the airport by Irawan. The following day, Irawan collected Djong from the Marriott Hotel in Melbourne and took him to a meeting with Widjaja (who had travelled to Australia on 13 December 2008), Mr Alex Dimopoulos (a person associated with the Martha Cove development), Mr Peter Brilliant (the registrar of the Building Commission of Victoria) and Irawan. They discussed the importation of building materials.
On the following day, 30 December 2008, Djong was invited to dinner at the Crown Casino, Crown Towers, Southbank, by Widjaja where he was introduced to Collins by Irawan. There was a discussion about the Magnetic Island Project and a possible inspection of the Martha Cove development.
On 26 January 2009, Collins and Irawan travelled to Indonesia. They had a meeting with Djong and Widjaja at Widjaja’s residence in Jakarta. They discussed the proposed Magnetic Island Project. Collins showed Djong some architectural drawings and said he had put $2 million into the venture to secure the project. Widjaja suggested that another Indonesian equity partner should be introduced to the project, a Mr Tommy Lybianto (“Lybianto”). Lybianto was a friend of Widjaja and had known him for 20 years.
On 7 February 2009, Lybianto met Djong for the first time. On that day Widjaja, Lybianto and Djong flew to Melbourne. Collins and Irawan picked them up from the airport.
On the following day, 8 February 2009, Collins drove Widjaja, Lybianto, Djong and Irawan to Lorne to inspect O’Shea’s property at 264 Mountjoy Parade, Lorne (“Mountjoy Parade Property”) and another development property near Lorne known as the “Little She-Oaks” property (the “Little She-Oaks Property”). Djong and Widjaja were initially told that they were to be taken to Martha Cove, but instead Collins drove them to Lorne.
At Lorne, Collins took the party to the Mountjoy Parade Property where they were introduced to O’Shea. Collins advised the group that the Mountjoy Parade Property was for sale at $8.8 million. Lybianto said that they should only do one project at a time. Djong said he was not interested in purchasing the Lorne property while the Magnetic Island Project was just beginning. The group had lunch at the Pier Café at Lorne.
There was an issue as to whether during luncheon Djong made an offer of $7 million to purchase the Mountjoy Property.
However, I find that Djong did not make such an offer. In the first place, this was contrary to the evidence of Djong, who was not challenged in cross-examination about his evidence on the matter. Second, it is inherently unlikely that such an offer would have been made. None of the Indonesian visitors had previously been told about the Mountjoy Parade Property and did not know that they were being taken there. Djong, Widjaja and Lybianto had not been given any information about the property, including the extent to which it had been developed and how it could be developed. Further, neither Collins nor O’Shea gave evidence that they had suggested any figure for which the property could be sold, either before or after the alleged offer by Djong.
While in Lorne, Djong, Widjaja and Lybianto were also taken by Collins and Irawan to inspect the Little She-Oaks Property. There is no evidence that any price was suggested for the Little She-Oaks Property but O’Shea’s evidence was that he would have contemplated sale at $3 million.
Following the visit to Lorne, the group proceeded to Martha Cove, for an inspection.
On about 9 February 2008, Collins arranged for Djong, Widjaja, Lybianto and Irawan to fly to Magnetic Island. On arrival the group stayed overnight and discussed the details of a possible joint venture with financial contributions from all the parties except Irawan. They inspected the Magnetic Island site. Djong advised Lybianto that together they should hold 60% of the shareholding. Widjaja suggested that a company, Anstell Pty Ltd (“Anstell”), should be used as the joint venture vehicle.
After returning to Melbourne on 13 February 2009, Collins and Irawan drove Djong, Lybianto and Widjaja to the airport. Collins took a detour past the Heidelberg Property. Collins said that it was for sale and that it was owned by O’Shea. Djong said that he liked the property and its location. Djong asked for some further information about the Heidelberg Property, however there was no discussion about purchase price or possible offers.
On 22 February 2009, Collins and Irawan flew to Jakarta where they met at Widjaja’s house. They discussed drawings, plans, design costs and Feng Shui designs for the Magnetic Island Project. They were introduced to Irawan’s niece, Ms Anti, who had been engaged as the architect on the project. It was agreed that Djong and Lybianto would hold a 60% interest through Anstell and Collins would hold 40% interest through his company, the Third Defendant, Broncorp Pty Ltd (“Broncorp”). Widjaja’s fee in respect of the Magnetic Island Project was discussed. Widjaja sought to increase his fee to USD$1.2 million, which was beyond a figure that had apparently been earlier discussed. At the end of the meeting four of the party, Collins, Widjaja, Djong and Lybianto agreed to be partners in the Magnetic Island Project and shook hands on the arrangement.
At this stage the Magnetic Island Project joint venture discussions appeared to be progressing satisfactorily, although Collins said that he did not believe it would ultimately proceed.
Sale of the Heidelberg Property
In February 2009, Christo secured a conditional offer for the sale of the Heidelberg Property for the sum of $6.5 million. However, the offer to purchase was subject to a return of 7.5% being achieved. The rental income at the time of the offer was below 7.5% net. If the sale transaction had been completed, O’Shea would have received the net sum of $6.1 million, after taking into consideration the costs and expenses of the sale including the agent’s commission.
Between about 25-27 February 2009, Collins and Irawan met Djong at the Grand Melia Hotel in Jakarta. Collins raised the question of the possible purchase of the Heidelberg Property. The substance of the discussion was to the effect that Djong was only interested in purchasing the property if it was part of a joint venture with Collins. Collins told Djong that the rental was $550,000 per annum. Djong expressed the view that the property would need to be returning at least 8% per annum. Collins told Djong that the asking price was $7.8 million. Djong said that he did not consider they should offer more than $6.8 million. Collins said that he could only invest $800,000 in the Heidelberg Property which he could not advance until the property had been purchased outright by Djong. Collins said further that he would contact O’Shea to negotiate the purchase price of the property. Collins also reported to the group that at different times O’Shea wanted a purchase price of $7.8 million and $7.2 million and that he thought it could be purchased for $7 million. Collins said that he would negotiate a purchase price.
