Lawford Robinson Pty Ltd v Boston Hill Limited - [2009] WADC 79

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: LAWFORD ROBINSON PTY LTD -v- BOSTON HILL LIMITED & ANOR [2009] WADC 79

CORAM: O'NEAL DCJ

HEARD: 29 - 30 APRIL 2009, 1 & 4 MAY 2009

DELIVERED : 29 MAY 2009

FILE NO/S: CIV 2835 of 2004

BETWEEN: LAWFORD ROBINSON PTY LTD
Plaintiff
AND
BOSTON HILL LIMITED
First Defendant
ANTHONY WILLIAM ROBINSON
Second Defendant

Catchwords:

Contracts - General contractual principles - Informal contracts - Resort to postcontractual conduct to ascertain terms of contract

Contracts - Enforceability by non-party - Property Law Acts 11(2)

Estoppel - Estoppel by convention - Subject matter and clarity of representations - Reliance, knowledge of reliance, and detriment necessary elements - Limitation of Actions - O 25 r 5(5)

Legislation:

Property Law Act 1969 s 11

Result:

Action dismissed

Representation:

Counsel:

Plaintiff:     Mr B P Wheatley
First Defendant              :     Mr A Hershowitz
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Mossensons
First Defendant              :     Kott Gunning
Second Defendant         :     Unrepresented

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

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd [2008] WASCA 119; (2008) 66 ACSR 643
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251
Mears v Safecar Security Ltd [1983] QB 54
Morgan v Banning (1999) 20 WAR 474
National Westminster Finance New Zealand Ltd v National Bank of New Zealand Ltd (1996) 1 NZLR 548
Peddie v Stein unreported, SCt NSW Equity Division, BC8701481, EQ 1410 of 1984, 26 March 1987
The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239
Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

O'NEAL DCJ: In 1999 the second defendant, Anthony Robinson, was engaged as a financial advisor in what was described in evidence as the "securities industry". When Mr Robinson entered the securities industry in about 1987 he established the Lawford Robinson Family Trust. The purpose of that arrangement was, as Mr Robinson said in his evidence, to have the family trust receive the fees and commissions that Mr Robinson generated by his personal activities and to then distribute the income so received to beneficiaries of the trust, principally the members of the Robinson family. In 1993 the plaintiff was incorporated and became its trustee.
Mr Robinson was, until 2000, a director of the plaintiff. He was never employed by the plaintiff. Although Mr Robinson was named as the second defendant in this action, for reasons which will later become clear, he took no part in the trial, seeks no relief in this action and agreed to abide by the decision of the Court.
In late 1997 or the beginning of 1998 the first defendant also commenced business in the securities industry. It obtained a securities dealers licence pursuant to the Corporations Law. Mr Robert Stewart has been, since 1999, the director of the first defendant. His family trust owned shares in the first defendant and Mr Stewart was himself a financial advisor.
Mr Stewart and Mr Robinson became acquainted when Mr Robinson first entered the securities industry. In April and May 1999 the two of them had discussions about Mr Robinson joining Mr Stewart as an authorised representative of the first defendant. The Australian Securities and Investments Commission ("ASIC") was notified in July 1999 by Mr Robinson that he had in fact become an authorised representative of the first defendant commencing 31 May 1999: Exhibit 7. Mr Robinson acted as an authorised representative for the first defendant for about a year. In about June 2000, the relationship came to an end. The plaintiff now sues for money it claims the first defendant was obliged to pay to it as a result of an agreement said to have been made between Mr Robinson and the first defendant.

Pleadings and the Agreement

On behalf of the plaintiff it is pleaded at par 3 of the statement of claim that:
"In or about April or May 1999, Tony Robinson and the first defendant agreed that Tony Robinson would sell securities recommended by the first defendant ('the Agreement').
Particulars
The Agreement was oral and was made pursuant to conversations between Tony Robinson and Robert Stewart on behalf of the first defendant and was evidenced in writing by handwritten note of Robert Stewart."
It is common ground between the parties that in May 1999 there was an agreement between the first defendant and Mr Robinson, engaging Mr Robinson to sell securities on behalf of the first defendant on certain terms. There is some difference on the pleadings and there was in the evidence as to when, precisely, the agreement arose. The first defendant contended that any agreement made by the parties had been made by 18 May 1999. I will refer later to the evidence in that respect. The exact timing of the agreement beyond "in or about … May 1999" did not appear to be critical except to the extent that the first defendant contends that the note of Mr Stewart referred to in the plaintiff's particulars was made "after the entry into the agreement" and recorded merely a subsequent oral request to make payments of any money due to Mr Robinson directly to the plaintiff.
The central issue between the parties is really with respect to just one term of the agreement. The plaintiff alleges, at par 4(a) of the statement of claim, that it was a term of the agreement that:
"In consideration of Tony Robinson introducing a purchaser or purchasers who or which purchased securities recommended by the first defendant the first defendant was to pay the plaintiff those brokerage fees and monthly trailing brokerage fees arising from such sales."'
The defence denies that there was any such term and says that, subsequent to the making of an agreement between Mr Robinson and the first defendant, there was an "oral request to Robert Stewart of the first defendant to make payment of sums due to Mr Robinson by the first defendant directly to the plaintiff."
The plaintiff argues that as a result of the effect of s 11(2) of the Property Law Act 1969 the plaintiff is entitled to enforce an obligation to pay said to arise from the pleaded agreement between Mr Robinson and the first defendant. The issue is not raised as a point of law in the statement of claim but the issue was plainly understood by the first defendant to arise from the facts pleaded in the statement of claim. The defence at par 3 expressly denies that any agreement between Mr Robinson and the first defendant:
"directly conferred a benefit on the plaintiff as contemplated by section 11(2) of the Property Law Act 1969 (WA)."
In late 1999 or early 2000 by virtue of some other financial dealings that Mr Robinson was involved in, he became implicated in the scandal that surrounded the affairs of a number of finance brokers in Western Australia at about that time. ASIC became interested in how Mr Robinson had conducted his affairs as a financial advisor. Ultimately, ASIC made allegations against Mr Robinson that he had not performed his duties honestly and fairly as a financial advisor. Later in 2000 Mr Robinson consented to an order banning him for life from acting as a financial advisor. Despite this, in his evidence before me, he sought to dispute the validity of the allegations made by ASIC.
In about May or June of 2000 the first defendant and Mr Robinson agreed to end their agreement and part ways. There is a dispute as to the terms upon which they did so.
The plaintiff's claim in this action is for $83,648, a sum which it is said is due and owing by way of:
"brokerage frees and monthly trailing brokerage fees arising from sales of securities by investment fund manager ITC … to purchasers introduced by Tony Robinson …" : statement of claim par 9.
It is common ground between the parties that certain payments were made by the first defendant to the plaintiff after June 2000. The first defendant seeks to set these amounts off from any amount that might otherwise be payable either to Mr Robinson or to the plaintiff: defence par 9A. As will be seen, the plaintiff by its reply alleges that there was in fact a "second agreement" made relating to any clients of Mr Robinson who remained with the first defendant after Mr Robinson ceased his position as an authorised representative of the first defendant. The plaintiff's case is that amounts paid after June 2000 were not paid with respect to the outstanding brokerage fees from the fund manager ITC but rather were commissions or fees from other fund managers related either to the original agreement between the parties or to this second agreement: reply par 2 and par 3.
The defendant also alleges that it is entitled to deduct from commission that would otherwise be payable to Mr Robinson an amount of money retained by ITC. The defendant says that Mr Robinson authorised the deduction by ITC of an amount of money that Mr Robinson personally owed ITC: defence par 9B. The plaintiff denies that Mr Robinson gave any such authority: reply par 4.

