Maestri Tower Investment Group Pty Ltd v Al Maha Pty Limited

[2019] NSWDC 92

District Court

New South Wales

Medium Neutral Citation:	Maestri Tower Investment Group Pty Ltd v Al Maha Pty Limited [2019] NSWDC 92
Hearing dates:	27, 28 February; 1 and 4 March 2019
Date of orders:	05 March 2019
Decision date:	05 March 2019
Jurisdiction:	Civil
Before:	P Taylor SC DCJ
Decision:	(1)   Judgment for the plaintiff in the sum of $121,517.68. (2)   Defendant to pay the plaintiff’s costs. (3)   Parties to notify my associate within seven days of any further argument concerning costs.
Catchwords:	CONTRACT – real estate commissions – bonus commission – construction – unconscionable conduct – expert valuation – need for reasoning to be exposed – market value – sale below market value – sale under pressure – sales to closely associated persons – relevance of statutory obligations PLEADINGS – whether allegations sufficiently pleaded
Legislation Cited:	Australian Consumer Law, s 20, s 21 Property, Stock and Business Agents Act 2002, s 47, s 48, s 49, s 55, s 55A
Cases Cited:	Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174 Briginshaw v Briginshaw (1938) 60 CLR 336 Buildev Development Pty Ltd v PIC Sales Pty Ltd (2004) 11 BPR 21,445 CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121 Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 Electricity Generation Corp v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp (2014) 251 CLR 640 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 Taouk v Assure (NSW) Pty Ltd [2017] NSWCA 227
Texts Cited:	N C Seddon & R A Bigwood, Cheshire & Fifoot Law of Contract (11th Aust. Ed, 2017, Lexisnexis Butterworths Australia)
Category:	Principal judgment
Parties:	Maestri Tower Investment Group Pty Ltd ACN 150 312 664 – plaintiff Al Maha Pty Limited ACN 118 230 087 - defendant
Representation:	Counsel: Mr A Macauley – plaintiff Mr M Sahade - defendant   Solicitors: Du & Associates Lawyers – plaintiff Diamond Conway - defendant
File Number(s):	2017/298294
Publication restriction:	None

Judgment

A. Introduction

1. Maestri Tower Investment Group Pty Ltd is a real estate agent which acted for Al Maha Pty Limited in relation to the off-the-plan sales of certain units in an Al Maha development in Newtown. Maestri Tower sues for alleged unpaid commissions.

B. Background

2. Maestri Tower and Al Maha entered two written open agency agreements in March and May 2014 respectively. The first provided for commission of 3.3% inclusive of GST; the second for 4.4%. Pursuant to these agreements, 34 units were sold by Maestri Tower resulting in alleged commission of $853,157, of which $630,000 has been paid. Of the remaining $223,157, Maestri Tower abandoned its claim for commission in respect of a unit sold to the father of Xiaotian Yang, a director of Maestri Tower, leaving an amount alleged to be owing of $194,197. This amount comprises $100,947 for commissions payable under the two written agreements, and $93,250 for "surplus commissions".

3. Maestri Tower's claim for surplus commissions relates to the sale of two units where amounts of $19,000 and $74,250 respectively are claimed as extra commission.

4. The first surplus commission arises from the sale of Lot 69. In about late May 2014 Antoine Bechara, a director of Al Maha, had a conversation with Mr Yang as follows:

“Mr Yang:	‘[Maestri Tower] is going to have a stand in the Australia Property Exhibition in Shanghai soon. We can sell your apartments there.’
Mr Bechara:	‘I don’t know how much you can sell there, but I can give you an incentive if you do sell more.’
Mr Yang:	‘Give me some surplus commission if I sell the units over your retail price so that it can cover my costs for the exhibition.’
Mr Bechara:	‘No problem.’”[1]

1. See affidavit of Xiaotian Yang, 9/3/18 at [15].

5. While at the exhibition in Shanghai, Mr Yang telephoned Mr Bechara and the following conversation occurred:

“Mr Yang:	‘Things are going well, I have sold some units for you. Can I get paid 100% of the surplus commission for whatever amount we sell the unit for on top of your retail sale price? I have a buyer for [Lot 69] who I think I can sell at a rate higher than your retail price. Can my company get the difference?’
Mr Bechara:	‘How much are they willing to buy it for?’
Mr Yang:	‘$699,000 or $700,000. Your original price is $680,000. So we will get paid 4.4% of $680,000 plus another $19,000 or $20,000. OK?’
Mr Bechara:	‘Yes no problem.’”[2]