Djong instructed Collins to negotiate a purchase price of $6.8 million which he calculated based on rental income being earned on the property. Djong gave the following account of events in his evidence, which I accept:
In late February 2009, Collins and Irawan came to Jakarta to meet with me to set up a joint venture with a unit trust with Collins’ company Broncorp Investments Pty Ltd. Collins raised the purchase of the Heidelberg property with me and whether we should consider purchasing it. I told him that I would only be interested in buying it as a joint venture property. Collins told me that the property was returning rental income of $550,000.00 per annum and the asking price was $7.8m. Based on this rental income, I told Collins that the Heidelberg property was worth approximately $6.875m based upon an 5% return.
Collins told me that he would contact O’Shea to negotiate the purchase price on our behalf. Collins came back to me and told me that he had spoken to O’Shea and that O’Shea wanted $7.2m for the Heidelberg property.
I instructed Collins to negotiate a purchase price of $6.8m based on the rental income being earned on the property. Collins told me that we would most likely get the property for $7m. I told Collins that we should offer no more than $6.8m. He agreed.
Collins said that he sought to arrange the sale without expectation of any payment.
On 26 February 2009, Irawan arranged for Indeco to be registered as an Australian company on behalf of Djong. Both Djong and Mr Irving Huang Artemas (“Artemas”) were appointed directors, with Artemas appointed as Company Secretary.
Collins then sent an email dated 27 February 2009 to O’Shea. In the email, Collins mentioned his meeting with Widjaja (described as the “Grand Poobar”) and confirmed the terms of an offer which he had formulated and put for the purchase of the Heidelberg Property. This included the following terms, ’Purchase Price $6,000,000’; ‘Contract Price’ ’$6.8m … $800k for Grand Poobar in total’. The email also said ‘Contract will reduce for stamp duty savings, this figure to be discussed.’ The email then set out a further offer for the Little She-Oaks Property and concluded with the statement ’Mountjoy will be discussed tomorrow.’ The relevant text of the email in respect of the Heidelberg Property was as follows:
Had a big meeting with the grand poobar today, he decided that his fee for the Magnetic Project is not enough, so he has upped it to $m USD, I have just left them to discuss, I said no that wasn’t the agreement, so hopefully they are sorting it out now, anyway back to your stuff …
Mount St
Purchase Price $,6,000,000
Contract Price $6.8m…$800k for Grand Poobar in total
Deposit 20% $1.36…Greg O’Shea $1,200,000, Grand Poobar $160,000
Balance 8 months $5.44m…Greg O’Shea $4,800,000, Grand Poobar $640,000
Cost to Greg O’Shea…1% to Les plus $1800 Total = $61,800 Wayne Collins debt to G.O of $2,000 considered Paid
Contract will be reduce for stamp duty savings, this figure to be discussed …
I construe the offer from Collins reflected in his email of 27 February 2009 to be: $6 million would be payable to O’Shea as the purchase price; $800,000 was proposed to be paid to the “Grand Poobar” (who was Widjaja); O’Shea would pay Irawan 1% of the purchase price of $6 million (being $60,000) plus $1,800 (a total of $61,800) and O’Shea would forgive a debt owed to him by Collins in the sum of $2,000. A deposit of 20% was to be paid on the signing of the contract, with the balance payable within 8 months.
O’Shea’s version of events in late February 2009 was as follows:
On 25 February 2009 Wayne Collins called me from Indonesia and advised that Indra Djong was prepared to offer $6,800,000 cash with a 20% deposit on an unconditional contract. I said that was great, and that I would accept the offer.
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Later that day [namely, on 26 February 2009] Wayne Collins called me and said that I would have to pay $800,000 to Anan Widjaja to get the deal done. I asked what for, and told him that was ridiculous. This was the first time anyone had said anything to me about my liability to pay commission on the sale of Mount Street.
Wayne Collins’ explanation for the payment to Widjaja of such a huge commission was that Anan Widjaja was a Feng Shui Master who advised the Prime Minister of Indonesia and that Anan Widjaja was very highly regarded in Indonesian society and when he visited Indonesia he was waved through at the airport, without any immigration or customs checks. Anan Widjaja had to approve all property developments before Indra Djong purchased any property.
Wayne Collins also told me that Anan Widjaja wanted the $800,000.00 paid towards the joint venture development on Magnetic Island in which he was a partner, as part of his contribution to the development. He said Anan Widjaja did not want the money paid to Indonesia because it would cause problems for his taxation. I said if any monies were to be paid I would require an invoice.
I said we would discuss it further when he returned from Indonesia.
On 27 February 2009 Wayne Collins sent me an email referring to a payment of $800,000.00 to be paid to a “grand poobah” who turned out to be Anan Widjaja. In addition to the Anan Widjaja fee, a 1% fee was added as a payment to Lesly Irawan.
The next day I called Wayne Collins and said no way will I pay any of these fees. He now expected me to receive under $6,000,000. I told him I was very close to fully leasing the property and then we would receive about $7,000,000, less an agent’s commission. I added that the offer from John O’Beirne’s client was still on the table, so why would I now accept less? I said that he stated in his email that he was receiving nothing from the deal. I said I should pay him something if the property settles. Wayne Collins said it didn’t matter; Indra Djong and he were doing the Magnetic Island project.
…
However, as later described, I do not accept the position taken by O’Shea that he refused to accept the fee of $800,000 which was included in the offer put to him by Collins.
Collins then reported to Djong that his negotiation for the sale of the Heidelberg Property had been successful. Djong gave the following account which I accept:
Collins told me that he telephoned O’Shea and that he had struck a deal for $6.8m with 20% deposit payable. We discussed what our respective contributions would be to the purchase price of the Heidelberg property. Collins told me that he had only $800,000 to invest in the Heidelberg property. I told him that together with Lybianto, I would make up the difference. We should hands and said to each other that it was a deal.
Again Djong was not advised that $800,000 of the purchase price was payable to any party as a commission, and that the vendor of the Heidelberg Property was only to receive $6 million in its hands.