Background and context

The first defendant was first incorporated in October 1997. Robert Alexander Stewart was one of several original directors of the first defendant. Mr Stewart has been involved in the financial services industry since about 1980. Starting at that time, he was a financial advisor operating his own business as an authorised representative of various dealers and securities. In about 1990 he joined a company called Asgard Capital Management ("Asgard") as its marketing manager for Western Australia. Asgard was and is a "master trust" from which investors money is distributed into a range of recommended investments in different fund managers. He was also the national insurance manager for a group of companies, including Asgard, that was owned by Seal Corp Holdings Ltd.
Before joining Asgard, while operating his own business, he was an authorised representative of another financial services company called Securitor. After joining Asgard, he was allowed to continue as an advisor maintaining a small private client base carried over from the time that he operated his own business.
In order to carry out his various duties and responsibilities in the financial service industry he has been obliged to undertake study with respect to a range of issues including taxation, accounting, and basic legal issues relevant to the industry.
The first defendant was incorporated by Mr Stewart and others to become a dealer in securities and to raise capital for certain private investments as well as providing financial planning services to clients. It gained an unrestricted security dealers licence in 1999.
Unsurprisingly, the scheme of licensing under the Corporations Law requires participants in the securities industry who sells securities or give advice to the public with respect to securities to be licensed. In 1999 natural persons or bodies corporate who met the requirements of Part 7.3 of the legislation were eligible to be licensed as dealers. Division 3 of Pt 7.3 permitted natural persons who held a proper authority from a licensed dealer to act as that dealer's representative. By s 809 of the Corporations Law a body corporate, like the plaintiff, was prohibited from acting as a representative of a dealer.
Both Mr Robinson and Mr Stewart gave evidence of their knowledge of the provisions of the Corporations Law, as it then stood, with respect to the role of authorised representatives. Mr Robinson was plainly aware that only a natural person was allowed to act as a dealer's authorised representative.
Mr Robinson holds a Bachelor of Arts degree. He and Mr Stewart know each other from about shortly after the time that Mr Robinson started working in the industry. In particular, during the 1990s, Mr Stewart's involvement with Securitor Financial Group brought him into regular contact with Mr Robinson. Mr Robinson was engaged as an authorised representative of Securitor for a period of time ending in 1999.
When Mr Stewart proposed to offer financial advice through the first defendant he had discussions with Mr Robinson. These discussions took place in about April 1999. The first defendant's unrestricted dealers licence was attractive to Mr Robinson. Securitor had only a restricted licence. What that meant was that a financial advisor acting as a representative of the first defendant would be able to offer a broader range of investments than someone representing Securitor.
Within the securities industry, representatives such as Mr Robinson are typically paid by commission. Mr Robinson's arrangement with Securitor was that he earned the total commission generated by securities purchased by his clients or customers, or perhaps more accurately contributed by the nine per cent employers' statutory contribution. In exchange he paid a monthly fee to Securitor of about $1,050 for the privilege of acting as their authorised representative.
At Securitor, Mr Robinson was primarily involved in placing money into managed investments, predominantly 'Asgard', for superannuation. This would generate both "up front" and "trailing" commissions. Asgard reserved the right to charge up to 5 per cent of the money contributed into superannuation plans but would reduce this percentage charge in various circumstances. For clients of Securitor, Asgard apparently only charged 2 per cent as a general rule. Of this amount, Asgard retained 0.5 per cent and 1.5 per cent would be earned by Mr Robinson. I deliberately use the word "earned" as opposed to "received" to distinguish the actual method of payment by Securitor. The evidence of Mr Robinson was that the commissions he earned while at Securitor were paid "to my family trust". For practical purposes what that apparently meant was that the commissions were paid to the plaintiff as trustee of the family trust and ultimately distributed by it, presumably as determined by Mr Robinson.
In addition to the upfront commissions, so long as Mr Robinson remained an authorised representative of a licensed dealer, he was paid "trailing" fees and commissions. Asgard, and other fund managers as well, paid a further 0.25 per cent of the funds invested by any particular client. I assume that this was an annual fee although it was not the subject of evidence.
There are other kinds of investments, "investment" here being used in the loosest sense, that were and are sold through advisors. For example "tax effective schemes" were recommended to people "who had significant tax problems … and were looking for tax deductions". According to the evidence of Mr Robinson these were provided where "… the tax payer was seeking to invest funds to obtain a tax deduction by that investment". These "investments" apparently generate brokerage or commission in the order of 10 per cent to the financial advisor involved. On the evidence before me, no "trailing" fees were generated by these schemes. ITC was in the business of providing "tax effective" investments. The plea at par 9 of the statement of claim that "monthly trailing brokerage fees could arise from sales of securities by … ITC" must be the result of an error or oversight.
While it was not entirely clear from the evidence, it seems that Securitor did not sell "tax effective schemes", and so Mr Robinson and the other beneficiaries of his family trust were unable to benefit by these. It was this potential additional source of earnings that it appears made it attractive for Mr Robinson to become an authorised representative of the first defendant. That it seems, at least on Mr Robinson's part, led to the discussions with Mr Stewart in about April 1999.

