Leon Mancini and Sons Pty Ltd (ACN 007 386 852) v Tallowate Pty Ltd(ACN 070 564 331)
[2014] VSCA 306
•1 December 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2014 0054
| LEON MANCINI & SONS PTY LTD (ACN 007 386 852) | Appellant |
| v | |
| TALLOWATE PTY LTD (ACN 070 564 331) | Respondent |
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| JUDGES: | NEAVE and KYROU JJA and GINNANE AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 20 October 2014 |
| DATE OF JUDGMENT: | 1 December 2014 |
| MEDIUM NEUTRAL CITATION: | [2014] VSCA 306 |
| JUDGMENT APPEALED FROM: | Leon Mancini & Sons Pty Ltd v Tallowate Pty Ltd [2014] VCC 15 (Judge Cosgrave) |
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CONTRACT – General Sale Authority entered into by Vendor and Agent – Whether subsequent variation letter made the commission payable on settlement of the sale, rather than on the purchaser’s entry into a contract of sale – Applied Codelfa Construction Pty Ltd v State Rail Authority of New South Wales – Appeal dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr G D Bloch | Berry Family Law |
| For the Respondent | Mr G R Gronow | Karavias & Associates |
NEAVE JA
KYROU JA
GINNANE AJA:
The appellant, Leon Mancini & Sons Pty Ltd (‘the estate agent’), appeals against the decision of a County Court judge rejecting its claim for commission of $225,000.[1] The estate agent claims it is entitled to the commission following the sale of a property in Sunshine, owned by Tallowate Pty Ltd (‘the vendor’) for $5,500,000.
[1]Leon Mancini & Sons Pty Ltd v Tallowate Pty Ltd [2014] VCC 15 (‘Reasons’).
The issues to be considered on appeal concern the effect of a standard form Real Estate Institute of Victoria general sale authority (‘GSA’) between the vendor and the estate agent, dated 20 October 2007 and a later letter which varied the amount of the commission payable (‘the variation letter’) which the parties signed on 27 November 2007.
Background
Mr Leon Mancini was the director of the estate agent and his son Eric Mancini was an employee. Jim Ververis (‘Ververis’) and his wife are co‑directors of the vendor. Leon Mancini, Eric Mancini and Ververis were business acquaintances prior to the events described below. The vendor retained the estate agent to sell the property by signing the GSA. The terms of the GSA provided that the estate agent would be entitled to a commission of 7 per cent of the sale price if the property was sold for $5,500,000 or 5 per cent of the sale price if it was sold for $5,000,000, both amounts excluding GST.[2] The GSA provided that the dollar amount of the estimated commission if the property sold for $5,500,000 ‘+ GST’ was $550,000.
[2]The clause relating to payment referred to these percentages ‘including GST’. These words were not deleted but in the handwritten amendment, which included the percentage and sales figures, the words ‘plus GST’ were added and counsel agreed that these were the terms of the GSA.
General Condition 2 of the GSA provided that:
Where the Purchaser does not complete the purchase and the Vendor is entitled to a forfeited deposit the Vendor will take all reasonable steps to recover the unpaid deposit from the Purchaser and/or any other person who may be liable for payment of the deposit and to pay the Professional Fees from the sum of the deposit paid or recovered.
In a section of the GSA form headed ‘Notices & Disclosures’ various items were included. Item 1 was as follows:
Item 1. Agent's Entitlement to Commission
Agent's Fees will be payable by the Vendor upon the Sale of the Property by the Agent or where the Agent is the effective cause of the sale by the Vendor to the Purchaser (but not if another agent holds an exclusive authority at the time of the Sale and that authority provides that the Vendor is liable to pay Professional Fees).
NOTE: See the definition of Sell, Sale and Sold in the definitions in the General Conditions following.
The relevant terms were defined as follows:
1.4 ‘Binding Offer’ is an offer on the terms set out in the Particulars of Appointment which, if obtained in compliance with this Appointment, would (or does) result in a contract enforceable against the Purchaser.
…
1.12‘Professional Fees’ are the total of the ‘Agent's Commission’ and the ‘Marketing Expenses’ (as duly authorised and expended).
…
1.16 ‘Sale’ is the result of obtaining a Binding Offer and ‘sell’ and ‘sold’ have corresponding meanings in the same situations.
After the GSA was entered into, there were discussions between the estate agent and Ververis about an offer to purchase the property made by Anbero Enterprises Pty Ltd (‘Anbero’). By a letter dated 22 November 2007, a representative of Anbero, Anthony Peluso, wrote to Eric Mancini proposing a new offer under attached terms and conditions ‘along with a reasonable consideration of $50,000 made payable to Mancini Real Estate.’[3] The terms and conditions were as follows:
[3]Reasons [6].
Purchase price: $5.5 million including GST
Deposit: $50,000 (already provided to Mancini Real Estate)
Balance of deposit: $225,000 to be paid three months from signing of contracts
Balance: $5,225,000 upon settlement at a time suitable to the vendor
Settlement period: 14 months from signing of contracts
Future development
sales: Mancini Real EstateSubject to: Subject to compliance with any of the vendor’s obligations pursuant to any tenancy, the purchaser shall have, at his own risk, free access to the property for the purpose of rezoning and the purchaser’s intended development of the property into a residential sub-division.
