Leon Mancini and Sons Pty Ltd v Tallowate Pty Ltd
[2014] VCC 15
•28 March 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
GENERAL CASES DIVISION
Case No. CI-12-03514
| LEON MANCINI & SONS PTY LTD | Plaintiff |
| v | |
| TALLOWATE PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29-31 January 2014 | |
DATE OF JUDGMENT: | 28 March 2014 | |
CASE MAY BE CITED AS: | Leon Mancini & Sons Pty Ltd v Tallowate Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 15 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT, ESTOPPEL, RECTIFICATION
Catchwords: CONTRACT – General Sales Authority – Variation of Authority – Agent’s commission – Whether agreement wholly written.
ESTOPPEL – Reliance on a document as constituting the whole of an agreement.
RECTIFICATION – Rectification of written document varying General Sales Authority.
Legislation Cited: Sale of Land Act 1962 (Vic).
Cases Cited:Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54; Jocelyne v Nissen [1970] 2 QB 86; Jones v Dunkel (1959) 101 CLR 298; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740; Pukallus v Cameron (1982) 180 CLR 452; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; Slee v Warke (1949) 86 CLR 271.
Judgment: The plaintiff’s claim is dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Bloch | Berry Family Law |
| For the Defendant | Mr M Gronow | Karavias & Associates |
HIS HONOUR:
1 The plaintiff is a real estate agent (“the Agent”). The defendant, as vendor (“the Vendor”) and proprietor of the property at 76 Wright Street, Sunshine (“the property”), retained the plaintiff under a General Sale Authority (“the Authority”) to sell the property on particular terms. The Agent found a buyer willing to purchase the property on different terms. The Agent and Vendor agreed to vary the terms of the Agent’s engagement. The main issue is 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.
Background
2 On 20 October 2007, the Vendor signed the Authority retaining the plaintiff as its selling agent in respect of the property. The terms of the Authority, including the handwritten amendments initialled by the parties, included the following:
· the Vendor’s asking price was $5.5 million plus GST payable in 180 days;
· if the Agent sold the property for the Vendor, the Vendor would pay a commission of seven per cent of the sale price if the property sold for $5.5 million or five per cent if it sold for $5 million; and
· the Vendor would pay the marketing expenses of $1,850 including GST only if the property were sold.
3 The General Conditions of the Authority included the following:
“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).
…
2Where 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.”
4 Item 1 of the “Notice & Disclosures” in the Authority stated as follows:
“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).”
5 Although it was not expressly referred to in the version of the Amended Statement of Claim filed on the first day of trial (but provided initially to the Vendor on or about 6 January 2014), the Agent relied upon this clause in final submissions. By leave given on 31 January 2014, the Agent referred to the clause in its Further Amended Statement of Claim.
6 By letter dated 22 November 2007, Anthony Peluso made an offer to Eric Mancini, an employee of the Agent, in respect of the property. The letter said that Peluso and his partners would like to propose a new offer for the purchase of the property under the attached terms and conditions “along with a reasonable consideration of $50,000 made payable to Mancini Real Estate”. The terms and conditions were as follows:
“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 Estate
Subject 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 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.”
Peluso said in the letter that the offer was valid only until 5pm on Monday, 26 November 2007.
7 The Agent and the Vendor agree that, as a result of discussions which took place between about 10 October and 27 November 2007, the Authority was varied.
8 A major difference between the parties was that the plaintiff contended that the variation was both oral and written, whereas the defendant contended that the variation was exclusively written. Insofar as the variation was written, it was common ground that the variation was to be found in a letter dated 27 November 2007 from the plaintiff to the defendant (“the Amended Authority”). The document stated as follows:
“On behalf of Mancini Real Estate I confirm that upon the sale of the above property for $5,500,000 inclusive of GST to Anbero Enterprises Pty Ltd and/or nominee our commission of $250,000 is to be paid to our company as follows:
1. $25,000 immediately upon execution of the section 27 statement by the purchaser;
2. $225,000 immediately upon settlement of the sale of the property.
It is agreed that following the execution by the purchaser of the section 27 statement and payment to our company of $25,000 your company charges its interest in the property in favour of our company to secure the balance of commission of $225,000 to be paid to our company at settlement.
Yours faithfully
Eric Mancini”
9 Between 28 November 2007 and 7 December 2007, there were discussions and/or correspondence between the representatives of the Vendor and Anbero Enterprises Pty Ltd (“Anbero”), regarding a revised purchase offer from Anbero which was on terms different from those set out in the Authority. Because of Anbero’s interest in sub-dividing the property for residential purposes, it was necessary to have an environmental audit report approving of the proposed use. Anbero wanted the Vendor to contribute to the cost of obtaining the requisite environmental approval.