Evidence of agreement

The central focus of the evidence with respect to the formation of an agreement in 1999 between Mr Robinson and the first defendant, and its terms, was the handwritten note of Robert Stewart referred to in the particulars to par 3 of the amended statement of claim. That document, which became Exhibit 2 was apparently only discovered by the first defendant in 2008. Mr Stewart has explained that the document was misfiled and that he found it only as a result of further searches that he conducted in 2008.
There is no dispute as to the genuineness of the document. To the contrary, the plaintiff's case initially sought to rely upon it, and subsequently upon parts of it. In fact, as a result of the discovery of this document by the first defendant, the plaintiff abandoned its original pleaded case.
From its original statement of claim until about version 13 or 14 of that document, the agreement which was the subject of this action was said to have been made between the plaintiff and first defendant, not between Mr Robinson and the first defendant. As a result of the discovery of the note, the plaintiff amended its case to its present form seeking to rely on s 11(2) of the Property Law Act in order to allow the plaintiff to enforce the agreement.
Mr Stewart's evidence was that Exhibit 2 was not written up during the meeting on 31 May 1999 but was written up afterwards, either that day or the next. He said however that Mr Robinson had approached him in around April 1999 following some earlier general discussions. He said Mr Robinson had asked him if he could become an authorised representative of the first defendant.
Mr Stewart's evidence was that there was a meeting on or before 18 May 1999 where he and Mr Robinson discussed the terms upon which Mr Robinson could act as the authorised representative of the first defendant. At that meeting, Mr Stewart said that, in effect, he offered an arrangement similar to that Mr Robinson had with Securitor. That is, Mr Robinson would have to pay a fee (later described as a "dealer's fee") of $1150 per month and that Mr Robinson agreed to do so. Otherwise, Mr Stewart told Mr Robinson that Mr Robinson would receive the full fees that were generated to the first defendant by Mr Robinson's efforts from Asgard and other fund managers that Mr Robinson had placed business with in the past. There was, Mr Stewart said, no discussion at that time as to who the first defendant would pay those fees or commissions to. Mr Robinson agreed to pay the dealers fee.
Mr Stewart said that at the same meeting there was a discussion about various incidental issues such as a time frame for the appointment of Mr Robinson that would allow him to sever his relationship with the previous dealer, Securitor. He said that there was no discussion in the course of that meeting "on the issue of trusts". Mr Stewart's evidence was that as a result of that meeting he gave instructions to order 500 "Boston Hill" business cards for Mr Robinson that described Mr Robinson as an authorised representative of the first defendant. That order was placed on 18 May 1999: Exhibit 25. Mr Robinson accepted in cross‑examination that by 18 May 1999 he had verbally agreed with Mr Stewart to become an authorised representative of the first defendant.
It seems to me that, understood in its context, the effect of that discussion on or before 18 May 1999, on Mr Stewart's evidence, was that no reference was made to the payment of commissions to anyone. Any objective assessment of that discussion would naturally lead to the inference that Mr Robinson personally would be paid for the work that he did.
I find that as a result of the matters proposed by Mr Stewart and accepted by Mr Robinson in the course of that meeting they reached an agreement as to the terms upon which Mr Robinson was to act as the first defendant's authorised representative. The agreement did not include any term that payment would be made by the first defendant to the plaintiff. Rather, it can be readily inferred that the agreement was that the first defendant would pay Mr Robinson.
Mr Stewart also described a second meeting on 31 May 1999 that dealt with the formalities of Mr Robinson's appointment. In the course of this meeting Mr Stewart said he provided Mr Robinson with several documents. One of these he said was a copy of the first defendant's dealers licence that bore this handwritten note at the top:
"This is a true copy of an original licence issued to First defendant Limited.
Anthony William Robinson acts for First defendant Limited as an authorised representative."

This handwritten note is signed by Mr Stewart as "director" and dated "May 31 1999": Exhibit 6.
Mr Stewart also said that various other documents were provided to Mr Robinson including some on a computer disk.
Mr Stewart's note of 31 May 1999, Exhibit 2, bears this handwritten title:
"Notes of meeting 31/5/99 with A. Robinson"
Immediately beneath that heading, the fact that Mr Stewart has provided a letter of appointment, a copy of the proper authority and other documents is recorded. Below that information is a another heading and bullet points which are worth setting out in full:
"Terms of appointment agreed –
•Fees $1150 p mth to B.H.
•All Asgard Comm + other trails to AR
•AR to occupy adjacent office – rent to be negotiated
•AR to pay for P.I. – same as Securitor
•Asgard only to be used unless approved by me
•Regular discussion + contact
•Cut from First Charter – no mortgage involvement
•Payments to be made to Lawford Robinson F/T"
There are two or three other matters recorded that are not relevant to this action but the final line of the note says: "agreement to be drawn up reflecting these issues."
Needless to say, no written agreement was ever drawn up by either party. How the "issues" would ultimately have been "reflected" in any such agreement is at this stage a matter of speculation. At least several of the bullet points patently would need to be considerably expanded in any written agreement to reflect with greater detail and accuracy what the parties had in fact discussed on those topics.
Mr Stewart said that the second bullet point "All Asgard Comm ..." reflected what had been agreed on or before 18 May 1999, namely that all Asgard commissions and other trails that were received by the first defendant relating to clients introduced by Mr Robinson would be paid to Mr Robinson. The fifth bullet point "Asgard only…" was a requirement stipulated by Mr Stewart that Asgard was the only fund entity with whom new business was to be placed unless Mr Stewart otherwise approved. Later in these reasons I will refer to the specific discussions that the parties had about this time with respect to commissions from ITC. The "other trails" in the second bullet point was also a reference to trailing commissions received from other fund managers for clients that accompanied Mr Robinson to the first defendant. That is, those fund managers, other than Asgard, were not funds for which Mr Robinson would be entitled to write new business, but he would continue to receive trailing commissions from funds already invested.
It is the eighth bullet point "payments to be made to Lawford Robinson F/T" that the plaintiff relies upon in proof of the term pleaded by it at par 4(b) of the amended statement of claim. With respect to this, Mr Stewart said that during the meeting on 31 May 1999, Mr Robinson asked that the money generated from his activities as an authorised representative be paid to his family trust. Mr Stewart said that he told Mr Robinson that he, Mr Stewart:
"was prepared to pay the money to wherever he directed me to pay the money. However, I pointed out to him the issues of personal exertion and I urged him to get advice on this matter because I could see a potential difficulty for him by paying money to his family trust, from a tax point of view."
Mr Stewart said that in response to his comments Mr Robinson said that he would seek advice on the matters that had been raised. Otherwise from Mr Stewart's evidence it appears there was at least tacit acceptance by Mr Robinson of the position taken by Mr Stewart.
With respect to the plaintiff's contention that it was a common practice in the financial services industry for authorised representatives' commissions to be paid to family trusts, Mr Stewart said:
"that was not the way of doing it in the industry at the time. I did not do it that way … and I was aware of other people in the past who had encountered difficulties from setting up their affairs in this way. I was well aware of an occasion – it was well known in the financial planning industry – where a financial planner had had his whole process overturned by the tax office in the 80s."
The latter evidence was received without objection. There was no evidence of any probative value from the plaintiff that it was in fact "common practice" for authorised representatives to conduct their affairs using family trusts the way that Mr Robinson did. There is no evidence that would allow me to make the finding that the plaintiff seeks in that respect.
Apart from the evidence of Mr Stewart above that I have referred to, there was little evidence of probative value with respect to the circumstances surrounding the formation of any agreement or of objective facts from which consensus as to any particular term of the agreement might be established. It is easy to understand why the party's recollection of 10 year old events would be hazy at best. However, Mr Stewart and Mr Robinson were not assisted in giving evidence of even the little that they recalled by the questions that they were asked in examination and cross-examination. What little evidence there was was often elicited, or was sought to be elicited, by leading questions in examination-in-chief and generally by questions directed to the witnesses' opinions as to what had been agreed or rather what they thought had been agreed. Much time was wasted in this way for little benefit.
In trying to determine the nature and terms of the agreement reached with respect to Mr Robinson's service to the first defendant I have been mindful of the principle of objectivity by which the rights and liabilities of the parties to a contract are to be determined. As the High Court said in Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]:
"It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction."
While Toll (supra) dealt with the terms of a written agreement the principles expressed are applicable to the terms of an oral agreement where there is evidence of the words used.
Exhibit 2 was placed before Mr Robinson in examination-in-chief and he was asked "does that accurately reflect a meeting that took place between yourself and Mr Stewart on or about 31 May 1999?" He confirmed that it did. It was not evident however that Mr Robinson had any independent recollection of his discussions with Mr Stewart. When invited in cross-examination to "… tell the Court what was said at the time you held these oral conversations with Mr Stewart?" Mr Robinson pointed out that the conversations had taken place 11 years ago, and said that he "didn't remember everything". When asked if he could recall "anything" he said "I can recall what was in Robert Stewart's handwriting". He said "I remember exactly what is written here."
However, when his attention was drawn to the second bullet point that notes that commissions were to be paid to "AR", before the question could be completed he said, "the evidence is that the first defendant received the fees from the plaintiff from day 1." When it was pointed out to him that that answer was not responsive he said first, "this note is Robert Stewart's note", and eventually "your client made a mistake there". With respect to the last bullet point referring to the Lawford Robinson family trust, Mr Robinson insisted in his evidence in cross-examination that it was Mr Stewart who suggested that that was the arrangement that the parties should enter into, to which he, Mr Robinson, agreed.
The contract here is of course an oral one. It is said to be "evidenced in writing". The evidence in that respect was that Exhibit 2 was not made contemporaneously but perhaps as late as a day after the discussion. No one suggests that the note is a verbatim record of the conversation that took place. Plainly, it could not be.
For the reasons set out later in this decision I prefer the evidence of Mr Stewart to that of Mr Robinson in resolving a number of factual controversies here. A question which arises however is whether or not there is evidence other than the witnesses' oral testimony that suggests that Mr Stewart is in error with respect to his recollection of the conversations of May 1999 and whether there is other evidence, apart from Exhibit 2, that assists in understanding what the parties in fact agreed, in the sense of binding themselves to a legal consequence, with respect to who was to be paid commissions earned by Mr Robinson. The memorandum Exhibit 2 is ambiguous at best. Both parties wish me to consider extrinsic evidence.