2. Affidavit of Xiaotian Yang, 9/3/18 at [17].

6. Mr Yang then sent an email to Belle Lee of Al Maha, which stated:

“Dear Belle

Please see agency agreement for May as we all agreed:

1. 4.4% commission will be paid from this month

2. 2.2% will be paid on exchange

3. If we sell more than vendor price, the surplus will be paid on settlement as commission

Regards

Andy”. [3]

3. Affidavit of Xiaotian Yang, 9/3/18, Annexure F.

7. Ms Lee responded by email on 26 May 2014, agreeing to items 1 and 2 and in respect of item 3 stating:

“The surplus commission is on case to case basis, please check with us before you go ahead with any sales. [Lot 69] is the only unit currently have the surplus to be paid to you if the purchasers are going ahead.” [4]

4. Affidavit of Xiaotian Yang, 9/3/18, Annexure G, errors in original.

8. The evidence indicates that Lot 69 was sold for $699,000 two years later, on 20 July 2016. Soon thereafter, the contract was rescinded by the purchaser and a new purchaser bought Lot 69 through Maestri Tower for the same price of $699,000. The circumstances of the initial sale (presumably an exchange of contracts), the rescission, and the new purchase were not otherwise explained in the evidence, although an illegible document purportedly referring to the sale of Lot 69 was in evidence. [5]

   5. Affidavit of Xiaotian Yang, 9/3/18 at [23] and Annexure H.

9. Maestri Tower claims $19,000 "surplus commission" on the final sale.

10. The second surplus commission claimed arises from the sale of Lot 185. In about November 2014 Mr Bechara and Mr Yang had a conversation as follows:

“Mr Bechara:	‘We need to get construction funding, we need to sell more properties. We need 5 more presales to achieve our construction loan target with NAB. Can you help me?’
Mr Yang:	‘I can help you with that. I can find 5 buyers to help you get your funding. But those people may need to have the right to rescind their contract later. But that’s ok, because once you get your funding, and if those people rescind their contract, we can find other buyers to take their place. The main thing is I want 100% of the commission surplus like the previous agreement for [Lot 69].’
Mr Bechara:	‘You can get the surplus.’”[6]
“Mr Yang:	‘The commission surplus is payable on top of the normal 4.4% commission because I need to use some of the surplus funds to pay the commission to my staff for the resale, plus I need to pay the original sales staff the commission on the original sale’
Mr Bechara:	‘Yes, I agree. It's all well and good that you think you can get buyers in the future to take over the contract, but you know your buyers won't be able to rescind the contract unless you find another buyer to replace them, right? Otherwise I will end up with 5 apartments that won't get sold which is very dangerous for my development and my funding and I will not allow that to happen’
Mr Yang:	‘Yes, sure, just make sure the price you give me is a good price for these buyers, but make sure it’s a price you can live with in case I don't find another buyer to replace them. Maybe I will take one of the apartments, or get someone from my family to buy it, so I will only need to find another four buyers for you after that. But make sure I get the surplus commission if I do find another buyer at a higher price.’
Mr Bechara:	‘Ok. These buyers can purchase from a pool of unsold units. Most of them are on the ground floor and I haven't released them to the market yet’
Mr Yang:	‘How much do you want to sell them for? Make sure they have a good layout in case my buyers want to keep them and not resell them. Can you give me a price list?’
Mr Bechara:	‘You tell me how much you can sell them for. If I can do your price, then I will accept it’
Mr Yang:	‘No problem. Also, I want a special deal where the buyer only needs to pay 5% deposit and a clause in the contract that allows them to rescind the contract’
Mr Bechara:	‘I agree to the buyers paying 5% deposit, but I can't have a clause in the contract allowing them to rescind because it will not pass the bank's requirement, but I promise I will do it for you if you resell those apartments’”.[7]

6. Affidavit of Xiaotian Yang, 9/3/18 at [24].

7. Affidavit of Xiaotian Yang, 25/9/18 at [9].

11. Mr Yang shortly thereafter had a meeting of Maestri Tower staff. Mr Yang gave evidence that there were then four staff apart from Mr Yang. Mr Yang said to his staff:

“The developer for the Newtown project needs to sell 5 units as soon as possible. He's willing to give a special price for those units and you only need to pay a 5% deposit. If any of you want to buy some units please go ahead, also, we have a deal where you are allowed to rescind the contract if you find a buyer who is willing to buy it at a higher price than your purchase price. We get surplus commission based on the higher price and I will split that with you. As you all know, the apartment block is in a very good location”.[8]

8. Affidavit of Xiaotian Yang, 25/9/18 at [10].

12. A few days later, "several" of the Maestri Tower staff expressed interest to Mr Yang in buying apartments in the Newtown development. Apparently "most of them" wanted to buy a one bedroom apartment "to keep the cost down" and because "those apartments would be able to attract tenants easier in the event they were unable to find a higher buyer". [9]

    9. Affidavit of Xiaotian Yang, 25/9/18 at [11].

13. Mr Yang then drew up sales advices for Lots 184, 185 and 186, each for $650,000, a price he determined based on four other sales by him of one bedroom units at prices between $645,000 and $660,000. The sales advices were all dated 26 November 2014.