The vendor must supply copies of any relevant documents and give any consents and sign any documents and do all things reasonably required for the purposes of the rezoning and development.
Upon giving 14 days’ notice in writing, the purchaser has the right to determine an early settlement date, in which event the vendor shall give notice to vacate to all tenants at the property, so as to give vacant possession of the property to the purchaser at the early settlement date.
Prior to settlement, the vendor shall, at its own expense, obtain an environmental audit report stating that the property is free from contamination and otherwise suitable for residential development.[4]
[4]Reasons [6].
The vendor and the estate agent agree that as a result of the discussions which took place at that time, the GSA was varied, although there were differences between them as to the nature of the variation. A letter of variation, dated 27 November 2007, was prepared by the estate agent’s solicitor and signed by the parties. It provided as follows:
Re: Sale of 79 Wright Street Sunshine
On behalf of Mancini Real Estate I confirm that upon the sale of the above property for $5,500,000.00 inclusive of GST to Anbero Enterprises Pty Ltd &/or nominee our commission of $250,000.00 is to be paid to our company as follows:-
1. $25,000.00 immediately upon execution of the Section 27 Statement by the purchaser;
2. $225,000.00 immediately upon settlement of the sale of the property.
As we explain below, the central issue considered by the trial judge was whether the variation letter made the commission payable on settlement of the sale, rather than on the purchaser’s entry into a contract of sale.
On 7 December 2007, Anbero and the vendor signed a contract note which provided for:
·a GST inclusive purchase price of $5,500,000 including provision for the price to be payable by a deposit of $275,000 by 20 March 2008, of which $50,000 was said to have been paid as at 7 December 2007; and
·the balance of the purchase price to be payable on 7 December 2008, or earlier by agreement.
The contract between Anbero and the vendor was subject to more extensive special conditions than those in the offer made on 22 November 2007. These included the following:
4. The Purchaser shall obtain within 90 days of the date of the Contract of Sale an environmental assessment report for the land, the cost of which shall be borne equally between the parties.
5. If the environmental assessment report indicates any contamination on the land such as to make it unsuitable for residential development, the Purchaser shall within 1 month elect either to terminate this Contract or to proceed with the purchase.
6. If the Purchaser elects to terminate this Contract, the only right of the Purchaser shall be to a refund of the deposit.
7. If the Purchaser elects to proceed with the purchase, it shall use its best endeavours to expeditiously remove such contamination from the land as may be required to make the land suitable for residential development and obtain an environmental audit report to that effect, and to have the land rezoned to residential. The Vendor shall contribute one-half of the cost of obtaining the environmental audit report and any removal of the contamination but in any event, not exceeding $100,000.00 plus GST.
8. If an environmental audit report stating that the land is suitable for residential development and the gazettal of the re-zoning are not available by the settlement date, the Purchaser may elect to extend the settlement date for 6 months (‘the first extension’), in which case interest shall be payable on the balance [sic] purchase price of $4,725,000.00 at 5%, payable monthly in arrears.
9. If an environmental audit report stating that the land is suitable for residential development and the gazettal of the re-zoning are not available by the end of the first extension, the Purchaser may elect to further extend the settlement date for a further 6 months, in which case interest shall be payable on the balance [sic] purchase price of $4,725,000.00 at 6%, payable monthly in arrears. If the re-zoning to residential is not gazetted by the end of the second extension period, the Purchaser may decide to terminate the contract.
It may be observed that the terms of the contract of sale were less advantageous to the vendor than the sale contemplated by the GSA. By contrast to the latter:
·the purchase price was $5,500,000 including GST, whereas the GSA provided for a sale price of $5,500,000 excluding GST;
·the vendor was required to contribute to the cost of an environmental assessment audit and any removal of contamination to a limit of $100,000 plus GST;
·the purchaser could elect to extend the settlement date, whereas the GSA required the purchase price to be payable within 180 days; and
·the purchaser could terminate the contract if the land was not re-zoned to residential by the end of the second extension period.
A number of letters making reference to commission were written by the estate agent to the vendor after the contract of sale was made. On 4 January 2008 there was a letter from the estate agent to the vendor’s solicitors, containing a cheque. That letter said the following:
We transfer this deposit to you to be held in trust as stakeholder pending settlement and on the understanding that payment of our commission as per Account Sales attached be forwarded to us by way of bank cheque on settlement. [5]
[5]In his Reasons at [65] his Honour refers to a letter to the vendor from Leon Mancini, and notes that that it was not sent (n 3). However at [13] the judge says that a trust account cheque of $50,000 was sent by the estate agent to the vendor’s solicitor, accompanied by a letter in identical terms. It may be that there were two letters written on the same day and that only the letter to the vendor personally was not sent.
The judge refers to a second letter from Leon Mancini to the vendor’s solicitor dated 16 January 2008, which was not included in the Appeal Book. The letter included a cheque for $25,000. In that letter Leon Mancini wrote:
Please advise our office immediately the purchaser has signed the s27 statement in order that we are released from our stake-holding in respect to the $25,000 currently held in our trust account.