Post-contractual Conduct

Both parties invited me to rely on what has been described as "post‑contractual conduct" in order to ascertain the nature of the terms agreed to by 31 May 1999. On behalf of the plaintiff, evidence was tendered that it was the plaintiff who made the payments to the first defendant that were required by the agreement and that it was the plaintiff who received the commissions that were actually paid by the first defendant. Against this, the first defendant tendered documents that show that, at a fairly early stage, Mr Robinson invoked a personal right to payment of commissions and demanded payment from the first defendant accordingly.
The proper use of evidence of post-contractual conduct in these circumstances was considered by Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239 in s 12.5.2. Owen J held there that the law permitted access to extrinsic evidence of the conduct of the parties for the limited purpose of ascertaining whether a contract, with the terms contended for, existed: The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (supra) at [2672]. In reaching that conclusion, His Honour applied principles derived from a number of earlier authorities.
In Mears v Safecar Security Ltd [1983] QB 54, 77, Stephenson LJ said:
"I have already expressed my view that this agreement was oral, but even if it was partly in writing, we are concerned with a search for a term that was not written down, and there is nothing in those authorities which prevents the courts from looking at the way the parties acted for the purpose of ascertaining what that term was. Common sense suggests that their subsequent conduct is the best evidence of what they had agreed orally but not reduced to writing, though it is not evidence of what any written terms mean."
In Peddie v Stein unreported, SCt NSW Equity Division, BC8701481, EQ 1410 of 1984, 26 March 1987 Young J held that evidence of subsequent acts or conversations was not admissible for the purpose of construing a contract. However, with respect to the formation of a contract he said, at 20:
"However not only is it legitimate to look at subsequent conduct for the purpose of determining whether a contract is made, it is also legitimate to refer to such evidence to work out what were the terms of the contract which was partly oral and partly written."
Finally, Owen J also cited Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 where, with respect to an informal contract, McLelland J said, at 9255:
"Where a question arises whether communications between the parties have given rise to a binding contract at a particular time, subsequent communications may be legitimately referred to and taken into consideration … However … the probative value of such communications must be found in the light they throw on the proper interpretation of the earlier communications alleged to constitute the contract."
Subsequent to 31 May 1999 when payments were actually made to the first defendant, for example for dealers fees, they were made by the plaintiff. Exhibit 25 consisted of seven invoices for the dealer services fee which were rendered by the first defendant. The first dated 28 July 1999 was directed to "Mr T Robinson". Thereafter each invoice appears to be made out to "Mr T Robinson (Lawford-Robinson Family Trust)". Exhibit 22 consisted of three receipts for the dealers services fee. The first dated 4 August 1999 and the second dated 20 August 1999 were made out to "Mr Anthony Robinson". The third, dated 30 November 1999, was made out to "Mr A Robinson ‑ Lawford‑Robinson family trust". It will be observed that in each case, just as in the conversation on 31 May 1999 none of the documents identify any juristic person apart from Mr Robinson himself.
The emphasis by counsel for the plaintiff on the fact that payments were made by the plaintiff is somewhat difficult to understand. The plaintiff has now expressly disavowed the case that it was a party to the contract with the first defendant. To the extent that Mr Robinson has any recollection of what was discussed with Mr Stewart, if indeed he does, it appears to be limited to the contents of Exhibit 2. Exhibit 2 records nothing about payments being made by the plaintiff.
I do not accept Mr Robinson's evidence that it was Mr Stewart who suggested that Mr Robinson somehow use the medium of a family trust to conduct Mr Robinson's business. Quite apart from the requirements of the Corporations Law with respect to "authorised representatives" it would be contrary to the interests of the first defendant to agree to accept the trustee company as the party liable for payments to the first defendant. An agreement of that kind by the defendant would be contrary to the ordinary logic of events. There was no evidence of any conversation where either Mr Robinson or Mr Stewart asked or agreed that the liability, for example to pay dealers fees, would be the responsibility of the plaintiff. It would be strange in the circumstances if there had been. These circumstances beg the question as to why Mr Robinson and the plaintiff thought it appropriate for the plaintiff to claim as expenses deducted from the plaintiff's taxable income the costs and expenses incurred by Mr Robinson in the course of carrying on the business of an authorised representative.
It is not in dispute between the parties that when commission was due it was paid by the first defendant to the plaintiff. That would be equally consistent of course with either a term of an agreement that the first defendant would pay the plaintiff or a term of the agreement that the first defendant would pay as directed from time to time by Mr Robinson, or a willingness on the part of Mr Stewart to accommodate a request by Mr Robinson to informally facilitate Mr Robinson's tax minimisation arrangement. The payment of commission throws no light on the question of which of the alternatives was in fact agreed or acquiesced in.
However, the conduct of Mr Robinson after the first defendant demurred from making any further payments of commission is, it seems to me, revealing and probative. It is likely to reflect Mr Robinson's recollection at that time as to what in fact had been discussed and agreed with Mr Stewart in May 1999.
On 20 December 2000, there was a telephone conversation between Mr Robinson and Mr Stewart. Mr Robinson confirmed in his evidence that Exhibit 14, a letter of 20 December 2000 written by Mr Stewart for first defendant to Mr Robinson personally and tendered by the plaintiff, sets out the details of that conversation. In the body of the letter Mr Stewart records that:
"during the conversation you indicated to me that unless Boston Hill Limited was prepared to pay monies that you claim are owed to you, that you would take the following actions:.."
There then follows a series of threats that are plainly intended to cause the first defendant to fear action by ASIC. The last point in this section is "that you will take action against Boston Hill Limited to recover monies that you claim are due to you." The earlier conversation apparently contained no suggestion that the prior discussions of the parties included a promise on anyone's part that the money earned by Mr Robinson would or should be paid to the plaintiff. The letter goes on to reserve the first defendant's position in the event that Mr Robinson's involvement in placing funds in certain failed mortgage schemes results in any action against the first defendant.
On 14 June 2002, Mr Robinson wrote, on his own behalf, to Mr Stewart for the first defendant. The body of the letter sets out a defence of Mr Robinson's conduct with respect to the concerns raised by ASIC, but it begins and ends in this way:
"Dear Robert
RE: COMMISSION PAYMENTS AND THE RE‑COMMISSION PAYMENTS
As you will be aware your last contact with me was 20 December 2000 (see letter enclosed). In that letter you stated that you were delaying to pay me my commission entitlements until ASIC had investigated my supposed placing of monies into a mortgage while I was an authorised representative of Boston Hill.
…
I would like to request that you make arrangements to discuss with me my commission entitlements as soon as possible.
Yours faithfully
Tony Robinson"
In his evidence before me, there were numerous occasions when Mr Robinson's unguarded recollection of his conversations and arrangements with Mr Stewart appeared to emerge. Of the many such examples the following are just a few. The following were in Mr Robinson's examination-in-chief:
"Alright were payments made? - - - He would give me payments of $2000, $3000 here to keep me happy, although I knew that there was a lot more owing to me. … Yes? - - - it was owing to me.
…
Now, around that time, did he give you any reason for not paying you apart from this ASIC investigation? - - - When I knew that Boston Hill wasn't implicated in any action, I then pursued my monies after that."
And in cross-examination:
"And the basis of that was that a monthly fee would be paid by you to Boston Hill on an ongoing basis is that correct? - - - As a licence fee? - - - A licence fee in lieu of me receiving 100% of commissions."
I accept Mr Stewart's evidence that the financial terms of the engagement of Mr Robinson by the first defendant had been settled by about 18 May 1999. I also accept that on 31 May 1999 there was a further meeting to deal with a number of formalities including the provision of a written proper authority, where Mr Robinson raised with him a request that the money that Mr Robinson earned be directed to Mr Robinson's family trust.
By 18 May 1999 the financial terms that were critical to an agreement between Mr Robinson and the first defendant had been settled. Otherwise, it seems improbable that Mr Stewart would have bothered to order business cards for Mr Robinson. What is not clear is the extent to which there was any variation in those terms, if there was, by 31 May 1999. In particular, it is not clear and I am unable to find that subsequent to the initial agreement that there were any new promises by Mr Robinson of some changed or additional performance on his part.
It is significant in my view that the plaintiff was not expressly identified in any discussion between the parties. It seems unlikely to me that Mr Robinson was bargaining to obtain a legal entitlement for the plaintiff as a separate entity. In my view, his only concern was to obtain a particular outcome which was the avoidance of the instance of personal income tax except to the extent that it might fall after distribution to beneficiaries of the family trust. The plaintiff was in a sense irrelevant, except as the legal intermediary for the time being, selected by Mr Robinson, to allow him to achieve the tax minimisation that he desired.