14. The sales advices refer to purchases by Fei Yu (Lot 184), Jing Wang (Lot 185) and Mr Yang (Lot 186), each for $650,000. Mr Yang did not proceed with the purchase of Lot 186, but another purchaser, Hong Tang, did. Nor did Jing Wang proceed with the purchase of Lot 185.

15. Mr Yang denied that any of his staff had purchased units. Fei Yu is recorded on the sales advice as having an email address attached to a Maestri Tower employee named Amy Yu, but Mr Yang gave evidence that Amy Yu was not Fei Yu and that Amy Yu often used her email address for prospective buyers. This evidence was supported by six other sales advices in evidence in respect of various purchasers that referred to Amy Yu's email address. [10]

    10. Exhibit B.

16. In about mid-January 2015 Mr Yang telephoned Mr Bechara and the following conversation occurred:

“Mr Yang:	‘The previous buyer for [Lot 185] wants to rescind, and I have found a new buyer willing to pay $775,000 for the unit. That's $125,000 above the original price set by you,’
Mr Bechara:	‘I can’t give you 100% of the surplus commission, that's too much.’
Mr Yang:	‘That was our original deal,’
Mr Bechara:	‘I can't give you that much it's too much.’
Mr Yang:	‘How about I take 60% of the surplus plus my 4.4% on the original retail price?’
Mr Bechara:	‘I am willing to split it with you half half,’
Mr Yang:	‘Ok, fine. I will send you an email and you guys just rescind the old contract’
Mr Bechara:	‘I can’t rescind the contract until NAB finalises my construction loan and I drawdown the funds. It should be next month.’”[11]

11. Affidavit of Xiaotian Yang, 9/3/18 at [27].

17. Mr Yang then approached Mr Bechara on several occasions following the conversation. Mr Bechara said, "[W]e should be able to draw down the loan next month. I will rescind the contract with your client as soon as we get the money from NAB."[12]

    12. Affidavit of Xiaotian Yang, 9/3/18 at [28].

18. In August 2015 Mr Yang sent Mr Bechara an email stating:

“Dear Boss

[Lot 185] sold before was 650k and exchanged with 5%

As we agreed before, now I have a new buyer who would like to pay 775k to buy it. Can you arrange contract rescind ASAP and I get new buyer to sign it at the same time. the new buyer will pay 10% to exchange and ready to go now

So

1. Commission will be 4% + gst as before based on 775k

2. The surplus commission will be shared 50/50 which is 62500+GST and pay on settlement.

Please let me know ASAP otherwise this buyer may walk away any time

Have a good day

Regards

Andy”. [13]

There was no email response from Mr Bechara.

13. Affidavit of Xiaotian Yang, 9/3/18, Annexure J.

19. Mr Yang, in his affidavit, calculated an entitlement to the 4.4% commission on the sum of $650,000 and a surplus commission of $62,500, being half of the $125,000. Both these figures seem more accurately to reflect the contents of the oral agreement than does the email.

20. The Lot 185 contract for $650,000, presumably with Jing Wang, was rescinded and Yun Chen, a new purchaser, entered a contract for $775,000 in June 2016. Maestri Tower claims as commission 4.4% of $775,000, plus 55% (50% plus GST) of the additional $125,000, or $74,250.

C. Issues

21. Al Maha denies the existence of the surplus commission agreements,[14] although, at least initially, it accepted the oral agreement in mid‑January 2015 in respect of Lot 185. That was evidenced by the undisputed conversation quoted above. [15] Al Maha also asserts that services provided in November and December 2014 were not provided pursuant to an agreement signed and served in accordance with s 55 of the Property, Stock and Business Agents Act 2002. [16]

    14. See Amended Defence at [4].

    15. Affidavit of Xiaotian Yang, 9/3/18 at [27].

    16. Amended Defence [3(c)(v), (vii), (xii), (xiii)].

22. Thirdly, Al Maha asserts that the sales of Lots 184, 185 and 186 were sales to persons closely associated with Maestri Tower and, in circumstances where the lots were not resold at higher prices, constituted unconscionable conduct for which it suffered loss. Maestri Tower does not dispute that any loss caused by proved unconscionable conduct can be set-off against its claim.