10 By contract note signed by Anbero and the Vendor on 7 December 2007 (“the contract note”), those parties entered a contract for the sale of the property. The contract provided that:
· the purchase price was $5.5 million including GST;
· the price was payable by a deposit of $275,000 by 20 March 2008, of which $50,000 had already been paid as at 7 December 2007. The balance of the purchase price and any GST was payable on 7 December 2008, or earlier by agreement.
11 The contract was subject to a number of special conditions, including 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 an environmental audit report and any removal of the contamination but in any event, not exceeding $100,000 plus GST.
8. If an environmental audit report stating that the land is suitable for residential development and the gazettal of the rezoning are not available by the settlement date, the Purchaser may elect to extend the settlement date for six months (‘the first extension’) in which case interest shall be payable on the balance [sic] purchase price of $4,725,000 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 rezoning 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 at 6%, payable monthly in arrears. If the rezoning to residential is not gazetted by the end of the second extension period, the Purchaser may decide to terminate the contract.”
12 By letter dated 21 December 2007, the Vendor’s solicitors, Karavias & Associates, advised the Agent that settlement was due on 7 December 2008 and requested that the deposit be sent as soon as possible to be held under the stakeholder provisions of the Sale of Land Act 1962 (Vic).[1]
[1]See Sale of Land Act 1962 (Vic) s24
13 Together with a covering letter dated 4 January 2008, the Agent sent to the Vendor’s solicitors a trust account cheque in the sum of $50,000. The letter included the following statement:
“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.”
14 By letter dated 16 January 2008 from Leon Mancini, Managing Director of the Agent, to the Vendor’s solicitors, Mancini enclosed a cheque of $25,000 to be held in accordance with the stakeholder provisions of the Sale of Land Act until Anbero signed the section 27 statement. Mancini retained the other $25,000 in his trust account pursuant to the letter dated 27 November 2007. The letter also stated:
“Please advise our office immediately the purchaser has signed the s27 statement in order that we are released from our stakeholding 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.”
15 On 23 January 2008, Karavias & Associates issued a trust account receipt for the $25,000.
16 By rescission notice dated 3 July 2008, the Vendor advised Anbero 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.
17 On 4 July 2008, Anbero produced a cheque for the unpaid deposit monies.
18 On 15 August 2008, the Vendor’s solicitors confirmed to Anbero’s solicitors that, at settlement, it would lend Anbero $250,000 on certain conditions to assist the purchaser with the environmental remediation works. The loan was to be repaid from the profits at the completion of the project or at the expiration or two years, whichever was earlier.
19 On 21 August 2008, Anbero’s solicitors confirmed to the Vendor’s solicitors that the deposit could be released upon the basis of the loan agreement set out in a letter passing between the solicitors dated 18 August 2008.
20 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.”
21 By letter dated 2 December 2008, Anbero elected to extend the settlement date pursuant to special condition 8 of the contract note.
22 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.
23 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.
24 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. I note that the form contained the typed year “2010”, which had been struck out and replaced by hand with “2009” and the initials “AP” were written nearby. This fact raised some concerns about the propriety and effect of the nomination form. However, it seemed accepted by the parties that because the form was not received by the Vendor until after Anbero had gone into liquidation, the form was of no legal effect.
25 By letter dated 10 March 2010, Anbero’s solicitors contended that the Contract of Sale was still on foot and the nomination was valid. The Vendor’s solicitors replied by letter dated 19 March 2010, disagreeing with Anbero’s position.
26 On 22 March 2010, Wright Street Developments Pty Ltd commenced a proceeding in the Supreme Court of Victoria to assert its alleged rights in respect of the property. However, it discontinued the proceeding on 14 April 2010.
27 On 31 March 2010, the Vendor sent Anbero another notice of rescission for failing to pay the balance of purchase monies of $5,225,000 and failing to pay an extra sum of $150,000, which the parties had agreed, pursuant to a letter dated 18 December 2009, would be paid at settlement.
28 On 28 April 2010, the Vendor terminated the Authority of the Agent to act on its behalf in respect of the property. The Vendor later sold the property to a third party.
Pleadings
29 By its Amended Statement of Claim filed by leave granted on 29 January 2014, the Agent alleged the engagement was varied such that:
“5.1Upon a sale of the property as aforesaid to Anbero to the sum of $5,500,000 inclusive of GST payable in 12 months, alternatively 18 months, alternatively 24 months, the defendant would pay the plaintiff commission in the sum of $250,000;
5.2$25,000 of such sum would be paid immediately upon execution by the purchaser of a s27 statement releasing the deposit paid; and
5.3$225,000 being the balance of commission would be paid 12 months after the date of any Contract of Sale of the property to Anbero.”
30 In its particulars, the Agent said that the variation was partly oral and partly written. Insofar as it was written, it was contained in or evidenced by the Amended Authority, dated 27 November 2007, executed by or on behalf of both parties.