On 28 February 2009, Collins, Djong and Irawan travelled to Shanghai in the People's Republic of China.
On 5 March 2009, Djong, Collins, Lybianto and Irawan returned to Australia. Collins produced a document to record the proposed joint venture partnership for the Magnetic Island Project, together with a document to record the proposed joint venture partnership for the She-Oaks project (the “She-Oaks Project”). Collins, Djong, Lybianto and Irawan all signed the Magnetic Island document but the She-Oaks Project document was not signed. It was at this time that Collins told Djong that he did not have sufficient money to contribute to the purchase of the Heidelberg Property and that he would concentrate on the Magnetic Island Project where he had invested the sum of $2.12 million as a deposit. Djong requested Collins to produce documentary evidence to support his claim that he had contributed this sum to the Magnetic Island Project, but Collins did not do so, in spite of continued requests from Djong.
From here on, the purchase of the Heidelberg Property proceeded with Indeco as the sole purchaser and with no joint venture in place. There had been discussions about the possibility of a joint venture in respect of the Heidelberg Property, but at this time it had not crystallized into a finalised agreement. As far as Djong was concerned, the proposed arrangement was dependent on Lybianto joining the venture. However, Lybianto had not been consulted when Collins and Djong shook hands on the “deal”. When he was later consulted, Lybianto refused to join in the purchase. Djong then decided to proceed in his own right. Further, there is no evidence that Collins insisted on continuing in the proposed joint venture for the purchase of the Heidelberg Property, or had the financial capacity to do so. Accordingly, I find there was no joint venture in place or which had ever been finally agreed upon, for the purchase of the Heidelberg Property.
At about this time the arrangements to proceed with the Magnetic Island Project were cancelled between the parties to that venture.
On 5 March 2009, a meeting took place between Collins, Irawan, O’Shea and Djong with respect to the execution of contract for the Heidelberg Property. There are different accounts of what occurred at this meeting, but Djong was not informed by O’Shea or anybody else about the contents of the 27 February 2009 email or the substance of the proposal reflected in that email, or the proposal to pay the $800,000 commission to Widjaja.
On 7 March 2009, there was a meeting between Djong, his lawyer Mr Con Kiatos, Collins, Irawan, Artemas and O’Shea. Again at this meeting O’Shea did not tell Djong about the contents of the 27 February 2009 email or the substance of the proposal reflected in that email.
On 11 March 2011, Djong signed the contract of sale for the purchase of the Heidelberg Property and on 20 March 2009 that contract was settled. The purchase price expressed in the contract was $6.8 million, with a 20% deposit and the settlement expressed to be due on 11 September 2009.
In the end, of all the projects in Australia inspected by the Indonesian investors, being the Lorne properties, Martha Cove and Magnetic Island, this was the only investment which resulted in a purchase.
Further Developments
On 23 March 2009, there was a telephone conversation between O’Beirne and O’Shea.
O’Beirne said that this conversation was to the following effect:
O’Shea said:
“Good news for me, bad news for you. Wayne’s got a buyer at $6.8m but there are $800,000 in fees. He’s paying 20% deposit on an unconditional sale”.
I said: “That’s a lot of money to be paying in commission”. He said:
“Wayne’s found this Indonesian buyer. He went over there and found him. There is an $800,000 fee going back to an Indonesian Feng Shui master”.
I discussed why the commission was so much. He said:
“An Indonesian guy is getting it. That’s the way the Indonesians operate”.
I said: “What’s Wayne getting?”
He said: “Nothing”.
I said: “He wouldn’t be doing it for nothing”.
He said: “I had just lent him $10,000 and Wayne said “We’ll call it quits on the $10,000 you lent me”.
Shortly before or at around the time this matter first came to Court I was contacted by O’Shea. He rang me and asked me in words to the effect:
“Have you seen the affidavit from Arthur Christo?” I told him that I had not.
He then said words to the effect:
“I have spoken to Wayne. I believe Wayne is trying to stooge me. The $800,000 is not going to the Indonesian”.
I said: “Where is it going?”
He said: “Wayne and some partner in a Magnetic Island project”.
O’Shea’s version of the conversation was to the following effect:
On 23 March 2009 I told John O’Beirne that I had good news and bad news. I told him that I had sold the property to an Indonesian developer for $6,800,000 with a 20% deposit on an unconditional contract. I said to John that I was sorry, that we were so close with his deal but I could not refuse this offer with 20% deposit. John O’Beirne was understandably unhappy about this news. John O’Beirne asked if Wayne Collins had sold the property, and I said yes. John O’Beirne asked how much was he getting out of the sale. I said Wayne is getting nothing; but said that he didn’t have to pay back a loan of about $10,000.00 I had given him. I said to John that after I agreed to sell the property Wayne Collins said an Indonesian person wanted $800,000 from the sale; he was an Architect from Indonesia who gave Feng Shui advice for all their developments. John said that was a lot of money for a commission. I said to John yes, it was a ridiculous amount.
However, I do not accept O’Shea’s version as being accurate. I prefer the account given by O’Beirne.
I find that O’Shea did in fact agree to receive $6 million as being the sum payable to his company from the sale and that he agreed that $800,000 would be paid as a commission to a third party nominated by Collins.
On the same day, 23 March 2009, O’Shea also had a telephone conversation with Christo, the agent who had been handling the sale of the Heidelberg Property. O’Shea told Christo that the Heidelberg property was sold for $6.8 million to an Indonesian purchaser and that a 20% deposit had been paid and consequently the services of East Coast were no longer required. Christo asked O’Shea about the price. O’Shea said words to the effect that ’I’m putting 6 ‘mil’ into my pocket and rest – the $800,000 – is being given to Wayne Collins, his Indonesian contact and various other parties.’ O’Shea denied that he had spoken these words but he did not give any other evidence as to his recollection of the conversation with Christo which he admitted did occur. I accept Christo’s account of the conversation.
