Mandy Lee Real Estate Pty Ltd v Coastal Properties Pty Ltd
[2017] VCC 7
•25 January 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-15-03382
| MANDY LEE REAL ESTATE PTY LTD | Plaintiff |
| v | |
| COASTAL PROPERTIES PTY LTD & ANOR | Defendants |
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JUDGE: | Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7,8,9,12 December 2016 | |
DATE OF JUDGMENT: | 25 January 2017 | |
CASE MAY BE CITED AS: | Mandy Lee Real Estate Pty Ltd v Coastal Properties Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 7 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT
Catchwords: Whether real estate agent entitled to commissions under exclusive agency agreement – when contract becomes “unconditional” - when commission is earned – when commission is payable – where original contracts of sale rescinded – whether developer engaged in unconscionable conduct
Legislation Cited: Sale of Land Act 1962 (Vic); Transfer of Land Act 1958 (Vic); Fair Trading Act 1999 (Vic); Competition and Consumer Act 2010 (Cth); Trade Practices Act 1974 (Cth)
Cases Cited:Simic v New South Wales Land and Housing Authority [2016] HCA 47; Maggbury Pty Ltd v Häfele Australia Pty Ltd (2001) 210 CLR 181; Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 240 CLR 45; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151; Byrnes v Kendle (2011) 243 CLR 253; Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; Rodin v Voyler Pty Ltd [2011] VSC 414; Australian Style Pty Ltd v au Domain Administration Ltd [2009] VSC 422; Phillipson v Indus Realty Pty Ltd [2004] VSCA 6; Trotter v McSpadden [1986] VR 329; Raffoul v Fresh 2 U Pty Ltd [2013] VSC 308; National Realty (Vic) Pty Ltd v Charles Lloyd Property Group Pty Ltd [2006] VCC 1061; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; BP Westernport v Shire of Hastings (1977) 180 CLR 266 ; Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196; Director of Consumer Affairs Victoria v Scully [2013] VSCA 292; Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514; March v Stramare (1991) 171 CLR 506
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Scotter | Robinson Gill Lawyers |
| For the Defendant | Mr P Marzella | Russell Kennedy |
HIS HONOUR:
Summary
1 In this case, the plaintiff (“Mandy Lee”) claims unpaid commission from the defendants (“Coastal Group” and “Mimmo” respectively) in relation to the sale of 5 apartments at a property located at 1219-1221 Riversdale Road Box Hill South (“the property”). Alternatively, Mandy Lee contends it is entitled to damages from Coastal Group and Mimmo arising from unconscionable conduct whereby they cancelled contracts of sale and re-sold apartments to the original purchaser through another estate agent in order to avoid paying commission to Mandy Lee. Coastal Group and Mimmo deny the plaintiff’s claims and say that there was no obligation to pay the commission claimed because the contracts were rescinded before they became unconditional, and hence, before there was an obligation to pay commission. They further deny that they rescinded any initial contracts of sale and re-sold apartments through a different estate agent to avoid paying commission to Mandy Lee.
Background
2 Mandy Lee carries on business as an estate agent.
3 Coastal Group carries on business as a developer.
4 On about 2 June 2010 Mandy Lee and Coastal Group entered into an exclusive agency agreement (“the Authority”) to sell apartments G1, G3, 1.2 (Lot 13) and 2.1 (Lot 22) to be built at the property. Through conversations between the plaintiff’s representatives and the first defendant, it was also agreed that Mandy Lee would be responsible for the sale of apartments 2.3 (Lot 24) and 2.5 (Lot 26). At the time the property was vacant land. Mandy Lee and Coastal Group understood that Mandy Lee was marketing and selling apartments “off the plan”. Mandy Lee was familiar with the property because it acted for the vendor in selling the property to Coastal Group. There is some dispute between the parties regarding the circumstances in which they signed the Authority.
5 On about 12 November 2010 Mandy Lee sold apartment G3 to Jia Hong Wang for $400,000. The deposit of $40,000 was payable by 25 November 2010 and the balance at settlement. The contract provided that settlement of an “off the plan” apartment was due on 28 February 2011 or, unless the land was a lot on an unregistered plan of subdivision, the settlement was due on that date or 14 days after Coastal Group gave notice to the buyer of registration of the plan of subdivision, whichever was the later.
6 On about 15 November 2010 Mandy Lee sold apartment Lot 13 to Pisen Hong for $515,000. The deposit of $50,800 was payable by 28 November 2010 and the balance at settlement. The date for settlement was not specified in the contract of sale but was left blank. However, the balance of the term regarding settlement was identical to the contract for apartment G3. Thus, in circumstances where each apartment related to an unregistered plan of subdivision, settlement was due 14 days after Coastal Group gave notice to the buyer that the plan of subdivision was registered.
7 There was a second contract which was also signed by Pisen Hong for Lot 13. The parties did not agree on when this contract was executed. The contract stated that the price was $520,000 with a deposit of $52,000 payable by 28 November 2010 and the balance of $468,000 payable at settlement. This second contract did not specify a date for settlement but provided that “if the land is a lot on an unregistered plan of subdivision, settlement is due on the later of 14 days after the vendor gives notice in writing to the purchaser of registration of the plan of subdivision and 14 days after an occupancy permit has issued in respect of the dwelling to be erected on the land in accordance with special condition 23 of the contract”.
8 On about 18 November 2010 Mandy Lee sold apartment Lot 24 to Fuxun Liu for $420,000. The deposit of $42,000 was payable by 25 November 2010 and the balance at settlement on 2 April 2011. If the land was a lot on an unregistered plan of subdivision, settlement was due on the above date or 14 days after the vendor notified the buyer of the registration of the plan of subdivision, whichever was later.
9 On 6 January 2011 Mandy Lee sold Lot 22 to Lu Pan for $270,000. The deposit of $27,000 was payable by 14 January 2011 ($550 had already been paid) and the balance of $243,000 was due at settlement on or about April 2011. If the land was a lot on an unregistered plan of subdivision, settlement was due on the above date or 14 days after the vendor notified the buyer of the registration of the plan of subdivision, whichever was later.
10 On about 9 January 2011 Mandy Lee sold Lot G1 to Andrew Lac (“Lac”) for $420,000. The deposit of $42,000 was payable by 1 February 2011 and the balance at settlement. The date for settlement was not specified but was left blank in the contract. However, the term regarding settlement was in identical form to the contract for apartment G3.
11 On about 28 January 2011, Mandy Lee sold Lot 26 to Sean Cathie for $515,000. The deposit of $51,500 was payable by 4 February 2011 and the balance at settlement. In the contract, settlement was due on 30 June 2011 unless the land was a lot on an unregistered plan of subdivision in which case settlement was due either on the above date, or 14 days after the vendor gave notice to the purchaser of registration of the plan of subdivision or 14 days after completion of the building works, described in special condition 14, and the issue of an occupancy permit in respect of the property, whichever was the latest.
12 On 5 July 2011, VCAT allowed an amendment to the planning permit in relation to the property whereby Coastal Group could develop an apartment building comprising 21 residential apartments instead of the 26 student apartments previously permitted. On 21 July 2011, the City of Whitehorse amended the permit in accordance with VCAT’s decision.
13 On 15 August 2012, the City of Whitehorse lodged a notice at the Land Titles Office advising that the section 173 agreement previously lodged on title to the property was cancelled.
14 On 19 September 2014 there was a second contract of sale entered for Lot G1 between Coastal Group and Lac. The purchase price was $520,000 with a deposit of $42,000 payable by February 2015 and the balance at settlement on 17 May 2015. Alternatively, if the land was a lot on an unregistered plan of subdivision, settlement was due on the later of the above date, 14 days after the vendor gave notice in writing to the purchaser of registration of the plan of subdivision and 14 days after an occupancy permit was issued in respect of the dwelling to be erected on the land in accordance with special condition 23 of the contract.
15 On 25 November 2014, Fuxun Liu rescinded the contract of sale for Lot 24 because the plan of subdivision was not yet registered.
16 On 17 December 2014 Coastal Group rescinded the first contract for Lot 13 with Pisen Hong on the ground that the plan of subdivision for the property was not yet registered. The second contract remained on foot.[1]
[1]See paragraphs [7] and [96]-[105].
17 On 27 January 2015, Korosidis Lawyers prepared a further pro-forma contract of sale and vendor’s statement.
18 On 28 January 2015, Coastal Group rescinded the first contract of sale for Lot G1 with Lac and the contract of sale for Lot 26 with Sean Cathie.