31 Insofar as it was oral, the variation comprised a number of conversations between Eric Mancini, on behalf of the Agent, and Jim Ververis, on behalf of the Vendor, between 20 October 2007 and 27 November 2007. The conversations were said to have occurred at Eric’s office, Ververis’s home and Crown Casino.
32 The Agent alleged the substance of the conversations involved the following sequence of events:
· Eric told Ververis he had a purchaser who was prepared to pay $5,500,000 inclusive of GST for the property. He said that this purchaser wanted the Vendor to contribute towards the cost of an environmental assessment report on the property.
· Ververis told Eric he was reluctant to agree to that. Subsequently, Ververis told Eric that the Vendor would pay half the cost of the environmental assessment report if the Agent also made a contribution by reducing the commission otherwise payable on the transaction.
· Ververis and Eric agreed on new terms whereby the Agent would receive a reduced commission of $250,000, of which $25,000 would be paid from the purchaser’s deposit upon execution of a section 27 statement and payment of the balance of commission would be deferred.
· Eric advised Ververis that although the purchaser intended to settle the transaction within 12 months, settlement would actually depend upon the special conditions in the proposed contract which enabled the purchaser to extend the settlement date by two further periods of six months.
· Eric told Ververis that the Agent was prepared to wait for up to 12 months from the date of contract for payment of the balance of commission of $225,000, but the commission had to be paid at that time even if settlement had not occurred.
33 The Agent alleged that Ververis agreed to a deferral of the commission payment on the basis of discussions between Eric and Ververis. The Agent further alleged that at no time during the discussions did Eric and Ververis discuss – much less agree – that payment of the balance of commission was conditional upon settlement of the conveyance.
34 The Vendor denied the Agent’s version of events. The Vendor said the variation agreement was wholly written and was faithfully reproduced in the Amended Authority.
Issues
35 As previously stated, the main issue in this case is whether the variation merely delayed the timing of the payment of commission to the Agent, or created a new condition whereby commission was payable only in the event of a settlement of the sale transaction. The questions which arise from this are:
(a) What was the agreed variation to the Authority?
(b)Was the variation wholly written or partly written and partly oral?
(c)As a matter of construction, was the Agent entitled to the commission pursuant to general condition 2 of the Authority as amended?
(d)Is it appropriate to rectify the Amended Authority?
(a) What was the agreed variation?
36 The terms of the amended Authority are set out in the document referred to at paragraph 8 above. In identifying the agreed variation, it is necessary to examine the evidence given by the witnesses for the plaintiff and for the defendant at trial.
(i) Leon Mancini
37 Leon Mancini, although managing director of the Agent, did not claim to have any involvement in agreeing a variation of the Authority with Ververis. Leon said that he could not recall any discussions with Ververis between 20 October and 27 November 2007. To that extent, he had no involvement whatever in the variation agreed.
38 Leon said that he could not recall a meeting or conversation with Ververis at the Agent’s office in Altona, at which Ververis alleged that he only wanted to pay commission upon settlement because he did not wish to be out of pocket on the transaction.
39 Leon said he agreed to the change in the terms of the Authority regarding the commission (that is, the payment of $25,000 immediately upon the signing of the section 27 document and deferral of the balance) in light of the relationship between Eric and Peluso. According to Leon, the hope was that if the sale transaction on the property were successful, Peluso would again retain the Agency for sales resulting from the redevelopment of the property. Leon expected that there would be about 100 lots to be sold. According to Leon, Eric helped convince him that it was good for the Agent to accept the engagement on the revised terms proposed by Peluso which were different from those in the Authority.
40 Leon’s expectations regarding the possibility of future agency opportunities with Peluso were soundly based. Eric had already worked closely with Peluso on the Willingara Estate. Peluso had purchased a number of lots in the subdivision, created house and land packages and retailed them on the market. As a result, Eric had bought and sold 10−15 properties per month for Peluso over a period of two years. Eric had also sold land for Peluso elsewhere. There was considerable incentive for the Agent to successfully achieve a sale of the property to Peluso’s company.
41 Leon appreciated that, due to the terms of the proposed contract with the Vendor, and in particular the special conditions, the settlement of the sale could take place at any time within two years from the date of contract. The settlement depended on various matters, the existence of which could not be assured prior to the time of signing the contract of sale. Depending upon the need for, and extent of, remediation required to obtain the appropriate approvals for residential usage, it was possible that the sale transaction would never be completed.
42 Leon agreed that he played a role in the production of the amended Authority. Because English was not Leon’s first language, and because he wanted the agreement to be in proper English, he engaged a local solicitor whom he had previously used, Peter Hutchins (“Hutchins”), to draft the Amended Authority document. Leon’s role in the process was to relay to Hutchins the new terms of agreement which Eric had explained to him.
(ii) Eric Mancini
43 Eric Mancini said that after he became aware that the Agent had the Authority for the property in 2007, he contacted Peluso in November to introduce him to the project. Having done this, Eric took him to the site, sent him information and, after many meetings, obtained an offer from Peluso to put to the Vendor. The offer (set out in paragraph 6 above) was subject to various conditions relating to contamination issues and an environmental audit report. Two reports in particular were required so the site could be rezoned for future development.