As I have said above, I prefer Mr Stewart's evidence as to the gist of the conversation with Mr Robinson with respect to how payments could be directed and made under their agreement. In my view the words in Exhibit 2 "payments to be made to Lawford-Robinson F/T" do not reflect any "term" of the agreement between the parties in the sense of a promise made by one or both of the parties as to how their relationship would be conducted. The plaintiff has not persuaded me that the agreement between Mr Robinson and the first defendant resulted in such a term. From the conversation with respect to payments about which Mr Stewart gave evidence, it appears to me that the most that can be said is that if there was a variation of the agreement made between the parties on or by 18 May 1999, as to how the first defendant would pay commissions, it was a term that the first defendant would pay commissions earned by Mr Robinson as Mr Robinson directed from time to time.
I am not satisfied that there was in fact any further consideration for any "agreement" to Mr Robinson's request that payment be made to his family trust nor that the "agreement" of Mr Stewart to do so was promissory in any legal sense. That is, I am not satisfied that there was any consideration from Mr Robinson that would support any change in the contractual terms that had been previously agreed. It follows that for Mr Robinson or the plaintiff to enforce any variation in the terms previously agreed, any right to do so must be in the nature of an estoppel. In the circumstances, I find that the words recorded by Mr Stewart in his note reflect nothing more than an informal request in that respect which might at any time be unilaterally altered by Mr Robinson. In that colloquial sense only, Mr Stewart "agreed" to pay Mr Robinson's commissions to the plaintiff.
Quite apart from the fact that that construction appears to me to arise from the actual words used by the parties, according to the evidence of Mr Stewart, it also seems consistent with the surrounding circumstances and the commercial context. Firstly, Mr Robinson was the only person who was entitled to earn the commissions generated as an authorised representative. Any income generated was entirely due to his personal exertion. If it had been a term of the arrangement between the parties that the plaintiff was to be entitled to the commissions earned by Mr Robinson, Mr Robinson would be foregoing his right to payment and giving up the right to direct to whom payment should be made. That would mean, effectively, that unless the first defendant were willing to vary the agreement to allow re-direction of commissions elsewhere, Mr Robinson's only option would be to give notice and terminate the agreement if he wished to receive payment directly. That, with respect, seems somewhat absurd.