19 On 23 February 2015 the plaintiff issued these proceedings in this Court.
20 On 10 September 2015 the City of Whitehorse issued an occupancy permit for the property.
21 On 11 September 2015 the plan of subdivision was registered.
22 On 25 September 2015, the second contracts of sale for Lots 13 and G1 settled.
23 On 6 October 2015 the contract for Lot 22 settled.
Issues
24 As the evidence unfolded, various matters in the list of issues submitted at the commencement of the trial by the parties became irrelevant or were not pursued. The issues for determination, as argued by the parties, were:
(a) What is the proper construction of the Authority with respect to the payment of commission?
(b) Was Mandy Lee entitled to be paid 50% or all of the commission for Lots G1, G3, 13, 22, 24 and 26?
(c) Was Mandy Lee entitled to be paid commission upon settlement of the second contracts of sale for Lots G1 and 13?
(d) Did the defendants engage in unconscionable conduct in relation to Lot G1? If so, what, if any, damages were payable?
(a) What is the proper construction of the Authority with respect to the payment of commission?
25 The front page of the Authority contained headings and spaces to complete other details such as the name of the vendor, the property to be sold, the price, the commission and marketing expenses. In a box completed in the handwriting of Andrew Shen, an employee of the plaintiff, the commission was said to be calculated and payable as follows:
“5.5% of the selling price is the agent’s fee.
(Half (50%) of the agents fee is payable upon contract becoming unconditional, the other half (50%) is payable upon apartments completion and settlement.)” (sic)
26 Mandy Lee contends that it was entitled to full commission on the sale of the various apartments at the property.
27 The defendants contend that Mandy Lee was not entitled to any commission because none of the contracts became “unconditional” within the meaning of that term in the Authority[2] and none proceeded to settlement.[3]
[2]Paragraph 9, Defendants’ closing submissions.
[3]Paragraph 8, Defendants’ closing submissions.
28 The principles of law in relation to the construction of contracts is clear and has been referred to at length in a number of High Court authorities. [4] In the latest case of Simic v New South Wales Land and Housing Authority,[5] Gageler, Nettle and Gordon JJ adopted part of the judgment in Electricity Generation Corporation v Woodside Energy Limited[6] and, in the context of construing certain undertakings in performance bonds, said:[7]
“The proper construction of each Undertaking is to be determined objectively by reference to its text, context and purpose. As was stated in Electricity Generation Corporation v Woodside Energy Ltd:
[T]he objective approach [is] to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean … [I]t will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd [2009] EWCA Civ 636 at [28], unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’. (footnotes omitted)”
[4]Maggbury Pty Ltd v Häfele Australia Pty Ltd (2001) 210 CLR 181; Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 240 CLR 45; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151; Byrnes v Kendle (2011) 243 CLR 253.
[5][2016] HCA 47.
[6](2014) 251 CLR 640.
[7][2016] HCA 47 at [78].
29 In the Victorian Supreme Court case of Rodin v Voyler Pty Ltd[8] Emerton J had to construe an exclusive sale authority document between a real estate agent and a property developer. Her Honour commented that Hargrave J in Australian Style Pty Ltd v au Domain Administration Ltd[9] had set out the principles of contractual interpretation to be applied in such a case as follows:
“This requires the court to consider what reasonable persons in the position of the parties would have understood the words to mean by reference to the text of the agreement, the surrounding circumstances known to the parties and the purpose or object of the transaction. It is not necessary to first conclude that the words used are ambiguous before having regard to other surrounding circumstances and the purpose or object of the transaction. In interpreting the words and resolving any ambiguity, the court should proceed in a common sense and non-technical way and give the agreement a commercially sensible construction. The court should have regard to all of the words used in the agreement ‘so as to render them all harmonious’ and to ensure the congruent operation of the various components of the agreement as a whole.” (footnotes omitted)
[8][2011] VSC 414.
[9][2009] VSC 422 at [88].
30 The Authority was in the standard form produced by the Real Estate Institute of Victoria Ltd. There were several important provisions in the Authority signed between Mandy Lee and the defendants:
“The Vendor agrees to pay the Agent the commission on the terms of this Authority if the Property is sold during the Exclusive Authority Period by the Agent or by any other person (including the Vendor or another agent).”: clause 1
“If the purchaser does not complete the purchase and the vendor is entitled to forfeit the deposit, the Vendor will take all reasonable steps (including legal proceedings) to recover any 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.”: clause 2
“A person signing this authority for or on behalf of the Vendor is personally responsible for the due performance of the Vendor’s obligations as if the signatory was the Vendor…”: clause 4
“If the Property is sold and no deposit monies are held by the Agent, the vendor will pay the professional fees properly incurred and state and federal taxes required to be deducted by law, including GST, on demand.”: clause 6
“An agreement of the Vendor and purchaser to cancel a contract of sale or the ending of a contract of sale as a result of a default of the Vendor or purchaser does not relieve the Vendor of the obligation to pay the Agent’s professional fees”.[10]: clause 11
[10]“Professional fees” were defined in the Authority to mean “the total of the commission and Marketing Expenses as duly authorised and expended”.
31 Also completed in Andrew Shen’s handwriting was an outline of payments for marketing expenses. The Authority provided that the marketing expenses were set at $4000 and:
“($2000 is payable upon signing the authority, the rest $2000 is only payable after all apartments sold)” (sic)
32 In the present case, Mandy Lee had been operating its real estate business since at least 2009. This was apparent because it acted for the party which sold the property to Coastal Group. The evidence in court included an email, which one of the plaintiff’s witnesses, Bruce Li, sent on 31 August 2009 to Mimmo enclosing the contract of sale and a letter extending the planning permit until 22 February 2013. Thus, Mandy Lee had experience in the real estate business. In particular, it was familiar with the property.
33 Mandy Lee and the defendants were all aware at the time of entering the Authority that:
· the property was vacant;
· there was a planning permit for student accommodation to be constructed on the property;
· Mandy Lee was selling apartments off the plan;
· settlement on the sale of these apartments could not take place until the proposed plan of subdivision was registered and titles were issued from the Land Titles Office.
34 The purpose of the Authority in general terms was to authorise Mandy Lee to sell the apartments on behalf of Coastal Group. The clauses about commission were designed to specify when the commission was earned and when it was to be paid. Given the circumstances with the sale of apartments off the plan, the parties knew that:
(a) the usual method of paying commission from the deposit monies was not an option due to the operation of section 9AA(1)(a)(i) of the Sale of Land Act 1962 (Vic) (“Sale of Land Act”);
(b) the cash-flow consequences of the paying condition were material for the parties. Mandy Lee wanted some payment before the completion of the building work, and the new owners taking occupation of their apartments. Coastal Group sought to postpone the obligation to pay all the commission due until the apartment sales settled and it had obtained the purchase price from each of the new owners.
35 In my view, under the terms of the Authority the estate agent earned commission when it “sold” a property during the Exclusive Authority Period. Under clause 1.13 of the Authority, “sold” is defined as the result of obtaining a binding offer and “sale” and “sell” have corresponding meanings. Clause 1.3 of the Authority provides that “binding offer” means:
“1.3.1An offer at the Vendor’s price and on the terms set out in the Particulars of Appointment which would result in a contract of sale, if signed by the Vendor and exchanged with the purchaser; or
1.3.2 A contract of sale signed by the Vendor and purchaser;
For the purposes of GC1.3.1 the offer must be in a contract of sale signed by the purchaser and ‘Vendor’s price’ has the meaning in GC 1.14. This is defined to mean a price equal to or greater than the Vendor’s price stated in the Particulars of Appointment.”
Accordingly, Mandy Lee sold an apartment when there was a binding offer for an apartment. A binding offer was constituted by a contract of sale signed by the purchaser and Coastal Group. Alternatively, a binding offer comprised a situation in which a purchaser signed a contract of sale and offered to buy an apartment at Coastal Group’s price and on its terms as set out in the Authority and the offer would result in a contract of sale if signed by Coastal Group and exchanged with the purchaser.
36 The facts in this case show that Coastal Group signed contracts of sale with purchasers for each of apartments: G1, G3, 1.2 (Lot 13), 2.1 (Lot 22), 2.3 (Lot 24) and 2.5 (Lot 26). Prima facie, Mandy Lee “sold” each of the apartments because there were contracts of sale signed by both buyer and seller. There was no dispute at trial about this aspect of the case.
