Mantova Holdings Pty Ltd v Caruso
[2010] FMCA 682
•3 September 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MANTOVA HOLDINGS PTY LTD v CARUSO | [2010] FMCA 682 |
| TRADE PRACTICES – Misleading and deceptive conduct – sale of property –whether exclusive agency agreement – whether exclusive agency agreement until property sold – whether a provision in a contract is a representation – whether representations misleading and deceptive – whether loss and damage consequent upon representations. CONTRACT – Counter-claim – whether implied term to act in best interests of seller. WORDS AND PHRASES – “until sold” – “waiver”. |
| Federal Court Rules (Cth), O35, r.8 Federal Magistrates Act 1999 (Cth), ss.18, 76(3)(d), 77(3)(a) Federal Magistrates Court Rules 2001 (Cth), r.26.01 Real Estate and Business Agents Act 1978 (WA), ss.61(4), 64(1) and (2) Trade Practices Act 1974 (Cth), ss.4(2)(a), 6(3)(a), 51A, 52, 82, 87 |
| Agricultural and Rural Finance Pty Ltd v Gardiner & Anor (2008) 238 CLR 570; [2008] HCA 57 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 Western Power Corporation v Normandy Power Pty Ltd [2001] WASC 202 |
| P. N. Wikramanayake SC, Voumard The Sale of Land (6th Edn) (Sydney: Lawbook Co, 2009) M. Woodley (Ed), Osborn’s Concise Law Dictionary (10th Edn) (London: Sweet & Maxwell, 2005) |
| Applicant: | MANTOVA HOLDINGS PTY LTD T/AS RAINE & HORNE MIDLAND |
| Respondent: | ROBERTO CARUSO |
| File Number: | PEG 155 of 2008 |
| Judgment of: | Lucev FM |
| Hearing date: | 28 April 2009 |
| Date of Last Submission: | 28 April 2009 |
| Delivered at: | Perth |
| Delivered on: | 3 September 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr A. Rumsley |
| Solicitors for the Applicant: | Alan Rumsley, Commercial Disputes Lawyer |
| Counsel for the Respondent: | Mr M.F. Dwyer |
| Solicitors for the Respondent: | Mendelawitz Morton Solicitors |
ORDERS
That the Respondent pay the Applicant:
(a)the sum of $100,000;
(b)interest on above sum of $20,000
by 1 October 2010.
That the Respondent pay the Applicant, by way of interest on judgment, pursuant to s.77(2) and (3) of the Federal Magistrates Act 1999 (Cth), and O.35 r.8 of the Federal Court Rules, at the rate of 10.5% per annum from 3 September 2010 until payment.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 155 of 2008
| MANTOVA HOLDINGS PTY LTD T/AS RAINE & HORNE MIDLAND |
Applicant
And
| ROB CARUSO |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter involves the entry into a selling agency agreement[1] granting the applicant rights in relation to the sale of the respondent’s commercial property in High Wycombe.[2] The dispute concerns the applicant’s entitlement to payment of commission under the Selling Agency Agreement, when the property was eventually sold by the respondent, without the involvement of the applicant.
[1] REIWA Internet Listing Service Selling Agency Agreement Residential entered into by the parties on 18 May 2007 – Exhibit A4 (“the Selling Agency Agreement”).
[2] Being lot 797 on plan 55349 and being certificate of title volume 2681 folio 801 (“the Property”).
The applicant is a corporation, Mantova Holdings Pty Ltd, a real estate agency trading under a franchise agreement as Raine & Horne Midland.[3] Mr Vincenzo Pileggi[4] is a licensed real estate agent, Director and Licensee of Mantova Holdings.[5]
[3] “Mantova Holdings”.
[4] “Mr Pileggi”.
[5] Transcript at 4.
The Respondent is Mr Roberto Caruso.[6] Mr Caruso has a franchise agreement under which he trades as a real estate agency, Raine & Horne Southern River. Mr Caruso is the trustee of The Caruso Family Trust, which was the holder of a beneficial interest in the Property, under an option to purchase from on or about April 2007, until it was sold on or about 20 March 2008.
[6] “Mr Caruso”.
Application
The application is made under ss.52, 82 and 87 of the Trade Practices Act 1974 (Cth)[7], and s.18 of the Federal Magistrates Act 1999 (Cth).[8]
[7] “TP Act”.
[8] “FM Act”.
Mantova Holdings claims the following:
a)damages of $100,000 under s.82 of the TP Act in respect of alleged representations constituting misleading and deceptive conduct by Mr Caruso in breach of s.52 of the TP Act;
b)further and in the alternative, damages in the amount of $100,000 for breach of the terms of the Selling Agency Agreement;
c)interest on damages pursuant to s.77(3)(a) of the FM Act at 10.5% as set by r.26.01 of the Federal Magistrates Court Rules 2001 (Cth)[9] and O35 r.8 of the Federal Court Rules (Cth);[10] and
d)costs.
[9] “FMC Rules”.
[10] “FC Rules”.
Response
Mr Caruso filed a response on 24 November 2008, opposing the orders sought by Mantova Holdings.
Mr Caruso seeks an order that Mantova Holdings pay Mr Caruso the sum of $100,000 by way of damages, for breach of an exclusive agency agreement within the Selling Agency Agreement between Mantova Holdings and Mr Caruso.
Issues
Representations
The issues which arise in respect of the alleged representations are:
a)did Mr Caruso make written and oral representations to Mantova Holdings?
b)if Mr Caruso did make representations to Mantova Holdings:
i)were they misleading or deceptive?
ii)were they in relation to a future matter pursuant to s.51A of the TP Act?
iii)did Mantova Holdings rely on them?
iv)has Mantova Holdings suffered loss and damage as a result?
Selling Agency Agreement
The issues which arise in respect of the Selling Agency Agreement are:
a)did Mr Caruso breach the written Selling Agency Agreement?
b)if Mr Caruso breached the written Selling Agency Agreement has Mantova Holdings suffered loss and damage as a result?
c)was there an implied term[11] in the Selling Agency Agreement that Mantova Holdings would act in the best interests of Mr Caruso at all times? and
d)if there was such an Implied Term:
i)did Mantova Holdings breach the Implied Term by failing to inform Mr Caruso that the purchaser of the Property had not obtained finance by the due date on 1 October 2007?;
ii)did Mantova Holdings act in breach of the Implied Term by failing to renegotiate the deposit so that it would become non-refundable?;
iii)did Mantova Holdings act in breach of the Implied Term by informing Mr Caruso that finance had been approved when it had not?
iv)did Mr Caruso lose money on the re-sale of the Property?
[11] “Implied Term”.
Basic factual background
The following is the basic factual background to these proceedings:
a)subsequent to a telephone conversation between Mr Pillegi and Mr Caruso on either 16 or 18 May 2007, the Selling Agency Agreement was signed on 18 May 2007 appointing Mantova Holdings as selling agent for the Property;
b)i) on 1 June 2007 Mr Pileggi presented an offer to purchase the Property on behalf of Cadora Pty Ltd and another prospective purchaser;[12]
[12] “Cadora Offer”.
ii)the Cadora Offer was rejected by Mr Caruso and a counter-offer made;[13] and
iii)the Cadora Counter-Offer was in turn rejected on about 5 June 2007 by the prospective purchasers;[14]
c)on 1 August 2007 Mr Pileggi presented an offer to purchase the Property on behalf of Mr Jambanis, which, after the inclusion of an additional term at the request of Mr Caruso, was accepted;[15]
d)on 4 October 2007 Mr Caruso accepted payment of $50,000 as an initial deposit on the Jambanis Offer;[16]
e)by 17 November 2007 finance on the Jambanis Offer had not been arranged, and Mr Pileggi’s son, Michael Pileggi, told Mr Caruso that he should sell to another purchaser;[17]
f)an offer to purchase the Property from WA Land Holdings Pty Ltd,[18] was accepted by Mr Caruso on 20 November 2007;[19] and
g)on 20 March 2008 settlement on the sale of the Property to WA Land Holdings took place.[20]
Representations alleged
[13] “Cadora Counter-Offer”.
[14] “Cadora Rejection”; affidavit of Vincenzo Gaetano Pileggi sworn 21 February 2009, para.18 (“First Pileggi Affidavit”); affidavit of Roberto Caruso sworn 25 March 2009, paras.22-28 (“Caruso Affidavit”).
[15] “Jambanis Offer”; First Pileggi Affidavit, paras.21-23; Caruso Affidavit, paras.32-34.
[16] First Pileggi Affidavit, paras.29-30; Caruso Affidavit, paras.40-42.
[17] Caruso Affidavit, para.48.
[18] “WA Land Holdings”.
[19] “WA Land Holdings Acceptance”.
[20] “Settlement”; Caruso Affidavit, para.62 and Annexure RC20.
Representations alleged by Mantova Holdings to have been made by Mr Caruso
Mantova Holdings alleges that the following representations were made by Mr Caruso:
a)that in a telephone conversation between Mr Pileggi and Mr Caruso on or about 16 May 2007 Mr Pileggi was told that Mantova Holdings would be appointed to sell the Property;[21]
b)in the Selling Agency Agreement Mr Caruso made representations that he would appoint Mantova Holdings to sell the Property “under an exclusive agency agreement, until the property was sold and pay Mantova Holdings a $100,000 fee when the property was sold”;
c)Mantova Holdings was appointed to sell the Property under an exclusive agency agreement;
d)the exclusive agency period was from and including the date of the Selling Agency Agreement until the Property was sold;[22] and
e)the selling fee (inclusive of GST) was $100,000. The selling fee would be payable if, during the exclusive rights period, the Property was sold or exchanged.
[21] Statement of Claim at para.4.1.
[22] Statement of Claim at para.12.
Admissions and denials concerning the alleged representations
Mr Caruso admits that he stated and represented to Mr Pileggi that Mr Caruso would appoint Mantova Holdings to sell the Property, and that he did so under the terms of the Selling Agency Agreement for the period 18 May 2007 until the Property was sold.[23]
[23] Defence and Cross-Claim at para.3. Although styled as a “Cross-Claim” the “Cross-Claim” is in fact a counter-claim, but for convenience is referred to hereafter as “Cross-Claim”.
Mr Caruso admits that he was at all material times engaged in trade or commerce for the purposes of the TP Act in relation to the marketing and sale of the Property.[24]
[24] Statement of Claim, para.5; Defence and Cross-Claim, para.4. On the basis of the facts in the Statement of Claim the admission accords with authority: Haydon & Anor v Jackson & Ors (1988) ATPR 40-845.
Mr Caruso denies that he appointed Mantova Holdings to sell the Property on an exclusive basis. The denial goes to what the parties agreed the basis of the Selling Agency Agreement would be and the meaning of the terms of the Selling Agency Agreement.
Detailed factual background
Purchase of the Property by Mr Caruso
On 25 January 2007 Mr Caruso, as trustee for The Caruso Family Trust (and/or nominee – specified as Perth Home and Land Sales Pty Ltd) entered into a contract for sale of land with SAS Global High Wycombe Pty Ltd[25] for the sale of the Property with a purchase price of $825,000 cash plus GST.[26]
[25] “SAS Global”.
[26] Caruso Affidavit, para.5 and Annexure RC1 (“SAS Global Contract”).
Proposed sale of the Property by Mr Caruso
On 19 February 2007 Mr Caruso sent details of the Property to other Raine & Horne franchisees to see if any of them had a buyer for the Property.[27] What Mr Caruso says was sought was a further sale of the Property to settle at the same time as Mr Caruso’s purchase of the Property from SAS Global, which he says was due to settle on 12 March 2008.[28] Mr Caruso says the sale of the Property was necessary because of a taxation liability to the Australian Taxation Office[29] said to have been incurred by him at or about the same time as the Property was sold to him.[30]
[27] Caruso Affidavit, para.8 and Annexure RC4.
[28] Caruso Affidavit, para.7.
[29] “ATO”.
[30] Caruso Affidavit, para.6 and Annexure RC3.