Enclosed please also find our Account Sales for your reference in anticipation of settlement. Could you please present a bank cheque in the amount of $225,000 at settlement and forward to our office.[6]
[6]Reasons [65].
The judge states in his Reasons that ‘the other $25,000’ was retained by the estate agent in his trust account. [7]
[7]Reasons [14].
On 25 August 2008, Leon Mancini wrote:
We confirm that the balance of commission, namely $225,000, will be payable immediately upon settlement by way of ‘Bank Cheque’ to Leon Mancini & Sons Pty Ltd.
By rescission notice dated 3 July 2008, Anbero was advised that it had defaulted under the contract of sale by failing to pay the balance of deposit money of $225,000 on 20 March 2008. Anbero then paid the unpaid deposit money. An agreement was made between the vendor and the purchaser relating to a loan to assist Anbero with environmental remediation works and Anbero’s solicitors authorised release of the deposit to the vendor. The events which followed are described by the trial judge as follows:
On 25 August 2008, Leon Mancini wrote to the Vendor’s solicitors advising that the Agent had that day drawn the balance of deposit of $25,000 held in its trust account. He also confirmed that:
[t]he balance of commission namely $225,000.00 will be payable immediately upon settlement by way of ‘Bank Cheque’ to Leon Mancini & Sons Pty Ltd.
By letter dated 2 December 2008, Anbero elected to extend the settlement date pursuant to special condition 8 of the contract note.
By letter dated 4 June 2009, Anbero advised that the rezoning of the property would not be gazetted before 7 June 2009, and it therefore elected to extend settlement for a further six months.
By notice dated 17 February 2010, the Vendor issued Anbero with a notice of rescission for failing to make interest payments due in the sum of $70,875. On the same day, Anbero was placed in liquidation as a result of a voluntary winding up.
On about 26 February 2010, the Vendor received a nomination form dated 27 August 2009 specifying Wright Street Developments Pty Ltd as the purchaser of the property. …[8]
[8]Reasons [20]–[24].
There was a dispute as to whether that nomination was valid and Wright Street Developments Pty Ltd commenced proceedings to assert its rights in respect of the property. It discontinued those proceedings on 14 April 2010. Subsequently, the vendor rescinded the contract of sale.
On 28 April 2010, the vendor terminated the estate agent’s authority and later sold the property to a third party. The estate agent contended that it was entitled to a commission of $225,000 because it had brought about the contract between Anbero and the vendor.
The judge’s reasons
In the proceedings below, the estate agent contended that it was entitled to the amount of commission in the variation letter when Anbero entered into a binding contract of sale. The vendor argued that under the terms of the variation letter, the commission was not payable until the sale was settled, and that this had never occurred.
The trial judge first considered the estate agent’s argument that there had been both an oral and a written variation of the GSA and the contrary argument made by the vendor that the only variation was that made by the letter of 27 November 2007. The estate agent relied on a number of conversations between Eric Mancini, on behalf of the estate agent, and Ververis, on behalf of the vendor, in support of the claim that the agreement had been varied orally. His Honour found that the evidence of Leon and Eric Mancini about the alleged oral variation was not persuasive and that the terms of the variation were wholly embodied in the variation letter.[9] That conclusion was not challenged on appeal.
[9]Reasons [57]–[60].
His Honour held that the GSA was varied to provide that the estate agent and the vendor would each receive $25,000 from the $50,000 paid by Anbero to Mancini. The $25,000 received by the estate agent was part payment of the commission, whilst the $25,000 received by the vendor was part payment of the deposit.
His Honour also held that, under the terms of the variation letter, the estate agent would not receive the balance of its commission (that is $225,000) until the sale was settled and the vendor had received the balance of the purchase price.
In reaching that conclusion he referred to extrinsic circumstances which were said to support that view. These were that:
(a) Ververis had made two previous unsuccessful attempts to sell the property between 2004 and 2006. In light of those failed sales his Honour said that:
it seems to me both reasonable and logical that a vendor might seek to take measures to limit the cost to himself of another incomplete conveyancing transaction. The two failed sales meant that the Vendor continued to hold the property for two or three years longer than he otherwise would have and continued to bear the attendant holding costs. In addition, the Vendor paid $100,000 commission to the [estate agent] for the second unsuccessful sale. It would not be unexpected, therefore, that on this third attempted sale the Vendor would want full payment of the agreed commission to be conditional upon the settlement in which the Vendor received the whole of the agreed purchase price.[10]
[10]Reasons [61].
(b) Secondly, the terms of the contract, which was actually entered into, were ‘notably different’ from those contemplated in the GSA and were much less favourable to the vendor.[11]
[11]Reasons [62].
(c) Thirdly, the estate agent could not explain its delay in demanding payment of commission. It was argued that the $225,000 was to be paid on 7 December 2008 when the contract was made. However, there was no demand for payment of commission until March 2012.[12]
[12]Reasons [63].