37 The debate at the hearing focused on the calculation of the commission and when it was payable. Mandy Lee’s position was that the handwritten words in the Authority related to when commission was to be paid and did not affect when the agent earned the commission. Rather, the words relieved the vendor of the obligation to pay the commission until certain events occurred. [11] Mandy Lee relied upon the terms of clause 1 of the Authority, the physical differentiation on the Authority document between the percentage of commission payable and the timing of the payments, and the similarity in approach to the payment of the expenses – namely, an amount was specified and the words within the brackets in the Authority set out the time at which Coastal Group was to make the payment.
[11]Paragraph 3, Plaintiff’s closing submissions.
38 Mandy Lee also relied upon the dissenting judgment of Chernov JA in Phillipson v Indus Realty Pty Ltd[12]. In that case, the court had to consider the proper interpretation of a handwritten addition to an estate agent’s authority document providing that the real estate agent’s fees would be “3% of the selling price subject to completion of a sale”. There, the majority found that the words “subject to completion of the sale” qualified the agent’s entitlement to commission so that the agent did not earn any commission unless a sale was effected.[13]
[12][2004] VSCA 6.
[13][2004] VSCA 6 at [9].
39 By comparison, Chernov JA said that the words “subject to completion of the sale” merely postponed the requirement to pay commission until the sale was finalised. His Honour referred to several factors supporting this conclusion. First, the authority was completed between vendor and agent, neither of whom was a lawyer. Secondly, the words did not affect the operation of the standard conditions which prescribed the event which gave rise to the agent earning its fee. Thirdly, once the agent had obtained the contract of sale, it had done all that it was required to do in order to earn the commission. Mandy Lee submitted that having regard to the different terminology in its Authority, the reasoning of the majority was distinguishable and the reasoning of Chernov JA was more compelling.
40 Mandy Lee’s closing written submissions did not address in any detail how the court should construe the handwritten part of the Authority regarding the contract becoming ‘unconditional’. But counsel for Mandy Lee did address the matter orally and made a number of points.
41 Counsel for the plaintiff drew a distinction between promissory and contingent conditions, arguing that when a party to a contract makes essential promises to another party, such conditions are promissory conditions. Where a contract includes a condition to address a contingency which may or may not occur, that is a contingent condition. An example was a contract between A and B, where A agreed to purchase land from B subject to completing the sale of another property. There, the fulfilment of the contingency was a condition of the obligation to complete the contract. But it was not a promise. Mandy Lee appeared to accept that any express stipulation that has the effect of making an obligation to perform conditional upon the occurrence or non-occurrence of a non-promised event qualifies as a contingent condition of performance.
42 Mandy Lee referred to special condition 11 of the sale contracts in this case and contended that Coastal Group as vendor had an obligation to use its reasonable endeavours to procure the certification and registration of the plan of subdivision. It contended that, because there was a contractual obligation upon Coastal Group to use its reasonable endeavours for this purpose, the contract was not conditional within the meaning of the Authority and the cases on point.
43 The plaintiff’s counsel referred to the decision of Gobbo J in Trotter v McSpadden.[14] There, the agent, Trotter, was engaged to sell the defendant’s property at Ormington. The agent secured a purchaser for the property, and both the vendor and purchaser signed a sale note containing a special condition that the sale was:
[14][1986] VR 329.
“Subject to and conditional upon the purchasers entering into an unconditional contract of sale for the sale of their property situated at and known as 729 Ferntree Gully Road, Glen Waverley on or before the 19th day of March 1983, such contract providing for settlement to be effected not later than the 19th day of May 1983.”
There was no unconditional contract entered by 19 March 1983. It became apparent that the vendors engaged another agent who secured a purchaser of their property on terms that were different in some respects to those contained in the original sale note. The respondents refused to pay the applicant commission in respect of the first sale. The Magistrate who heard the claim to commission made a number of findings in favour of the defendants in connection with the transaction and held that properly construed, the engagement did not entitle the applicant to commission because the special condition had not been fulfilled.
44 Gobbo J dismissed the appeal. He said that the critical question was whether the purchasers legally bound themselves to become the purchasers of the property and if they did, whether the entitlement to commission accrued immediately upon that act occurring, represented as it was by the vendors and purchasers signing the contract embodied in the sale note. His Honour said that the answer depended upon the terms of the agent’s engagement which read as follows:
“The terms of this engagement are that the commission payable therefor shall be as prescribed under the Estate Agents Act and that such commission shall be payable by me/us to you upon a person found or introduced by you signing (either by himself or by his agent) a document whereby that person legally binds himself to become the purchaser of the property”
45 His Honour then said that, in his view, a contract though in some or most respects legally binding, which was conditional upon a particular event occurring which was not related to obligations resting on either of the parties to the contract, was not a binding contract for the purposes of the engagement. An agent did not become entitled to commission until the condition upon which the binding force of the contract depends was satisfied. He said that while it may be true for certain purposes there was a legally binding contract, it was not a binding contract for the purposes of granting an entitlement to commission. His Honour considered that this was the case as a matter of principle and in the particular instance, was also true as a matter of construction. Moreover, His Honour said that the engagement and entitlement to commission was subject to a possible implication that the commission was not payable in the event that the condition was not fulfilled. His Honour said that it could properly be said that the agent was entitled to commission, but that entitlement was subject to defeasance if the condition was not satisfied.
46 Mandy Lee then argued that the defendants sought to treat the existence of unperformed contractual duties as rendering the contracts conditional. It argued that this was incorrect and said that the fact that a contract of sale in respect of an “off the plan” unit cannot be settled until registration of the plan of subdivision and the issue of a title was no more than a contractual obligation of the vendor to arrange for the registration of the plan and to make title.
47 The plaintiff contended that Coastal Group impermissibly sought to treat special condition 11.1 as rendering the contract conditional. Mandy Lee’s position was that the fact that a contract of sale contained conditions (it seems even conditions precedent) did not of itself mean that the agent had not earned its commission (subject always to the terms of the actual agency agreement).
48 Mandy Lee referred to the decision of Sifris J in Raffoul v Fresh 2 U Pty Ltd.[15] In that case, the plaintiff, a business broker and estate agent, entered into a written agency agreement with the first defendant whereby he was engaged to sell a business. After the first defendant sold its business by agreement made on 14 November 2011, Raffoul claimed that he was entitled to commission on the sale. Under the terms of the agency agreement, Raffoul was entitled to a fixed commission of $1 million if he fulfilled one of the three situations contemplated in clause 2.1 of the agency agreement, namely:
“(a)upon Raffoul obtaining an Acceptable Offer during the 300 days following the execution of the Sale Authority (the “Authorisation Period”);
(b)upon the Business being sold to anyone during the Exclusive Authority Period; or
(c)upon the Business being sold during the 12 month period following the Exclusive Authority Period to a “Purchaser” who was “Introduced to the Business” by Raffoul before or during the Authorisation Period (the terms Purchaser and Introduced to the Business are defined within the Sale Authority)”
[15][2013] VSC 308.
49 An “Acceptable Offer” was defined as an offer to sell the business for $7 million or another price which the vendor company regarded as acceptable. It was not a requirement of clause 2.1 that the sale of business be completed for commission to be payable. The vendor denied Raffoul was entitled to commission because there was no sale within the time set out in the agency agreement and Raffoul did not introduce the purchaser to the business. The first defendant said that there was no sale on 14 November 2011 because the sale of business agreement was subject to conditions precedent which were either not fulfilled at the time or only fulfilled at a much later date when settlement took place on 23 March 2012. In the course of finding that Raffoul was entitled to commission, the trial judge said:
“The fact that the sale was subject to conditions precedent and was amended from time to time, including a reduction of the purchase price does not affect the entitlement to commission. Commission was in no way dependent upon completion or settlement and the amount of the Commission did not depend on the purchase price. It was fixed. Further, the definition of Acceptable Offer specifically contemplated an agreement with conditions precedent. Finally, the sale was relevantly a sale for the purposes of the Commission irrespective of the financial condition of the purchaser or its ability to complete”.
50 The plaintiff submitted that merely because the contract between vendor and agent might be subject to conditions did not of itself disentitle Mandy Lee from recovering its commission. I accept that in Raffoul’s case, this contention was correct. However, it is important to bear firmly in mind that the circumstances in which, and time at which, commission is payable to an agent will depend upon the particular facts including the terms of the engagement agreement between the agent and the vendor.