Brunetti’s Café Meeting
On 25 August 2009, Artemas called O’Shea and arranged for a meeting to take place with Djong and himself to discuss matters prior to the settlement of the Heidelberg Property. O’Shea agreed to meet the others at 4.30 pm that day at Brunetti’s Café, Carlton (the “Brunetti’s Café Meeting”). Djong, Artemas and O’Shea met together, as arranged.
O’Shea’s version of this encounter was as follows:
Irving Artemas asked why I was going to pay a large commission to Wayne Collins. Con Kiatos had told them that I only wanted $6,000,000 for the property and had knocked back an offer of $5,800,000.
I said yes, I had knocked back $5,800,000.
Irving Artemas said, so you are paying Wayne Collins $800,000.
I said no, Wayne Collins was getting nothing from the sale, and after we agreed on the sale, Wayne Collins then told me that $800,000 was to be paid to Anan Widjaja. I said to Wayne Collins that was ridiculous. I said that Wayne Collins had said that Widjaja was to invest the money in your joint venture development in Magnetic Island.
Hey said Anan Widjaja knows nothing about this. Wayne Collins was receiving the money. I said that this was the first time I had heard that.
I said Wayne Collins had also told me later that Lesly Irawan was to receive 1% of the sale price.
I said that as Wayne Collins and Lesly Irawan had no money, I had lent Lesly Irawan $10,000 after Collins had pleaded with me to help Irawan, who was threatened with eviction from his house. I believe Irawan had introduced the Indonesian investors to Collins.
Indra Djong said it was absurd and the called Anan Widjaja to confirm. After Indra Djong’s phone call he said that Anan Widjaja confirmed that he knew nothing about an $800,000 payment to himself and denied he had anything to do with Magnetic Island.
Indra Djong and Irving Artemas said again and again that Anan Widjaja would never do such a thing as to accept an $800,000.00 fee for his Feng Shui services.
I said I was very shocked at the moment with all this news and could not believe it, especially after Collins had said he was getting nothing from the deal. But I had said I would pay him something.
Indra Djong said what if we reduced the contract price to $6,000,000 and then he would pay Wayne Collins. Indra Djong said that Anan Widjaja said not to pay Lesly Irawan any money. Anan Widjaja was extremely upset with Lesly Irawan; I should keep this money.
Indra Djong seemed to become very agitated and said that Wayne Collins and Lesly Irawan would not be welcome in Indonesia. I later learnt via Collins that Irawan was very upset about these comments.
I said I had no agreement whatsoever to pay anyone any commissions at all.
Indra Djong said he could get a letter from Anana Widjaja to explain that the $800,000 was not his.
I said I would have to check with my lawyers to see what to do and said I would not be paying anyone. I just wanted to get out of the meeting.
Indra Djong and Irving Artemas continually asked me to reduce the contract price to $6,000,000 or to pay the $800,000 to another of Indra Djong’s companies. I kept saying that I would have to speak to my lawyers. Again I just wanted to get out of the meeting.
However, I prefer the evidence of Artemas, as in essence confirmed by Djong, as to what occurred at the Brunetti’s Café Meeting. I find that at the meeting, the following matters were discussed between O’Shea and Artemas in the presence of Djong:
(a)Artemas introduced Djong once again to O’Shea and told him that he had previously met Djong though Collins when he was at Lorne. Artemas asked O’Shea how well he knew Collins. He said in words to the effect that he had known him for about 8 years, on and off, but would not call him a friend;
(b)After some conversation not relevant to matters in issue Artemas asked him why it was that he was paying so much commission to Collins and Irawan. O’Shea replied that he did not want to pay the commission and that he had never engaged either Collins or Irawan to sell the Heidelberg property on his behalf and that he only wanted to sell the property for $6m;
(c)O’Shea told Artemas that prior to the signing of the Contract of Sale to Indeco, Collins had approached him (O’Shea) and asked him how much he wanted for the property, to which O’Shea had replied to Collins he would be happy if he got $6m;
(d)O’Shea said in words to the effect that after the price had been agreed at $6m, Collins had asked him to have a contract for $6.8m prepared and that the difference between O’Shea’s asking price of $6m and Collins’ price of $6.8m, namely $800,000, was to be paid by O’Shea as a consultancy fee into a Collins’ nominated account;
(e)O’Shea told Artemas that he also had to pay Irawan 1% out of the sale price of $6.8m for his commission in assisting in finding a buyer for the Heidelberg property;
(f)O’Shea told Artemas that Collins had told him that he, Collins, was not getting a cent out of the commission. He had told him that the whole of the $800,000 was for a business partner of Indeco’s called Widjaja in Indonesia;
(g)O’Shea told Artemas that Collins had then issued him with an invoice for $800,000 including GST from Collins’s company. O’Shea told Artemas that he argued the point with Collins that if the $800,000 was in fact for Widjaja, why was the commission of $800,000 being paid into Collins’ account and not Widjaja’s account, given that O’Shea could just as easily pay the commission directly into Widjaja’s account. O’Shea said that Collins replied by saying that the money was to be paid into Collins’ account because the commission was to pay for Widjaja’s share in another project at Magnetic Island and Widjaja had told Collins to get the commission from O’Shea in order to pay for Widjaja’s share in the Magnetic Island Project;
(h)O’Shea told Artemas that Collins had then insisted that the whole of the commission money was to be paid from the deposit paid by Indeco and that effectively the commission was to be paid “upfront”. O’Shea said that he had refused Collins’s demands to make any upfront payments. O’Shea further informed Artemas, however, that as Collins and Irawan had no money, he had decided to advance Irawan the sum of $10,000 of the 1% commission, once the deposit was released to O’Shea;
(i)Artemas asked O’Shea if he would assist him by reducing the commission. Artemas told O’Shea that in reality Widjaja would not have asked for any commission as Widjaja was a close friend of both Djong and Artemas.