(d) Fourthly, the letters written by the estate agent to the vendor or the vendor’s solicitor supported the argument that commission was not payable until settlement. As the judge observed:
In each of the three letters, reference was made to the payment of the balance of commission ‘at’, ‘on’ or ‘upon’ settlement. Those expressions are consistent with the version of events propounded by Ververis and a plain reading of the terms of the Amended Authority. By contrast, the [estate agent’s] assertion that the agreement was for commission to be payable within 12 months or on the due date for settlement, being 7 December 2008, is not borne out by the evidence.[13]
[13]Reasons [65]–[66].
(e) Finally, the estate agent had considerable incentive to achieve a sale, on whatever terms it could, to Anbero. Because of the relationship between the estate agent and Mr Peluso, the representative of Anbero who had negotiated the sale, the estate agent was justified in believing that if Anbero purchased the property the estate agent was likely to be engaged for the purposes of the sale of the redeveloped property after its subdivision was completed. His Honour observed that:
it is reasonable to believe that Leon Mancini would have agreed to such a stipulation because it protected the [estate agent’s] future relationship with Peluso.[14]
[14]Reasons [67].
His Honour held that the variation letter determined when the vendor became liable to pay commission. However, he went on to consider whether, if the date when the vendor became liable had not been changed by the variation letter, the estate agent would have been entitled to the balance of the $250,000 commission, under Item 1 of the Notices & Disclosures section in the GSA. The estate agent argued that he was entitled to the commission because when the variation letter was combined with the GSA there was a ‘Sale’ of the property, falling within the first limb of Item 1 of the GSA, or the agent was ‘the effective cause of the sale’ under the second limb of Item 1 of the GSA. By contrast, the vendor argued that there was no ’Sale’ of the property and in any case the estate agent was not the effective cause of any alleged sale.
His Honour said that although his earlier conclusion made it unnecessary to decide the point, the GSA did not require the vendor to pay commission. This was because:
(f) The terms of the contract contemplated by the GSA differed substantially from the contract of sale actually entered into by Anbero.
(g) To the extent that the GSA contained terms, which were different from those in the proposed offer, the vendor had an option about whether or not to sell the property on the new terms. There was therefore no ‘Binding Offer’ as defined by cl 1.4 of the General Conditions of the GSA. Because there was no ‘Binding Offer’ there was no ‘Sale’ as defined in the GSA and the vendor was not legally obliged to pay any commission.
Finally his Honour said that:
If the other limb of Item 1 requires that ‘sale’ be read as if it were a ‘Sale’ as defined, then for the reasons already set out, there was no such ‘Sale’. If ‘sale’ is to bear its usual meaning unaffected by the definition in the Authority, then it is the act of giving something to someone in exchange for money or the transfer of ownership of title of property from one to another for a price. The essence of the word’s meaning is the exchange of ownership for money. This limb of Item 1 contemplates that the agent can recover commission even if the sale of the property is on terms different from those in the Authority. It is enough that the agent is the effective cause of the sale (and no other agent holds an exclusive authority which provides that the vendor is liable to pay professional fees).[15]
[15]Reasons [80].
However, in this case, there had been no transfer of ownership to the purchaser, so that this alternative provision did not apply.
The grounds of appeal
The grounds of appeal were as follows:
1.His Honour erred in finding that the Appellant was not entitled to be paid by the Respondent and/or had not earned the balance of a selling commission in the sum of $225,000 under the terms of an engagement in writing made on or about 20 October 2007 between the Appellant as Agent and the Respondent as Vendor/Principal (‘the engagement’) in respect of the sale by the Respondent of its property known 79 Wright Street, Sunshine to Anbero Enterprises Pty Ltd under a contract note dated 7 December, 2007 (‘the contract note’).
2. His Honour erred in finding that the Appellant was not entitled to be paid by the Respondent and/or had not earned the balance of a selling commission in the sum of $225,000 under either of the two limbs of Item 1 of the Notices & Disclosures provisions of the engagement.
3. His Honour erred in not finding that the Appellant was entitled to be paid by the Respondent and/or had earned the said balance of a selling commission in the sum of $225,000 under General Condition 2 of the engagement which provided that the Respondent would pay the Appellant commission from a forfeited deposit when (as was the fact) Anbero Enterprises Pty Ltd had paid the Respondent deposit moneys in the aggregate sum of $275,000, the Respondent had rescinded the contract note and the Respondent became entitled to and retained the forfeited deposit.
4. His Honour erred in finding as a matter of construction that under the second limb of Item 1 of the engagement the word ‘sale’ (with a lower case ‘s’) had a different meaning from the meaning of the word ‘Sale’ (with a capital ‘S’) appearing both therein and in the first limb of Item 1 of the engagement. His Honour erred in finding that ‘(t)he essence of the ... meaning of the word (‘sale’) is the exchange of ownership for money’ and that the Appellant could therefore only be the effective cause of a sale where a sale is successfully settled and a transfer to a purchaser actually occurs when -
4.1 it is the vendor, not the agent, who takes the risk of contracting with a purchaser;
4.2 the word ‘sale’ as appearing in the engagement, having regard to conveyancing convention, does not mean an actual settlement and transfer but rather means the execution of a contract of sale or contract note by a vendor and a purchaser regardless whether the contract note is settled and title conveyed;
4.3 the words ‘Sale’ ‘sell’ and ‘sold’ were defined in General Condition 1.16 to mean the obtaining of a Binding Offer (as therein defined) which definition does not require there to be a successful settlement; and
4.4 the words ‘sale’ and ‘Sale’ must have had the same meaning, not different meanings, as both appear successively in the second limb of Item 1 and especially as the word ‘Sale’ (which appears last) clearly refers back to the word ‘sale’ (which appears first).