51 Mandy Lee then contended that none of the conditions relied upon by Coastal Group were truly conditions subsequent which was the only proper meaning which could be given to the word “unconditional” in the Authority. Even if they were, they did not apply or were otherwise satisfied or waived before the relevant contracts of sale for the apartments came to an end or were discharged. Thus, Mandy Lee said it had earned at least 50% of the commission on the contracts of sale.
52 Mandy Lee also sought to distinguish between two things. On the one hand, there were contracts which were subject to or conditional upon the occurrence of an event, for example, they were subject to finance, subject to the sale of another property or subject to solicitor’s approval of the contract. On the other hand, there were contracts which provided for their termination upon the occurrence of a particular event, for example, where a vendor failed to obtain a contract or licence necessary for the sale or where the innocent party could serve a default notice providing for termination of the contract if the party in breach failed to remedy the breach within the time allowed. Mandy Lee submitted that only the former gave rise to a conditional contract, and the latter did not. Mandy Lee argued that special condition 11.2 was not a condition which qualified either the creation of a contract or the full performance of the vendor’s obligations. Mandy Lee said the effect of special condition 11.2 was that if the plan of subdivision were not registered within 48 months of the making of the agreement then each party had the right to terminate the sale agreement between the expiry of the 48 months and the actual time of registration. Thus, it was said that “for the first 48 months of the life of the contract, special condition 11.2 had no operation at all” and the contract of sale was not “subject to” it. A right to terminate which may or may not come into existence during the life of a contract could not be a condition subsequent to that contract.
53 Mandy Lee submitted that on Coastal Group’s case, special conditions such as 11.2 and 14.6 of the contracts of sale would render the contract conditional until settlement occurred. Mandy Lee said that this would render half the handwritten words on the authority otiose and meant, in effect, that Mandy Lee could receive no payment until settlement. It was said that this could not have been the parties’ intention, as recorded in the written agreement.
54 There are several observations to be made in response to Mandy Lee’s submissions.
55 Firstly, Mandy Lee emphasised that for a contract to be truly conditional upon an event, the event could not be related to the performance of a parties’ contractual obligations. The plaintiff’s suggestion here was that Coastal Group could not seek to rely upon special condition 11.2 because, pursuant to 11.1, it was to use its reasonable endeavours to procure the certification and registration of the plan of subdivision.
56 Special condition 11 is in the following terms:
“11.1The Purchaser acknowledges that the Property is a lot in the Plan which has not been certified or registered in accordance with the Subdivision Act 1988 (Vic) and the Vendor shall use its reasonable endeavours, at its own cost and expense, to procure the certification and registration of the Plan.
11.2If the Plan is not registered within forty eight (48) months after the date of this Contract, the Purchaser or the Vendor may at any time after the expiration of that period but before the Plan is registered rescind this Contract.
57 I agree that Coastal Group had a contractual obligation under special condition 11.1 to use its reasonable endeavours as stated. However, even if Coastal Group complied with its obligation, there was no guarantee that the plan of subdivision would be registered at the Land Titles Office. In other words, just because the plan of subdivision was not registered did not mean that Coastal Group breached its contractual obligations. In this context, I note there was no allegation in the statement of claim that Coastal Group breached its obligations in relation to procuring registration of the plan of subdivision.
58 Also, the terms for completion of the agreements assumed the plan of subdivision would be registered and it was not. To that extent, a condition affecting the full or complete performance of the contracts of sale was not satisfied.
59 Secondly, the decision in Trotter does not compel a finding in favour of Mandy Lee. If anything, it tends in the opposite direction. As Gobbo J made clear[16] the case in relation to the agent’s claim to commission fell to be decided upon the terms of the agent’s engagement. The sale in Trotter was subject to and conditional upon the buyer entering into an unconditional contract of sale for the sale of another property by a nominated date and settling that sale by another specified date. The buyer did not enter into the sale contract by the due date and the condition was not satisfied. His Honour noted that an agent did not become entitled to commission until the condition upon which the binding force of the contract depended was satisfied. The judge considered that:
[16]Trotter v McSpadden [1986] VR 329, 331.
· for certain purposes there could be a binding contract but it was not binding for the purposes of bringing about an entitlement to commission;
· even if that point were not so as a matter of principle, it was true in the particular case as a matter of construction;
· if the agent were entitled to commission as a result of the creation of a contract of sale, the entitlement was subject to defeasance when the applicable condition was not satisfied.
60 Thirdly, the handwritten words in the box beneath the reference to the commission rate of 5.5% were put there by a servant or agent of Mandy Lee. Adopting an objective approach to construing the Authority, it is clear that the parties contemplated that any commission due would not be paid upon signing a contract of sale for an apartment. So much was apparent by contrasting the provision with the first payment of half the marketing expenses (see above). The payment of the initial 50% of commission was intended to take place at some point after the vendor and purchaser signed the contract of sale but before settlement of the sale. A fair reading of the contract would be that “upon [the] contract becoming unconditional” means the time at which full performance or completion of the contract is not dependent or conditional upon the fulfilment or satisfaction of any condition.
61 In my view, the completion of the contracts in this case was dependent upon at least one condition, namely the registration of the plan of subdivision. Coastal Group referred to some other conditions in the contracts but, on the evidence, none of them were relevant. Here, at the time the contracts of sale were entered into, the plan of subdivision was not registered. In each contract, the due date for settlement was conditional upon the registration of plan of subdivision. The buyers and vendor could not settle before registration of the plan of subdivision because it was only after the plan of subdivision was registered that:
· the date for settlement could be identified;
· the first defendant was able to fulfil its contractual obligation and do all things necessary to enable the purchaser to become registered proprietor of the land. The first defendant had to provide a signed transfer of land containing relevant title particulars so the purchaser could lodge the same with the Land Titles Office. This position was reinforced by section 97(4C) of the Transfer of Land Act 1958 (Vic) which provides:
“until a plan of subdivision has been approved or registered, the Registrar shall not, on the relevant folio of the register make a recording giving effect to a dealing with an allotment or a lot and may refuse to accept for lodgement and may return to the party producing the same any instrument giving effect to a dealing with an allotment or a lot”
62 On the evidence, there seems to be no dispute that the contracts in this case were rescinded or discharged after the expiry of the 48 months but before the time at which the plan of subdivision was registered. Thus, I find that the various contracts of sale for the apartments never reached the point of being unconditional. At the time they came to an end, the condition referable to the registration of the plan of subdivision was still operative.
63 In my opinion, the case law supports the view I have adopted.
64 National Realty (Vic) Pty Ltd v Charles Lloyd Property Group Pty Ltd[17] concerned a case about the liability of a vendor of real property to pay commission to a real estate agent pursuant to a General Sale Authority and an Exclusive Sale Authority. The authorities concerned contracts for the sale of allotments on proposed plans of subdivision where the sale contracts were conditional upon the vendor and purchaser having the right to terminate the contract if the plan of subdivision was not registered within 18 months. The time expired and the sale contracts were terminated.
[17][2006] VCC 1061.
65 Special condition 12(h) of the contracts in question required the buyers and vendor to wait at least 18 months before either could exercise the option to terminate the contract and avoid the sale if the relevant plan of subdivision were not registered in that time.
66 Clause 2(c) of the Exclusive Sale Authority further provided that “the vendor is obliged to pay the agent…the agent’s fees if the vendor sells the property during the currency of this agreement (note particularly the meaning of “sells” as defined in agreed condition 1.16 over page)”.
67 The following definitions applied to both authorities:
· “sale” was defined as “…the result of obtaining a binding offer and ‘sell’ and ‘sold’ have corresponding meanings in the same situations”;
· “Binding offer” was defined as “… an offer on the terms set out in the particulars of appointment which, if accepted by the vendor, would (or does) result in a contract enforceable against the purchaser”.
68 There was no issue in the case about whether the contracts constituted an offer accepted by the vendor. The critical issue was whether, for the purposes of the General Sale Authority and the Exclusive Sale Authority, the sale contracts in respect of the allotments were contracts “enforceable against the purchaser” notwithstanding the terms of special condition 12(h).
69 The defendant contended that special condition 12(h) made the sale contracts conditional and, unless and until the condition was fulfilled by registration of the relevant plan of subdivision, the contracts could not be enforced against the purchaser and therefore the plaintiff was not entitled to commission from the sales.
70 Judge Anderson reviewed the authorities in some detail and set out a summary analysis of the principles. For present purposes, the following paragraph was particularly relevant:[18]
“For a period of 18 months [48 months in the present case], unless and until the plans of subdivision were registered in the meantime, the contracts of sale would remain conditional, i.e. they were binding contracts subject to the condition subsequent”
[18][2006] VCC 1061 at [25(c)].