44 Eric said that between 20 October 2007 and 27 November 2007 (that is, between the dates of the Agent obtaining the Authority and the Authority being varied), he had four or five discussions with Ververis concerning, amongst other things, the relationship between the Agent and the Vendor. Eric’s evidence about the meetings was at times confusing and unclear. Although he said the meetings took place at the office of the Agent, Ververis’s home and Crown Casino, he could not recall the substance of the discussions on each occasion. At one point, he said that the theme was that once the Agent sold the property, it would get paid 12 months after the sale had taken place. The only persons alleged to have been present at these meetings were Eric and Ververis.
45 Eric explained Peluso’s request that the Vendor contribute to the cost of the environmental assessment report or audit report. Initially, Ververis was unwilling to do this. According to Eric, Ververis subsequently said he would bear half the cost of the reports provided the Agent reduced its commission. Eric said that, after speaking to the Vendor and to Peluso, the Agent agreed to contribute to the cost by reducing its commission to $250,000.
46 The upshot to the reduction in commission was that the Agent was to receive a payment of $25,000 upon execution of the section 27 statement and the balance of outstanding commission was to be paid 12 months from the date of signing the contract. Eric said that when he stipulated in the conversations with Ververis that the balance of commission was to be deferred 12 months from signing the contract of sale, there was no response from Ververis. I find this to be inconsistent with the Agent’s case that Ververis agreed to paying the balance of commission on 7 December 2008 whether or not the transaction settled.
47 Eric said that Ververis asked him to produce a letter which Hutchins subsequently drafted for the Agent. Eric said that Ververis did not ask for this in one of the four or five conversations which took place before 27 November 2007, although it was in conversation approximately a week before that date that Ververis asked for the letter. Initially, Eric said that he could not recall the exact conversation in which Ververis had asked for the letter which became the amended authority. He then said that Ververis wanted something in writing about the payment of the holding deposit. Eric said that while all the discussion regarding commission took place before 27 November 2007, the letter did “not necessarily” record the agreement regarding commission. Eric said the document reflected the agreement that the Agent would receive $25,000 and Ververis would receive the balance of $25,000 from the deposit. This statement does not appear to be borne out by the evidence.
48 Eric stated that he never had any direct conversation with Hutchins about the letter. Eric received the letter from his father. He said that he signed it and took it to the Vendor, and that Ververis at first refused to sign the letter because of an objection to the last paragraph of the letter. Eric understood why Ververis did not want to sign the letter, and acknowledged that the paragraph in question was not part of the agreement which the two of them had previously made.
49 Notwithstanding Eric’s comments about the Amended Authority, the document says nothing about the Vendor receiving half the deposit moneys, and does not refer to the Agent being paid the outstanding balance of commission within 12 months of the contract note or the due date for settlement.
(iii) Jim Ververis
50 Jim Ververis, as director of the defendant company, gave evidence that he and his wife, as co-director, signed the Authority dated 20 October 2007. There were handwritten amendments made to the document at the time of signing because Ververis wanted express reference to GST as a tax additional to the “raw” sale price.
51 Ververis had another discussion with Leon Mancini about three or four weeks after signing the Authority. Leon told him that he had a potential buyer for the property at $5 million, and that the Agent had a cheque for $50,000 towards the purchase price. Ververis attended at the Agent’s office in Pier Street, Altona.
52 Ververis said that the $50,000 deposit “sent [him] alarm bells”. He said the only basis on which he would accept the proposal was if he and the Agent each received $25,000 and the balance of the commission was paid when he received the balance of the sale monies at settlement. According to Ververis, Leon agreed to that.
53 Ververis said that his wife signed the Amended Authority document and that the document reflected his understanding of the agreement made with the Agent regarding commission.
54 Ververis denied that the Agent was required to reduce its commission for the transaction to proceed. He agreed that he accepted Peluso’s request that the Vendor contribute towards the costs of an environmental assessment report for the land. Ververis agreed that the Vendor would pay half the costs but that the Vendor’s contribution would not exceed $50,000. He denied that the Vendor agreed to pay half the costs only if the Agent contributed by reducing its commission. Ververis pointed out that the $250,000 commission was consistent with the terms of the initial Authority in respect of a purchase price of $5 million.
55 Ververis denied ever agreeing to a proposal whereby the Agent was to receive the balance of commission 12 months after the date of the contact of sale irrespective of whether or not settlement had taken place. Ververis says that the agreement about the payment of commission was made with Leon rather than Eric. According to Ververis, the agreement regarding commission was influenced by the fact that this was the third time the Vendor had attempted to sell the property. He said on the first occasion there had been a fraudulent buyer. On the second aborted sale, the plaintiff had been agent for the sale of the property. Notwithstanding that the sale never completed, the Agent retained $100,000 as commission. Ververis was anxious not to suffer another experience whereby, absent any actual settlement, he paid a very substantial amount in commission to the Agent.