23. Determining the real issues in the proceedings is complicated by the state of the pleadings, especially the defence. Al Maha, at the commencement of the trial, sought leave to file a Further Amended Defence to confine its defence to reliance on certain statutory provisions in the Property, Stock and Business Agents Act 2002, namely s 55, which dealt with the need for an agency agreement to be in writing, signed and served, and ss 47 to 49, which relates to sales to related persons. It appeared that the grant of leave would result in a vacation of the hearing date, something that had occurred previously as a result of Al Maha's conduct of the proceedings. Leave to amend and the vacation of the hearing date were refused by the list judge at the outset of the hearing.

24. In the result, Al Maha was obliged to rely on its existing defence which, although s 55 was pleaded, it was relied upon only in relation to "relevant services" occurring in the period November and December 2014, [17] which could significantly limit its utility. Sections 47 to 49 were not pleaded at all, although the claim for unconscionable conduct [18] that it maintained may have rendered the obligations of a real estate agent under ss 47 to 49 to be a circumstance relevant to unconscionability.

    17. See Amended Defence [3(c)(vii), (xii) and (xiii)].

    18. Amended Defence at [19]-[26].

25. During the hearing, bearing in mind these limitations, I proposed certain issues to be the issues in the proceedings, which both parties accepted. These issues were:

1. Whether there was an agreement between Maestri Tower and Al Maha that provided for a surplus commission to be payable, and in what amount, in respect of Lot 69.

2. Whether in respect of any surplus commission otherwise payable in respect of Lot 185, the commission arose out of services provided in November and December 2014 which were not pursuant to an agreement signed and served in accordance with s 55 of the Property, Stock and Business Agents Act 2002.

3. Whether the sales of Lots 184, 185 and 186 were sales to closely associated persons which were, in the circumstances pleaded, including the obligations under s 47 of the Act, unconscionable under ss 20 and 21 of the Australian Consumer Law.

4. What, if any, damages were suffered by Al Maha as a result of unconscionable conduct.

D. Credit

26. Mr Yang's affidavits were read and he was cross-examined. Mr Bechara's affidavit was not read and he did not otherwise give evidence. Accordingly, there is no need to resolve any differences that might otherwise have existed between their affidavits.

27. Mr Yang's credit might nevertheless be relevant in determining whether inferences adverse to him that might appear from documents and other evidence should be drawn if those matters were denied by Mr Yang.

28. To the extent necessary, I will consider those matters in dealing with the issues.

E. Surplus commission for Lot 69

29. Whether surplus commission is payable on the sale of Lot 69 turns on the meaning of the words "if the purchasers are going ahead" in the email from Ms Lee on 26 May 2014. It is clear that the surplus commission was on a "case by case basis", that a "prior check" was necessary before Maestri Tower went "ahead with any sales" and that the only exception to this was in respect of Lot 69 "if the purchasers are going ahead".

30. Al Maha submits that the words should be given their ordinary meaning, that "the purchasers" were the intending purchasers as at 26 May 2014, but since they did not proceed with the sale a surplus commission agreement was not activated.

31. There are several matters that support this construction. First, there was "a buyer"[19] of Lot 69 at the time of the email exchange. Secondly, the reference to "case by case" was arguably more consistent with a "sale by sale" (and thus would include "purchaser by purchaser") approach than a "unit by unit" approach. Thirdly, it was clear that there was only one exception to the rule of the need for prior approval. Fourthly, that exception had two components: Lot 69 and "the purchasers" so that if either component was missing, either because the sale did not involve Lot 69 or did not involve "the purchasers", then the exception was not activated. I think this natural reading of the email supports the submission of Al Maha. And the circumstance that the law in s 55 of the Property, Stock and Business Agents Act 2002 imposed strict formal requirements for enforceable agreements on real estate agents tends to support a strict reading of the email even if s 55 is not relied upon as a defence in this instance.

    19. Affidavit of Xiaotian Yang, 9/3/18 at [17].

32. Maestri Tower relies upon a number of authorities to submit that such a construction is uncommercial and should not be adopted. [20] However, there is no reason why a construction of the exception that insists on a particular transaction (as distinct from including later transactions with a different purchaser albeit at the same selling price) is uncommercial. The transaction at the higher price rather than the list price provides no immediate commercial benefit to Al Maha if the surplus commission is allowed since all the excess goes to the agent. But Al Maha may benefit indirectly in that a higher priced sale may set a higher floor or ceiling on the prices of similar units. Such a higher comparable price would be of lesser value the later it occurs as the sale prices of units already sold would be unaffected by it. So there is a commercial value to Al Maha in having the higher price achieved earlier. This may constitute a commercial reason for the surplus commission agreement to be limited to the sale of one unit to particular purchasers.