71 Perri v Coolangatta Investments Pty Ltd[19] concerned a contract for the sale of land made on 7 April 1978. There was a special condition in the contract which said the contract was entered into subject to the purchasers completing the sale of their property at Lilli Pilli. There was no time fixed for completion. On 17 July 1978 the vendor gave a notice requiring the purchasers to complete by 8 August 1978. They did not do so. On 10 August 1978 the vendor gave the purchasers a notice rescinding the contract. On 29 September 1978 the vendor sued the purchasers claiming a declaration that the contract had terminated on about 10 August 1978. The purchasers did not complete the sale of the Lilli Pilli property until 13 June 1979. The purchasers cross-claimed for specific performance of the contract. Gibbs CJ, Stephen, Wilson and Brennan JJ held that when the time has elapsed for performance of a condition, which is not a promissory condition but a condition precedent to the obligation to complete a contract of sale, either party if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived.
[19](1982) 149 CLR 537.
72 Gibbs CJ noted that, in the particular case, it probably did not matter whether the condition was described as “precedent” or “subsequent” provided that it was understood that its non-fulfilment did not prevent a binding contract from coming into existence but did have the effect that the respondent was under no obligation to complete the sale unless the condition was fulfilled or waived.
73 To similar effect, Wilson J said that if it mattered at all, the special condition in the contract could be described accurately either as a condition subsequent to the formation of the contract or as a condition precedent to an obligation in either party to proceed to completion. The obligation to complete was contingent on the fulfilment of the condition. However, in the meantime, there was a conditional contract in existence from which neither party was at liberty to withdraw at will. Both parties had undertaken interim obligations. [20]
[20]Brennan J expressed similar views at pp. 565-6.
74 These views provide a useful perspective on the present case. By the terms of the Authority, the parties undertook binding obligations to each other. Again, consistent with the terms handwritten by Andrew Shen, the commission was payable in two tranches, the first being when the contracts of sale became unconditional. However, because the contracts of sale did not become unconditional, the entitlement to receive the initial tranche did not arise.
75 This view of the plaintiff’s entitlement to commission is also consistent with the principles of construction for commercial contracts. It constitutes a fair reading of the text. It gives effect to the various parts of the text and treats them harmoniously. It takes into account (and Li expressly agreed) there are extensive legislative requirements and practical steps involved in the process of obtaining registration of a plan of subdivision. The scope for potential delay in this process is recognised in special condition 11.2 and section 9AE of the Sale of Land Act. The construction also accords with the parties’ intention expressed in the Authority to the extent that the Authority did not contemplate that the agent would receive commission before the contract was unconditional. The Authority could have provided for commission to be payable in part upon signing the contract, but it did not. While the Authority provided for payment of commission in two tranches and one was to be before the settlement, it seems to me likely that the parties expected the initial payment to have been payable sooner i.e. although aware that registering a plan of subdivision could be a long process, they expected registration to be achieved more quickly than it was.
76 Mandy Lee is critical of Coastal Group’s position that in effect, special condition 11.2 is a condition affecting completion of the contract. Mandy Lee contends:
(a) special condition 11.2 does not provide the contract is “subject to” the provision. The clause had no operation during the first 48 months of the contract and therefore the contract was not “subject to” the clause.
(b) it was entirely within the vendor’s hands to procure registration of the plan of subdivision. There was nothing further for the agent to do and the agent could not control what occurred with the plan of subdivision.
77 While the contract did not in terms provide that it was “subject to” special condition 11.2, the proper interpretation of the sale contracts meant that it should be so read. Until the plan of subdivision was registered, the contract was not unconditional because the contingency remained that the plan of subdivision might not be registered within 48 months and one of the purchaser or vendor could terminate the contract. The fact that special condition 11.2 could not operate in accordance its terms before the expiration of 48 weeks did not mean that the special condition could be ignored and treated as if it were of no actual or potential effect. It seems to me that even if Mandy Lee earned the commission by selling the apartments, that is, obtaining contracts of sale by both purchaser and seller, the commission was not to be paid until a later date. The apartment sales were always conditional to the extent that special condition 11.2 might operate to affect the issue. Because the contracts of sale never become unconditional, the time for payment, as set out in the Authority, never arrived.
78 As noted earlier, the plan of subdivision might not become registered and yet Coastal Group might still have used its reasonable endeavours to try to procure its registration. Whether or not Mandy Lee as the agent could do anything to affect this outcome was irrelevant. If Mandy Lee believed that Coastal Group had failed to use reasonable endeavours to achieve registration, it ought to have made such a claim in the proceeding. It did not do so.
79 While it is appropriate to construe the Authority to avoid it being a commercial nonsense or commercial inconvenience, there are limits to this approach. It is not a proper basis to effectively authorise judicial re-writing of a provision to better reflect the result said by a party to accord with “commercial reality”, namely its financial interests.[21] Further, what in respect of a particular agreement comprises “business common sense” as an apparently objectively ascertained matter may itself be a topic upon which minds may differ and in respect of which imputed consensus is not possible.[22] A court must be wary of employing its own preconceptions of what constitutes business common sense in a particular context.[23] In this case, I do not regard the conclusion about the payment of commission to be unjust or uncommercial because it is consistent with the parties agreement as expressed in the words they used. However, even if I thought otherwise, the court has no power to re-make or amend a contract for avoiding a result which might be considered inconvenient or unjust.[24]
[21]Kooee Communications Pty Ltd v Primus Telecommunications [2008] NSWCA 5 at [27].
[22]Maggbury Pty Ltd v Hafele Aust Pty Ltd (2001) 210 CLR 181 at [11].
[23]North Sydney Leagues Club Ltd v Synergy Protection Agency Pty Ltd [2008] NSWSC 413, at [40].
[24]Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109 per Gibbs J in a dissenting judgment. However, the passage has subsequently been followed on many occasions.
80 I cannot determine in this case what position might be more consistent “business common sense”. The parties obviously negotiated about how and when any commission would be paid and expressed their agreement in the Authority. The net result is that half became payable when the contracts of sale became unconditional and the other half became payable upon completion and settlement of the apartments. To the extent that a condition was not satisfied, either the contracts remained conditional or did not settle, no part of the commission was payable.
(b)Was Mandy Lee entitled to 50% or all of the commission for Lots G1, G3, 13, 22, 24, 26? [25]
[25]This part of the claim relates only to the first contract of sale for Lots 13 and G1.
81 In my view, Mandy Lee is not entitled to payment of 50% of the commission (or any other percentage) payable in relation to the sale of Lots G1, G3, 13, 24, 26.
82 In each case, the contract of sale was rescinded at a time when the contract was still conditional. Thus, a condition which qualified the time at which any commission became payable remained unsatisfied and no payment was due.
83 Mandy Lee argued that there should be no dispute that the apartments were all completed as the occupancy permit was issued in due course. The second contracts in relation to Lots G1 and 13 settled. The contracts in relation to Lots G3, 22, 24 and 26 were rescinded and therefore did not result in settlements.
84 Mandy Lee submitted that the court should imply a term to the effect that, in the event that settlement failed to take place, the commission earned was payable on demand. Alternatively, the plaintiff argued that the court could imply a variation of such a term whereby the commission was payable within a reasonable time of demand being made.
85 Mandy Lee relied upon paragraph 4(g) of the Amended Replacement Statement of Claim which read as follows:
4. “There were terms of the Agreement, inter alia, that: …
(g)the timing with respect to the payment of commission was as follows:
(I)50% of the Agent’s commission would be payable uponthe Contract of Sale becoming unconditional; and
(II)the balance of the 50% commission would be payable upon the completion of the construction of the apartments and settlement of the sale, or in the event that the settlement fails to take place, upon demand.”
86 The particulars to paragraph 4 said that the terms of the agreement between Mandy Lee and Coastal Group regarding the sale of the apartments to be built at the property were partly written, partly oral and party implied. However, Mandy Lee did not identify which of the terms alleged were within which category. Unhelpfully, given the later reliance which Mandy Lee sought to place on the term, the plaintiff did not refer to this important issue in its opening. As a result, the defendants were a little surprised when Mandy Lee referred to the matter in closing submissions.
87 Mandy Lee’s argument is tantamount to saying that, although neither of the conditions specifying when commission was to be paid (which were referred to in the box on the lower right side of the Authority document) came to pass, it nonetheless was entitled to commission on the sale of the apartments.