(iv) The Court’s view
56 Having considered the evidence and seen the witnesses give their testimony, I have concluded that the Authority was varied in such a manner that:
·the Agent and Vendor would each receive $25,000 from the $50,000 paid by Anbero. The Agent’s share represented part payment of commission. The Vendor’s share was part payment of the purchase price; and
·the Agent would receive the balance of the commission only when the sale of the property settled and the Vendor received the remainder of the purchase price.
As is apparent from these findings, I prefer the evidence of the Vendor to that of the Agent regarding the variation of the Authority. This is so for a number of reasons.
57 Firstly, I found Ververis’s evidence more credible. Ververis was forthright and direct. By comparison, Eric’s evidence was at times confusing and unimpressive. For example:
·Eric’s account of the four or five meetings he claimed to have had with Ververis between 20 October and 27 November was disjointed and unclear. He was not able to describe the events in an orderly, sequential (much less, detailed) manner.
·Having said in his evidence that Ververis signed the Amended Authority, Eric later admitted he could not recall where the document was signed or whether it was signed by Ververis or his wife. Both Ververis and his wife said that she signed the Amended Authority for the vendor.
·Eric failed to explain precisely what varied agreement he reached with Jim Ververis, its relationship with the Amended Authority document, in what way the Amended Authority differed from the agreement made or why the Amended Authority did not record what Eric said it purported to record. [2]
[2]See para 50 above
58 Eric appeared to lack a sound grasp of the narrative he wanted to communicate other than his insistence that the Agent was to receive the balance of the commission 12 months after the date of contract, whether or not the transaction settled.
59 Leon’s evidence about the Amended Authority was hampered by the fact that he was reliant upon what Eric told him because he had little or no direct contact with Ververis or Peluso, and therefore lacked first hand knowledge. Further, he could not recall any meeting or discussion with Ververis before 27 November 2007 where it was alleged they discussed the payment of commission on the new contract terms proposed by Peluso.
60 More generally, I have concerns about Leon’s evidence. A critical aspect of his examination-in-chief was devoted to what Eric told him of his discussions with Peluso and Ververis. Leon had difficulty giving an orderly and sequential account of the matter. For example, notwithstanding that he is Eric’s father and they have worked together in the business for 15 years, he could not identify Eric’s handwritten additions to the special conditions on the contract note. Nor did Leon have any contemporaneous documents to support his testimony.
61 Secondly, in the context and having regard to the history of the costly failed attempts to sell the property in 2004 and 2006, 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 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.
62 While the Agent sought to make something of the fact that the conditional nature of the payment could have been set out in the original Authority, I accept that Ververis was significantly affected by the proposed new terms of Peluso’s offer whereby the initial deposit was about one per cent of the purchase price and there were various special conditions which meant the transaction might never settle. These terms were notably different from those in the original Authority signed by the Vendor.
63 Thirdly, the Agent could not, in my view, satisfactorily explain why, if the $225,000 were to be paid on 7 December 2008 regardless of whether or not the conveyance settled, there was no demand for payment of the commission until March 2012. Where the Agent’s case is that the Vendor agreed to pay the balance at that time, one would have expected either a request or demand well before March 2012 or, alternatively, a persuasive explanation for the delay. The Agent provided neither.
64 According to Ververis, he had a conversation with Leon Mancini in around 2011 after he had sold the property. Ververis gave Leon the mobile phone number of the developer so that he could approach the developer for work. At that time, Leon made no mention that the Vendor owed money to the Agent. Nor did Eric speak to, or otherwise contact, the Vendor about monies which were said to be owing to the Agent.
65 Fourthly, after the parties executed the contract of sale, the Agent wrote[3] three letters to the Vendor which made a reference to commission. By letter dated 4 January 2008, Leon Mancini wrote:
[3]But it did not send 4/1/08
“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”.
By letter dated 16 January 2008, Leon Mancini wrote:
“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”.
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”.
66 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 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.
67 Fifthly, it is clear from a comparison of the initial Authority, and the terms of the contract of sale actually entered into, that the two sets of terms are significantly different. In my view, it is equally clear that the Agent had considerable incentive to achieve a sale, on whatever terms it could, to Peluso’s company. Given the relationship between the Agent and Peluso, the Agent was well justified in believing that if Peluso were the successful purchaser, then he would engage the Agent as his real estate agent for the sale of the redeveloped property after he had completed the subdivision. Indeed, Leon Mancini said they were expecting there to be 100 or more lots in the subdivision. For that reason, if Ververis said he was content for the Agent to receive $25,000 out of the deposit but the balance of the commission would only be payable at or upon settlement, it is reasonable to believe that Leon Mancini would have agreed to such a stipulation because it protected the Agent’s future relationship with Peluso. If, as Leon noted in his evidence, the choice was to take the work – albeit on different terms from originally proposed – or reject it, he chose to accept the engagement from the Vendor.