Djong then called Widjaja in Indonesia in O’Shea’s presence by mobile telephone to confirm whether or not Widjaja was to receive the commission of $800,000. Djong told O’Shea and Artemas that Widjaja emphatically denied that he was receiving any money whatsoever and further denied any involvement in the Magnetic Island Project. Artemas conveyed Widjaja’s denial to O’Shea;
(j)O’Shea then said he would not pay the commission and commented that he did not have any written agreement with Collins or Irawan for the payment of their commissions in any event. As a consequence, he said, in words to the effect that he would be happy to reduce the purchase price by the commission amount of $800,000;
(g)O’Shea then said words to the effect that: “I will give the money back provided that I have written confirmation from Widjaja that the $800,000 is his. If I do, I’ll pay the money into his nominated account”;
(h)He then asked if he changed the contract from $6.8m to $6m “What do I say to Collins. If I have a letter from Widjaja that I can show to Collins which show I am paying the money directly to Widjaja, then I can do it”;
(k)However, O’Shea then stated first he would have to confirm this with his lawyers.
This evidence confirmed the existence of an agreement between O’Shea and Collins to the effect that the price which O’Shea was content to accept for the sale of the Heidelberg Property was $6 million and that $800,000 of the purchase price for the sale, was to be paid as a consultancy fee into a Collins’ nominated account for Widjaja, or some other person or persons nominated by Collins.
I also accept that after Djong had confirmed by phone that Widjaja was not receiving anything he said he suggested reducing the contract price to $6 million.
Following the request from O’Shea for a letter to be provided to him to show Collins, Artemas then drafted a letter in which Widjaja confirmed to O’Shea that the $800,000 should be deducted from the contract price. The letter, dated 26 August 2009, was signed by Widjaja and sent to O’Shea. It stated as follows:
Anan Widjaja (Kang Hong Klan)
GreenGarden Blok G3 No 14
Jin. Panjang, Jakarta 11520, Indonesia
…
Private and Confidential
Jakarta, August 26, 2009
Attn: Greg O’Shea
Geneva Investments Pty Ltd
By Fax Only
Dear Greg,
I am writing to you in relation to my consulting fee of the sale of 104 Mount St, Heidelberg to the amount of A$800,000 as your discussion with Mr Wayne Collins.
I do no longer have any interest in Magnetic Island project, therefore I have requested Indeco Pacific Pty Ltd to pay the money on settlement directly by Indeco Pacific office in Indonesia.
I hereby instruct you to deduct my consulting fees of $800,000 from the original contract price of $6,800,000. Indeco Pacific Pty Ltd is only obliged to pay $6,000,000 to your company.
Alternatively, you can issue a bank cheque on the settlement day to the amount of $800,000 payable to ANSTELL Pty Ltd.
Should you need further clarification, please do not hesitate to contact me directly …
Regards,
Anan Widjaja (Kang Hong Kian)
“Pak Kang”.
Anstell was the company which Widjaja had suggested could act as a joint venture vehicle for the Magnetic Island Project.
Widjaja signed the draft letter. He explained his action in the following way:
On 21 August 2009, Djong told me that he had just received disturbing news from his associate and friend in Australia, namely Irving Artemas (Artemas), that it was discovered that without the knowledge of Djong, a sum of $800,000 was being paid to Collins and Irawan as a result of the sale of property to Djong located at 104 Mount Street, Heidelberg, Victoria, and that it was my commission.
…
Approximately half an hour later, Djong telephoned me and told me that O’Shea claimed that $800,000 commission was to be paid to me through Collins for my share of the Magnetic Island Project by way of commission.
I told Djong that there was no arrangement that I would receive any money from Collins. I also told Dong that I had no further involvement in the Magnetic Island Project at that stage. This conversation ended with Djong saying that he would telephone me back.
Djong telephoned me back a few minutes later and told me that O’Shea suggested that if a letter was provided by me and addressed to O’Shea’s company (Geneva Investments Pty Ltd), stating that I was the one entitled to the $800,000 then O’Shea would pay the $800,000 to me, or at my discretion. I am told by Djong that the purpose of this letter would be to release O’Shea from any obligation to pay the money to Collins.
…
I suggested to Djong that he should ask O’Shea to deduct $800,000 from the sale price or otherwise pay $800,000 into Djong’s company Anstell Pty Ltd. Djong told me that O’Shea agreed to this course of action but that O’Shea still insisted that a letter be provided by myself addressed to his company in order that he could show it to Collins.
I requested Djong to provide me with a letter drafted in accordance with whatever O’Shea wants me to say and that I was happy to sign it.
I received a letter from Djong and which I signed and sent back to Djong by facsimile transmission to Djong.
I accept this explanation from Widjaja as a correct account.
By an email dated 27 August 2009 to O’Shea, Djong attached the signed letter from Widjaja which was said to have been created ‘… as per our discussion on the 25th of August 2009 at Brunetti in Carlton.’ The email said:
Dear Greg,
How are you?
Please find attached the letter from Pak Kang as per our discussion on the 25th of August 2009 at Brunetti in Carlton.
By a reply email dated 27 August 2009 to Djong, O’Shea stated he was not prepared to vary the price and that ‘Geneva has agreed to pay Wayne Collins a consultancy fee in relation to services rendered.’ The email suggested that O’Shea would be prepared to substitute the Heidelberg Property contract for a new contract in respect of the Mountjoy Parade Property at a price which ‘… remains $7,200,000 as previously offered.’ The email said:
Hi Indra,
Thank you for your previous e-mail.
I confirm that Geneva Investments Pty Ltd is not prepared to vary the price set out in the contract.
Geneva has agreed to pay Wayne Collins a consultancy fee in relation to services rendered.
I appreciate the comments you have made in your previous e-mail. Regardless of any consultancy fees that Geneva has occurred I still feel you have acquired a quality property at a fair price.
Please note that the Contract stipulates that settlement is due to take place on 11 September 2009.
I realize you feel you have agreed to pay too much for the 104 Mount Street Property. As an alternative arrangement would you still be interested in acquiring 246 Mountjoy Parade Lorne? In the event that a sale of the Mountjoy Parade Property eventuates, Geneva may consider retaining the 104 Mount Street Property and agreeing to cancel the contract relating to the 104 Mount Street Property.