Estoppel

At par 9 of its reply the plaintiff raises a plea of estoppel:
"further or alternatively, the first defendant by entering into the agreements and subsequently making payments under the agreements to the plaintiff, the parties conducted their affairs on the basis that the plaintiff was entitled to receive payments under the agreements and in reliance thereon the plaintiff failed to enter into separate agreements with the first defendant so that it would be unconscionable for the first defendant to deny that the plaintiff was entitled to claim the payments from the first defendant."
In its submissions the plaintiff argues that "the parties conducted their affairs on the basis that the plaintiff was entitled to receive payment of commissions from the first defendant for commission earned by Tony Robinson". I was not referred to any evidence that would support this submission beyond the fact that payments were actually directed to the plaintiff. Reliance however was placed upon the doctrine of estoppel by convention as described by Buss J in Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd [2008] WASCA 119; (2008) 66 ACSR 643 at [164].
This issue was not canvassed by the first defendant's submissions. There are a number of reasons why however it seems to me that this plea must fail. It is sufficient for present purposes to set out just a few.
Referring to the elements of the doctrine of estoppel by convention taken by Buss J from the decision of the Court of Appeal of New Zealand in National Westminster Finance New Zealand Ltd v National Bank of New Zealand Ltd (1996) 1 NZLR 548, and set out in Alpha Wealth Financial Services (supra) at [164] the plaintiff's argument fails in these respects:
1.The evidence does not establish that the first defendant conducted its affairs on the basis that the plaintiff "was entitled to receive payments under the agreements". To the contrary, while he was willing to accommodate Mr Robinson's directions, Mr Stewart was dubious about the arrangement and urged Mr Robinson to seek advice. The only evidence of the plaintiff's position was that it in fact was the passive recipient of such payments. The evidence does not establish that the plaintiff conducted anything on any basis.
2.To the extent that there was any belief on the part of the plaintiff or Mr Robinson it was not one induced by any representation on the part of the first defendant. Nor has it been established that the first defendant knew that either Mr Robinson or the plaintiff was proceeding on the assumption of any entitlement on the part of the plaintiff for the purposes of the transaction between the first defendant and Mr Robinson.
3.The evidence fell far short of establishing that the plaintiff either could have or would have been able to enter into "separate agreements with the first defendant". Given that the plaintiff was in any event a passive recipient of commissions earned by Mr Robinson to which Mr Robinson was plainly entitled to is difficult to see how the plaintiff or the beneficiaries suffered some detriment that otherwise could have been avoided.
4.Finally, in the circumstances of this case, it is difficult to understand how it could be "unconscionable", following Mr Robinson's bankruptcy, for the first defendant to decline to pay anything other than to Mr Robinson's trustee if demand were made. According to Mr Stewart that was the legal advice that he had received.

Section 11(2) of the Property Law Act

It follows from what I have said about the terms of the agreement that in my view the agreement that was made between Mr Robinson and the first defendant was not a contract which "expressly in its terms purports to confer a benefit directly on a person who is not named as a party to the contract..." namely, the plaintiff. In any event, even if the agreement between the parties included the term for which the plaintiff contends, s 11(2) of the Property Law Act would not assist it here.
First, the provisions of s 11(2) can only be invoked in respect of a contract in writing: The Bell Group Ltd (supra) at [3361]. In answer to the invocation of that aspect of the decision of Owen J by the first defendant, the plaintiff advanced the argument that, by analogy with the provisions of the Statute of Frauds (1677) (IMP) it was sufficient if the relevant agreement was "evidenced in writing". Although the first defendant did not choose to respond to this submission it seems to me that there are at least three problems with it. The ability of a party to rely in some circumstances on a written "memorandum or note" rather than a formal written agreement arises from the express provisions of the Statute of Frauds. There is no such provision, in part II of the Property Law Act. And, the express provisions of the Statute of Frauds require any such memorandum or note to be "signed by the party to be charged". In the case of Exhibit 2 it does not appear to me that there is anything that could have been intended as a signature for the purpose of authenticating the matters described in the memorandum. In the circumstances, the plaintiff's argument with respect to s 11(2) must fail in the face of the decision of Owen J in The Bell Group Ltd on this point.
Secondly, it does not appear to me to be correct to say that, even on the plaintiff's case, there was a contract here that expressly benefited the plaintiff. At best, on the plaintiff's case, the plaintiff would have had a right to receive payment, as to which see The Bell Group Ltd at [3363].
Finally, the real benefit here was intended, on the plaintiff's case, to be that of beneficiaries of the Lawford-Robinson family trust. If the other requirements of s 11(2) have been met, it is no objection that there is an express conferral of a contractual benefit on a class of people. The problem here is that the extent to which there would have in reality been any benefit was dependant upon the exercise of the discretion of the trustee. In other words, it cannot be said who among the beneficiaries might have fallen within the class of persons to be benefited even had that been the case advanced on behalf of the plaintiff.

Credibility

The resolution of several of the factual issues here effectively requires a choice between the evidence of the two main witnesses, Mr Robinson and Mr Stewart. As set out earlier in these reasons, on the central question of the substance of the discussions leading to an agreement between the parties I prefer the evidence of Mr Stewart. To the extent that there is a conflict between his evidence and that of Mr Stewart, I do not accept the evidence of Mr Robinson. It was apparent in his evidence before me that Mr Robinson in fact had little genuine recollection of the substance of his conversation or conversations with Mr Stewart beyond the arithmetic of their arrangement as at 31 May 1999.
There were several other matters that lead me to conclude that Mr Robinson was not a reliable or careful witness, apart from his difficulties of recollection. First, there were several instances that suggested that Mr Robinson had a tendency to overlook facts that were potentially unhelpful or inconvenient. The statement of affairs provided by Mr Robinson to his trustee in bankruptcy in March 2001 was tendered in evidence as Exhibit 18. The standard form of this document contains repeated warnings of penalties under the Bankruptcy Act for providing false or misleading information. The declaration on its final page warns of the penalty for signing a declaration that the person knows to be false.
The second page of this document asks whether the declarant has any managed investments or other investments. Mr Robinson answered this question "no". At this time he was in fact still the owner of an investment in the company called ITC. His explanation was that he did not believe that this had any value because in June 2000 he failed to pay management fees and interest on a loan related to the investment. He said that he had written to ITC to tell them that he would not be able to pay and he therefore concluded that the investment was of no value. As will be seen later in these reasons, I do not accept that in March 2001 Mr Robinson had reason to or did think that those payments were outstanding. In any event however, question 47 which deals with the issues of investments in more detail and allows the declarant to assess their market value even if that were "nil". Nonetheless, again in this box on the form, Mr Robinson has answered "no" to the question as to whether he has any managed investments or other investments.
On the second page, under the heading "Assets you contributed towards or helped purchase" the declarant is asked "have you contributed or otherwise assisted in the purchase or improvement of any asset valued over $1000 which is held by someone else?" Mr Robinson ticked the box "no". Later in the form at question 44 under the heading "Trusts" he disclosed that the trust "owned" 15,000 ITC shares worth $22,500. The evidence before me revealed that the opportunity to acquire those shares at the price at which they had been purchased by the plaintiff was an opportunity that came to him personally because of his work as an authorised representative for the first defendant. The money for the purchase of the shares had to come, either directly or indirectly, as a result of his work as a financial advisor. It is difficult to see how he could have concluded that he had not contributed or assisted in the purchase of an asset valued over $1000, held by someone else.
In the same section dealing with "trusts", he was asked the question "have you transferred any assets to the trust in the last 5 years?" The box "no" is ticked. Given the nature of the plaintiff's case here and the fact that he had ensured that all money that he earned as an authorised representative was paid over to the plaintiff that answer is difficult to understand, except upon the most legalistic interpretation of "assets".
On a variety of occasions in the course of his evidence Mr Robinson was argumentative or evasive or both. He thought it appropriate on several occasions in the course of cross-examination to respond to a question by saying "no comment". He denied in cross-examination that he had been the source of instructions to the plaintiff's solicitors when he had previously acknowledged that fact in his examination-in-chief.
Nor was his demeanour in the witness box such as to give confidence. At one point in the course of his cross-examination he was asked whether he had understood that payments from the first defendant to him as opposed to the plaintiff would be treated differently for taxation purposes. In answer to that he said "all I knew was that that was the terms of the agreement that we entered into." Of course, the entire purpose of this arrangement from Mr Robinson's perspective was the minimisation of tax. This and other evasive or argumentative answers were delivered with a half smile. I considered whether that behaviour might have been prompted by nervousness. Ultimately I concluded that it was not.
By contrast, Mr Stewart was forthright and direct in answering questions. He was ready to admit matters that were apparently unhelpful to the first defendant's case. The contrast with Mr Robinson was vivid.