68 Sixthly, neither Leon nor Eric Mancini on behalf of the Agent provided any sensible explanation about what constituted the agreement over and above the terms referred to in the Amended Authority document. I find there was no compelling evidence which set out the balance of any agreement said to have been reached between the Agent and Ververis.
69 Again, the fact that Eric and Ververis’ wife struck out clause 5.3 of the General Conditions in the Amended Authority, because it did not represent what was agreed between Eric and Ververis, supports the Vendor’s position that the Amended Authority embodied the agreement between the parties (and excluded that which was not part of the agreement).
(b) Was the variation wholly written or partly written and partly oral?
70 For reasons stated above, I am satisfied that the variation agreed to by the parties was wholly written and embodied in the Amended Authority.
(c)As a matter of construction, was the Agent entitled to the commission pursuant to General Condition 2 of the Authority as amended?
71 The Agent contended that it was entitled to be paid the balance of the $250,000 commission because it introduced Anbero to the Vendor and Anbero contracted to buy the property for $5.5 million. The Agent submitted the entitlement to commission arose from item 1 of the “Notices & Disclosures” in the Authority (as referred to in paragraph 4, above). The Agent argued that either there was a “Sale” of the property (as defined in the Authority) or the Agent was the effective cause of the sale by the Vendor.
72 The Vendor denied the Agent had any entitlement to commission under the Authority, whether before or after the variation. The Vendor’s position was that there was no “Sale” of the property. Nor was the Agent the effective cause of any alleged sale of the property.
73 Because I have found that the Authority was varied wholly in writing and that, as a result, the Agent’s entitlement to commission was to be found only in the Amended Authority document, it is perhaps not strictly necessary to determine this point. However, if I am wrong about that, then I should express my views on this argument.
74 “Sale” is defined in General Condition 1.16 of the Authority as follows:
“‘Sale’ is the result of obtaining a Binding Offer and ‘sell’ and ‘sold’ have corresponding meanings in the same situations.”
75 In order to have a “Binding Offer” (as defined in clause 1.4 of the general conditions of the Authority and as set out in paragraph 3 above), the Agent must obtain an offer on the terms set out in the Particulars of Appointment which would, or did, result in a contract enforceable against the purchaser.
76 The terms of the Authority included a requirement by the Vendor that the asking price was $5.5 million plus GST payable in 180 days. However, the contract note actually entered into in relation to the property provided that the purchase price was $5.5 million including GST. The price was payable by a deposit of $275,000 due by 20 March 2008 (of which $50,000 had already been paid at the time of execution of the Authority) and the balance of $5,225,000 plus any GST was to be paid on 7 December 2008, or earlier by agreement.
77 Further:
·the contract note had special conditions which made the sale conditional upon satisfactory environmental reports and rezoning of the property;
·the deposit was not the usual 10 per cent, but substantially less; and
·the buyer wanted the vendor to contribute to the cost of the reports and any land remediation which was required.
78 To the extent that the Authority contained terms different from the proposed offer, the Vendor had an option about whether or not to sell the property on the new terms sought by the Purchaser. Unless and until the Vendor decided to accept the offer, he was not obliged to pay any commission on the terms of the offer procured by the Agent. Even had the terms been binding on the buyer, an offer on those terms created no obligation upon the Vendor under the Authority to pay commission to the Agent.
79 In short, there was no “Binding Offer”, as defined in the Authority, which could lead to a “Sale”.
80 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).
81 Here, the contracting buyer did not produce the purchase price and there was no transfer of ownership of the property from the Vendor to Anbero. Anbero never produced the purchase price, but went into liquidation. The contract was terminated and the Vendor sold the property to another buyer. In the circumstances, there was no obligation upon the Vendor to pay the balance of the commission to the Agent.
(d) Is it appropriate to rectify the Amended Authority?
82 It is not strictly necessary to deal with this issue having regard to my other findings. However, it was argued at some length so I set out my views on the matter.
83 The Agent argued, in the alternative, that the court has power to rectify the Amended Authority so as to give effect to the parties’ true agreement or common intention, namely, that the $225,000 balance of commission would be paid 12 months after the date of the contract note, irrespective of whether or not settlement occurred. The Agent argued that the parties signed the Amended Authority, mistakenly believing that it embodied their agreement.
84 The Vendor contends that there is no basis for rectifying the document embodying the variation, primarily because it was an accurate statement of the agreement reached between the parties.