5. In the circumstances His Honour erred in not finding that the Appellant was the effective cause of the sale to Anbero Enterprises Pty Ltd under the second limb of Item 1 of the engagement.
6. His Honour erred in finding that by paragraph 2 of a letter dated 27 November 2007 countersigned by or on behalf of both the Appellant and the Respondent (‘the variation letter’) the parties varied the engagement such that the said balance of commission in the sum of $225,000 would only be paid were a settlement of the sale of the said property actually to occur.
7. His Honour erred in not finding that, on its proper construction, paragraph 2 of the variation letter simply stipulated the time when the said balance of commission in the sum of $225,000 would be paid by the Respondent to the Appellant (as distinct from stipulating a new condition that commission would only be paid were a settlement of the sale actually to occur).
8. His Honour erred in not finding that paragraph 2 of the variation letter, on its proper construction, did not disentitle the Appellant to be paid the said balance of commission in the sum of $225,000 by the Respondent under General Condition 2 of the engagement, namely in circumstances where the Respondent terminated the contract note and became entitled to the said forfeited deposit.
9. His Honour, having correctly identified the latent ambiguity in paragraph 2 of the variation letter (namely ‘whether the variation merely delayed the timing of the payment of commission to the Agent, or whether it created a new condition whereby no substantive commission was payable unless there was a settlement of the sale transaction’), erred by adopting the latter construction which conflicts with General Condition 2 of the engagement, when paragraph 2 of the variation letter was susceptible to the former construction which does not conflict with General Condition 2 of the engagement.
10. His Honour erred in not finding that even though the contract note did not proceed to settlement, the said balance of commission in the sum of $225,000 ought to have been paid by the Respondent to the Appellant under General Condition 2 of the engagement within a reasonable time after the Respondent forfeited the deposit paid to it by Anbero Enterprises Pty Ltd.
11. His Honour erred in not finding that the Appellant's entitlement to be paid the balance of commission in the sum of $225,000 by the Respondent under General Condition 2 was a discrete claim unaffected by the variation letter or by any negotiations between the parties.
12. His Honour, having found that the engagement was varied only in writing, erred in concluding that the Appellant's ‘entitlement to commission was to be found only in the Amended Authority (the variation letter)’ when -
12.1 the variation letter did not purport to address much less delete the Appellant's entitlement to the balance of commission in the sum of $225,000 were Anbero Enterprises Pty Ltd unable to settle the purchase;
12.2 the variation letter did not purport to address much less delete the Appellant's said discrete entitlement to the balance of commission in the sum of $225,000 under General Condition 2 of the engagement; and
12.3 the engagement otherwise continued to regulate the commercial relationship of the Appellant and the Respondent as agent and principal.
13. His Honour's finding that there was no ‘Binding Offer’ obtained by the Appellant because the terms of Anbero Enterprises Pty Ltd's offer were inconsistent with the terms of appointment set out in the engagement, was against the evidence and the weight of the evidence in that Jim Ververis (a director of the Respondent) gave evidence that prior to the contract note being entered into between the Respondent and Anbero Enterprises Pty Ltd, the Appellant and the Respondent had varied the terms of appointment set out in the engagement to accord with the terms of Anbero Enterprises Pty Ltd's offer (being the terms upon which the contract note was entered into).
14. In the circumstances His Honour erred in concluding that the Appellant obtained no ‘Binding Offer’ from Anbero Enterprises Pty Ltd when the contract note was entered into as aforesaid, Anbero Enterprises Pty Ltd paid $275,000 by way of deposit moneys and paid other moneys to the Respondent and the Respondent ultimately rescinded the contract note and retained the whole of the said deposit moneys paid by Anbero Enterprises Pty Ltd.
15. His Honour's finding that after two failed attempts to sell the property, the Respondent did not want to pay commission unless a sale of the property actually settled was against the evidence and the weight of the evidence given that-
15.1 the Respondent executed the engagement on 20 October 2007 well knowing that under General Condition 2 commission would be payable even where no settlement occurred;
15.2 the Respondent executed the engagement on 20 October 2007 well knowing that if a purchaser introduced by the Appellant proved unable to complete the purchase, commission would nevertheless be payable even where no settlement occurred so long as a ‘Binding Offer’ (as therein defined) had been obtained by the Appellant;
15.3 when executing the engagement, a number of conditions were deleted on pages 2, 4 and 5 but the Respondent did not request that either General Condition 2 or the definition of ‘Binding Offer’ be deleted or modified;
15.4 Jim Ververis gave evidence that where (as was the fact) a deposit sufficient to pay commission is paid, he would be ‘happy to pay commission’.