Apart from the fact that the Property purchase by SAS Global did settle on 20 March 2008,[31] there is nothing, other than what was said by Mr Caruso in his evidence, to indicate that that date was fixed as the settlement date at the time of the purchase of the Property from SAS Global. The SAS Global Contract contains two conflicting provisions concerning settlement dates: the first being “40 Days: upon confirmation/issuance of title”, and the second, in SAS Global’s “Standard Industrial Conditions”, provides that “settlement date” “means 14 days from issue of title”.[32]
[31] Caruso Affidavit, Annexure RC20.
[32] Caruso Affidavit, Annexure RC1.
Tax debt
Mr Caruso says that he agreed to pay the ATO $5,000 a month from 30 August 2007, and settle the balance on 12 March 2008 when settlement on his purchase of the Property was allegedly due.[33]
[33] Caruso Affidavit, para.7.
The documentary evidence of the taxation liability relied upon by Mr Caruso consists of:
a)a page, marked 1 of 5, of a letter from the ATO addressed to “Landsmart Pty Ltd” issued on 24 October 2007, the first paragraph of which reads as follows:
We refer to your recent request regarding your outstanding account and agree to accept an arrangement for payment by instalments. The conditions of this arrangement are:
-Payments must be made as detailed in the schedule below
-All future lodgement obligations must be met by the due dates
-All future payment obligations must be made by the due dates.
DATEAMOUNT DATE AMOUNT
01 Nov 2007 $ 5000.00 01 Dec 2007 $ 5000.00
01 Jan 2008$ 5000.00 01 Feb 2008 $ 5000.00
01 Mar 2008 $ 5000.00 01 Apr 2008 $224686.00
14/3/08 – [indecipherable] - BPAY[34]
[34] Caruso Affidavit, Annexure RC3. The entry “14/3/08 – [indecipherable] – BPAY” is handwritten. The arrangement is hereafter referred to as the “ATO Repayment Arrangement”.
b)a document headed “Landsmart Pty Ltd T/A Raine & Horne … Card Transactions [Accrual] 1/01/2007 To 9/03/2009” which shows:
i)a series of payments to the Australian Taxation Office on the following dates and in the following amounts, from 30 August 2007 until 14 February 2008:
Date Credit
30/08/2007 $5,000.00
27/09/2007 $5,000.00
22/10/2007 $7,589.00
30/10/2007 $24,215.00
30/10/2007 $5,000.00
30/10/2007 $4,348.08
16/11/2007 $5,778.00
30/11/2007 $5,000.00
18/12/2007 $13,338.00
21/12/2007 $5,000.00
29/01/2008 $5,000.00
29/01/2008 $100.00
29/01/2008 $100.00
7/02/2008 $9,036.00
14/02/2008 $100.00
14/02/2008 $100.00
ii)a series of payments from the date of settlement on the Property on 14 March 2008 until 11 August 2008 as follows:
Date Credit
14/03/2008 $5,000.00
14/03/2008 $18,823.00
1/04/2008 $50,000.00
2/04/2008 $10,199.00
9/04/2008 $6,781.27
11/04/2008 $35,485.00
19/05/2008 $1,211.00
12/06/2008 $2,490.00
25/06/2008 $50,000.00
11/08/2008 $3,770.00
being a total of payments of $278,463.35 from 30 August 2007 until 11 August 2008.[35]
[35] Mr Caruso’s Affidavit, Annexure RC3.
There is no evidence, apart from what Mr Caruso says, that the tax problem dated from February 2007 when he purchased the Property or May 2007 when he was having discussions with Mr Pileggi concerning the Property.
There is no evidence that Mr Caruso had a personal tax problem at or about the relevant time. The evidence is that the tax problem is that of a company called Landsmart Pty Ltd trading as Raine & Horne Southern River, of which it appears Mr Caruso was the franchisee and an employee.[36] There is evidence that when Mr Caruso put the Property up for sale, or at least floated it on the market, in February 2007, that he sought a non-refundable deposit of $50,000 on offers over $1.4m on the Property. There is however nothing to link the non-refundable deposit with any taxation liability, of either Landsmart Pty Ltd trading as Raine & Horne Southern River or of Mr Caruso personally.
[36] Exhibit A5, para.3(a).
There is:
a)no evidence of the actual amount of the taxation liability said to be owing; and
b)save for monthly payments (but not on the 1st of each month) of $5000 in November and December 2007 and January and March 2008, no correlation between the amounts paid and the ATO Repayment Arrangement, and most notably no lump sum payment of $224,686 on 1 April 2008.
Entry into the Selling Agency Agreement
Mr Pileggi says that he telephoned Mr Caruso on 16 May 2007 and had a discussion concerning the possible sale of the Property. Mr Pileggi says that Mr Caruso told him that he wanted $1.45m for the Property, and that he would pay Mr Pileggi $100,000 if Mr Pileggi sold the Property.[37] Mr Pileggi says that arrangements were made to meet Mr Caruso at the Kenwick office of Raine & Horne on 18 May 2007[38] to “draw up the paperwork appointing me to sell the property.”[39] Mr Caruso is unclear about the date of this telephone conversation. At first he says it occurred on the morning of 18 May 2007.[40] Later, he denies discussing “commission payable” with Mr Pileggi “during our telephone conversation of 16 May 2007”, and says that it was first discussed at the 18 May 2007 Meeting.[41] It is not strictly necessary to resolve the question of the date of the telephone call, but the better view of the evidence overall is that it was probably 16 May 2007. The Court observes however that Mr Caruso’s evidence is inconsistent. Mr Caruso says that when Mr Pileggi telephoned him he told Mr Pileggi that he could sell the Property if he had a serious buyer, however he would need to bring Mr Caruso an offer first.[42]
[37] First Pileggi Affidavit, para.13.
[38] “18 May 2007 Meeting”.
[39] First Pileggi Affidavit, para.14.
[40] Caruso Affidavit, para.9.
[41] Caruso Affidavit, para.67
[42] Caruso Affidavit, paras.9-10.
Mr Caruso says that Mr Pileggi rang him saying that he had a purchaser for the Property. Mr Caruso says that he told Mr Pileggi that he had a tax problem and that he had another “potential buyer” (an offer having apparently been made for $1.3m through another real estate agent, Brendan Clark of Clark and O’Neil Property Group), and that he did not want to be “messed around” because of his tax problem. He said that he needed an offer before he would enter into a selling agency agreement.[43]
[43] Caruso Affidavit, para.10.
Mr Pileggi says that he asked Mr Caruso whether the agency would be an exclusive one and that Mr Caruso “said yes”, and also said that Mr Pileggi “would be the exclusive agent until the property was sold.”[44]
[44] First Pileggi Affidavit at para.15.
There is no dispute that at the 18 May 2007 Meeting the Selling Agency Agreement was prepared using standard Real Estate Institute of Western Australia[45] documents.[46]
[45] “REIWA”.
[46] First Pileggi Affidavit, Annexure VP1.
Mr Caruso says that at the 18 May 2007 Meeting Mr Pileggi produced the Selling Agency Agreement, and “insisted” that he be paid $100,000 commission to sell the Property, which was significantly more than the usual fee for selling a development property.[47] Mr Caruso would however give evidence that he said to Mr Pileggi, “[a]s long as you sell it you can have $100,000. That’s fine with me.”[48] Mr Caruso said that Mr Pileggi had led Mr Caruso to believe that he already had an offer of $1.45m for the Property. Therefore, although he was paying $50,000 more in commission than was payable on the offer made through Mr Clark (which was $1.3m made and rejected in February 2007)[49] Mr Caruso was $50,000 better off overall if he accepted the offer which Mr Pileggi had led him to believe that he had. Mr Caruso said he therefore had “no choice” but to pay the $100,000 commission because he owed money to the ATO.[50] Mr Pileggi says that the $100,000 was offered by Mr Caruso during their telephone discussion, and again at the 18 May 2007 Meeting, and that he simply accepted what was offered.[51]
[47] Caruso Affidavit, para.12.
[48] Transcript at 38.
[49] Caruso Affidavit, Annexure RC5.
[50] Caruso Affidavit, para.13.
[51] Mr Pileggi’s second affidavit, sworn 16 April 2009, para.7 (“Second Pileggi Affidavit”).
Mr Caruso says that he told Mr Pileggi that any offer and acceptance for the Property was conditional on the following:
a)a 30 day due diligence period;
b)settlement to coincide with his settlement on the Property;
c)after due diligence was completed a $100,000 non-refundable deposit was required;
d)a 30 day finance period; and
e)a not negotiable purchase price of $1,450,000.
and that these conditions were “a minimum” before Mr Caruso “signed the listing authority” because Mr Caruso was being charged “3 times the normal as commission.”[52] None of these “conditions” were anywhere reduced to writing.
[52] Caruso Affidavit, para.14.
Mr Caruso says that Mr Pileggi told him “that he could achieve what I required” and began filling out the Selling Agency Agreement.[53] Mr Pileggi says that Mr Caruso wrote his name on the Selling Agency Agreement, and that Mr Pileggi completed the rest of the Selling Agency Agreement.
[53] Caruso Affidavit, para.15.
Mr Caruso says that when Mr Pileggi got to the part of the Selling Agency Agreement specifying how much time the Property was to be listed for Mr Caruso told Mr Pileggi that he could have one week for the listing. However, Mr Pileggi said to him that it needed to be “Until Sold” because it might take longer to finalise.[54] Mr Caruso says that there was mutual agreement that “Until Sold” meant “until sold to the client who he [Mr Pileggi] had told me [Mr Caruso] was about to make an offer and not forever.”[55] Mr Pileggi says that there was no discussion concerning the meaning of “Until Sold” and that Mr Caruso initialled the words “UNTIL SOLD” where they twice appear in the Selling Agency Agreement.[56]
[54] Caruso Affidavit, paras.16 and 17.
[55] Caruso Affidavit, para.18.
[56] Second Pileggi Affidavit, paras.8 and 9.
Mr Caruso said that he was not happy when Mr Pileggi told him, once the Selling Agency Agreement was signed, that he had to go and get the offer, as he understood that he had previously been told on the telephone that Mr Pileggi already had an offer.[57] Mr Pileggi denies ever telling Mr Caruso that he had an offer at any time until he presented an offer in writing on 31 July 2007.[58]
[57] Caruso Affidavit, para.19.
[58] Second Pileggi Affidavit, para.6.
There are a number of difficulties with Mr Caruso’s account of his entry into the Selling Agency Agreement.
First, despite initially saying that Mr Pileggi would need to bring him an offer first, Mr Caruso was prepared to enter into the Selling Agency Agreement without seeing a written offer.
Second, his evidence about whether or not he understood that an offer had been made is inconsistent with his pre-conditions for signing the Selling Agency Agreement and his position before doing so. At first he alleged that Mr Pileggi led him to believe he already had an offer of $1.45m, then, inconsistently, he said that he understood that Mr Pileggi’s client was about to make an offer, and, finally, that he was unhappy when told, once the Selling Agency Agreement had been signed, that Mr Pileggi had to go and get the offer. This all occurs against a background of his assertion that he wanted an offer first before he signed the Selling Agency Agreement, and his statement that he did not want to be “messed around” because of his alleged taxation liability. Not only is Mr Caruso’s version of events inconsistent, it is contrary to conditions which he says he laid down for the signing of the Selling Agency Agreement.
Third, having told Mr Pileggi that the Selling Agency Agreement was to be for a period of a week, Mr Caruso then, having been told it might take longer than a week to finalise any sale, signs the Selling Agency Agreement not for a specific period, but for a period not fixed by chronological time, but described as “UNTIL SOLD”. Mr Caruso initials those words where they appear in the Selling Agency Agreement without further written notation or qualification of any kind, in circumstances where he says that it was agreed that “UNTIL SOLD” meant until sold to Mr Pileggi’s client. However, there is no evidence that Mr Caruso knew who this particular person was, or how he could know that it had been sold to the person who was “about to make an offer”.
Fourth, the suggestion that time was important to the period of the Selling Agency Agreement is belied by subsequent events:
a)the Cadora Offer, Cadora Counter-Offer, Cadora Rejection and Jambanis Offer which were spread over a period of ten weeks;
b)it is then a further period of eight weeks before the Jambanis Offer deposit is paid, almost five weeks late; and
c)it is a further six weeks before the WA Land Holdings Acceptance.