88 I am disinclined to imply a term of the kind sought by Mandy Lee. In doing this, I accept that the parties probably did not consciously intend such an outcome. From one perspective, it is perhaps odd that commission earned should not be paid. However, the Authority did not expressly provide for what would happen if a contract of sale did not settle. But it did lay down the circumstances in which the commission would be paid.
89 In this case, I will not imply a term because I am not satisfied that the proposed term satisfies the criteria listed in BP Westernport v Shire of Hastings.[26] I consider that the proposed term:
[26](1977) 180 CLR 266.
· is not necessary to give business efficacy to the contract. It is effective without it;
· is not so obvious that it goes without saying; and
· is not necessarily reasonable and equitable.
For example, one might infer from the terms of the Authority that Mandy Lee should not receive 50% of the commission unless the construction of the apartments was completed and the contract settled. Similar considerations apply to the other half of the commission. It is an available inference, and indeed I have found, that Mandy Lee should not be paid that component of commission until the contract becomes unconditional.
(c)Was Mandy Lee entitled to be paid commission upon settlement of the second contracts of sale for Lots G1 and 13?
90 Mandy Lee claimed that, in the event it was not entitled to some or all of the commission under the first contracts of sale for Lots G1 and 13, then it should be entitled to commission, as a result of the later settlement of these properties pursuant to the second contracts of sale. This was because of the “saving provision” contained in general condition 11 of the Authority.
91 The plaintiff relied on general condition 11, which provided that:
“An agreement of the Vendor and purchaser to cancel a contract of sale or the ending of a contract of sale as a result of a default of the Vendor or Purchaser does not relieve the Vendor of the obligation to pay the Agent’s professional fees”
92 Mandy Lee submitted[27] that there must have been an agreement between the purchasers and Coastal Group to cancel the first contracts, and that this situation was covered by the scenario contemplated in general condition 11.
[27]Paragraph 38, Plaintiff’s closing submissions.
93 This was because in each case, the second contract was signed before the first contract had been rescinded. The plaintiff contended that from this, I could infer there was an agreement between Coastal Group and the purchaser, to the effect that the first contracts should be cancelled.
94 It was effectively agreed between the plaintiff and defendants at trial that the first contract for Lot G1 was dated 9 January 2011, the second contract was dated 19 September 2014 and the first contract for Lot G1 was rescinded on 28 January 2015.
95 Similarly, it was agreed between the parties that the first contract for Lot 13 was dated 15 November 2010. It was also common ground that the first contract for Lot 13 was rescinded on 17 December 2014.
96 However, the situation with the second contract for Lot 13 was more complicated.
97 Copies of the contract in the court book bore various dates. On one copy, the handwritten date next to the purchaser’s signature was 15 November 2010, whilst the vendor’s signature was dated 15 November 2012. The due date for deposit was 28 November 2010. A further copy, which was attached to a letter dated 14 April 2015 from Bentley Koch Real Estate to Korosidis Lawyers, was dated 15 September 2014.
98 The plaintiff contended that the 15 September 2014 date was correct, whilst Mimmo insisted that the written dates on the contracts were incorrect and, in fact, the contract had been agreed in April or May 2015.
99 The plaintiff provided several reasons in support of its contention.
100 First, the plaintiff contended that the 15 September 2014 date was correct, because it had been attached to an email from Korosidis Lawyers where it was confirmed as bearing the correct date. By email dated 15 September 2015, Korosidis Lawyers had emailed the purchaser’s solicitors stating:
“Further to my email below I attach the following for your attention:
1. Execution page and particulars of Contract of Sale. Unfortunately, the previous contract of sale was not dated correctly and accordingly the parties have re-executed the contract and included the correct date”
101 When pressed with this in cross-examination, Mimmo denied that this showed the 15 September 2014 date was accurate, stating that the solicitors had put that date in on the basis of Les Cook’s incorrect instructions. He did not provide any evidence to support this explanation.
102 Secondly, Mimmo could not account for why the 2010/2012 contracts bore those dates, when they were in a standard form adopted in 2014. He also could not point to who inserted the “grossly false” 2010/2012 dates. He agreed that he signed three ‘pro forma’ versions of the contracts and vendor statements in March/April 2015 but said that he was not responsible for dating them. He insisted that one copy bore a March/April 2015 date, but when the plaintiff called for production of this document neither Mimmo nor his legal representatives could provide this copy to the court. Mimmo said he left the contracts with Les Cook. He also could not explain who incorrectly filled in statements, on both of those contracts, which listed the value of improvements and balance of construction costs. He agreed that these statements were false, and that in this context of building, people falsify such information to reduce stamp duty costs.
103 Thirdly, Mimmo denied that the 15 September 2014 contract was merely a “crudely changed version” of the 2010/12 contract. He contended that the contract was in the form of the new version of contracts provided by Korosidis Lawyers to the first defendant in January 2015. No explanation or evidence was provided to support this denial, even though there was evidence on the 2014 contract itself that white out had been used, with the addition of handwritten “dots” to continue the original signing line. Further, the signatures and handwriting of the names of signatories was exactly the same.
104 Fourthly, because the contract was in the standard form from 2014, and given the secondary contract for Lot G1 was dated 27 September 2014, it was more probable that the contract was dated 15 September 2014.
105 Mimmo did not provide any evidence in support of his explanation that the agreement was made in April or May 2015. However, in closing submissions, the defendants contended that the document dated 15 September 2014 was in the form of that supplied by Korosidis Lawyers to the defendants in January 2015.
106 Mandy Lee further submitted that the wording of the Authority did not require that the contract of sale under which a property settled, be brought about by the action of Mandy Lee as the agent. Rather, the Authority stated that the apartments be completed and settled. Such an interpretation was said to be commercially understandable, because it would ensure that Mandy Lee would be paid once Coastal Group had the cash from settlement. This was so particularly in circumstances where the handwritten terms about when commission was to be paid took account of both parties’ cash-flow needs. [28] Further, Mandy Lee contended that it was not precluded from receiving commission based on the doctrine that to earn a commission, the agent must be the cause of the sale. This was because, on the plaintiff’s view, commission would be earned upon entry into the first contract, but the time at which it became payable was upon the settlement of the property. It did not matter that the settlement came about as a result of the second contract.
[28]The defendants did not make submissions on this point.
107 Additionally, although general condition 11 referred to cancellation, rather than rescission, the plaintiff submitted that the terms were used interchangeably. Counsel referred to parts of Cheshire & Fifoot’s Law of Contract in support of its submission.
108 The defendants submitted that the plaintiff could not rely on general condition 11 for several reasons.
109 First, neither of the first contracts for Lot 13 or G1 was cancelled. Rather, they were validly rescinded by the first defendant. It was submitted that “cancel” in the context of general condition 11, meant a mutual decision by both parties to no longer give effect to the contract. Rescission, on the other hand, was a unilateral exercise of a right to set aside the contract, pursuant to special condition 11.2 of the contracts of sale.
110 Secondly, the plaintiff could not contend for cancellation of the contracts, having admitted that they were rescinded on the dates outlined above.
111 Thirdly, neither the first defendant nor the purchasers entered into agreements to cancel the first contracts in respect of these properties. In support of this proposition, I was directed to the fact that other contracts had been rescinded by the first defendant without entering into further contracts. Thus, it was submitted, it was unlikely there was some pre-rescission agreement to cancel the initial contracts of sale. This was also supported by the fact that the contracts of sale and vendor statements comprising the second contracts were said to have been prepared by Korosidis Lawyers in pro-forma format after the rescission of the first contracts, as evidenced by an email dated 27 January 2015 which confirmed they were completed.
112 Fourthly, general condition 11 only preserved a liability to pay commission if it existed at the date of any agreement to cancel the contract. Therefore, even if there were such an agreement, because the contracts remained unconditional, there was no liability to pay commission.
113 I accept, on the balance of probabilities, that there was an arrangement which fell within general condition 11 between the purchaser and Coastal Group to cancel the contracts. This is largely because, in the absence of any reasonable explanation proffered by the defendants, it seems an appropriate inference to draw from the evidence of the circumstances and dealings between the various parties.
114 Thus, as I have found that commission was earned on the signing of the first contracts in respect of Lot 13 and Lot G1, commission earned would be protected by this provision.