16. His Honour's finding that the parties agreed that commission would only be payable if settlement of the contract note occurred was against the evidence and the weight of the evidence given that-
16.1 the Respondent executed the engagement on 20 October 2007 well knowing that under General Condition 2 commission would be payable even where no settlement occurred;
16.2 the Respondent executed the engagement on 20 October 2007 well knowing that if a purchaser introduced by the Appellant proved unable to complete the purchase, commission would nevertheless be payable even where no settlement occurred so long as a ‘Binding Offer’ (as therein defined) had been obtained by the Appellant;
16.3 when executing the engagement, a number of conditions were deleted on pages 2, 4 and 5 of the engagement but the Respondent did not request that either General Condition 2 or the definition of ‘Binding Offer’ be deleted or modified;
16.4 even on the Respondent's case, at no time, whether prior to executing the engagement, the variation letter or otherwise did the parties discuss the Appellant's entitlement referred to in paragraph 16.1; and
16.5 when executing the variation letter the parties took no step whether by the variation letter or otherwise to render General Condition 2 ineffective and it continued in full force and effect.
17. His Honour erred in determining this proceeding on the basis of the Appellant's (Plaintiff's) Amended Statement of Claim filed by leave granted on 29 January 2014 rather than the Appellant's Amended Statement of Claim filed by leave granted on 31 January 2014 which included inter alia the Appellant's discrete claim under General Condition 2 of the engagement for the said balance of a selling commission in the sum of $225,000. By not adequately considering the Respondent's obligation to pay commission from a forfeited deposit, His Honour erred in providing the Respondent with an undue windfall gain by reversing the benefit conferred by General Condition 2 which was a consequence never discussed much less agreed to by the parties.
18. His Honour erred in not awarding interest on the Appellant's claim as from 14 April 2010 (being the date the contract note was rescinded by the Respondent under a 14 day rescission notice dated 31 March 2010 and being the date the Respondent forfeited the deposit moneys paid by Anbero Enterprises Pty Ltd and became obliged to pay the Appellant the balance of commission under General Condition 2 of the engagement) pursuant to General Condition 3 of the engagement at a rate of four per centum higher than the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983.
The appellant’s submissions
In support of grounds 1 to 5, 10 and 11 the appellant argues that Item 1 and General Condition 2 of the GSA, made the vendor liable to pay a commission of $250,000, with $25,000 to be payable on the execution of the s 27 statement, and the balance of $225,000 to be payable when Anbero and the vendor entered into a binding contract of sale. The variation letter did not change the nature of the vendor’s liability to pay the commission under the GSA, although it altered the amount payable.
Under Item 1 of the Notices & Disclosures section of the GSA, agent’s fees were payable on entry into the contract because:
(h) there was a ‘sale’ of the property within the definition in cl 1.16 of the General Conditions and because Item 1 provided that agent’s fees would be payable on sale (first limb of Item 1). By conveyancing convention the word ‘sale’ meant entry into a binding contract (see ground of appeal 4.2). The provision, in the Contract Note, for settlement on 7 December 2008, or at an earlier date by agreement, for $5,500,000, which was the price set out in the GSA, was sufficient to bring the matter within the first limb. The judge had erred in holding that because the Contract Note contained terms which were not specifically contemplated by the GSA, Item 1 did not apply. Thus the vendor was liable to pay the amount of commission agreed in the variation letter.
(i) The fact that the Contract Note was made on terms not included in the GSA did not prevent the first limb of Item 1 applying. It would be uncommercial to interpret a standard form authority such as the GSA in such a way that an agent who had an authority to sell would have to obtain a new authority every time the terms of the contract made between a vendor and purchaser differed from the terms contemplated in a general sale authority.
(j) Even if there was no ‘Sale’ within the first limb of Item 1, because the sale was on different terms from that contemplated by the GSA, the second limb of Item 1 applied because the estate agent was ‘the effective cause of the sale which had been made’. Even if the first limb required the contract to be made on the same terms as contemplated by the GSA, the second limb did not do so. In that context, the appellant relied on the judge’s alternative conclusion that even if the variation letter did not change the time when the vendor became liable to pay commission[16] the second limb of Item 1 contemplated that the agent could recover commission even if the sale was on terms different from those in the authority and that ‘it is enough if the agent is the effective cause of the sale’.
(k) General Condition 2 of the GSA specifically provided for payment of the commission out of a forfeited deposit when the purchase was not completed and required the vendor to take all reasonable steps to recover any unpaid deposit from the purchaser. The judge had erred by not taking account of this provision, which gave rise to a discrete claim under the amended statement of claim dated 29 January 2014. General Condition 2 continued to operate, despite the terms of the variation letter.
(l) Alternatively, Item 1 applied because although the terms of sale in the contract note were different from the particulars of appointment set out in the GSA, the particulars of appointment had, in effect, been altered in the variation letter and the Contract Note was entered into after the variation letter. It followed that the binding offer obtained was consistent with the new particulars of appointment, so that the appellant was entitled to commission under the first limb of Item 1.
[16]Reasons [80].
Under cover of grounds 6 to 9 the appellant contended that there was no difficulty in reading the GSA together with the variation letter and that both documents could and should be read together. The variation letter reduced the amount of commission payable and stipulated the time when the commission was to be paid. However, it did not alter the fact that the vendor’s liability to pay commission arose on entry into a binding contract of sale.