85 A document can be rectified for common mistake in two circumstances:
(a)where a prior agreement is reached and the parties then erroneously record that agreement in a written document; or
(b)where the parties have formed a common intention not amounting to a concluded bargain and they have then drawn up a contract to give effect to that intention, but it fails to do so because of some slip.[4]
So long as there is a continuing common intention of the parties, it seems it is not necessary to show that the accord found outward expression.[5]
[4]N Seddon, R Bigwood, and M Ellinghaus, Cheshire and Fifoot Law of Contract (LexisNexis Butterworths, 10th ed, 2012) at [12.30]
[5]See Pukallus v Cameron (1982) 180 CLR 447 at 452
86 A party seeking rectification needs to advance convincing proof that the written contract does not embody the final intention of the parties. The omitted ingredient must be capable of such proof in clear and precise terms.[6]
[6]See, eg, Jocelyne v Nissen [1970] 2 QB 86 at 98; Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54 at 64; Slee v Warke (1949) 86 CLR 271 at 281; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349. These authorities were referred to in Pukallus v Cameron (1982) 180 CLR 447 at 452.
87 Because evidence of the parties’ intention of prior agreement must be admissible, the plea for rectification constitutes an exception to the parol evidence rule.[7]
[7]Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at [269]–[272]
88 In NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd,[8] Clarke J, when addressing an argument for rectification of a written document, said:
“It seems to me to follow that the search for the subjective intention should not be circumscribed by reference to rules of evidence which are concerned only with the construction of written contracts. For instance, I see no reason why a party should not be able to say what he intended to convey by the written document.
There is authority for the proposition that a party can say that the document is consistent with his intention: Snell's Principles of Equity, 28th ed (1982) at 612; Fowler v Fowler (1859) 4 De G & J 250 at 273; 45 ER 97 at 107. If that evidence is receivable then the contrary (ie that the party's intention was not reflected in the document) should also be admissible. Similarly it seems to me that facts, whether pre or post contractual, from which an inference can be drawn that a party had, or the parties had, at the time of entering into the transaction, a particular intention should be received.”[9]
[8](1986) 6 NSWLR 740
[9]Ibid at 752
89 This approach was endorsed by the Court of Appeal in Ryledar Pty Ltd v Euphoric Pty Ltd.[10] There, Tobias JA (with whom Mason P agreed) said:
[10](2007) 69 NSWLR 603
“179.Thus in The Principles of Equity, 2nd ed (2003) Sydney, Lawbook Co, edited by Professor Parkinson, Mr David Wright in his chapter on rectification refers (at 977) with approval to Bromley’s suggestion that there is no need for an outward (or objective) expression of intention and that the relevant consideration is the subjective intention of the parties given that the ancient equitable remedy of rectification is an application of the maxim that “equity looks to the intent, rather than to the form”. The lack of any need to establish some outward expression of accord was confirmed by Clarke J in the NSW Medical Defence Union case and by Gummow J in Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 253–254; Spry, The Principles of Equitable Remedies, 6th ed (2001), at 611. Therefore, it is the need to establish the subjective common intention of the parties which is critical, especially where the parties’ dealings prior to the execution of the instrument sought to be rectified are inconclusive.
…
182. It follows from the foregoing that first, the common intention which must be established by clear and convincing proof to justify rectification must be the actual or true common intention of the parties. Second, evidence of that intention may be ascertained not only from the external or outward expressions of the parties manifested by their objective words or conduct but also from evidence of their subjective states of mind.
…
186. Sixth, where as in the present case, the outward expression of the parties’ common intention is at best inconclusive, then establishing that the subjective states of mind of the parties evinces the relevant common intention becomes critical if the necessary standard of proof to support an order for rectification is to be achieved.”
90 Campbell JA (with whom Mason P also agreed) said:
“267. By contrast, the type of intention that is relevant to rectification of a contract is the subjective intention — sometimes called the actual intention — of the parties.
268. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 346, Mason J said:
“The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual agreement. A term which should have been included has been omitted. The difference is that with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. Rectification ensures that the contract gives effect to the parties’ actual intention; the implication of a term is designed to give effect to the parties’ presumed intention.” (Emphasis added)
269. One way in which it can be seen that it is subjective intention that matters for rectification, concerns the evidence admissible in a rectification suit. Notwithstanding that the contract that it is sought to rectify is in writing, and notwithstanding the common law rule that parol evidence is not admissible to contradict a written agreement, parol evidence is receivable, in an action seeking rectification, to establish what was the intention of each of the parties to the contract: Ball v Storie (1823) 1 Sim & St 210 at 219; 57 ER 84 at 88; NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740 at 751, 752; Farrow Mortgage Services Pty Ltd (In Liq) v Slade and Nelson (1996) 38 NSWLR 636 at 642; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (at 332) per Mahoney AP; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 164 [27]; Green v AMP Life Ltd (2005) 13 ANZ Insurance Cases 90–124 (86,632) at 86,665 [172].
270. It is also possible to have evidence from the draftsperson of the document stating what his or her instructions were, and that particular words were included in the document by mistake: Mortimer v Shortall (1842) 2 Dr & War 363 at 370, per Sir Edward Sugden.