Fifth, there was no action taken to terminate the Selling Agency Agreement at the time of the Cadora Rejection, or subsequently, thereby indicating that at that time Mr Caruso did not consider that the Selling Agency Agreement was:
a)meant to be for a period of a week only; or
b)to apply only in respect of Mr Pileggi’s client (Cadora) at the time the Selling Agency Agreement was signed by Mr Caruso.
Finally, Mr Caruso’s conduct in not qualifying the period or conditions attaching to the duration of the Selling Agency Agreement beyond specifying that it was “UNTIL SOLD” stands in contradistinction to his actions in placing quite specific conditions into, for example, a further selling agency agreement entered into by him in relation to the Property, on or about 21 November 2007.[59]
[59] Exhibit R2.
The various changes to, and inconsistencies in, Mr Caruso’s version of events concerning the entering into of the Selling Agency Agreement and his subsequent conduct, are such that his version of the events concerning his entry into the Selling Agency Agreement is less credible than that of Mr Pileggi. Mr Pileggi’s account is the more credible account of these events, and the Court therefore finds that:
a)the Selling Agency Agreement was signed on 18 May 2007 by Mr Caruso;
b)Mantova Holdings was appointed as the selling agent until the Property was sold; and
c)the words “Until Sold” were not qualified in any way by Mr Caruso at the time the Selling Agency Agreement was entered into.
The terms of the Selling Agency Agreement
Seller
The Selling Agency Agreement identifies the seller of the Property as:
Rob Caruso ATF The Caruso Family Trust
Type of agreement
The Selling Agency Agreement sets out the type of agency appointment at the top of the first page in the following terms:
TYPE OF AGENCY APPOINTMENT*
aRefer to Definitions of the attached Terms & Conditions
c Exclusive agency agreement
þ Exclusive Plus agency agreement
c Multi-List exclusive agency agreement
* The seller is required to select and initial which type of exclusive agency the seller wishes to apply to this agreement.
These 3 types of exclusive agency are defined in the Definitions of the attached Agreement.
Although ticked, the selection of the “Exclusive Plus agency agreement” was not initialled by Mr Caruso. However, Mr Caruso gave evidence that:
(a)At no time during my dealings did I appoint Mr Pileggi as the exclusive agent to sell my property. The actual listing agreement indicates an exclusive plus authority which allows an agent to sell the property as well as multi list the property.[60]
(b)… The Agency Agreement was not an exclusive agency agreement. It was an exclusive plus agreement. I refer to annexure RC6 of this Affidavit in which the parties have ticked the “Exclusive Plus agency Agreement” box of the Selling Agency Agreement. This meant that there was an exclusive agency with the addition that the property could be multi-listed.[61]
[60] Caruso Affidavit, para.63.
[61] Caruso Affidavit, para.68.
Mr Caruso, having given affidavit evidence about the nature of the Selling Agency Agreement, then gave evidence orally under cross-examination that because he had not initialled the box that was ticked “[I]t means nothing.”[62] Cross-examined further he denied that it was agreed that there was an Exclusive Plus agency agreement, saying that it was “ticked but not agreed”.[63] He then claimed that because he had not initialled next to the ticked box indicating an Exclusive Plus agency agreement this resulted in the Selling Agency Agreement being “invalid”.
[62] Transcript at 35.
[63] Transcript at 36.
Mr Caruso cannot have it both ways: he cannot on the one hand swear an affidavit saying that there was an Exclusive Plus agency agreement, and then deny the existence of that agreement in cross-examination.[64] In the Court’s view his cross-examination evidence was opportunistic, and evidence of the unreliability of his oral evidence generally. In the circumstances, the Court finds that the parties did enter into an “Exclusive Plus agency agreement” under the Selling Agency Agreement. The issue then becomes what is meant by a “Exclusive Plus agency agreement”.
[64] Or as Jordan CJ said in O’Connor v SP Bray Ltd (1936) 36 SR(NSW) 243 at 257:
“Since the days of the Year Books it has been recognised that you cannot have the egg and the halfpenny too.”
The Year Books are a series of anonymous reports, in the form of notes of cases, commencing in the 13th century and ending in 1535: M. Woodley (Ed), Osborn’s Concise Law Dictionary (10th Edn) (London: Sweet & Maxwell, 2005) at p.435.
Defining the type of agency appointments
The first page of the Selling Agency Agreement has a box headed “PROPERTIES FOR SALE BOOK Information” under which tenant and owner details appear, and then the following appears:
Inspection/Marketing Arrangements**
c Homebuyer* c REIWA Internet Site* c Other
* ** Refer to note at foot of page
Multilist/Exclusive Plus Automatically Appear on and Homebuyer
The single and double asterisks in the above quote are referable to text at the bottom of the first page of the Selling Agency Agreement which provides as follows:
*refer to the “Definitions” of the attached Agreement for a definition of this term.
**as a consequence of the definition of an Exclusive Plus Agency agreement, contained in the “Definitions” of the attached Agreement, if the seller elects to enter into an Exclusive Plus agency agreement there will automatically be a marketing of the property in the “Homebuyer” magazine and on the REIWA internet site. Further, as a consequence of the definition of a Multi-List exclusive agency agreement, contained in the Definitions of the attached terms and conditions, if the seller elects to enter into a Multi-List exclusive agency agreement there will automatically be a marketing of the property in the “Homebuyer” magazine and on the REIWA internet site and other real estate agents who are entitled to use the REIWA Internet Listing Service will automatically have the right to display a photograph of the Property in their office window.
In the Selling Agency Agreement the various kinds of agency and sale agreements are defined in a “Definitions” clause at the end of the Selling Agency Agreement.
An ‘Exclusive agency agreement’ is defined in the Selling Agency Agreement as follows:
a listing agreement whereby the agent is appointed to sell the Property on an exclusive basis and the seller agrees to pay a selling fee to the Agent in accordance with the terms of clause 1 above.
The Selling Agency Agreement defines ‘Exclusive Plus agency agreement’ as having:
an identical meaning to an exclusive agency agreement save and except that the Agent and the seller agree that the property will be marketed using the REIWA Internet Listing Service and further, the property will be marketed using the REIWA internet site and in the “Homebuyer” magazine and the seller may authorise the use of a security lock box.
The Selling Agency Agreement defines “multi-list exclusive agency agreement” as follows:
… an identical meaning to an Exclusive Plus agency agreement save and except that the Agent and the Seller agree that the Agent will offer conjunctional sale agreements to all licensed real estate agents who are entitled to use the REIWA security lock box and the seller authorises other real estate agents who are entitled to use the REIWA Internet Listing Service to display a photograph of the Property in their office window.
The Selling Agency Agreement defines “Conjunctional Sale Agreements” as follows:
… means agreements whereby the agent agrees with other licensed real estate agents in accordance with the terms of the REIWA Internet Listing Service by-laws to share the Agent’s Selling Fee with those agents in return for and on condition that those agents provide agreed real estate services. Such a conjunctional agent becomes a sub-agent of the listing Agent.
In this case, it is clear that the parties entered into an “Exclusive Plus agency agreement” as defined above. There is however no evidence that the seller authorised the use of a security lock box. That however does not alter the nature of the agreement. Thus, subject only to the Property being marketed using the REIWA internet listing service, REIWA internet site and in the Homebuyer magazine, Mantova Holdings was appointed to sell the Property “on an exclusive basis”, and Mr Caruso agreed to pay the selling fee set out in clause 1 of the Selling Agency Agreement. There is no evidence to support Mr Caruso’s contention that the Property was, or that there was an agreement to, multi-list the Property. The agreement entered into was an exclusive one, with marketing allowed through additional outlets, not a multi-listing agreement, which is separately and differently defined.
The authority period
The Selling Agency Agreement sets out the period during which Mantova Holdings had “exclusive” agency rights to sell the property. The Selling Agency Agreement provides that:
The Exclusive Agency Period is from and including the date of this agreement until midnight of UNTIL SOLD inclusive of any extension of the said Period.
and also a provision in the following terms:
IT IS AGREED:
1. Authority Period
The Seller authorises the Agent to find a buyer for the property … :
…
for an Exclusive Rights Period from and including the date of this Agreement until midnight on UNTIL SOLD inclusive. (“the Exclusive Rights Period”)
In each of the above quotes the words “UNTIL SOLD” have been included in lieu of a space for insertion of a date in the pre-printed form, and in each case those words have been initialled by Mr Caruso.
The selling agent’s authority
The Selling Agency Agreement contains detailed provisions relating to the selling agents, in this case Mantova Holdings, authority, including the following:
8.Agent’s Authority
(a)The Agent may engage other licensed Real Estate Agents to find a buyer. If so, the Agent may pay a fee to the other Agent.
(b)The Agent is authorised to accept any deposit paid by a buyer and to hold it as a stakeholder, or in the case of Strata titled Property being sold before registration of the Strata Plan, as Trustee for the buyer in accordance with Section 70 of the Strata Titles Act, 1985.
(c)If the Property is sold, the Agent is authorised to give appropriate instructions to aid settlement for the nominated conveyancer of both the Seller and buyer.
(d)The Agent is authorised at or prior to settlement to remit the balance of the deposit to the Seller or to the Seller’s nominated conveyancer for the purpose of completing the sale after deducting the Agent’s Selling Fee and any outstanding agreed Marketing Charges and Expenses. The Agent’s Selling Fee shall be held on trust pending settlement.
(e)If the Property is sold and there is no deposit, or the deposit held by the stakeholder is insufficient to cover the Agent’s Selling Fee and outstanding agreed Marketing Charges and Expenses, the Seller shall pay on demand any shortfall and the Seller authorises the agent to obtain payment of the shortfall out of purchase monies held or to be received by the Seller’s conveyancer.
(f)The Seller authorises the Agent to sign the certificate of giving of compulsory disclosure material for and on behalf of the Seller (Strata property only).
…
10.Seller’s Warranty
The Seller warrants that the Seller has the authority to enter into this Agreement and that no other person holds an agency agreement for the Property.
…
12.Definitions
…
“Introduce”, “introduced” and/or “introduction” used in this form means, whether in the context of an introduction by the agent or the seller, that the entity who claims to have introduced the buyer concerned has been an effective cause of the relevant sale.
Selling fee
The Selling Agency Agreement provides terms for the selling fee to be charged by an agent, and in this case the Selling Agency Agreement provided as follows:
3.AGENT’S SELLING FEE
NOTICE: Fees charged by real estate agents are not fixed by law, and are to be agreed between seller and agent.
If the Seller disputes the fee payable to the Agent on the grounds that it is unjust the Seller may refer the dispute to the Real Estate and Business Agents’ Supervisory Board or REIWA for adjudication.
The following Agent’s Selling Fee has been agreed:
*(i) The Agent’s Selling Fee inclusive of GST is $100,000
The agent’s selling fee is initialled by Mr Caruso.
There are extensive further provisions in the Selling Agency Agreement relating to Mantova Holdings’ entitlement to the selling fee. Those provisions are as follows:
4.Agent’s Entitlement To The Agent’s Selling Fee
The Agent’s Selling Fee will be payable if during the Exclusive Rights Period:
(a)the Property is sold or exchanged;
(b)at any time a buyer introduced by the Agent to the Seller or the Property, contracts to buy the Property, or gets another person or entity to buy the Property or otherwise becomes a legal or beneficial owner of the Property;
(c)the Property is sold to a buyer in any of the abovementioned circumstances and the sale is not completed owing to the fault of the Seller;
(d)if after the end of the Exclusive Rights Period the Seller enters into a Selling Agency Agreement to sell the Property through another lawfully authorised Real Estate Agent, then the Agent shall not be entitled to a Selling Fee where the new listing agent is entitled to a Selling Fee in accordance with the new agency agreement then Clauses 4(b) and 13 shall not apply.
5.Agent’s Selling Fee Payable on Settlement
The Agent’s Selling Fee will only be payable to the Agent on the settlement of the transaction that gives rise to the Agent’s entitlement to that fee, PROVIDED THAT if there is a failure to settle the transaction and that failure is due to the fault of the seller the fee will be payable immediately. In this clause, “settlement”, in relation to a transaction:
(a)where the transaction is to be completed by the payment of the purchase price by way of a single payment over and above the deposit means the payment of the purchase price; or
(b)where the buyer is obliged to make two or more payments to the seller over and above any deposit paid within 28 days of the execution of the contract, before the buyer is entitled to a conveyance or transfer of the subject of the contract, means the time at which the buyer is entitled to possession, occupation or control of the subject matter or the time at which the buyer has paid at least 10% of the purchase price, whichever is the latter.