Limitation

The first defendant pleads a limitation defence said to arise as a result of the introduction of a new cause of action by an amendment made by the plaintiff to the statement of claim on 15 October 2008. The effect of that amendment was to abandon the allegation that the plaintiff had been a party to the agreement and instead allege that it was a term of an agreement between Mr Robinson and the first defendant that the plaintiff would receive the commissions earned by Mr Robinson. When the application for leave to amend came on before his Honour Judge Goetze the applicability of O 21 r 5(5) of the Supreme Court Rules was argued. His Honour allowed the application.
There were several bases upon which his Honour could have allowed the application which may have resolved the limitation issue under O 21 r 5(5) or may have left it for the determination of the trial judge. At the commencement of this trial, I advised counsel that unless they were able to agree on what his Honour's reasons had been in that regard they would need to obtain a copy of the transcript.
Following the conclusion of the trial I was provided with the transcript. On my reading of the transcript it appears that Goetze J granted leave to amend without reserving the limitation issue to the trial with this action. Accordingly, it appears to me that leave was granted on the basis that the amendment did not add a new "cause of action" in the sense described by authorities such as Morgan v Banning (1999) 20 WAR 474 at 475, 484 (FC). It follows that if the plaintiff's action had otherwise had merit it would not have been barred by the expiry of any limitation period.

Commissions owing but unpaid

Given my findings with respect to the terms of the agreement between Mr Robinson and the first defendant, it follows that no money is owing to the plaintiff. For the sake of completeness however, I will deal with the parties respective cases with respect to the amount of commission outstanding.
The plaintiff's claim is that prior to the 30 June 2000 year end, four of Mr Robinson's clients had, at his recommendation, purchased investments in ITC. That should have generated commissions of about 10 per cent of the money invested by Mr Robinson's clients, yielding an amount of $83,648.
The first defendant does not challenge the gross calculation of commission that is set out at par 9 of the statement of claim. Its case was that, subsequent to the May 1999 agreement between Mr Robinson and the first defendant, there was an agreement that if Mr Robinson placed investments in ITC commissions received on that account would be split 90 per cent to Mr Robinson and 10 per cent to the first defendant. Secondly, the first defendant says that it paid the plaintiff $39,745 on account of the ITC commissions. Finally, the first defendant says that Mr Robinson's entitlement to commission or brokers fees in respect of the ITC investments was reduced by $24,333.63, an amount deducted by ITC from the commissions that would otherwise have been paid to the first defendant on Mr Robinson's account. That deduction it is said was authorised by Mr Robinson in about July 2000 and, as will be seen, related substantially to amounts owed by Mr Robinson to ITC.
90 per cent of $83,648 is $75,283. If the payments on account and deductions by ITC are subtracted that would leave a balance of $11,205. That was the amount that Mr Stewart in his evidence estimated and accepted would be owing subject to any claim that the first defendant might have for costs that it incurred in dealing with an ASIC investigation arising from Mr Robinson's activities.
With respect to the "90/10" division of ITC commissions, Mr Stewart said that up until the end of May 1999 he and Mr Robinson had had discussions about ITC but had not agreed anything in that respect. Prior to 31 May 1999 Mr Stewart and Mr Robinson had discussed the potential opportunities with respect to ITC in general terms but they did not reach any agreement with respect to ITC fees or commissions. He said that shortly after the 31 May 1999 meeting Mr Stewart told Mr Robinson that Mr Stewart was prepared for Mr Robinson to bring business in to be placed into the ITC project on the basis there was a split of commissions or brokerage of 90 per cent to Mr Robinson and 10 per cent to the first defendant. Mr Stewart said that he had a clear recollection of the discussion and that Mr Robinson agreed to the proposal.
Mr Stewart's evidence was that on a regular basis, commission payment statements prepared by the first defendant were left in Mr Robinson's in tray. Exhibit 23 was an example of a commission payment statement for July 1999. The statement records three amounts of commission. Two are for relatively minor amounts but commission for "ITC" for that month is calculated as $85,252.50. Mr Robinson was shown to have earned a total of $86,126.64 in that month. The bank account statement for the plaintiff for 30 July 1999 records the receipt of a cheque from the first defendant for that amount.
There was a handwritten note on Exhibit 23 that records that the total amount of revenue for ITC for "Tony" was $94,725. The note says "BH fee was 10% - $85,252.50 = ($94,725 – 10%)". When asked if he had received a copy of Exhibit 23, Mr Robinson said "I presume so". Mr Robinson was not re‑examined with respect to the matters disclosed on the face of Exhibit 23. Mr Stewart was cross‑examined at some length as to the manner in which the "90/10 split" was pleaded in the defence and in particular the timing of that agreement. Of the many and various topics covered in cross-examination it was never suggested to Mr Stewart that Exhibit 23 with its handwritten note was not provided to Mr Robinson.