    20. CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121 at [155], Electricity Generation Corp v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp (2014) 251 CLR 640 at [35], Taouk v Assure (NSW) Pty Ltd [2017] NSWCA 227 at [104], Buildev Development Pty Ltd v PIC Sales Pty Ltd (2004) 11 BPR 21,445 at [12], N C Seddon & R A Bigwood, Cheshire & Fifoot Law of Contract (11th Aust. Ed, 2017, Lexisnexis Butterworths Australia) at [26.13].

29. As earlier indicated, the circumstance and timing of the initial sale, the rescission and the subsequent sale are not altogether clear. One or both sales apparently occurred, at least formally, two years after the buyer was found. Perhaps there was not a great time differential between the sales.

30. Maestri Tower submitted that the identity of the purchaser was irrelevant. In one sense that is true, but it does not seem incongruous that parties concerned about the timing of a sale that is subject to a particular unusual arrangement could specify that it only pertained to the existing purchaser or existing prospective purchaser. The circumstance that additional transaction costs may be incurred by Al Maha where there are multiple purchasers and rescissions of contracts may be another reason why a tight limit on the exception could be commercially justified.

31. By the time of the ultimate sale of Lot 69, Al Maha and Maestri Tower had reached another agreement regarding surplus commissions, which is considered below in another context. There is no suggestion by either party that that agreement applied to this sale, nor could it, since it applied only to sales that were rescinded to allow a purchase at a higher price, a feature that did not attach to this rescission where the final buyer purchased at the same price as that under the rescinded contract.

32. I do not regard the construction advanced by Al Maha to be "commercial nonsense or involving commercial inconvenience",[21] nor one that defeats an evident commercial purpose. [22] The evident commercial purpose is to provide a bonus commission in very limited circumstances, and the express extent of that limitation should be given its natural meaning.

    21. See Electricity Generation Corp v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp (2014) 251 CLR 640 at [35].

    22. CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121 at [155].

33. Maestri Tower also placed reliance on a later email in 2017 where the amount of the debt, an amount which included a $19,000 surplus commission, was "confirmed" by Al Maha's Chief Financial Officer in a text message. Although that one word text might only refer to the arithmetic calculation, in the absence of other evidence, it might be persuasive. But, in my view, it is insufficient to displace the plain words of the agreement. It did not constitute a new agreement and post-contractual conduct is not useful as an aid in construction. [23]

    23. Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [10]-[12].

34. Al Maha, towards the conclusion of submissions, faintly raised an argument that the commission was also not payable because of s 55 of the Act. I need not deal with this argument in view of my findings, although it will be apparent from what appears later in the judgment that the argument could not be sustained. In particular, Lot 69 was not an apartment identified by the Amended Defence as being affected by s 55.

35. Accordingly, I find that the $19,000 surplus commission claimed is not payable in respect of Lot 69. However, Maestri Tower is entitled to 4.4% on the additional $19,000 achieved on the sale price pursuant to the second written agreement. That sum is $836.

F. Surplus commission for Lot 185

40. Maestri Tower pleaded that on or about 20 August 2015 it entered an oral agreement that Al Maha would pay it surplus commission. [24] That agreement was denied. [25] The evidence did not establish an oral agreement at about that time. However, there was evidence not objected to which proved that an oral agreement for surplus commission occurred several months earlier on or about mid-January 2015, as set out earlier in this judgment. [26]

    24. Statement of claim at [8].

    25. Amended Defence at [4].

    26. Affidavit of Xiaotian Yang, 9/3/18 at [27].

41. The oral agreement proved by Maestri Tower contemplated that Al Maha and an existing buyer would together rescind an existing purchase agreement for $650,000 in respect of Lot 185 and a sale agreement would be entered with a new purchaser at a sale price of $775,000. Maestri Tower would receive half of the price uplift, namely $62,500, in addition to its existing commission of 4.4% on $650,000. [27]

    27. Affidavit of Xiaotian Yang, 9/3/18 at [27], [31].

42. As at the date of this agreement, mid-January 2015, Maestri Tower had found a buyer willing to pay $775,000 for Lot 185 but because the finance for the development had not yet been received, the formalisation of the rescission and the execution of the new contract were postponed. It did not occur until 20 June 2016.

43. Al Maha resists the claim for surplus commission asserting that services provided in November and December 2014 [28] in respect of the sale of apartments including Lot 185 [29] were not provided pursuant to an agreement complying with s 55 of the Act.