…
17.Seller Introducing Buyer
The Seller(s) agree to pay the Agent’s Selling Fee on the terms and conditions set out in this Agreement PROVIDED THAT, regardless of anything contained in those terms and conditions, the Seller(s) and Agent agree that if, during the Authority Period, the Seller(s) introduce the ultimate buyer of the Property to the Property themselves the Seller(s) *WILL/WILL NOT be liable to pay the Selling Fee to the Agent. *CROSS OUT WHICHEVER DOES NOT APPLY.
18.Seller Appointing Another Real Estate Agent
The Seller may not during the Exclusive Rights Period, except through the Agent, appoint another agent to find a buyer. If the Seller contravenes this clause by appointing another agent during the Exclusive Rights Period to find the buyer, that other agent finds such a buyer and the Property is sold to that buyer the Seller will be deemed to have terminated this authority and must pay to the Agent the Agent’s Selling Fee and the agreed Marketing Charges and Expenses incurred by the Agent, as described in clause 16(a), 16(b) or 16(c), up until the date of termination as liquidated damages. If the Agent’s Selling Fee has been agreed to be a percentage of the actual selling price, for the purposes of calculating liquidated damages pursuant to this clause, the Agent’s Selling Fee will be deemed to be the equivalent percentage of the Initial Listing Price.
Although Mr Caruso has initialled under the words “Select option”, no option has in fact been selected in clause 17 of the Selling Agency Agreement set out above. It is therefore not possible to directly discern from an express provision what the parties to the Selling Agency Agreement intended to occur when, or if, Mr Caruso introduced a buyer for the Property. Ultimately, that does not matter in this instance because the evidence establishes that the WA Land Holdings Acceptance was not as a consequence of an introduction by Mr Caruso, but rather by way of an introduction of WA Land Holdings to the “Seller”, Mr Caruso, by the Clark & O’Neil Property Group. Indeed, Mr Caruso paid the Clark & O’Neil Property Group the sum of $46,200 as a “Commission”[65] which he said was for their services in introducing the buyer of the Property, WA Land Holdings.
[65] Caruso Affidavit, Annexure RC20.
Seller’s acknowledgment
Under the Selling Agency Agreement Mr Caruso acknowledges:
(a)having been informed by the Agent, before signing this authority, that the Agent’s Selling Fee is subject to agreement;
(b)having read and understood and agreed to the terms and conditions of this Agreement.[66]
[66] Selling Agency Agreement, sub-paras.11 (a) and (b).
The meaning of ‘sold’
The Selling Agency Agreement defines ‘sold’ in cl.12 as follows:
includes the disposition of the Property in any manner whatsoever or any part of the legal or beneficial ownership of the Property.
The offers made on and sale of the Property
31 May – 3 June 2007
On about 31 May 2007 the Cadora Offer of $1.4m, subject to finance, was made.[67] When the Cadora Offer was put to Mr Caruso he noted that:
a)the price was $50,000 less than he required;
b)the deposit was $95,000 less than he required, and made refundable instead of non-refundable; and
c)the due diligence was 60 days more than he was willing to allow.[68]
[67] First Pileggi Affidavit, para.17.
[68] Caruso Affidavit, para.22.
Mr Caruso in discussion with Mr Pileggi made amendments to the Cadora Offer to reflect the above issues, but also added a further condition as follows:
The Seller reserves the right to take other offers subject to due diligence of this offer not being satisfactory and the offer not proceeding.[69]
[69] Caruso Affidavit, Annexure RC8 (at Annexure see para.5).
The above condition does not affect the Selling Agency Agreement, but rather merely reserves to the seller, Mr Caruso, the right to take other offers in the prescribed circumstances.
The Cadora Counter-Offer by Mr Caruso was rejected by Cadora.[70]
[70] First Pileggi Affidavit, para.18; Caruso Affidavit, para.28.
June and July 2007
Over the next six weeks Mr Caruso received a number of calls from Mr Clark of the Clark & O’Neil Property Group asking whether the Property was still available as he had a client apparently keen to purchase the Property. He also received a call from another Raine & Horne franchisee on behalf of another potential buyer. Mr Caruso says that he told both Mr Clark and the other Raine & Horne franchisee that he would check with Mr Pileggi to see if an offer was coming from Mr Pileggi’s client before getting back to them. On 20 July 2007 Mr Caruso sent to Josie Pileggi (who appears to be Mr Pileggi’s wife) an email addressed to Mr Pileggi indicating that he had another buyer who he was working with and so did another Raine & Horne franchisee, but no more than that.[71]
[71] Caruso Affidavit, paras.30 and 31 and Annexure RC9.
1 August 2007
On 1 August 2007 Mr Pileggi presented the Jambanis Offer to Mr Caruso. The Jambanis Offer was for $1.45m subject to finance within 30 days.[72]
[72] First Pileggi Affidavit, para.21; Caruso Affidavit, para.32.
Mr Caruso wanted the purchaser to agree that Mr Caruso could have full use of the deposit of $100,000, and the Jambanis Offer was prepared so as to include a term to that effect with the $100,000 deposit payable within 60 days of acceptance of the offer.[73]
[73] First Pileggi Affidavit, paras.21 and 22 and Annexure VP2; Caruso Affidavit, paras.33 and 34 and Annexure RC10.
The Jambanis Offer provided that:
a)“Robert Caruso … to have full use of deposit”; and
b)“12. In the event that the property does not proceed to settlement the $100,000 ($100) to be refunded in full by the seller to the buyer within 10 days.”[74]
[74] First Pileggi Affidavit, Annexure VP2; Caruso Affidavit, Annexure RC10.
The Jambanis Offer was accepted by Mr Caruso on 1 August 2007.
Mr Caruso asserted that the Jambanis Offer was to “go unconditional” on 1 October 2007.[75] However, all that was required to happen by 1 October 2007 was that the buyer was to have obtained finance[76] and to have paid the deposit. The contract for sale was still subject to, at a minimum:
a)titles becoming available;
b)due diligence; and
c)the settlement of Mr Caruso’s purchase of the Property.
[75] Caruso Affidavit, para.34.
[76] In fact finance was supposed to be approved by 1 September 2007.
Mr Caruso gave evidence that the deposit was intended to be a refundable deposit in the event that settlement did not proceed, but that Mr Caruso could use the deposit pending settlement.[77] However, in cross-examination Mr Caruso’s evidence again changed. Despite having initialled a clause in the Jambanis Offer (clause 12) providing for a refund of the deposit within 10 days “[i]n the event the property does not proceed to settlement”,[78] Mr Caruso claimed in cross-examination that the intention was that the deposit only be refundable if he, as seller, was not able to proceed to settlement, and that Mr Pileggi had written the clause up wrongly.[79] Given the terms of:
a)the Jambanis Offer, initialled by Mr Caruso; and
b)his affidavit,
Mr Caruso’s evidence in cross-examination again cannot be relied upon. The Court considers it clear that a $100,000 deposit, refundable if the Property did not settle, was what the parties agreed to in the Jambanis Offer.
[77] Caruso Affidavit, para.70.
[78] Transcript at 44; First Pileggi Affidavit, Annexure VP2.
[79] Transcript at 44-46.
Following acceptance of the Jambanis Offer Mr Caruso says he had no communication from Mr Pileggi until October 2007.[80]
[80] Caruso Affidavit, para.35.
1 October 2007
Mr Pileggi says that on 1 October 2007 he telephoned Mr Caruso, which Mr Caruso denies, and said that he had not yet received the deposit from Mr Jambanis, but that he wanted to talk to Mr Jambanis and see if the deposit was able to be paid. Mr Pileggi says that Mr Caruso said that that was “Okay” and to let him know what happened.[81] Mr Pileggi says that in his discussions with Mr Jambanis he was told that Mr Jambanis was dealing with a finance broker and arranging finance but was concerned about paying the deposit direct to Mr Caruso. Mr Pileggi says that he telephoned Mr Caruso and told him of these concerns, which Mr Caruso denies, and says that Mr Caruso told him that he had a tax bill of $100,000 which he needed to pay.[82] Mr Caruso says that he told Mr Pileggi about the tax problem “weeks earlier”.[83]
[81] First Pileggi Affidavit, para.24; Caruso Affidavit, para.72.
[82] First Pileggi Affidavit, paras.25-27; Caruso Affidavit, paras.36 and 73.
[83] Caruso Affidavit, para.73.
On 1 October 2007 Mr Caruso sent a facsimile to Mr Pileggi in the following terms:
Please be advised that I require $100,000 non-refundable deposit as agreed in the Offer and Acceptance for the purchase of … [the Property] by close of business today.
Should the deposit not be paid today I will be cancelling the Offer and Acceptance and selling the property to another party who have an offer in place subject to the current offer not becoming unconditional.
Sorry if this causes any inconvenience however I have no choice as I need to give the other party an answer by end of business today.”[84]
[84] First Pileggi Affidavit, Annexure VP3; Caruso Affidavit, Annexure RC11 (“1st October 2007 Facsimile”).
As set out above it is not the Court’s view that the $100,000 in the Jambanis Offer was a non-refundable deposit and the above assertion to that effect is wrong.
3 October 2007`
Mr Caruso says that he received a call from Mr Pileggi on the afternoon of 3 October 2007. Mr Caruso says that Mr Pileggi told him that the finance for Mr Jambanis was approved, but that Mr Jambanis was overseas for three to four weeks and that Mr Caruso would get his deposit when Mr Jambanis returned.[85] Mr Pileggi denies telling Mr Caruso that finance had been approved.[86] Mr Caruso said that he wanted the deposit that day otherwise he would cancel the contract and re-sell the Property. Mr Caruso says that Mr Pileggi asked for a couple of hours and that when he called back said that Mr Jambanis was able to pay $50,000 and that he would get the rest when Mr Jambanis returned from overseas.[87]
[85] Caruso Affidavit, para.37.
[86] Second Pileggi Affidavit, para.13.
[87] Caruso Affidavit, paras.38 and 39.
4 October 2007
On 4 October 2007 Mr Gooding sent Mr Pileggi a note in the following terms:
In a conversation with George [Jambanis] at about 7.30 last night, George expressed the view that he was not prepared to risk $50,000.
He suggested an alternative – That he is willing to pay the $50,000 this morning, but he wants an written agreement that he will have a further 30 days to get his finance approval.
If he does not have this finance approval at this time, the vendor agrees to pay back the $50,000 in a further 60 days.
This serves the purpose of providing the vendor with the $50,000 that he needs now and George with the extra time he needs to try and obtain finance. It also has the effect of giving the vendor $50,000 interest free for 90 days while George does not take the risk of losing his $50,000.
At this stage, I am unable to provide an assurance that finance will be available.[88]
[88] Caruso Affidavit, Annexure RC19 (“Mr Gooding’s Note”).
On 4 October 2007 Mr Pileggi gave a cheque for $50,000 to Mr Caruso from Mr Jambanis.[89]
[89] First Pileggi Affidavit, Annexure VP4.
Mr Caruso says that he had to go to Mr Pileggi’s Raine & Horne Midland office to collect the cheque. He says that when he did so Mr Pileggi told him that finance was approved and unconditional and that due diligence was completed to the purchaser’s satisfaction.[90] This is denied by Mr Pileggi.[91] Mr Caruso says that he made Mr Pileggi aware of the fact that he needed the money to pay a tax bill and that he would not be returning the deposit if the deal did not proceed, and he produced the receipt and Mr Pileggi gave him the cheque.[92]
[90] Caruso Affidavit, para.40.
[91] Second Pileggi Affidavit, para.13.
[92] Caruso Affidavit, paras.40 and 74 and Annexure RC12.
Mr Caruso confirmed receipt of the $50,000 in an email in which he said:
I have received from George Jambanis the amount of $50,000 being an initial deposit for the purchase of … [the Property]. The buyer accepts that should for any reason he is unable to proceed with the Offer & Acceptance the $50,000 is forfeited and the seller Robert Caruso retains the amount of $50,000.