Settlement of the 246 Mountjoy Parade sale could be schedule for 30 September 2009. The price of the Mountjoy Parade Property remains $7,200,000.00 as previously offered. I confirm that no consultancy fees or commissions would be payable in relation to this sale. Furthermore, the property has a bank valuation of $7,000,000 which is dated five years ago (9 August 2004). I would be pleased to provide you with this valuation on a non-reliance basis if you are interested.
Please note this proposal is made on a without prejudice basis and in no way effects the current contractual obligations set out in the Contract for the 104 Mount Street Property. I would appreciate if you could let me know as soon as possible whether you wish to consider this proposal. If so, I would be pleased to provide you with further information or arrange a meeting to discuss this matter.
Regards
Greg O’Shea.
It appears that the original agreement as to an $800,000 commission payable out of the transaction to Widjaja, as represented by Collins, was varied at this time following the Brunetti’s Café Meeting whereby Geneva agreed to pay Collins a consultancy fee in relation to services rendered. However, there is no evidence as to the amount of this “consultancy fee” and the terms of the agreement between Geneva and Collins.
Also on 27 August 2009, Djong sent O’Shea an email saying
with relation to the $800,000, it is not an amount that I would jeopardize our business relationship now or the future
and ’I do not wish to press further with the $800,000 matter but rather I would like to mend our relationship’. Djong’s email finished with
I will be leaving Melbourne this Friday, I would appreciate if you can spare me some time for us to catch up before today.
At some point, the position taken by Djong in this email changed, and on behalf of Indeco, he sought recovery of the $800,000. It seems that at this time, Djong had set up a conciliatory course.
Further Developments
On 3 September 2009, the solicitor for Indeco, Mr Con Kiatos (“Kiatos”), had a conversation with the solicitor for O’Shea, Mr Koidl (“Koidl”), in which Koidl told Kiotis that a large sum of money from the proceeds of the sale from the Heidelberg Property was payable to an unspecified third party. This evidence was neither challenged or contradicted.
The sale of the Heidelberg Property was settled on 18 September 2009. Kiatos reserved the purchaser’s rights in respect of the sum of $800,000 of the purchase price and settled under protest.
Irawan made a claim from O’Shea for the sum of $58,000 arising from the sale of the Heidelberg Property, claimed to be a
consulting fee of 1% out of the sale price of $6,800,000 to the amount of $68,000 less the sum of $10,000 … already advanced … the total amount of $58,000.
Irawan’s claim was articulated in a letter to O’Shea dated 30 October 2009, which was the claim he pressed at the trial of the proceeding. The letter read:
Dear Greg
…my consulting fee of the sale of 104 Mount St, Heidelberg to the amount of $68,000.00.
I hereby instruct you to deduct my consulting fee of 1% out of the sale price of $6,800,000.00 to the amount of $68,000.00 less the sum of $10,000.00 has already been advanced it come to the total amount of $58,000.00
…
Lesly Irawan
On 28 October 2009, an interlocutory application was made to the Court in the present proceeding. The application was dismissed on the basis that Geneva gave undertakings to the Court that until the final hearing and determination of the proceeding or earlier order, or without the written consent of Indeco:
(a) it would not pay the sum of $800,000 or any sum to Collins or Broncorp; and
(b) it would not pay the sum of $58,000 or any sum to Irawan.
Conclusions as to the Facts
I reject O’Shea’s contention that prior to executing the contract of sale for the Heidelberg Property on 11 March 2009 at the purchase price of $6.8 million he had no knowledge of and did not agree to a commission of $800,000 being payable to any person and 1% being payable to Irawan. I also reject his contention that he had refused to accept the arrangement set out in the email from Collins of 27 February 2009 for a commission of $800,000 to be paid to the “Grand Poobar” and $61,800 to be paid to Irawan. The following facts, which I accept, support my findings:
(a)Christo of East Coast Property Services was engaged as the agent to handle the sale of the Heidelberg Property. He was instructed that O’Shea had obtained a valuation of the property at $5.7 million, and that O’Shea’s asking price was around $6 million;
(b) the contents of the email from Collins to O’Shea of 27 February 2009;
(c)the telephone conversations between O’Shea, O’Beirne and Christo on 23 March 2009 which constitute admissions by O’Shea against his interest; and
(d)the conversations between Artemas and O’Shea in the presence of Djong on 25 August 2009 prior to the settlement of the Heidelberg Property at the Brunetti’s Café Meeting, which also contain admissions by O’Shea.
O’Shea denied that he had ever agreed to pay Irawan a commission. He said he paid him $10,000 because he was in a bad financial state but said it was essentially a gift. He specifically denied that it was an agent’s commission. I do not accept O’Shea’s evidence that the payment was a gift to Irawan. He maintained that denial until he was shown his own notation on a Westpac statement which described the payment as “agent’s commission”.
The cross-examination of O’Shea on the issue was as follows:
That's a Westpac statement?---Yes, yes.
Of a bank account of yours, is that correct?---Correct.
Does that record on 1 May 2009 a payment of $10,000?---Yes.
There's some handwriting next to it?---Yes.
Is that handwriting your handwriting?---Yes.
OK.. What does that entry show?---"Agent's commission".
And, "$10,000"?---That's right.
Was that to Mr Irawan?---Yes.
Why did you describe it as, "Agent's commission", when your evidence is now that it was just a gift?---I'm not a - an accountant. I write in there what I think. I just fill this in for my accountant how I think it's to be entered. I called it an agent's commission. Had to - had to describe it as something so I termed it, "Agent commission".
…
And so you wrote, "Agent's commission", because that's what you believed at the time it was?---You would think that, yes.
I also reject the explanation of Collins as to his email of 27 February 2009 where he said in his evidence that he sent the letter because of fear of being ‘… hit later on with a 12% fee’ being the 10% allegedly agreed fee to Irawan and 2% to Widjaja and he sent this email because ‘and I thought, well, I’ve just got to put the fee in there and see what bounces back.’