115 However, even if general condition 11 operates as a saving clause for commission earned, it will not necessarily assist Mandy Lee in this case. Mandy Lee conducted its claim on the basis that the commission was payable as set out in the Authority. The conditions for payment were not satisfied with respect to the first contracts of sale regarding Lots G1 and 13, hence, the contracts of sale were not unconditional.
116 In passing, I note that I do not accept that by virtue of the Authority, Mandy Lee is entitled to receipt of commission on the second contract of sale for Lot G1 and 13. I am not satisfied that such a claim falls properly within the terms of the Authority.
117 Further, in circumstances where there was confirmation from Korosidis Lawyers as to the correctness of the September 2014 date, coupled with an absence of any evidence to support Mimmo’s proffered 2015 dates, I accept that it is more probable that the agreement for Lot 13 was signed in 2014, rather than on the proposed 2015 dates. I am also less inclined to rely on Mimmo’s account, given my views about his credibility and the reliability of his evidence.[29]
[29]See also at [148].
118 The plaintiff’s cross-examination of Mimmo in respect of the Lot 13 contracts caused me to have concerns about the accuracy and veracity of the evidence he was giving.
119 Signing a suite of undated, pro-forma contracts and vendor statements, as Mimmo says he did, indicates a potentially reckless attitude towards ensuring that binding legal documents will be accurate. Such conduct facilitates the scope to cause mischief. But, of itself, such behaviour would not be determinative of Mimmo’s truthfulness.
120 However, when this behaviour is coupled with Mimmo’s inability to explain who filled in the dates and information concerning construction and building costs on the contracts and vendor statement details, it suggests that, at the very least, he has insufficient knowledge of the contracts themselves to be providing pertinent and accurate evidence about them.
121 Further, it seems incongruous that someone who plainly understands the importance of these documents for legal purposes – for example, in calculating stamp duty[30] - would be so reckless as to not even know who was inserting information into these documents. Again, this indicates a failure on Mimmo’s part to care about the veracity of these documents. However, it could also be indicative of a reluctance to truthfully answer counsel’s questions.
[30]Which Mimmo discussed during his cross-examination. See T276/12-17.
122 I also accept the plaintiff’s submission that Mimmo was an “unresponsive witness”. Mimmo adopted a somewhat evasive approach to answering the plaintiff’s questions. On several occasions, the court had to remind Mimmo of his obligation to respond to counsel’s questions, rather than failing to answer directly the question asked.
(d)Did the defendants engage in unconscionable conduct in relation to Lot G1? If so what, if any, damages are payable?
123 Mandy Lee alleges that the defendants’ conduct in relation to the second contract with Lac in relation to Lot G1 was a contravention of section 8 of the Fair Trading Act 1999 (Vic)[31] and section 21 of Schedule 2 of the Competition and Consumer Act 2010 (Cth), the Australian Consumer Law (“ACL”).
[31]This Act was repealed on 1 July 2012.
124 Section 21 of the ACL relates to unconscionable conduct as follows:
“21 Unconscionable conduct in connection with goods or services
(1) A person must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person (other than a listed public company); or
(b)the acquisition or possible acquisition of goods or services from a person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
(2)This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b)refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3)For the purpose of determining whether a person has contravened subsection (1):
(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b)the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4) It is the intention of the Parliament that:
(a)this section is not limited by the unwritten law relating to unconscionable conduct; and
(b)this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c) in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii)the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.”
125 Section 20 of the ACL provides as follows:
“20 Unconscionable conduct within the meaning of the unwritten law
(1)A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.
Note: A pecuniary penalty may be imposed for a contravention of this subsection.
(2)This section does not apply to conduct that is prohibited by section 21.”
126 Thus, section 21 is different from section 20 of the ACL – section 21 refers to unconscionability ‘in all the circumstances’ and makes no reference to the concept of unconscionability within the meaning of the unwritten law.
127 It was admitted that Coastal Group was engaged in trade or commerce and that Mandy Lee engaged in the supply of services to it, such as to enliven section 21. Thus, the question at trial was whether Coastal Group had engaged in ‘unconscionable’ conduct.[32]
Legal principles
[32]And whether Mimmo was accessorily liable.
128 In Body Bronze International Pty Ltd v Fehcorp Pty Ltd,[33] Macaulay AJA (with whom Harper and Hansen JJA agreed) considered the meaning of sections 51AA and 51AC of the Trade Practices Act 1974 (Cth) (“Trade Practices Act”). While this predecessor legislation is different from the current legislation in the ACL, the words considered were in the same terms – that is, section 51AC referred to unconscionable conduct ‘in all the circumstances’ whereas section 51AA referred to unconscionability ‘within the meaning of the unwritten law’.
[33][2011] VSCA 196.
129 Macaulay AJA noted that while the concept under section 51AA was confined in its operation by reference to specific equitable doctrines such as unconscientious exploitation of serious disadvantage and undue influence, “the concept of unconscionability under section 51AC is not so confined, and is ‘at large’.”[34] Thus, it is clear that the scope of section 21 of the ACL is wider than that of section 20.
[34]Ibid, at [87] and the cases cited therein.
130 Section 22 of the ACL provides a non-exhaustive set of matters which the court may have regard to for the purposes of section 21. It provides:
“22 Matters the court may have regard to for the purposes of section 21
(1)…
(2)Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier), the court may have regard to:
(a)the relative strengths of the bargaining positions of the acquirer and the supplier; and
(b)whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and
(c)whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and
(e)the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and
(f)the extent to which the acquirer’s conduct towards the supplier was consistent with the acquirer’s conduct in similar transactions between the acquirer and other like suppliers; and
(g) the requirements of any applicable industry code; and
(h)the requirements of any other industry code, if the supplier acted on the reasonable belief that the acquirer would comply with that code; and
(i)the extent to which the acquirer unreasonably failed to disclose to the supplier:
(i)any intended conduct of the acquirer that might affect the interests of the supplier; and
(ii)any risks to the supplier arising from the acquirer’s intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and
(j)if there is a contract between the acquirer and the supplier for the acquisition of the goods or services:
(i)the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and
(ii) the terms and conditions of the contract; and
(iii)the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and
(iv)any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k)without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the goods or services; and
(l)the extent to which the acquirer and the supplier acted in good faith.”
131 In relation to the matters set out in section 22,[35] Macaulay AJA stated that:[36]
“Not only do these factors assist in comprehending the intended scope and meaning of unconscionable conduct prohibited by the section, but they also provide a useful, although non-exhaustive, set of factors by which to test the particular conduct in question.”
[35]Macaulay AJA was referring to the equivalent provision in the Trade Practices Act 1974 (Cth). For present purposes, they are in substantially the same terms.
[36]Ibid, at [76].
132 In Director of Consumer Affairs Victoria v Scully,[37] Santamaria JA (with whom Neave and Osborn JJA agreed) stated that these listed matters are not to be regarded as automatically rendering conduct unconscionable – rather, they are indicia of unconscionability.[38]
[37][2013] VSCA 292.
[38]Ibid, at [44].
133 Statutory unconscionability is determined by the conduct of a party ‘in all the circumstances’. A party may have had good reason for breaking the contract which involves no moral taint nor any desire to exploit a vulnerability of the other party to the transaction. Macaulay AJA in Body Bronze stated:[39]
“A decision may be taken to break a contract because, upon rational commercial considerations, the burden of performance may be greater and more onerous than the liability to be incurred if the conduct amounts to breach. The party committing the breach may know that it will deliver to the opposite party an opportunity to exercise rights both under and outside the contract that flow from the breach, and that the opposite party has the means to exercise and enforce those rights. Those rights may include seeking injunctive relief to restrain the breach, accepting a repudiation of the contract so as to terminate executory obligations and seeking damages, or keeping the contract on food and merely seeking damages. There may be nothing offensive to conscience in a commercial participant taking such a commercial decision in given circumstances. Whether or not it amounts to unconscionable conduct does not simply flow from it being a deliberate breach; it must be evaluated ‘in all the circumstances’.”
[39]Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196, at [92].
134 Unconscionable conduct must involve some form of moral taint or conduct which is unethical. In Tonto Home Loans Australia Pty Ltd v Tavares,[40] Allsop P did not decide whether a “high level” of moral obloquy was required. Instead, His Honour considered that “[w]hat is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party”.[41]
[40][2011] NSWCA 389.
[41]Ibid, at [293] (Bathurst CJ and Campbell JA agreeing on this point).
135 In a sense, the decision of whether conduct is unconscionable in all the circumstances will, at least in part, lie in the value judgment of the particular decision maker.[42]
[42]Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196, at [93].