In the event that the seller cannot settle then all monies shall be refunded in accordance the Condition 12 of the Offer & acceptance.[93]
[93] First Pileggi Affidavit, Annexure VP5; Caruso Affidavit, Annexure RC12 (“Mr Caruso’s 4 October 2007 Email”) .
There is no dispute that the above email was sent and received. Neither Mr Pileggi nor Mr Caruso were cross-examined on it. The facts set out above in Mr Gooding’s Note and Mr Caruso’s 4 October 2007 Email indicate that whilst Mr Caruso took the deposit on a non-refundable basis, that was not the basis on which it was tendered by Mr Jambanis.
October – November 2007
Mr Pileggi says that he was advised of ongoing discussions between Mr Jambanis and Mr Jambanis’ finance broker, Clive Gooding, during October and November 2007. Mr Pileggi says that when Mr Caruso accepted the deposit from Mr Jambanis, Mr Pileggi was aware that Mr Jambanis did not have finance approval but that he had been told that it was being progressed and was likely to be approved shortly. Mr Pileggi says that there were subsequent discussions updating him in relation to the finance application, and that he continued to advise Mr Caruso of what the finance broker Mr Gooding and Mr Jambanis had said to him during this time. Mr Caruso denies being told by Mr Pileggi of these developments in October and November 2007.[94]
[94] First Pileggi Affidavit, paras.31-34; Transcript at 15-16; Caruso Affidavit, para.77.
7 November 2007
Mr Caruso asserts that there was no communication with his office until 7 November 2007 and on that day he went to Raine & Horne in Midland and spoke to Mr Pileggi’s son, Michael Pileggi. Michael Pileggi advised Mr Caruso that Mr Pileggi was on holiday.[95] As a consequence of Mr Caruso’s visit Michael Pileggi seemingly made inquiries with respect to Mr Jambanis’ finance, and later called Mr Caruso. As a consequence of that call Mr Caruso says that he then “knew the purchaser [Jambanis] still hadn’t received finance to purchase my property”. Mr Caruso says that Michael Pileggi undertook to ring the finance broker and ask him for the approval.[96] As a consequence of those discussions Michael Pileggi later faxed Mr Caruso a letter from an organisation called “Purely Finance” which was in the following terms:
We advise we have an approval in principal for purchase of the above property subject to some conditions being met.
We anticipate we will require a further one to two weeks to be able to satisfy these conditions before we are in a position to provide an unconditional approval.[97]
[95] Caruso Affidavit, para.43.
[96] Caruso Affidavit, para.44.
[97] Caruso Affidavit, Annexure RC13.
The above letter was addressed to Mr Pileggi, and signed by a Mr Ezzard, on Purely Financial letterhead, and is undated although it appears to have been faxed from Purely Finance on 7 November 2007.[98]
[98] Caruso Affidavit, paras.44 and 46 and Annexure RC13.
Mr Caruso says that he agreed to await the finance approval.[99]
[99] Caruso Affidavit, para.47.
17 to 20 November 2007
On 17 November 2007 Mr Caruso received a facsimile forwarded from Raine & Horne Midland which he says indicated that finance approval had been declined and that “the deal” (that is, the sale of the Property) was not proceeding.[100] The facsimile, addressed to Raine & Horne Midland, on Purely Financial letterhead, and signed by Mr Ezzard as “Director”, is in the following terms:
Please be advised that financial approval for the above [the address of the Property and Mr Jambanis’ name appear in the subject matter line of the letter] has been declined due to conditions not being able to be met.[101]
[100] Caruso Affidavit, para.47.
[101] Caruso Affidavit, Annexure RC14.
The letter does not indicate that the sale of the Property is not proceeding, and could not indicate that because it is a letter from Purely Finance to Raine & Horne Midland, solely about finance, and says nothing about the sale of the Property itself. The letter from Purely Finance appears to have been sent to Raine & Horne Midland two days earlier on 15 November 2007, which is the date of the letter.
Mr Caruso said that he called Michael Pileggi on 17 November 2007, and:
a)Michael Pileggi could not tell him why finance had been declined; and
b)Michael Pileggi said that:
… I should now sell it to my purchaser …[102]
[102] Caruso Affidavit, para.48.
Mr Caruso says that he then called Brendan Clark at the Clark and O’Neil Property Group to ask if his client was still interested in purchasing the Property.[103]
[103] Caruso Affidavit, para.49.
Mr Pileggi says that Mr Jambanis’ finance broker rang him on 17 November 2007 and told him that finance approval would be available by 21 November 2007.[104] Mr Pileggi says that he telephoned Mr Caruso and advised him that Mr Jambanis would have finance approval on 21 November 2007.[105] Mr Caruso denies being advised by Mr Pileggi of the impending finance approval.[106] Mr Caruso’s denial is however inconsistent with an email which he says he sent on 20 November 2007, and which is set out below,[107] in which he refers to being made aware of “another finance acceptance coming” on 21 November 2007.
[104] First Pileggi Affidavit, para.35.
[105] First Pileggi Affidavit, para.36.
[106] Caruso Affidavit, para.79(ii).
[107] See para.91 below.
On or about 20 November 2007 Mr Pileggi says that he received an email from Mr Caruso saying that he had accepted another offer on 17 November 2007.[108] The text of that email is as follows:
[108] First Pileggi Affidavit, para.37.
Hi Vince and Michael
Please be advised that due to receiving a finance decline letter from your purchaser on the 15th November I accepted another offer on the property on Friday the 17th. I was made aware that the purchaser had another finance acceptance coming tomorrow (Wednesday 21st November) and have tried to have the current offer withdrawn to accommodate your purchaser however the new purchaser won’t release me from the contract.[109]
[109] First Pileggi Affidavit, Annexure VP6 (“20 November 2007 Email”). The date of the letter of advice concerning the finance being declined is incorrect, as although the facsimile was dated 15 November 2007 Mr Caruso was not, on his own evidence, advised of it until 17 November 2007.
Mr Caruso says that Mr Clark came to see him with Mr O’Neil on 20 November 2007 and presented him with an offer of $1.4m for the Property. Mr Caruso says this was $50,000 less than had previously been offered on behalf of their client, and according to Mr Caruso the lesser sum was due to the time it took for Mr Caruso to respond to them and the purchaser being able to take advantage of his desperation to sell the Property. Beyond Mr Caruso’s bare and brief assertion, there is no other evidence of an offer of $1.45m for the Property by the Clark & O’Neil Property Group at any time.
The WA Land Holdings Acceptance was signed on the morning of Tuesday 20 November 2007,[110] for $1.54m inclusive of GST. The Jambanis Offer inclusive of GST amounted to $1.595m.[111] Mr Caruso says that at the point in time at which the WA Land Holdings Acceptance was signed he had no choice but to do so because of the tax liability and because of the arrangement that he had made with the ATO.[112]
[110] Caruso Affidavit, paras.50-51 and Annexure RC15.
[111] Caruso Affidavit, para. 52.
[112] Caruso Affidavit, para. 51.
The WA Land Holdings Acceptance noted that the Clark & O’Neil Property Group Pty Ltd trading as Clark & O’Neil Property made the offer “As Agent for the Seller”.[113] In his evidence Mr Caruso asserted that Clark & O’Neil Property Group were paid a commission of $46,200 on the sale, not as selling agents, but for the provision of services to Mr Caruso, those services being the introduction of the buyer of the Property.[114]
[113] Caruso Affidavit, Annexure RC15.
[114] Transcript at 53.
The WA Land Holdings Acceptance provided for a deposit of $50,000 payable within seven days of acceptance. The deposit was payable to “the Seller” which was identified as Rob Caruso as Trustee for the Caruso Family Trust.[115]
[115] Caruso Affidavit, Annexure RC15.
Mr Pileggi says that when he told Mr Jambanis and Mr Jambanis’ finance broker that he had been advised by Mr Caruso on 20 November 2007 that he had accepted another offer the finance broker indicated that finance would not therefore be proceeded with.[116]
[116] First Pileggi Affidavit, paras.38-39.
According to Mr Caruso there were unsuccessful attempts by the Pileggis to resurrect the deal involving Mr Jambanis in late November 2007.[117]
[117] Caruso Affidavit, paras.53-54.
The Second Selling Agency Agreement
On 21 November 2007 The Caruso Family Trust entered into a selling agency agreement with Raine & Horne Southern River,[118] which is the real estate agency through which Mr Caruso trades.[119] The type of agreement is an Exclusive Plus agency agreement, and on this occasion the selection of the type of agreement is initialled by Mr Caruso. The Second Selling Agency Agreement was for the sale of the Property by Raine & Horne Southern River. The agent’s selling fee is set out in Schedule A of the Second Selling Agency Agreement. Having identified the Property there is a single clause which states as follows:
1.Any amount over $1,000,000.00 achieved as a sale price for the abovementioned property will be taken as commission by Raine & Horne Southern River.
For example, if the actual selling price is $1,300,000.00 the Agent’s Selling Fee inclusive of GST is $300,000.00.[120]
[118] “Second Selling Agency Agreement”.
[119] Cf. s.64(1) and (2) of the Real Estate and Business Agents Act 1978 (WA) (“REBA Act”) concerning conflicts of interest on the part of agents, sales representatives and employees. The issue was not raised in argument.
[120] Exhibit R2, Schedule A.
In a manner not explained in the evidence, other than to say that a commission of $46,200 for introduction of the buyer of the Property was paid, the Clark & O’Neil Property Group were removed as agents for the seller, that is Rob Caruso as trustee for The Caruso Family Trust, and Mr Caruso’s real estate agency, Raine & Horne Southern River became the selling agent under the Second Selling Agency Agreement. The consequence of that, together with the commission provision set out above, was that a commission of $400,000 (or 28% of the sale price) was paid by The Caruso Family Trust to Landsmart Pty Ltd. Not only was this a commission which was four times that which Mr Caruso had described as “excessive” in relation to Mantova Holdings, it was also a sum which Mr Caruso admitted was being diverted from the owner of the Property (The Caruso Family Trust) to pay the tax liability of another entity, namely Landsmart Pty Ltd.[121]
[121] Transcript at 20-21 and 24-29.
Refund of Mr Jambanis’ $50,000 deposit
On 6 December 2007 Mr Pileggi sent a letter to Mr Caruso with an attached letter from Mr Jambanis requesting the return of his $50,000 deposit. A complaint to the Real Estate and Business Agents Board and a threat to sue followed, as did correspondence with Mr Jambanis’ lawyers.[122] Mr Caruso says that he made it clear to Mr Jambanis’ lawyer that he had told Mr Pileggi that the deposit was non-refundable prior to taking the $50,000. He subsequently discovered however that Mr Jambanis had made it clear to Mr Pileggi that he did not want to lose his $50,000 deposit and that the deposit was to be refundable if the deal did not go ahead.[123] Mr Caruso alleges that Mr Pileggi did not ever reveal to him the fact that the deposit was to be refundable and had in fact lead Mr Caruso to believe that the deal was unconditional and the deposit non-refundable.[124] As indicated above neither Mr Pileggi nor Mr Caruso were cross-examined on this aspect of the matter. Following discussions with Mr Jambanis’ lawyer Mr Pileggi refunded $50,000. He did this on 14 March 2008.[125]
[122] Caruso Affidavit, paras.55-58.
[123] Caruso Affidavit, paras.58-59 and Annexures RC19 and RC 20.
[124] Caruso Affidavit, para.60.
[125] Caruso Affidavit, para.61.
14 March 2008
On 20 March 2008 the settlement of the sale by Mr Caruso to WA Land Holdings took place.[126]
[126] Caruso Affidavit, Annexure RC21.
Refusal to pay selling fee
There is no dispute that Mr Caruso subsequently refused to pay the selling fee to Mantova Holdings when written demands were made.[127]
[127] First Pileggi Affidavit, paras.43-44.