I find that the email from Collins to O’Shea of 27 February 2009 contained an offer conceived o f by Collins which was accepted by O’Shea. It resulted in an agreement with Collins that from the sale price negotiated with the purchaser, $6 million would be payable to O’Shea with a commission of $800,000 payable, on its face to Widjaja and a commission of $61,800 payable to Irawan. The email sent by Collins to O’Shea dated 27 February 2009 correctly records the arrangements agreed to between Collins and O’Shea at this time and disclosed the secret commission which Collins sought to extract from the arrangement, which at that time was purportedly in favour of Widjaja. Djong was not privy to this email or the terms of the offer proposed or the fact that $800,000 of the proposed purchase price was to be paid, apparently as commission to Widjaja.
I find that the commission of $61,800 payable to Irawan was to be paid by the vendor, Geneva, which incurred that liability to Irawan, as later discussed.
As to the proposed commission payment of $800,000, expressed to be payable from the sale proceeds to Widjaja, I find that this was a contrivance devised by Collins. What was intended by Collins was that the commission payment would be paid to a person or persons nominated by himself. Widjaja had done nothing to warrant any payment of commission in respect of the sale of the Heidelberg Property. He had attended the site on his way to the airport with the others on 13 February 2009, but there was no evidence of any other involvement with this sale. Nor is there any evidence that Widjaja made any claim to a commission in respect of the Heidelberg Property sale. Indeed, he expressly denied any such claim in his telephone conversation with Artemas and Djong on 25 August 2009 at the Brunetti’s Café Meeting, and effectively disavowed the truth of the claim he made in the letter dated 26 August 2009 which had been drafted for him and signed by him. I find that Widjaja signed this letter at the behest of O’Shea, ostensibly for O’Shea’s use in a proposed attempt to appease Collins if the purchase price was to be reduced to $6 million in a re-drafted contract.
It is not open on the evidence to conclude that the proposed fee of $800,000 was somehow connected with Widjaja’s fee in respect of the defunct Magnetic Island Project. The evidence does not permit a positive finding on the issue.
I further find that at the time of the making the offer for the purchase of the Heidelberg Property reflected in the 27 February email, Collins was acting as the agent of Djong and his company Indeco, both of whom gave instructions to put an offer of a purchase price at $6.8 million to O’Shea, and both of whom had no knowledge of the commission of $800,000 of the $6.8 million sum payable to any third party or of the fact that the vendor was prepared to accept $6 million has the purchase price.
Legal Principles
A fiduciary relationship arises when a person (the fiduciary) undertakes to act in another’s best interests, or is obliged so to act, and that other reposes confidence in the person so to do.[4] The relationship between an agent and principal is an established or accepted fiduciary relationship.[5]
[4] Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41, 96-7 (Mason J).
[5]Ibid.
There is no necessity for a written contract of agency to exist in order to create an agency.[6] The parties do not need to have used the language of agency or even appreciate the legal concept of agency for an implied agency relationship to be established.[7]
[6] Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174, 185.
[7] Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552, 587 (Lord Wilberforce).
Prior to entering into the Heidelberg Property contract of sale, Collins was requested by Djong, and Collins accepted, that he would act as an agent in the interests of Indeco and himself in negotiating the purchase of the property.
On the basis of the agency agreement, Collins was in a fiduciary relationship with Indeco.
Unless the fiduciary, in this case, the agent, has the informed consent of the person to whom he or she owes fiduciary duties, he or she must not place himself or herself in a position where there is or may be a conflict between the duty as a fiduciary and his or her own interest or a duty to a third party.[8] Moreover, no agent who has accepted employment from one principal can in law accept an engagement inconsistent with his duty to the first principal from a second principal, unless he or she makes the fullest disclosure to each principal of his interest, and obtains the consent of each principal to the double employment.[9]
[8]G E Dal Pont, Law of Agency (LexisNexis Butterworths, 2nd ed, 2008) 228.
[9] Fullwood v Hurley [1928] 1 KB 498, 502 (Scrutton LJ).
As an agent for Indeco under the agency agreement whereby Collins undertook to negotiate the best price possible for the Heidelberg Property on behalf of Indeco, Collins placed himself in a position where he conflicted with his own interest in negotiating a transaction from which he could potentially benefit by requesting O’Shea to accept a purchase price of $6.8 million, above his asking price of $6 million, in order to receive a secret commission of $800,000, alternatively in order to divert this money to other parties to his advantage. Collins did not disclose his interest in the sale to Indeco, and Indeco did not consent to the payment of $800,000 to any person other than the vendor which was O’Shea’s company, Geneva.
At common law, a bribe is a payment of a secret commission whereby the person making the payment:
(i) makes it to the agent of the other person with whom he is dealing;
(ii) knows that the person is acting as the agent of the other; and
(iii)fails to disclose to the other person that he has made that payment to the person whom he knows to be the other person’s agent.
See: Industries & General Mortgage Co Ltd v Lewis.[10]
[10] Industries & General Mortgage Co Ltd v Lewis (1949) 2 All ER 573.
In this case, O’Shea knew that the proposed purchaser was purchasing the property through Collins, and yet did not disclose to the proposed purchaser the payment he was making to Collins or at the direction of Collins. O’Shea knew Collins was representing the proposed purchaser in the negotiations. It was only when asked by Artemas at the Brunetti’s Café Meeting, well after the contract was signed, that O’Shea told Djong of the $800,000 secret commission. The three elements described in Industries & General Mortgage Co Ltd v Lewis are made out on the facts.[11]
[11]Industries & General Mortgage Co Ltd v Lewis (1949) 2 All ER 573.
Once the giving of a bribe is established, there is an irrebuttable presumption that it was given to induce the agent to act favourably to the payer and thereafter unfavourably to the principal. If the agent is a confidential buyer of a sale item for his principal from the briber, the Court will assume against the briber that the price of the sale item was "loaded" as against the purchaser at least by the amount of the bribe.[12] It is clear in this case that the price of the Heidelberg Property was "loaded" as against the purchaser. The asking price of $6 million was increased to $6.8 million at the behest of Collins in order to factor in the secret commission.