The appellant contends that his Honour erred in finding that the variation letter altered the basis on which commission was payable. The terms of the variation letter did not make the requirement to pay professional fees (defined as the ‘Agent’s Commission’ and the ‘Marketing Expenses’ in the GSA) contingent on a settlement of a purchase occurring. The variation letter simply regulated the timing for payment of agent’s commission (by postponing the time at which payment was made until the date when the sale was settled). The appellant submits that if the variation letter had been intended to make the vendor liable to pay commission only if settlement occurred, it would have clearly dealt with the matter and made it clear that the GSA was being amended to that effect.
The appellant argues that the learned trial judge could not legitimately rely on the matters set out in [61] to [69] of his reasons, described above at [24], to support his conclusion that the variation letter meant that the commission was only to be paid if settlement actually occurred.
Finally, under cover of grounds 15 and 16, the appellant’s written submission argued that the judge’s findings as to the intentions of the parties in entering into the variation letter were against the weight of the evidence. Ververis had given evidence that if a deposit sufficient to cover the commission were paid he would be ‘happy to pay commission’.[17]
[17]Transcript of Proceedings, Leon Mancini & Sons Pty Ltd v Tallowate Pty Ltd (County Court of Victoria, CI-12-03514, Judge Cosgrave, 30 January 2014), 141.
On that basis, the judge should have considered that Ververis, on the part of the vendor, intended to pay commission in the circumstances contemplated by the GSA and knowing that if a purchaser introduced by the estate agent was unable to complete the contract, the commission would be payable.
The respondent’s submissions
Counsel for the respondent submitted that the variation letter replaced the provision in the GSA, which provided for payment of commission on ‘sale’ of the property as defined by cl 1.16 of the General Conditions.
Counsel’s primary submission was that the variation letter unambiguously provided that liability to pay commission did not arise until the sale was settled. In these circumstances it was not permissible to take account of the surrounding circumstances in order to interpret what was meant by the words ‘upon settlement of the sale of the property’ in the letter of variation dated 27 November 2007.
Alternatively counsel argued that even if the words ‘upon settlement of the sale of the property’ when read in the context of the whole letter were ambiguous, the matters properly taken into account by the trial judge, in [61] to [69] of his reasons, supported the conclusion that the letter did not make the vendor liable to pay commission unless the sale was settled. Contrary to the appellant’s submission these words did not simply regulate the timing of payment.
After some discussion with the Bench, counsel conceded that in interpreting the letter the judge could not rely on evidence of matters occurring after the variation letter had been signed, unless they were within the contemplation of the parties, at the time the letter was signed, or amounted to admissions.
Further, even if there was some scope for the GSA to apply it did not entitle the agent to commission because:
(m) There was no ‘Sale’ as defined in the GSA. A ‘Sale’ was the result of a binding offer which was ‘an offer on the terms set out in the Particulars of Appointment'. The 7 December 2007 Contract Note was not made on those terms but on different and less favourable terms to the vendor than the contract contemplated in the GSA. These differences are described in [12] above.
(n) General Condition 2 was not the source of the vendor’s obligation to pay commission but simply provided a mechanism for the recovery of a commission which was otherwise payable. For the reasons explained above, the commission was not otherwise payable.
Conclusion
The primary question to be resolved on this appeal is whether the variation letter altered the time at which the vendor became liable to pay commission by postponing it until the date of settlement. The introductory words of the letter referred to payment ‘upon the sale of the… property’. Such words would normally refer to entry into a binding contract. However, this was immediately qualified by cl 1 and cl 2 of the variation letter, which provide for payment of $25,000 on execution of the s 27 statement and payment of the balance immediately ‘upon settlement of the sale of the property’. Clause 2 itself differentiates between ‘sale’ and ‘settlement of the sale’.
There was no evidence before the Court as to the trade usage of the word settlement. However, that expression is a well understood conveyancing term which describes the process by which a vendor receives the purchase money and hands the transfer to the purchaser (or the purchaser’s mortgagee) for registration under the Torrens system.
In these circumstances, the judge correctly held that the variation letter unambiguously and exhaustively set out the vendor’s liability to pay commission, namely $25,000 immediately upon execution of the s 27 statement by the purchaser and $225,000 immediately upon settlement. For the purposes of the sale to Anbero, the provision for payment of commission in the variation letter took the place of the provision for payment of commission in the GSA. The variation letter did not replace the GSA, but altered the time at which the vendor became liable to pay commission.[18]
[18]Parties to an agreement may vary some or all of its terms by subsequent agreement. Tallermans & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93, 143-144 (Taylor J).
Because the words of the variation letter are clear, it is unnecessary to engage with the controversy about whether a contractual ambiguity is required before a court can receive evidence as to surrounding circumstances in order to interpret the meaning of the contract.[19]
[19]See Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J, Stephen and Wilson JJ concurring); Royal Botanic Gardens & Domain Trust v South Sydney Council (2002) 240 CLR 45, 62-3 [39]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40]; Western Export Services Inc v Jireh (2011) 86 ALJR 1 [3].