In the circumstances, I find that it was drawn to Mr Robinson's attention in July 1999 that 10 per cent was being deduced from ITC commissions that were earned. There is nothing in the evidence to suggest that Mr Robinson quibbled or complained about this deduction. This is an instance of post-contractual evidence that supports an agreement with respect to a 90/10 split as alleged by the first defendant. Even if the statement provided to Mr Robinson for July 1999 had not included the handwritten note it is inconceivable that a commissioned sales person earning commission at a rate of 10 per cent could have failed to have noticed that his earnings for that period of time had been reduced by nearly $9,500.
I find that the discussions between Mr Robinson and Mr Stewart in May 1999 did not resolve the issue of commission for any placement of securities apart from Asgard. Mr Stewart only granted permission to Mr Robinson to deal in Asgard funds unless Mr Stewart gave express consent otherwise. It was open to the first defendant to impose terms on the grant of permission to sell other securities. I accept Mr Stewart's evidence and I find that there was a subsequent agreement where the first defendant agreed to allow Mr Robinson to place ITC investments subject to a division of the commission in the manner in which Mr Stewart described. It follows that the most that the first defendant would have owed Mr Robinson would be $75,283.
The first defendant alleges however at 9A of the defence that it made payments totalling $39,745.02 on account of the ITC commissions. Those payments were made between 18 July and 21 November 2000. The most significant payment was made on 29 September 2000 in the amount of $22,245.02.
The plaintiff's case with respect to these payments is set out in the reply that has been filed. Essentially the plaintiff says that the payments referred to at 9A of the defence were paid either for other outstanding commissions or were owing as a result of the "second agreement", and not on account of any commissions owing for ITC. In the course of Mr Stewart's cross‑examination it was suggested to him that some of the payments pleaded at 9A of the defence were paid in respect of trailing commissions owing with respect to other fund managers, and that the single largest payment of $22,245.02 was not received from ITC and accordingly was not paid on account of ITC commissions earned by Mr Robinson. Mr Stewart accepted that the $22,245 that was paid to the plaintiff had been received from a source other then ITC but insisted that all the 9A payments were made on account of ITC commissions.
It might seem odd that parties engaged in the business of providing financial advice to the public could conduct their affairs in such a way as to leave in doubt what had been earned and what was owing. It would seem particularly odd that with respect to initial commissions or brokerage Mr Robinson kept no record of what he had earned and what he had been paid. Nonetheless, that is the state of the evidence. From the contemporaneous records available and tendered into evidence it appears to me that Mr Stewart was in error, at least in part, with respect to the purpose of the 9A payments.
Exhibit 4, a copy of the bank account statements for the plaintiff, records the amounts referred to at par 9A of the defence and does not appear to disclose any other payments by the first defendant to the plaintiff. Exhibit 26 was a calculation of brokerage due to Mr Robinson prepared by the first defendant up to 8 August 2000. Other than offsets for the dealers fee, office rental and phone charges, the last payment recorded on this document from the first defendant to Mr Robinson, or rather to the plaintiff, was $3,000 on 2 May 2000. At that point according to the first defendant's own calculations there remained due to Mr Robinson, as at 8 August 2000, $8,172.64. On the first defendant's own evidence, it appears probable to me that the payments recorded as commencing on 18 July 2000 were not paid with respect to any particular commission but were simply payments on account of what was then owing. Accordingly, from the total of $39,745.02, I would deduct the amounts shown by the first defendant's own records as being due with respect to commissions for funds placed other than with ITC. That leaves $31,572.38 outstanding that the first defendant is entitled to credit towards payment of the ITC commissions. The balance owing after this deduction is $43,711.
During the course of the evidence, as a result of an exchange with counsel, I raised the question as to whether it was to be suggested that on the proper construction of the agreement between the parties the first defendant was only liable to pay net amounts of commission received from fund managers or whether the case was that the first defendant was liable to pay the commission "earned" by Mr Robinson by placing funds with different fund managers, regardless of whether the fund manager paid the amount due or not. I raised that point because it appeared to me that it was not raised as an issue on the pleadings. With respect to the agreement of May 1999 pleaded by the plaintiff, the first defendant's response at par 3 of its defence was to essentially deny the allegations made so far as the particular terms were concerned. The defence plea however with respect to commissions generated with respect to ITC Securities was set out at par 4A of the defence:
"it was an express term of the agreement referred to at par 3 above that any brokers fees earned by Robinson on the sale of securities by him would be paid as to 90 per cent to Robinson and 10 per cent to the first defendant".
This would seem to be consistent with an obligation on the part of the first defendant to pay, regardless of whether it had received payment of the commissions itself from ITC. At 9B of the defence however, the first defendant alleges that it is entitled to reduce the brokers fees that otherwise would have been payable to Mr Robinson by $24,333.63 "being a sum deducted by ITC from the fees paid to the first first defendant by ITC which deduction was authorised by Robinson". The particulars provided refer to an authorisation given by Mr Robinson "orally or in writing on or before 25 July 2000". The parties' respective cases and the evidence tendered in respect of this issue was not especially helpful.
The first part of the ITC commissions due to the first defendant was paid by ITC on 25 July 2000. At the time that it paid $43,585.60 into the first defendant's bank account (Exhibit 12) ITC prepared a calculation showing the commissions said to be owing less certain deductions: Exhibit 13. ITC's calculation shows a deduction of $9,341.68 as being "less MGT fees for Tony Robinson deducted as authorised". The same calculation shows "less paid 25 July 2000" being an amount of $33,760.72. If all of that was correct, it would appear that the full amount owing, that is $86,698 less the "management fees" for Tony Robinson had been paid as of 25 July 2000. However, the first defendant's bank records (Exhibit 3) show only the amount of $42,080.72 deposited to its account on 26 July 2000 as "ITC project management commission". A balance of $21,553.65 was paid on 6 December 2000: Exhibits 3 and 16.
The plaintiff and Mr Robinson were aware of the deduction of $9,341.68 for "lease and management fees", $11,850 as a "loan repayment" and $3,141.95 on account of "lease and management fees due from First Manhattan Securities (Lindsay Sandford)" by October 2004. At that time Mr Robinson received an email containing this information from a Mr Mike Hendriks who was then the national marketing manager for ITC. Mr Robinson said that he was "shocked and upset" to learn that those deductions had been made. Despite that the plaintiff's original statement of claim, filed in December 2004, accepts the deductions made without demur and at par 16 of the statement of claim reduces the total of brokerage fees paid to the first defendant by the amount of the deductions and claims only the net amount. Nor did this "upsetting" information cause the plaintiff or Mr Robinson to direct any protest towards Mr Hendriks or ITC or make any further enquiry at all about the circumstances surrounding the ITC deductions, at least until late last year. Eventually, after some number of further versions of the statement of claim had been filed, all tacitly accepting the deductions that had been made by ITC, the plaintiff adopted the position that it now maintains.
In his evidence, Mr Robinson denied authorising anyone to deduct any of the three amounts making up the total of $24,333.63 by ITC. Mr Stewart however said that the question of money owing by Robinson to ITC was raised with him by Mr Hendriks in June 2000 at about the time that Mr Robinson's relationship with the first defendant was coming to an end. Mr Stewart said that Hendriks asked whether Mr Stewart would agree to have the fees owing by Mr Robinson deducted from commission owing before it was paid to the first defendant. Mr Stewart said that he raised that specifically with Mr Robinson and Mr Robinson agreed that it be done. According to Mr Stewart, Mr Robinson told him that he had agreed that the money owed by him to ITC could be deducted from the commissions that were to be paid to the first defendant. I accept that evidence. That, on its face, would account for $21,191.68 of the deduction ($9,341.68 plus $11,850). It does not explain the deduction of $3,141.95.
Counsel for the first defendant accepted that if I did not accept his argument with respect to construction of the term with respect to payment (gross proceeds or net proceeds) then the evidence was not sufficient to prove an authority to deduct the "First Charter" money. In my view, subject to any express authorisation of deductions by Mr Robinson, the case pleaded by the first defendant with respect to ITC commissions accepts that the first defendant was liable to pay the gross amount due to be paid by ITC. Even if the first defendant's pleaded case had alleged a construction of the payment term that only obliged it to pay over net amounts received from ITC, such an agreement would in any event be subject to an implied duty on the part of the first defendant to ensure that it made reasonable efforts to receive what was properly due to Mr Robinson.
It appears that there has been some confusion with respect to the "First Charter" deduction as between Mr Stewart and Mr Hendrix and, at least on the evidence before me, I am not persuaded that there was proper authority obtained from Mr Robinson to allow the deduction of that amount. Accordingly, the amount owing to Mr Robinson by the first defendant would have been $22,519.
For the reasons set out above, the plaintiff's action is dismissed.