Observations on the witnesses
As is probably already apparent Mr Caruso’s evidence was marked by inconsistency and more coloured by the case being argued on his behalf than was the case in relation to Mr Pileggi who was cross-examined only briefly. In relation to Mr Caruso the Court particularly notes:
a)the inconsistency in his evidence as to whether or not there was a telephone conversation on 16 or 18 May 2007;
b)that in circumstances where he said he needed an offer before he could enter into the Selling Agency Agreement, he entered into the Selling Agency Agreement without seeing an offer, or ensuring that there was an offer made, as he asserted he had been told by Mr Pileggi;
c)despite asserting that there were minimum conditions which must be included in any offer and acceptance for the Property before he would sign a listing authority, and particularly so in light of the fact that he was being charged what he regarded as excessive commission, he failed to ensure that an offer and acceptance with those minimum conditions was before him before he signed the Selling Agency Agreement;
d)inconsistencies in his evidence as to whether an offer had been made or was about to be made in connection with the 18 May 2007 Meeting;
e)his assertion that the Selling Agency Agreement was for a week, when:
i)a week is not specified in the Selling Agency Agreement;
ii)the issue of the Selling Agency Agreement being for a week is not subsequently raised on the evidence, until these proceedings are commenced;
iii)Mr Caruso’s conduct in continuing to deal with, and accepting another offer from Mantova Holdings is inconsistent with the Selling Agency Agreement being for a week;
f)there is no independent evidence that Mr Caruso’s tax problem dated from February 2007 when he purchased the Property, or May 2007 when he was having discussions with Mr Pileggi concerning the Property;
g)his criticism of Mr Pileggi charging over three times the normal commission on the sale of the Property, and the contrast with his own conduct when he enters into the Second Selling Agency Agreement where the commission is not $100,000, but $400,000, (or twelve times the normal commission if Mr Caruso’s rationale with respect to Mantova Holdings’ commission is adopted), and four times that charged by Mantova Holdings, in circumstances where the commission is being paid to Raine & Horne Southern River, and then only in such a large amount for the purpose of diverting funds from the owner of the Property (The Caruso Family Trust) to pay the tax liability of another entity, namely Landsmart Pty Ltd which was the operating company for Raine & Horne Southern River and which Mr Caruso ran under franchise and of which he was an employee;[128]
h)he was prepared to swear an affidavit that the Selling Agency Agreement was an Exclusive Plus agency agreement, but in his oral evidence denied this because the Selling Agency Agreement was not initialled at the relevant points; and
i)that there was no direct evidence that any of the money paid as a deposit on, or upon settlement of, the Property, was used to pay the outstanding tax liability.
[128] Transcript at 28-29.
In the circumstances, where there is a conflict between the evidence of Mr Pileggi and Mr Caruso, the Court will, absent corroborating evidence from other sources tend to prefer the evidence of Mr Pileggi to that of Mr Caruso. The Court will also treat bare and uncorroborated assertions by Mr Caruso with caution.
The Court has not found it necessary to refer to matters external to these proceedings, and referred to in Exhibit A5 and MFI 1, in assessing Mr Caruso’s credibility. It is therefore unnecessary to rule on the admissibility of MFI 1.
Were the representations made?
16 May – Mantova Holdings to sell the Property
There is no dispute that Mantova Holdings was appointed to sell the Property by Mr Caruso, and the Court, preferring the evidence of Mr Pileggi, finds that an oral representation to that effect was made by Mr Caruso in a telephone conversation with Mr Pileggi on 16 May 2007. Further, that oral representation was reiterated on 18 May 2007, and reduced to writing in the form of the Selling Agency Agreement.
Exclusive agency agreement
Mr Caruso denies appointing Mantova Holdings as an exclusive agent to sell the Property. In his affidavit evidence he said that there was an Exclusive Plus Agency Agreement which allowed Mantova Holdings to sell as well as to multi list the Property.[129] In his oral evidence, Mr Caruso denied the existence of an Exclusive Plus Agency Agreement on the basis that although the relevant box on the Selling Agency Agreement had been ticked, he had not initialled it as required under the Selling Agency Agreement.[130] However, it is clear from the earlier admissions in Mr Caruso’s Affidavit, and the content of the Selling Agency Agreement considered as a whole, that there was an Exclusive Plus Agency Agreement.
[129] Caruso Affidavit, para.68.
[130] Transcript at 35-36.
Mr Caruso asserts that an Exclusive Plus Agency Agreement meant that the Property could be multi listed, and it seems, by inference, that he therefore asserts that other agents could therefore sell the Property. The definition of Exclusive Plus Agency Agreement does allow the Property to be marketed using:
a)REIWA’s internet listing service;
b)REIWA’s internet site; and
c)REIWA’s Homebuyer magazine,
but none of that means that the Exclusive Pllus Agency Agreement is an agreement to multi-list the Property, nor does it authorise or allow the use of another selling agency, either in its terms or on the evidence in these proceedings.
Under the Exclusive Plus Agency Agreement Mr Caruso was able to authorise the “use of a security lock box”. There was no evidence that he did so. Nor was there any evidence as to what precisely it would have meant had he done so.
That the Exclusive Plus agency agreement is not an agreement to multi-list the Property is confirmed by the definition of a “Multi-List exclusive agency agreement” which is defined to have an identical meaning to an Exclusive Plus Agency Agreement, except that it allows conjunctional sales to all licensed real estate agents entitled to use the REIWA security lock box. Neither Mr Caruso nor Mantova Holdings asserted that the Selling Agency Agreement was a Multi-List exclusive agency agreement as defined. Mr Caruso did not assert that an error had been made and the wrong agreement box ticked. Rather he asserted that the Exclusive Plus Agency Agreement in this case allowed for multi-listing. In that regard, both as a matter of fact, and of construction of the Selling Agency Agreement, Mr Caruso is wrong.
What remains is the Exclusive Plus Agency Agreement, which in its terms provides for:
a)Mantova Holdings to be appointed to sell the Property on an exclusive basis;
b)agreement by Mr Caruso to pay a selling fee (in this case $100,000) to Mantova Holdings; and
c)the Property to be marketed using the internet and magazine resources set out above.
Those provisions do not constitute an agreement to multi-list the Property with other agents.
Representation in a contract
The question arises on Mr Caruso’s argument as to whether a provision in a contract, in this case the Selling Agency Agreement, is a representation for the purposes of the TP Act.
In Accounting Systems 2000 the Full Court of the Federal Court, having referred to s.4(2)(a) of the TP Act, and the reference therein to “engaging in conduct” (the terms of which remain the same today) went on to observe that:
The result of this examination of the provisions of the legislation before and after the 1977 Act is that s 4(2)(a) in dealing with “conduct” operates generally, … So understood, s 4(2)(a) provides significant support for the conclusion reached in this case by the primary Judge, and for the general proposition that the making of a statement as to a presently existing state of affairs, if false, may be the engaging in misleading or deceptive conduct, where the statement is embodied as a provision of a contract.[131]
[131] Accounting Systems 2000 at 505 per Lockhart and Gummow JJ.
Dealing with the position where there was a future representation the Full Court of the Federal Court went on to say:
Where the conduct relied upon involves not a statement as to a presently existing state of affairs, but a representation with respect to a future matter, which is contained purely in a contractual promise, then a case for contravention of s 52 will involve consideration of the extra steps spelled out in s 51A of the TP Act.[132]
[132] Accounting Systems 2000 at 506 per Lockhart and Gummow JJ.
In Coles Supermarkets Australia Pty Ltd v FKP Ltd[133] a single Judge of the Federal Court observed as follows:
[133] [2008] FCA 1915 (“Coles Supermarkets”).
67 The interaction between the TPA and the law of contract is interesting and has been the subject of previous consideration: see by way of example Concrete Constructions Group v Litevale Pty Ltd (2002) 170 FLR 290; Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217; Mander Forklift Pty Ltd v Dairy Farmers Co-operative (1990) ATPR (Digest) 46-061.
68 In Futuretronics at 239, Ormiston J “expressed [his] doubts whether a contractual promise of itself carries with it any representation as to fact or conduct” actionable by reason of s 51A. His Honour explained the issue (at 238-39) in the following terms:
It is hard to believe that normally any promisee with ordinary contractual rights would … describe himself as having been deceived or misled [based on the mere acceptance of a promise]. It is only when it becomes apparent that the promise cannot be enforced, because, for example, it is either unenforceable or the promisee's rights are valueless or diminished, that one may return to the original promise to inquire whether that promise was of so little substance that it can be concluded that the promisee was indeed misled or deceived in the first place, at the time of his acceptance of the promise. Thus it may then be seen that the promisor originally had no intention to perform his promise or that he originally had no capacity or ability to perform it.
…
It would seem on the authorities that, at the least, a contractual promise would amount to an implied representation that the promisor then had an intention to carry out that promise. If it can be shown that he had no such intention, he would be guilty of misleading or deceptive conduct. Likewise it would seem that such a representation connotes a present ability to fulfil that promise which, if shown to be untrue at the time of making, would likewise characterise the implied representation as misleading or deceptive.
69 As this passage reveals, an express contractual promise or representation will constitute an actionable implied representation under s 52 of the TPA only if the party making the promise or representation had no intention or capability of carrying it out at the time it was made (ie the promisor had no reasonable grounds for making the promise). The questions which then arise are (1) what is the contractual promise in this case and (2) did the respondents have the intention and ability to carry it out at the time it was made?[134]
[134] Coles Supermarkets at paras.67-69 per Gordon J.
In Young v Wyllie & Ors[135] having cited the above passage from Coles Supermarkets, the Federal Court insofar as the claims were contractual in a case under s.52 of the TP Act said that it was inappropriate to give summary judgment.[136] More recently, the Chief Justice of the High Court has said:
[35] The term “conduct which is misleading or deceptive or likely to mislead or deceive” is apt to cover a large variety of possible circumstances in which the conduct of one has a tendency to lead another into error. There is no reason in principle why the fact that a false statement is contained in a contractual document thereby takes the use of that statement in the document out of the scope of “misleading or deceptive conduct”. Whether the proffering of a contractual document containing a false statement amounts to a misrepresentation or to misleading or deceptive conduct, is a matter of fact to be determined by reference to all the circumstances. The circumstance that such a representation is the subject of a contractual warranty does not, as a matter of law, exclude the making of it from the purview of the statutory prohibition. This is consistent with the observation by Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd [85] : “the making of a statement as to a presently existing state of affairs, if false, may be the engaging in misleading or deceptive conduct, where the statement is embodied as a provision of a contract.”[137]
and:
[42] It was submitted that the giving of contractual warranties can constitute misleading or deceptive conduct. Reference was made to Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd [91] . But the pleading, so far as it related to Sch 3, alleged in effect representations comprising the statements in the Schedule. It was not linked to the giving of any contractual warranty in relation to them. On the other hand, as discussed earlier in these reasons and contrary to the submissions made on behalf of Mr Campbell, it is not an answer to a plea of misleading or deceptive conduct based on misrepresentation to assert that the misrepresentation is contained in a contractual document.[138]
[135] (2010) 86 IPR 84; [2010] FCA 283 (“Young”).
[136] Young IPR at 106 per Moore J; FCA at para.64 per Moore J.
[137] Campbell v Back Office Investments Pty Ltd (2009) 238 CLR 304 at 322 per French CJ; [2009] HCA 25 at para.35 per French CJ (“Back Office Investments”).
[138] Back Office Investments CLR at 324-325 per French CJ; HCA at para.42 per French CJ.
Although Accounting Systems 2000 was a case concerned with contractual warranties, the principles with respect to misleading and deceptive conduct in contracts set out there are of general application. That is confirmed by the observations of the Chief Justice of the High Court in Back Office Investments, and nothing said in Coles Supermarkets or Young detracts from the general proposition.
The Court therefore finds that the Selling Agency Agreement can contain a written representation capable of being a representation for the purposes of s.52 of the TP Act.
In the circumstances of this case, and for reasons set out above, the Court prefers Mr Pileggi’s account of the telephone conversation of 16 May 2007 and the 18 May 2007 Meeting, and therefore finds that Mr Caruso made oral representations that:
a)he would grant an exclusive agency to Mantova Holdings to sell the Property;
b)the exclusive agency was until the Property was sold; and
c)the fee for selling the Property was $100,000.
The fact that the oral representations were made in these terms is, in the Court’s view, confirmed by the relevant terms of the Selling Agency Agreement, which are, for reasons set out above, written representations to the same effect.
The questions remain:
a)were the representations false?
b)what was meant by the words “UNTIL SOLD”?