If, contrary to that view the letter was ambiguous, so that it was necessary to take account of the surrounding circumstances known to the parties to interpret the meaning of the variation letter, we consider that the trial judge correctly concluded that these circumstances supported the interpretation that commission was not payable until the sale was settled.
That interpretation is consistent with the fact that the vendor had, to the knowledge of the estate agent, made two previous unsuccessful attempts to sell the property. The estate agent had acted as agent in at least one of them and the vendor had paid a commission to the agent following the purchaser’s default. A provision under which the vendor did not become liable to pay the $225,000 commission until settlement was entirely explicable in these circumstances.
Further, at the time the variation letter was signed, the vendor had received the offer of 22 November 2007, which was valid until 5 pm on Monday 26 November 2007. At that time the vendor was continuing to negotiate entry into a contract of sale which, as that offer showed, was likely to be on materially different and less advantageous terms than the provisions contemplated in the GSA (see [12] above). For that reason (as well as the fact that it was in the estate agent’s interests to continue to act for the vendor in the sale to Anbero, because the estate agent was likely to get the chance of making commission on the sale of the individual lots when the land was sub-divided by Anbero), it was entirely explicable that the estate agent would agree that the vendor would not be liable for the balance of commission until the sale settled.
The appellant made no argument relating to the fact that the initial commission payment of $25,000 was payable when the purchaser signed the statement under s 27 of the Sale of Land Act.[20] But even if reliance had been placed on that matter it does not detract from our conclusion that liability to pay the balance of $225,000 did not arise until settlement.
[20]Section 27 provides for release of the deposit held by an estate agent as stakeholder on authorisation by the purchaser. The authorisation is not effective until the vendor provides various particulars to the purchaser and the purchaser indicates satisfaction with those particulars. Under s 27(9) when the estate agent releases the deposit to the vendor the estate agent is entitled to retain commission to which he or she is entitled, plus relevant expenses.
The failure of the estate agent to make any demand for payment of commission until March 2012, more than four years after the Contract Note was signed by the vendor and Anbero, provides additional support for the conclusion that the variation letter postponed liability to pay commission until the date of settlement.
The judge also relied on the letters dated 4 January, 16 January and 25 August 2008 to support his conclusion that commission was not payable until settlement. It is not necessary to decide whether or not these letters could be regarded as admissions against interest. No objection was taken by either party, to the reliance by the Court on this material. We note, however, that the letters support our view that the variation letter provided that commission was not payable until settlement.
We would also accept the submissions of the respondent in relation to the effect of Item 1 of the Notices & Disclosures section of the GSA, when read in combination with the definitions in the General Conditions, and of General Condition 2. The first limb of Item 1 provided that agent’s fees were payable by the vendor upon the Sale of the Property. A ‘Sale’ was defined as requiring a ‘Binding Offer’, which in turn was defined as an offer:
on the terms set out in the Particulars of Appointment which, if obtained in compliance with this Appointment, would (or does) result in a contract enforceable against the Purchaser.
As the judge correctly held, the offer made by Anbero, which did result in an enforceable contract, was not on the terms set out in the GSA.
We would also reject the argument made under cover of ground 17, that General Condition 2 provided a stand‑alone basis for entitlement to commission. In our view, General Condition 2 does not make the vendor liable to pay a commission in situations not covered by Item 1, which is headed ‘Agent’s Entitlement to Commission’. It is simply a machinery provision which provides recovery of commission from a forfeited deposit where the commission is otherwise payable and does not create a liability to pay which does not arise under the other terms of the GSA.
We do not agree with the judge’s conclusion that in Item 1 the word ‘sale’ in the lower case, meant something different from ‘Sale’ in the upper case. The definition provided that the words ‘sell and sold’ (lower case) had ‘corresponding meanings to ‘Sale’ in the same situations. All the defined terms in the General Conditions are capitalised and capitals are used in a random manner throughout the GSA. We consider that because there was no sale based on a binding offer as defined in the General Conditions, the GSA did not make the vendor liable to pay commission. His Honour’s error in that respect, however, does not detract from his conclusion that the variation letter of 27 November 2007 imposed liability for commission only on settlement.
Finally, reference should be made to ground of appeal 15 (in particular 15.1), which claims that Ververis signed the GSA ‘well knowing’ that commission would be payable even if no settlement occurred. This ground simply assumes what the appellant seeks to prove and ignores the effect of the variation letter. Further, Ververis’ evidence that if a sufficient deposit had been paid (as in fact it was) he would have been happy to pay the commission, does not assist in interpreting the effect of the GSA and the variation letter. As the High Court observed in Toll (FGCT) Pty Ltd v Aphapharm Pty Limited:
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 or conduct would have led a reasonable person in the position of the other party to believe.[21]
[21](2004) 219 CLR 165 179, [40].
In this case the judge held that the nature of the obligation to pay commission was to be determined solely by the words used in the GSA as varied by the variation letter. That view was not challenged on appeal. Consequently, Ververis’ evidence about what he would have been happy to do, or indeed what was intended by the variation letter, was not relevant.
In light of the conclusion we have reached, it is unnecessary to consider ground 18 which relates to the payment of interest on the commission. For these reasons, we would dismiss the appeal.
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