    28. Amended Defence [3(c)(v), (vii) and (viii)].

    29. Amended Defence [3(c)(vii) and (viii)].

44. Section 55 relevantly provides:

“55 No entitlement to commission or expenses without agency agreement

(1) A licensee is not entitled to any commission or expenses from a person for or in connection with services performed by the licensee in the capacity of licensee for or on behalf of the person unless:

(a) the services were performed pursuant to an agreement in writing (an agency agreement) signed by or on behalf of:

(i) the person, and

(ii) the licensee, and

(b) the agency agreement complies with any applicable requirements of the regulations, and

(c) a copy of the agency agreement signed by or on behalf of the licensee was served by the licensee on that person within 48 hours after the agreement was signed by or on behalf of the person.”

45. There was no evidence that the oral agreement giving rise to the claim by Maestri Tower was reduced to writing, signed by the parties and served in accordance with s 55. That was not the issue. Rather, the debate is whether the pleading is sufficient to enable Al Maha to rely upon s 55 to resist the claim of surplus commission. If it can, Maestri Tower did not contend that the surplus commission nevertheless remained payable.

46. As indicated, Al Maha's defence is directed at services alleged to have been provided in November and December 2014, alleging that those services were not provided pursuant to an agreement complying with s 55. Those services included services to procure a contract for $650,000 for Lot 185. Clause 3(c)(ix) of the Amended Defence appears to indicate that the services included procuring the sale of Lot 185 at $775,000. The evidence indicates that the buyer was not found until "about mid-January 2015" and that the sale was not formalised until almost 18 months later, but the applicability of the pleading is not concerned with the facts as found but with the content of the allegation.

47. In determining whether Al Maha is entitled to rely on the s 55 defence, it is relevant that the pleaded defence indicates a connection to Maestri Tower selling Lot 185, [30] and selling Lot 185 for $775,000. [31] The evidence established that the buyer of Lot 185 was procured "about mid-January 2015", but that remains arguably within the November/December 2014 window or at least supports the contention that the s 55 defence is alleged in respect of the higher priced sale of Lot 185. The circumstance that the date of the agreement pleaded by Maestri Tower was incorrect by a significant margin, some eight months (January rather than August 2015), and that s 55 applies not merely to services that create the entitlement to commission but also to those services "in connection with" the commission also provide support for Al Maha's submission.

    30. Amended Defence [3(c)(viii)].

    31. Amended Defence [3(c)(ix)].

48. As to this last matter, although the buyer apparently did not enter the contract until much later, the service performed in locating a buyer willing to purchase at the higher price is both a substantial service and one performed "in connection with" the event of a buyer executing the contract, the event giving rise to the commission. These services are in connection with the commission, therefore the commission is necessarily in connection with the services and thus within the terms of s 55.

49. It is important to note that this dispute is not concerned with whether an entitlement to commission arose in December 2014 or January 2015; clearly it did not. The dispute is concerned with whether Al Maha has indicated sufficiently in its defence that s 55 is relied upon in relation to the surplus commission of Lot 185. The matters noted above are sufficient to persuade me that it did. Once Al Maha is entitled to rely on s 55, the claim by Maestri Tower for surplus commission fails.

50. Section 55A of the Act allows the possibility of additional commission. As that was neither pleaded by Maestri Tower nor relied upon in the proceedings it need not be further considered.

51. However, Maestri Tower remains entitled to commission under the second written agreement of 4.4%, an agreement which did comply with s 55.

52. Accordingly, Maestri Tower is entitled to additional commission of 4.4% on $125,000, or $5,500.

53. In case I am wrong I would allow Maestri Tower $62,500, being half of the price increase. The oral agreement did not provide for additional GST or for the 4.4% commission to extend to the higher price, and to this extent the written unilateral document in August 2015 was an inaccurate record of the agreement. In those circumstances, the amount additional to what I propose to award would be $57,000 ($62,500 less $5,500).

G. Unconscionability and sales to closely associated persons

54. The third claim by Maestri Tower is for $100,947 for unpaid commissions under the written agreements. Al Maha resists this claim on the basis of alleged unconscionable conduct.