271. Lord Hardwicke explained why parol evidence was admissible in this way in Baker v Paine (1750)1 Ves Sen 456 at 457; 27 ER 1140 at 1141: “How can a mistake in an agreement, be proved but by parol evidence? It is not read to contradict the face of the agreement which the court would not allow, but to prove a mistake therein, which cannot otherwise be proved …”.
272. Not only is parol evidence from the parties admissible to prove their intention, it is of considerable importance. In Fowler v Fowler (1859) 4 De G & J 250 at 273; 45 ER 97 at 106–107, Lord Chelmsford LC said:
“Upon the question of rectifying a deed, the denial of one of the parties, that it is contrary to his intention, ought to have considerable weight. Lord Thurlow, in Irnham v Child (1 Bro C C 93) says, ‘The difficulty of proving that there has been a mistake in a deed is so great, that there is no instance of its prevailing against a party insisting that there was no mistake.’ And Lord Eldon, in Marquis of Townshend v Stangroom (6 Ves 334), after observing that Lord Thurlow seemed to say that the proof must satisfy the Court what was the concurrent intention of all the parties, adds, ‘And it must never be forgotten to what extent the Defendant, one of the parties, admits or denies the intention.’”
91 On the basis of these authorities, I am entitled to take account of the evidence given regarding the subjective intention of the contracting parties.
92 Ververis said that when he read the Amended Authority signed by his wife and the Agent, he thought that it reflected the verbal agreement he had already reached.
93 In circumstances where I accept the evidence of the Vendor regarding the Amended Authority and the agreement made with the Agent about the payment of commission, the Agent would not satisfy me that the Amended Authority document does not reflect their common intention.
94 The party seeking rectification must produce clear and compelling evidence of how it is that the document does not accurately embody the agreement made. The Agent has failed to do this. There was no evidence of an agreement or common intention that the Vendor pay the balance of commission to the Agent on 7 December 2008, whether or not settlement had taken place.
95 Moreover, in my view, the fact that the Agent’s solicitor produced the Amended Authority document after conferring with the Agent’s Managing Director, makes it less likely that the document failed to accurately set out the gist of the instructions given about the agreement. The document, in my view, is not ambiguous. Even if it were, the Vendor could properly invoke the contra proferentem principle. This principle is not limited to contracts of insurance or guarantees but is of more general application.
96 The Vendor invited the court to draw a Jones v Dunkel[11] inference against the Agent for not calling Hutchins, the solicitor who drew the Amended Authority for Leon Mancini. The Vendor argued that the Court should infer that Hutchins’ evidence would not assist the Agent and he would say that the terms regarding payment of the commission were drawn in accordance with instructions given to him. He may well have had file notes or other documents to support this position. Although the Agent did not respond to this argument, I note that generally the Jones v Dunkel rule does not apply where the witness not called is the party’s solicitor, at least where the evidence not given is subject to legal professional privilege and the privilege has not been waived.[12] Leon Mancini gave some general evidence about what he told Hutchins. However, the detail was such, especially as it did not refer expressly to what Hutchins told Mancini, that I do not treat the Agent as having waived privilege. For this reason I draw no Jones v Dunkel inference against the Agent on this point.
[11](1959) 101 CLR 298
[12]J D Heydon, Cross on Evidence (LexisNexis Butterworths, 9th ed, 2012) para 1215
97 Further, insofar as the parties seeking rectification must produce clear and compelling evidence of the mistake, the conduct of the Agent was more consistent with the position put by the Vendor than it was supportive of the Agent’s own position. In the circumstances of this case, it was not unjust or harsh to hold the Agent to the agreement regarding commission embodied in the 27 November 2007 document.[13]
[13]See Slee v Warke (1949) 86 CLR 271 at 277-281
(e) Estoppel
98 As a fallback, the Vendor raised the defence of estoppel against the Agent. It was said that the Agent, by preparing and presenting the 27 November 2007 document to the Vendor for signature, represented that the document constituted the agreed variation of the commission arrangements made between the parties. The Vendor says that it acted to its detriment by executing the letter and agreeing to be bound by it.
99 The Vendor gave evidence that if the Agent had not agreed to make the payment of the balance of commission conditional upon a successfully completed settlement, then he would not have agreed to and signed the contract note with Anbero in the terms which he did.
100 The Agent denies that the Vendor relied upon any assumption or expectation embodied or created by the letter and said that the Vendor did not act to its detriment.
101 Having regard to my other findings in this matter, it is not necessary for me to determine this issue and I refrain from doing so.
Conclusion
102 Subject to hearing from the parties regarding the final form of orders, I propose to make the following orders:
(a) The plaintiff’s claim is dismissed.
(b)The plaintiff pay the defendant’s costs of the proceeding, including reserved costs, to be taxed in default of agreement.
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