136 Mandy Lee alleges that the defendants acted unconscionably by reason of the following:[43]
[43]At paragraph 41 of plaintiff’s written closing submissions.
(a) Coastal Group entered into a contract of sale for the purchase of Lot G1 by Lac dated 9 January 2011. The sale price was $420,000. This purchaser was introduced to the vendor by Mandy Lee. If this first contract of sale had been satisfactorily completed, Mandy Lee would have been entitled to $23,100 commission.
(b) on about 19 September 2014, Coastal Group entered into a second contract of sale for the purchase of Lot G1. Again, the purchaser was Lac.
(c) the nominal price in the second contract was $520,000 but it contained a rebate of $100,000. Thus, the plaintiff alleges that the effective sale price of Lot G1 was the same in both the first and second contracts.
(d) the making of the second contract of sale was concealed from the agent because:
(i) the vendor said nothing to the agent about the second contract;
(ii) the rebate was designed to conceal the true price; and
(iii) the vendor failed to discover the second contract in the proceeding until the agent made an application for further discovery.
Coastal Group concealed the second contract from Mandy Lee. Coastal Group acted in bad faith.
(e) the first contract dated 9 January 2011 was rescinded by Coastal Group by a notice of rescission dated 28 January 2015.
137 Mandy Lee alleged that there was no commercial purpose for the making of the second contract other than to deprive it of its commission.
138 Coastal Group denied that it acted unconscionably.
139 First, it pointed to the fact that its conduct in this regard involved no breach of contract – due to special condition 11.2, Coastal Group was acting within its rights under the first contract of sale when it sent a notice of rescission.
140 Secondly, Coastal Group denied concealing the contract of sale in respect of Lot G1 from Mandy Lee and submitted that such contracts could not be concealed – it states that the change of ownership would be lodged at the Land Titles Office and a search of the register would reveal its owner.
141 Thirdly, Coastal Group submitted that there were other significant changes to the terms of the second contract by comparison with the first contract. These included, inter alia, that the property’s use was now residential rather than student accommodation; it was now an apartment complex where all other apartments were residential use apartments; its design had altered; some fixtures, fittings and finishes were different and now contained overhead cupboards, laundry, dishwashing and air-conditioning (as opposed to the first contract which had none).
142 Fourthly, Coastal Group contended that there was a legitimate commercial purpose for the making of the second contract. Coastal Group submitted that the $100,000 rebate in the second contract was a “commercial promotion” that was offered to Lac to hold him as purchaser. Mimmo proffered the following explanation when asked why Coastal Group offered the purchaser a rebate of $100,000:
“When he finally looked at the actual property, two things. He was only been able to fund I think it was around the 400, something like that, thousand. We'd actually shrunk his unit down a little bit by the time his original to the second one. It changed a few of the head heights because we had to increase the ramp side to get under the car park. So his height inside the unit was affected a little bit. The bedrooms had swapped around. Just a variety of changes inside.”
This answer is a little puzzling. If the accommodation was changed in some ways which were adverse to the purchaser, it would seem odd to increase the nominal price by $100,000. Even allowing for the rebate, it seems strange to charge the same price for worse accommodation – the reduced area and lower ceilings. Although there was no definitive evidence on the point, perhaps the pricing reflected a balance between the adverse change to the rooms in the apartment and the addition of some whitegoods and fittings.
143 Fifthly, Mimmo gave evidence that a commercial purpose of the rebate was to prevent the prices for other two bedroom units from falling. He said that he was selling the two bedroom units at the property for approximately $500-550,000. Mimmo said that if he sold Lot G1 for $420,000, that would become a reference price and might have the effect of lowering the prices on the remaining two bedroom units. Thus, it was worthwhile for the defendants to give Lac a rebate of $100,000 to maintain the prices on the other units.
144 Besides referring me to authorities which made good the propositions propounded above (and about which there was no real disagreement), the parties did not refer me to any authorities in which an analogous situation has occurred. As such, it seems that I am, at least in part, required to make a judgment on the morality of the conduct undertaken by the defendants in all the circumstances.
145 Using the ‘indicia’ contained in section 22 of the ACL, I find, on balance, that Coastal Group acted unconscionably.
146 First, it is clear that Coastal Group obtained the benefit of the work done by Mandy Lee. Mandy Lee found a prospective purchaser. Coastal Group was able to satisfactorily settle the sale of Lot G1 with that purchaser. After Mandy Lee introduced the purchaser to the vendor, completion of the sale was out of its control – its work was done. In effect, Coastal Group received the benefit of the work done by Mandy Lee without paying for it. I find that avoiding liability to pay commission for this work by settling on a separate but substantially unchanged contract constitutes an unfair tactic for the purposes of section 21(2)(c).
147 Secondly, for the reasons referred to in the above paragraph, I find that Coastal Group’s conduct constituted bad faith. This is a factor to be taken into account by section 21(2)(l).
148 Thirdly, I reject Coastal Group’s submissions that it did not conceal the making of the second contract from Mandy Lee. While it is strictly true that a titles search would reveal the registered proprietor of the property, it would not reveal the terms of the contract of sale. Nor is it incumbent upon the estate agent to check this. Further, my finding is reinforced by the fact that the defendants failed to discover the second contract of sale until an order of the court required it. To this end, the indicia at section 21(2)(i) is instructive. Here, the vendor unreasonably failed to disclose to the estate agent any intended conduct of the vendor which might affect the interests of the estate agent.
149 Finally, I do not find that Coastal Group could establish any sufficient, commercial purpose to justify the making of the second contract with Lac. Coastal Group did not provide a cogent explanation for discharging the initial contract with Lac. I did not accept the evidence of Mimmo on the matter. As discussed earlier, Mimmo’s credibility was suspect and I did not regard him as a witness whose testimony could be relied upon. Also, his demeanour in the witness box was not impressive. Nor did Coastal Group provide any satisfactory explanation of why it engaged a new agent for the second contract.
150 After considering the cumulative effect of these matters set out above, I find that the defendants contravened section 21 of the ACL, Coastal Group being the primary actor and Mimmo being liable in his accessorial capacity as the directing force and controller of Coastal Group.
Damages
151 I have found above that Coastal Group acted unconscionably within the meaning of section 21 of the ACL. The plaintiff claimed loss and damage pursuant to section 236 of the ACL.
152 Section 236 of the ACL provides as follows:
“236 Actions for damages
(1) If:
(a)a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
(2)An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.”
153 Mandy Lee did not particularise the loss and damage claimed. Nor did either party make any written or oral closing submission on the specific amount of the damages which might flow from any finding of unconscionability.
154 In Wardley Australia Ltd v The State of Western Australia,[44] the High Court considered section 82 of the Trade Practices Act.[45] In Wardley, Mason CJ, Dawson, Gaudron and McHugh JJ stated[46] that the section should be understood as taking up the common law practical or common-sense concept of causation discussed in March v Stramare[47] except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Hence, causation is essentially a fact to be determined by reference to common sense or experience.[48]
[44](1992) 175 CLR 514.
[45]Section 82 of the Trade Practices Act provides that an applicant must prove that loss or damage was suffered “by conduct” in breach of that Act, whereas the ACL provides that the applicant must prove that loss or damage was suffered “because of” conduct in breach of the ACL. As with the learned author of Millers’ Annotated Competition and Consumer Law, I am satisfied that the use of a different phrase appears to make no practical difference.
[46]Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at [11].
[47](1991) 171 CLR 506.
[48]Director of Consumer Affairs Victoria v Scully [2013] VSCA 292 at [41].
155 Here, using a common sense approach, I find that Coastal Group’s unconscionable conduct caused Mandy Lee to suffer loss. I find the quantum of that loss and damage to be $23,100, being the amount to which the agent would have been entitled under the Authority in respect of the contract for Lot G1 but for the defendants’ breach of the ACL.
Conclusion
156 In summary, I have reached the following conclusions regarding the claim by Mandy Lee:
(a) 50% of the agent’s fee was not payable because the contracts of sale did not become unconditional;
(b) 50% of the agent’s fee was not payable because the contracts for the sale of the apartments did not settle;
(c) the agent was not entitled to be paid 50% of the commission for Lots G1, G3, 13, 22 24 and 26;
(d) the agent was not entitled to be paid commission upon the settlement of the second contracts of sale for Lots G1 and 13;
(e) the defendants engaged in unconscionable conduct in relation to Lot G1 and the agent is entitled to damages of $23,100.
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