“UNTIL SOLD”
It is convenient first to deal with the question of the meaning of the words “UNTIL SOLD”.
To the extent that there was an oral representation that the exclusive agency agreement would be until the Property was sold, there is no reason to consider that the meaning of such an oral representation was any different to the representation reduced to writing in the words “UNTIL SOLD”.
Mr Caruso asserts that in discussing the Selling Agency Agreement with Mr Pileggi in the 18 May 2007 Meeting he made it clear that the words “UNTIL SOLD” in the Selling Agency Agreement meant until the offer that Mr Caruso said Mr Pileggi had said that he then had (that is as at 18 May 2007) was accepted. Mr Pileggi says that there was no such conversation. For reasons set out above, the Court will generally prefer the evidence of Mr Pileggi on this issue. However, on this issue there are several specific reasons why the evidence of Mr Pileggi, that there was no discussion of the kind asserted by Mr Caruso, is to be preferred. They are:
a)there is no indication in the Selling Agency Agreement that it is for a period of a week, or for any other period, other than “UNTIL SOLD”;
b)Mr Caruso has initialled the words “UNTIL SOLD” in the two places at which they occur, and has done so without written qualification of any kind;
c)the Selling Agency Agreement otherwise contains no words of qualification in relation to the words “UNTIL SOLD”; and
d)in the Second Selling Agency Agreement Mr Caruso has:
i)specified a date until which the “Exclusive Agency Period” in that agreement is to run;
ii)attached a schedule specifying that the selling fee is any amount over $1m achieved as the sale price of the Property,
thereby demonstrating that when he so wishes, Mr Caruso can be quite specific as to the terms of a selling agency agreement.
In the circumstances therefore the evidence of Mr Pileggi is to be preferred, supported as it is by the written terms of the Selling Agency Agreement, and the Court finds that the words “UNTIL SOLD” were not qualified in any way by any thing or matter external to the Selling Agency Agreement at the time that the Selling Agency Agreement was entered into by the parties. It remains therefore to determine what those words mean as they appear in the Selling Agency Agreement.
The evidence discloses that whilst Michael Pileggi’s father was absent, Michael Pileggi:
a)forwarded correspondence concerning the Property from Raine & Horne Midland to Mr Caruso;
b)had telephone conversations with Mr Caruso concerning the property from, or on behalf of, Raine & Horne Midland;
c)was in attendance at, and apparently conducting the business of, Raine & Horne Midland when Mr Caruso attended there on 7 November 2007;
d)undertook to Mr Caruso to speak to a finance broker concerning finance on the Jambanis Offer, and seemingly did so; and
e)spoke to Mr Caruso about finance in relation to the Jambanis Offer,
all of which culminated in Michael Pileggi telling Mr Caruso that he could sell the Property to his purchaser in the terms set out above.
The above circumstances lead to the conclusion that Michael Pileggi had ostensible authority to act as he did on behalf of Mantova Holdings in his dealings with Mr Caruso, and that he did indeed tell Mr Caruso that he could sell the Property to his, Mr Caruso’s, purchaser.
Furthermore, and relevantly, at no stage however does it appear that Michael Pileggi has discussed with Mr Caruso the Selling Agency Agreement, or its terms.
WA Land Holdings’ acceptance
The Property was subsequently the subject of the WA Land Holdings Acceptance, and a sale to WA Land Holdings which settled on 20 March 2008.
Prohibition on misleading and deceptive conduct
Section 52 of the TP Act provides as follows:
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Were the representations misleading and deceptive?
When considered overall the evidence leads the Court to the conclusion that it was never Mr Caruso’s intention to appoint Mantova Holdings as the exclusive selling agent of the Property. Rather, what Mr Caruso did, was to sign the Selling Agency Agreement indicating that that was the case, but, in addition, continue to have contact with other real estate agents, principally Clark & O’Neil Property Group it appears, with respect to, and with a view to, the sale of the Property. It does not appear, and it can be inferred from the evidence, that it was never Mr Caruso’s intention that any buyer emerging from those other discussions would be passed on to Mantova Holdings in order to complete the sale. Thus the representation that Mantova Holdings was being appointed as the exclusive selling agent for the Property was misleading and deceptive, and it follows from that that it was also misleading and deceptive to assert that Mantova Holdings would be paid $100,000 when the Property was sold because it is evident that that was not Mr Caruso’s intention if the Property was sold as a consequence of his activities with respect to the Property with other real estate agents.
The Court therefore considers that the following representations were misleading and deceptive:
a)that Mr Caruso would appoint Mantova Holdings as the exclusive selling agent of the Property;
b)that Mr Caruso would appoint Mantova Holdings as the exclusive selling agent of the Property until the Property was sold; and
c)that Mr Caruso would pay Mantova Holdings $100,000 when the Property was sold.
Did Mantova Holdings rely on the representations?
Mantova Holdings says that in reliance on the Representations it:
a)attended Mr Caruso’s premises at Unit 2, 1808 Albany Highway, Kenwick on 18 May 2007;
b)entered into the Agreement;
c)marketed the Property;
d)provided a contract for sale of land by offer and acceptance in respect of the Property, which was accepted by Mr Caruso on 1 August 2007; and
e)on or about 4 October 2007 provided a cheque from the proposed purchaser for $50,000 by way of deposit in respect of the offer to purchase the Property.[153]
These events are not in dispute.
[153] Statement of Claim, para.6.
Mr Pileggi gave evidence that:
In all of my dealings with Mr Caruso in relation to the land I relied on his statements that he would appoint me as exclusive agent to sell the property until it was sold, including in the agency agreement. He never said that he wanted to terminate the agreement or wanted to have another agent market the property, so I did not take any other steps to have him confirm that I would be paid the agreed commission when the property was sold.[154]
In his brief cross-examination Mr Pileggi was not challenged on this statement.
[154] First Pileggi Affidavit, para.42.
In the Court’s view it is clear that Mantova Holdings relied upon the representations set out above, either in whole or part, and as a consequence had an expectation that it would receive the selling fee of $100,000 if the Property was sold while the Selling Agency Agreement remained in place.
Were the representations made as to future matters?
Section 51A of the TP Act provides as follows:
(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.
Section 51A of the TP Act is a proof facilitation provision with respect to representations as to future matters.
A representation is about a future matter when it refers to things to occur in the future,[155] predictions or projections.[156] A representation may be as to both a present state of mind or belief and a future matter.[157] Honest belief in a particular state of affairs does not mean that there are reasonable grounds for the correctness of the representation; that is, it may be honestly held but unreasonable.[158]
[155] Sykes v Reserve Bank of Australia (1998) 88 FCR 511 (“Sykes”) (premature press release concerning issuance of polymer bank notes); Ting v Blanche (1993) 118 ALR 543 (“Ting”) (likely rental income if property leased).
[156] Cummings v Lewis & Ors (1993) ATPR (Digest) 46-103 at 53,449 per Sheppard and Neaves JJ (“Cummings”) (financial projections by accounting firm).
[157] Ting at 552 per Hill J.
[158] Cummings at 53,448 per Sheppard and Neaves JJ.
The representations that Mantova Holdings would be the exclusive selling agency until the Property was sold and that Mantova Holdings would be paid $100,000 when the Property was sold were representations as to future matters for the purposes of s.51A of the TP Act.[159]
[159] Sykes.
Where a representation is made about a future matter which matter fails to occur, the maker of the representation bears the onus of adducing evidence to show that the representation was made on reasonable grounds.[160] Liability can be avoided if the representor had reasonable grounds for making the representation.[161]
[160] TP Act, s.51A(2).
[161] Sykes at 514 per Heerey J.
What constitutes reasonable grounds? Reasonable grounds have to be assessed having regard to all of the circumstances of the case, including background, the parties prior conduct and the overall probabilities.[162]
[162] Cummings at 53,449 per Sheppard and Neaves JJ.
Mr Caruso did not have reasonable grounds for making the future representations because, for reasons set out above, it was never his intention to grant an exclusive selling agency agreement to Mantova Holdings or to pay the $100,000 to Mantova Holdings if the Property was sold to a buyer not introduced to the Property by Mantova Holdings.
Waiver
Mr Caruso alleges that Mantova Holdings has waived its right to recovery of the selling agent’s fees by reason of the conduct of Michael Pileggi on 17 November 2007 when he told Mr Caruso that he could sell the Property to his, Mr Caruso’s, purchaser.
The plea of waiver was a bare one in reliance upon the above conduct. In response to it, there was simply a plea of denial of waiver by Mantova Holdings. Submissions on the point were equally brief, and neither in the written nor oral submissions was any authority cited to the Court to assist it with the determination of this issue. That is unfortunate given that the doctrine of waiver is surrounded by uncertainty, both as to its existence, and if it does exist, its content and meaning.[163]
[163] Agricultural and Rural Finance Pty Ltd v Gardiner & Anor (2008) 238 CLR 570 at 586-588 per Gummow, Hayne and Kiefel JJ; [2008] HCA 57 at paras.50-54 per Gummow, Hayne and Kiefel JJ, and especially at CLR 586 and HCA at para.50: “Leading scholars long cautioned against, even condemned, its use. Roscoe Pound, in his Foreword to Ewart’s work Waiver Distributed described waiver as one of a number of “solving words” which are “but substitutes for thought” and as one of a number of “pseudo-conceptions” or “soft spots in what appears a hard legal crust” (“Agricultural and Rural Finance”). See also Pacific Brands Sport & Leisure Pty Ltd & Ors v Underworks Pty Ltd (2006) 149 FCR 395 at 421-422 per Finn and Sundberg JJ; [2006] FCAFC 40 at paras.112-113 per Finn and Sundberg JJ; Helicopters Pty Ltd v Bankstown Airport Ltd [2009] NSWSC 889 at paras.51-55 per White J.
In Agricultural and Rural Finance the majority of the High Court made the following observations:
95… But if, as is the case here, there was no election between inconsistent rights, there was no variation of the contract, and there was no detrimental reliance upon the representation, no reason is given for holding the party concerned to its earlier expressed attitude beyond the fact that the representation was made. To hold that the making of the representation, without more, suffices to alter the rights and obligations for which the parties stipulated by their contract is a step that should not be taken.
96. It should not be taken for two reasons. First, to hold that the making of a representation, without more, alters the rights and obligations of parties to a contract would be to supplant accepted principles governing whether an estoppel is established and whether a contract has been varied. It would supplant those principles by dispensing with the need to show detrimental reliance to establish an estoppel and by discarding as irrelevant the need to show consideration for an agreement to vary an existing contract. The second reason, which in a sense is no more than the obverse of the first, is that no reason is proffered to hold the person making the representation to it. The person to whom the representation is made has not relied on it; it is not demonstrated that departure from the representation would be unjust; there was no consideration to support a bargain.[164]
[164] Agricultural and Rural Finance CLR at 601-602 per Gummow, Hayne and Kiefel JJ; HCA at paras.95 and 96 per Gummow, Hayne and Kiefel JJ.
In Agricultural and Rural Finance the High Court held that there was no waiver, in the sense of abandonment or renunciation, of insistence upon punctual payment as a condition for an indemnity being effective and enforceable, notwithstanding that a borrower had been allowed to make late payments.
In this case Mr Pileggi’s statement on 17 November 2007 does not involve an election between inconsistent rights. Nor does it involve any variation of the Selling Agency Agreement, for the usual conditions for variation of a contract, including consideration, have not been met. Nor is there detrimental reliance, for here the effect of Mr Pileggi’s statement was not, and could not be considered to be, for reasons set out below, one which allowed Mr Caruso to sell the Property free of the obligations, including the payment of the selling agent’s fee, under the Selling Agency Agreement.
Mr Pileggi’s 17 November 2007 statement says no more to Mr Caruso than that the seller, which was Mr Caruso, should sell the Property to the prospective purchaser whom he had been cultivating but had not introduced to the selling agent, Mantova Holdings. Mr Pileggi’s 17 November 2007 statement says nothing concerning:
a)abandonment of the Selling Agency Agreement as a whole (which is the true effect of the position advocated for by Mr Caruso);
b)variation of any provision of the Selling Agency Agreement; or
c)variation or abandonment of Mantova Holdings’ right under the Selling Agency Agreement to the seller’s fee if the Property was sold.