55. The conduct alleged to be unconscionable comprised:

1. the awareness of Al Maha and Maestri Tower that Al Maha needed further completed [32] sales to obtain funding; [33]

2. Maestri Tower obtained sales of apartments at prices below the list price, [34] and the market value; [35]

3. some of those sales were to purchasers "closely associated" with Maestri Tower; [36] and

4. Maestri Tower had promised and failed to secure subsequent sales of the apartments at prices higher than the list price [37] so that the purchasers closely associated with Maestri Tower obtained the benefit of a purchase at a lower price. [38]

   32. See Amended Defence at [19(a)(i)(B)].

   33. Amended Defence at [19].

   34. Amended Defence at [3(c)(vi)(A)], [20(a)(i)].

   35. Amended Defence at [21].

   36. Amended Defence at [20(a)(ii)], [20(b)].

   37. Amended Defence at [3(c)(vi)(B)], [20(c)].

   38. Amended Defence at [22].

56. As to these items of conduct, the awareness alleged in (a) was not in dispute. In context “completed” must refer to an unconditional exchange of contracts. Nor was it in dispute that Maestri Tower procured sales of apartments. But there was a dispute about whether the prices of the apartments were below list price or market value, whether the purchasers were closely associated with Maestri Tower and whether Maestri Tower had promised to secure subsequent sales at higher prices. Each of these matters requires separate attention.

(a) Below list price

57. There was no list price for these apartments. The evidence was that Al Maha requested Maestri Tower to set the price,[39] Al Maha reserving to itself the right subsequently to reject or accept the price. Accordingly, it was not the case that the apartments were sold at a price "below the list price".

    39. Affidavit of Xiaotian Yang, 25/9/18 at [9].

(b) Below market value

58. Al Maha relied on a valuation to establish that two of the apartments were sold below market value. The valuation was the subject of a number of objections:

1. The reasoning of the expert was not disclosed so that it was impossible to determine whether the expert had derived his opinion of the price wholly or substantially from specialised knowledge. [40]

2. The assumptions on which the expert report was based, in particular, the details of the alleged comparable properties, were not proved in the evidence.

3. The report gave an opinion of market value which is dependent on a willing but not anxious seller or a seller not under compulsion, whereas Al Maha was an anxious seller who was obliged to sell two units (in fact five units) in order to obtain funding for the development.

4. The market value was not relevant as a determinant of Al Maha's loss.

   40. See Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at [42].

59. Each of these objections has force. The valuer in the expert report gave his opinion of the values of Lots 184 and 186. Each was a one bedroom, ground floor unit without parking. The valuer referred to eight sales in the development. Two of the eight sales referred to were said to be "relatively comparable", and one was "towards the upper echelon" whereas the other five were either inferior or superior. The apartment that was "towards the upper echelon" was on Level 1 with a parking space and the two "relatively comparable" apartments were on Level 3. The valuer acknowledged that Lots 184 and 186 would be priced at the "lower end" because of the "ground floor position, potential sunlight issue, potential privacy issues" and "economies of scale" (which I took to mean that price per square metre would decline as size increased). The valuer referred to "prevailing market conditions", which were unidentified, and gave an opinion of value of $715,000. How that figure was derived was not revealed as it was significantly greater than the two "relatively comparable" properties which were on higher levels.

60. I was not satisfied that the report exposed the basis of the opinion. As stated in Arcus Shopfitters Pty Ltd v Western Australian Planning Commission:

“It is not satisfactory, in my opinion, for a valuer who values land using the comparable sales method, to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land. Such an opinion will only have any value if the valuer explains which is the most important of the comparable sales, why that is so, and what adjustments have been made to reach a conclusion about the value of the subject land.”[41]

41. [2002] WASC 174 at [78].

61. Although the valuer did indicate that two of the sales were "relatively comparable", he did not indicate why but rather gave reasons why they were not, being on a higher level. It might be inferred that the valuer thought the apartments were relatively comparable because they were of a similar size, although this was not expressed. There was not an explanation for the adjustments made to reach the conclusion.

62. In my view, the expert report is an example of a valuation that may be sufficient for commercial requirements, evidencing a valuer's opinion, but is not necessarily sufficient as evidence of value in legal proceedings. For admissibility in proceedings, the reasoning of the valuer must be expressed.

63. For this reason alone, I would reject the report.

64. As to the second objection, there was no evidence to establish the particulars of the two "relatively comparable" properties. As a result, the assumptions of the expert were not established so the opinion was bereft of any evidentiary foundation. It is plainly insufficient to prove only some of the details of only two of the other properties in the report, neither of which were thought by the valuer to be "relatively comparable".

65. I note that the valuer did not refer to the sale of four other one bedroom apartments in the building, the particulars of which were in evidence. [42]

    42. Affidavit of Xiaotian Yang, 25/9/18 at [14].

66. Similarly, the valuer deducted $75,000 for a car space from the price of some of the apartments referred to in the report, but there was no evidence, or reasoning by the valuer, to support that figure.

67. As to the assertion of the anxious seller, the evidence established that the sales were necessary for funding to be obtained and that Al Maha needed help. [43] Thus, the sales occurred in a situation where fair market value, as defined by the expert, was not evidenced to be achievable.