[12]Industries & General Mortgage Co Ltd v Lewis (1949) 2 All ER 573, 576-577.
Every sort of profit or advantage, clandestinely derived by an agent from dealing or speculating with his principal’s effects, is the property of the latter, and must be accounted for.[13] Where an agent makes a “secret profit”, “illicit commission” or “bribe”, an action for money had and received lies.[14] As soon as the commission found its way into O’Shea’s hands as a result of a bargain for a secret commission, Indeco was entitled to recover it as money had and received. Indeco is entitled to it whether Djong elected to adopt or rescind the sale. It became Indeco’s money held to its use by O’Shea.
[13]Morison v Thompson [1874] LR 9 QB 480, 486.
[14] Reading v Attorney-General [1951] AC 507.
Alternatively, Geneva holds the $800,000 on constructive trust for Indeco.[15]
[15] Attorney-General for Hong Kong v Charles Warwick Reid & Ors [1994] 1 AC 324.
In Grant v Gold Exploration and Development Syndicate[16] AL Smith LJ said:[17]
The case in this Court of the Salford Corporation v. Lever is a clear authority that where an agent, who has been bribed so to do, induces his principal to enter into a contract with a person who had paid the bribe, and the contract is disadvantageous to the principal, the principal has two distinct and cumulative remedies: he may recover from the agent the amount of the bribe which he has received, and he may also recover from the agent and the person who has paid the bribe, jointly or severally, damages for any loss which he has sustained by reason of entering into the contract without allowing any deduction in respect of what he has recovered from the agent under the former head, and it is immaterial whether the principal sues the agent or the third person first.[18]
[Citations omitted]
[16] Grant v Gold Exploration and Development Syndicate [1900] 1 QB 233.
[17]Ibid 244.
[18]Ibid.
The remedy of rescission of the contract is available to the wronged party. As observed by Collins LJ in Grant:
In my opinion, if a vendor pays a commission to a buyer's agent in order to secure his help in bringing about the sale, and does not inform the buyer of the fact, he cannot defend the transaction if impeached by the buyer, who has, in fact, had no notice, by proving that he believed that the agent had disclosed the circumstances to his principal. I think it is clearly established that in such circumstances the buyer would be entitled to rescind the purchase …[19]
[19]Ibid 248-249 (Collins LJ).
However, an alternative remedy is available where the wronged party is able to identify a specific sum over and above what must be taken as between the parties to be the real price, which has found its way into the vendor's pocket as a result of a sale so effected. The purchaser is entitled to recover the specific sum. In Grant, Collins LJ made the following further observation:
I think it follows in principle that where the buyer elects not to rescind the sale, but can nevertheless point to a specific sum over and above what must be taken as between the parties to be the real price, which has found its way into the vendor's pocket as a result of a sale so effected, he is entitled to recover it back. When the sum is thus liquidated, and in the hands of the vendor, I think it would be clearly contra aequum et bonum [20] that he should retain it. I think that if he takes the hazardous course of paying a sum to the buyer's agent in order to secure his help, and does not himself communicate it, he must at least accept the risk of the agent's not doing so. He has taken a course which can be validated only by actual disclosure to the opposite principal, and as a result of it he is in possession of a sum which, whether the bargain stands or is rescinded, never ought to have been paid by the buyer, or found its way into the pocket of the seller. He is responsible as for money had and received to the use of the buyer, even though possibly he could not be made liable in an action of deceit.[21]
[20] ie. Contrary to what is right and just.
[21]Ibid 249 (Collins LJ).
In the present case, the vendor, Geneva, in the absence of any order of the Court to the contrary, claims an entitlement to the full purchase price of $6.8 million for the sale of its property. That sum includes the illicit secret commission of $800,000. That sum should never have been paid by the purchaser, Indeco, and should not find its way into the pocket of the vendor.
In the circumstances, the vendor, Geneva must disgorge the sum as money had and received to the use of the purchaser, Indeco, alternatively, which it holds on constructive trust for Indeco.
The Irawan Counterclaim
Irawan filed a document, prepared by himself, which I construe to be a counterclaim. Although it was not in perfect form, it was not struck out, and constitutes a sufficient pleading of a counterclaim. Irawan’s counterclaim was also set out in his witness statement. Further, Irawan’s counterclaim was re-stated in an email to O’Shea dated 30 October 2009 in the terms earlier referred to.
I find that in making the offer to O’Shea by his email of 27 February 2009, Collins was also acting as the agent for Irawan. This is to be inferred from the terms of the offer itself which included a specific reference to “Les”, who was Irawan.
The offer from Collins was accepted by O’Shea on behalf of his company, Geneva. It thereby incurred a liability to pay the commission totalling $61,800 to Irawan.
This payment stands in a different category to the $800,000 secret commission which I have found. The purchase price for the sale of the Heidelberg Property was not inflated to cover this liability, which had to be paid from the proceeds of the sale in the ordinary course.
Irawan was paid $10,000 of the total of the commission due to him. Accordingly, Geneva is indebted to Irawan in the sum of $51,800.
Irawan also made other claims against O’Shea, relating to airfares, travel expenses, entertainment and legal fees. I am not satisfied that there existed any enforceable contract between Irawan and O’Shea in relation to these matters. These further claims are dismissed.
Orders
The following orders will be made:
1.The First Defendant is ordered to pay out of the proceeds of the sale of the sale of the property situated at 104 Mount Street, Heidelberg, the sum of $800,000 to the Plaintiff.
2.The First Defendant is ordered to pay the sum of $51,800 to the Fourth Defendant.
I will hear the parties as to any other ancillary order which ought to be made and as to the costs of the proceeding and I will grant liberty to apply to the parties in the event that agreement on these matters is not able to be reached.
---
“KO: Pooh-Bah, it seems that the festivities in connection with my approaching marriage must last a week. I should like to do it handsomely, and I want to consult you as to the amount I ought to spend upon them.
POOH: Certainly. In which of my capacities? As First Lord of the Treasury, Lord Chamberlain, Attorney-General, Chancellor of the Exchequer, Privy Purse, or Private Secretary?”
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