In short, Mr Pileggi’s 17 November 2007 statement is nothing more than a representation to Mr Caruso that the Property could be sold to the prospective purchaser, which was WA Land Holdings. It was not however an invitation for Mr Caruso to sell the Property through either the Clark & O’Neil Property Group (to whom he ultimately paid an introduction commission) or through his own agency, Raine & Horne Southern River (as he ultimately did paying a commission of $400,000). There was nothing in Mr Pileggi’s 17 November 2007 statement from which it could be assumed by Mr Caruso, or inferred by the Court, that Mantova Holdings had given up the rights that it had under the Selling Agency Agreement in the event that the Property was sold.
Therefore, even if there is a doctrine of waiver by way of renunciation or abandonment, it does not apply to the facts in this case.
Is Mantova Holdings entitled to commission?
Mr Caruso argued that Mantova Holdings would not be entitled to commission on the final sale of the Property in any event, by reason of:
a)section 61(4) of the REBA Act; and
b)clause 5(a) of the Selling Agency Agreement.
Section 61(4) of the REBA Act provides as follows:
The remuneration of an agent for services rendered by him in his capacity as agent in respect of a transaction he has negotiated is payable only on settlement of the transaction unless there is a failure to settle the transaction and that failure is due to the fault of the agent’s principal.
Section 61(4) of the REBA Act has been construed as follows:
It is … essential to appreciate that s61(4) of the Real Estate and Business Agents Act 1978 does not prescribe the services in relation to which an agent is entitled to remuneration. The … entitlement must be sought … in the terms of … appointment. The purpose and effect of s61(4) … are simply to fix the time for payment of the agreed remuneration. That time is on settlement of the transaction which the agent has negotiated, unless there is a failure to settle the transaction due to the fault of the agent’s principal, in which event, no doubt, the remuneration is payable at the time when settlement should have been effected.[165]
[165] Michael J Bignell Pty Ltd v Noakes [1989] ANZ ConvR 148 at 152 per Kennedy J.
The terms of Mantova Holdings’ entitlement to remuneration as agent have been discussed above and the Court has found that Mantova Holdings was appointed as an exclusive selling agent for the Property and therefore was entitled to the commission as provided for in the Selling Agency Agreement when the Property was sold.
Mr Caruso claims that by reason of s.61(4) of the REBA Act Mantova Holdings is not entitled to commission because Mantova Holdings did not negotiate the final sale of the Property and did not render any services in respect of that sale.
As indicated in Bignell, s.61(4) of the REBA Act does no more than fix the time for payment of agreed remuneration between the seller and the selling agent. That time is on settlement of any relevant transaction. In this case, that relevant transaction is the time at which the Property was sold, namely on settlement of the WA Land Holdings Acceptance on 20 March 2008. Whether or not Mantova Holdings is entitled to remuneration is to be determined by the terms of the Selling Agency Agreement. Furthermore, s.61(4) of the REBA Act does not preclude, as has occurred here, a seller and a selling agent from entering into a selling agency agreement, including provisions requiring payment of the seller’s fee in the event that the seller appoints another agent to sell the property during any exclusive rights period. Thus, for example, s.61(4) of the REBA Act would not prevent payment of the seller’s fee if clause 18 of the Selling Agency Agreement is engaged.
It was also argued that clause 5(a) of the Selling Agency Agreement precluded payment of the selling fee to Mantova Holdings. However, clause 5(a) merely provides for the time at which the selling fee is payable, namely on settlement of the transaction. In that respect at least, it reflects s.61(4) of the REBA Act. However, the entitlement to payment of the seller’s fee is set out in clause 4(a) of the Selling Agency Agreement where the agent’s selling fee is said to be payable during the exclusive rights period if “the Property is sold or exchanged”.[166] In this case the Property was sold, and settled, on 20 March 2008. By reason of clauses 4(a) and 5(a) of the Selling Agency Agreement the selling fee of $100,000 was payable. Therefore, clause 5(a) of the Selling Agency Agreement did not preclude payment of the selling fee of $100,000 to Mantova Holdings.
[166] Selling Agency Agreement, cl.4(a).
Damages under the TP Act
Mantova Holdings contends that it is entitled to recover damages under s.82 of the TP Act where Mr Caruso’s conduct in selling the Property, through another agent, was a cause of Mantova Holdings not being able to sell the Property by the completion of the Jambanis Offer, or by sale to another party.
The effect of the misleading and deceptive conduct by Mr Caruso was to deny Mantova Holdings the opportunity to sell the Property and obtain the selling fee of $100,000. The evidence establishes that it was likely that finance on the Jambanis Offer would finally have been approved by 21 November 2007, and in those circumstances a sale to Mr Jambanis would ultimately have been completed, thereby entitling Mantova Holdings to the $100,000 selling fee. In any event, given that Mantova Holdings had exclusive rights to sell the Property (no steps having been taken to terminate the Selling Agency Agreement by Mr Caruso) there was nothing to prevent Mantova Holdings being designated as the selling agent by Mr Caruso for the sale to WA Land Holdings, and that is what ought to have occurred if effect was to be given to the provisions of the Selling Agency Agreement. That would not have precluded payment of a buyer’s introduction fee, or other commission, to the Clark & O’Neil Property Group for the introduction of WA Land Holdings as a buyer. The payment of the seller’s fee has been denied to Mantova Holdings by Mr Caruso’s appointment of Raine & Horne Southern River as the selling agent, and the payment of what appears to be a grossly excessive commission to that agency in which Mr Caruso had an interest. Further, it is apparent on the evidence that it was done in that manner so that Landsmart Pty Ltd would receive that commission and be able to discharge the taxation liability. The effect of all of that was to deny Mantova Holdings the $100,000 selling fee to which it would have been entitled had the Jambanis Offer been allowed to be completed, or had it been given the opportunity, as it ought to have been, to be the selling agent on the sale to WA Land Holdings.
Mantova Holdings has therefore suffered loss and damage in the amount of $100,000, being the amount of the fee payable under the Selling Agency Agreement on sale of the Property.
Has Mantova Holdings suffered damage as a result of the breach of the Selling Agency Agreement?
In the alternative to a claim for damages under the TP Act, Mantova Holdings claims that it is entitled to recover the $100,000 fee as damages for breach of contract.
The terms of clause 18 of the Selling Agency Agreement are clear. Mr Caruso was not entitled during the exclusive rights period, that is until the Property was sold, to appoint another agent to find a buyer, other than through the agency of Mantova Holdings, unless he took proper steps to terminate the Selling Agency Agreement, which he did not. The evidence establishes that one or other or both of the Clark & O’Neil Property Group and Raine & Horne Southern River were appointed as selling agent in respect of the Property on or about 20 or 21 November 2007. Appointment of another agent during the exclusive rights period is a contravention of clause 18 by Mr Caruso, and in circumstances where, as occurred in this case, the other agent has found a buyer (WA Land Holdings) and the Property has been sold to WA Land Holdings, Mr Caruso is deemed to have terminated the Selling Agency Agreement and is obliged to pay the selling agent’s fee of $100,000 to Mantova Holdings.
Therefore, in the circumstances, Mantova Holdings is entitled to damages of $100,000 for breach of contract, being a breach of clause 18 of the Selling Agency Agreement.
Cross-claim
Implied Term in the Selling Agency Agreement
Mr Caruso’s Cross-Claim asserts that the Implied Term in the Selling Agency Agreement was that Mantova Holdings would act in the best interests of Mr Caruso in carrying out the Selling Agency Agreement.
Mr Caruso argues that Mantova Holdings acted in breach of that Implied Term by:
a)failing to inform Mr Caruso that the purchaser of the Property had not obtained finance by the due date. As a consequence, Mr Caruso alleges he missed an opportunity to resell the Property as at 1 October 2007;
b)failing to carry out Mr Caruso’s instructions to renegotiate the deposit with the purchaser, so that the $50,000 deposit would become non-refundable in the event the purchase of the Property did not proceed; and
c)failing to properly keep Mr Caruso informed of the progress of the sale of the Property, including informing Mr Caruso that finance had been approved when it had not been, and failing to inform Mr Caruso that the purchaser was not prepared to make the deposit non-refundable.
Mr Caruso claims to have suffered damage as a consequence of the alleged breach in the following terms:
a)loss of the use of the $50,000 paid by the purchaser because the deposit was refunded, in circumstances where Mr Caruso had instructed Mantova Holdings to renegotiate that deposit to make it non-refundable; and
b)Mr Caruso re-sold the property for a price of $50,000 less than what he would have otherwise obtained had he been able to resell the property at a much earlier time.
As to the assertion by Mr Caruso that he missed an opportunity to re-sell the Property as at 1 October 2007, and that he subsequently re-sold the Property to WA Land Holdings at a price $50,000 less than he would otherwise have obtained, there is no independent evidence of any offer for $1.45m on or about 1 October 2007. For reasons set out above, the Court is not prepared to accept a brief and bare assertion by Mr Caruso that there was such an offer and that it resulted in the loss claimed. There would have been no difficulty, given the nature of the amendments which were made by both parties up to and including the day of hearing, for evidence on this issue to have been led. It was not, and the claim is simply not made out on the facts.
As to the claim that Mantova Holdings failed to carry out instructions from Mr Caruso that the $50,000 deposit paid by Mr Jambanis was to be non-refundable, and accepting for present purposes that such instructions were given, the Court is not satisfied that there was any breach of the Selling Agency Agreement nor that any loss was suffered. It is not a breach of an agreement to fail to convert instructions to negotiate the terms of a separate agreement into terms of that separate agreement, here amended terms as to the deposit in the Jambanis Offer. Further, and in any event, when the evidence is considered in context it is tolerably clear that Mr Jambanis would not have agreed to a non-refundable deposit. The Jambanis Offer had a refundable deposit of $100,000, and Mr Gooding’s Note makes clear Mr Jambanis’ position that he would not offer a non-refundable deposit of $50,000, and that the $50,000 was not tendered on that basis. Thus, the Court concludes that there was no loss of a $50,000 non-refundable deposit by Mr Caruso because Mr Jambanis did not, and would never have, agreed to such a provision.
As to the assertion that Mantova Holdings failed to keep Mr Caruso informed of the progress of the sale of the property, including informing Mr Caruso that finance had been approved when it had not been, and failing to inform Mr Caruso that the purchaser was not prepared to make the deposit non-refundable, the Court, for reasons set out above, prefers the evidence of Mr Pileggi to Mr Caruso in this respect. Therefore, the Court is not satisfied that the failures as alleged had occurred. Even if they had, there is no evidence to prove that any breach would have resulted in damage, for reasons also set out above.
The Cross-Claim therefore fails.
Conclusion, orders and costs
The Court has concluded that:
a)Mr Caruso contravened ss.51A and 52 of the TP Act by reason of misleading and deceptive conduct in relation to the Selling Agency Agreement;
b)by reason of Mr Caruso’s contravention of ss.51A and 52 of the TP Act Mantova Holdings has suffered loss and damage of $100,000;
c)Mr Caruso is in breach of clause 18 of the Selling Agency Agreement; and
d)by reason of Mr Caruso’s breach of clause 18 of the Selling Agency Agreement Mantova Holdings is entitled to damages of $100,000.
In respect of each of the amounts of loss and damage set out above the $100,000 is the same $100,000, and subject to interest and costs, Mr Caruso’s liability is therefore limited to $100,000.
In relation to the sum of $100,000, which would have been payable on or about 21 November 2007 by reason of the breach, the Court will order that a lump sum be paid in lieu of interest,[167] the lump sum to be in an amount of $20,000.
[167] FM Act, s.76(3)(d).
There will therefore be orders that:
a)the respondent pay the applicant:
i)the sum of $100,000;
ii)interest on above sum of $20,000
by 1 October 2010.
b)the respondent pay the applicant, by way of interest on judgment, pursuant to s.77(2) and (3) of the Federal Magistrates Act 1999 (Cth), and O.35 r.8 of the Federal Court Rules, at the rate of 10.5% per annum from 3 September 2010 until payment.
The Court will hear the parties as to costs.
I certify that the preceding two hundred and six (206) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate:
Date: 3 September 2010
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