    43. Affidavit of Xiaotian Yang, 9/3/18 at [24].

68. On the final and related point, the relevance of market value, it cannot be inferred that fair market value would have been achieved had the sales not occurred. This is because the consequence of the sales not occurring would, on the evidence, have been that the whole project would not have proceeded due to a lack of funding. There was no evidence that Al Maha would simply retain the apartments to sell at a higher price. Whether that consequence of the project being abandoned would have lessened Al Maha's loss, or alternatively, destroyed a substantial profit from the sales of other apartments, is not the subject of evidence. But as Al Maha could have given evidence about its financial return on the project, but did not, it is not appropriate that I draw inferences in its favour that there was a loss on the whole project. In any event, that was not the case advanced by Al Maha.

69. Al Maha submitted that I should accept the only valuation in evidence, especially where the valuer was not cross-examined. These are not matters that go to admissibility.

70. For all these reasons, I reject that the report is admissible. It follows that there was no evidence of a sale at undervalue, or to establish a loss.

(c) Closely associated sales

71. Mr Yang deposed that he had told his staff about the apartments which resulted in several expressing interest. Thereafter, he drew up sales advices for Lots 184, 185 and 186. In cross-examination, he denied that any of these apartments were purchased personally by staff. There was no evidence to the contrary. Two of the prospective purchasers recorded on the sales advices, Mr Yang being one of them, did not proceed to enter contracts and complete the purchase, which may explain how it appeared, but did not eventuate, that some of Maestri Tower’s staff were the purchasers.

72. One of the purchasers, Fei Yu, had an identical surname to a staff member, one Amy Yu, and recorded this staff member’s email as her contact email. As indicated, this was shown to be a not uncommon practice with buyers. The term "closely associated" was not defined in the defence, but even if it included staff members and their families, still I was not satisfied of that fact. Mr Yang denied the proposition and if it was a serious breach of his obligations, as alleged, it would require stronger evidence than the inferences Al Maha sought to draw from related facts in Mr Yang's affidavit for me to be satisfied to the applicable Briginshaw [44] civil standard.

    44. Briginshaw v Briginshaw (1938) 60 CLR 336.

(d) Maestri Tower failed to fulfil a promise to secure subsequent more favourable sales

73. This assertion was not maintained by Al Maha at the hearing.

(e) Conclusion

74. It follows that the facts alleged to support the claim of unconscionable conduct were not established. There were no sales below the list price or market price, or to closely associated persons. Nor was there a breach by Maestri Tower of a promise to secure higher resales.

75. Al Maha relied on a related additional fact, although not pleaded.

76. Section 22(1)(g) of the Australian Consumer Law provides that requirements of any applicable industry code are relevant to assessing whether there is unconscionable conduct under s 21 of the Australian Consumer Law. Thus, the obligations imposed by ss 47 to 49 of the Property, Stock and Business Agents Act 2002 are relevant to the question of whether there has been a contravention of s 21 of the Australian Consumer Law. However, like the other facts alleged to constitute unconscionable conduct, Al Maha did not establish any contravention, in particular because there was no persuasive evidence that the purchasers of Lots 184 and 186 included staff of Maestri Tower or their families. Whether such a purchase would constitute unconscionable conduct in circumstances where Al Maha had orally approved potential purchases by the family of Mr Yang,[45] was thus not necessary to be decided.

    45. See affidavit of Xiaotian Yang, 25/9/18 at [9].

74. As none of the significant facts alleged to constitute unconscionable conduct have been proved, the claim for unconscionable conduct fails. Maestri Tower is thus entitled to recover the agreed commission in respect of its sales.

H. Value of claim

78. Maestri Tower is entitled to $836 on the higher price achieved on the sale of Lot 69, $5,500 for the higher price achieved for Lot 185 and $100,947 in respect of the unpaid commissions, a total of $107,283.

79. Interest is claimed on this unpaid sum from 10 October 2016 to date, and was not resisted. The interest amounts to $14,234.68.

80. The total judgment sum is therefore $121,517.68.

I. Costs

81. Maestri Tower has been entirely successful in the largest and primary component of its claim and recovered some amounts in respect of each of its claims. In these circumstances, costs should follow the event so that Al Maha should pay the plaintiff's costs.

82. I will grant liberty in case any further argument concerning costs is sought.

J. Orders

83. The orders of the Court are:

1. Judgment for the plaintiff in the sum of $121,517.68.

2. Defendant to pay the plaintiff’s costs.

3. Parties to notify my associate within seven days of any further argument concerning costs.

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Endnotes

Decision last updated: 02 April 2019