Noahs Rosehill Waters Pty Ltd v Centreplex Pty Ltd - [2023] WASC 57

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   NOAHS ROSEHILL WATERS PTY LTD -v- CENTREPLEX PTY LTD [2023] WASC 57
CORAM:   MASTER SANDERSON
HEARD:   27 SEPTEMBER 2022
DELIVERED          :   27 SEPTEMBER 2022
PUBLISHED           :   3 MARCH 2023
FILE NO/S:   CIV 2219 of 2020
BETWEEN:   NOAHS ROSEHILL WATERS PTY LTD
Plaintiff
AND
CENTREPLEX PTY LTD
First Defendant
ALAN BERNARD STOTT
Second Defendant
BRIAN THOMAS BURKE
Third Defendant

Catchwords:

Trusts - Money held by agent against claim of oral variation of written agreement - Turns on own facts

Legislation:

Real Estate and Business Agents Act 1978 (WA)

Result:

Funds in court paid to plaintiff

Category: B

Representation:

Counsel:

Plaintiff	:	ML Bennett
First Defendant	:	JA Robertson
Second Defendant	:	No appearance
Third Defendant	:	JA Robertson

Solicitors:

Plaintiff	:	Bennett
First Defendant	:	Williams & Hughes
Second Defendant	:	In Person
Third Defendant	:	Williams & Hughes

Case referred to in decision:

Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2019] AC 119

MASTER SANDERSON:

When proceedings were issued in this matter, there were a number of issues dividing the parties. As at the date of the hearing of the application, there was only one issue outstanding. That was whether the plaintiff or the first defendant was beneficially entitled to the sum of $106,041.80 (the trust amount) paid into court on or about 9 December 2021. At the conclusion of the hearing, I decided the plaintiff was entitled to the trust amount. I said I would publish reasons for my decision. These are those reasons.
Below I will detail the relevant facts more fully. But the position can be summarised as follows. The plaintiff was conducting a business developing land in South Guildford and engaged the first defendant to provide marketing and real estate agent services for the sale of the lots. Primarily, these lots were sold as house and land packages. On sale of a package, the first defendant would be paid a commission. The first defendant asserts the rate of commission on some of the sales was varied by oral agreement. The trust amount represents the difference between the commission payable to the first defendant under the written agreement and the commission alleged to be payable to the first defendant under the agreement as (allegedly) orally varied.
The plaintiff claims an entitlement to the trust amount on three basies:
(1)The trust amount was derived from deposits paid to the first defendant by purchases of the land. These funds were held in a regulated trust account on trust for the plaintiff. The plaintiff says that even if the first defendant had a right to a payment of commissions, it had no entitlement to funds held in trust. Any such claim by the first defendant was compromised by a deed of company arrangement executed in respect of the plaintiff in December 2019;
(2)By operation of the terms of the contract and statute, any oral variation was of no legal effect. The parties' contract included a 'no oral modifications' clause and s 60 of the Real Estate and Business Agents Act 1978 (WA) prohibited the first defendant from demanding or receiving any commissions that were not the subject of an agreement in writing signed by the plaintiff;
(3)The plaintiff does not admit the alleged oral variation. The plaintiff says that the variation was discussed at a meeting held by the first defendant's staff and was not the subject of agreement between the parties.
In support of its position, the plaintiff relied on four affidavits. There was an affidavit of Anthony John McKenzie Perrin sworn 11 December 2020, an affidavit of Andrew Fatin sworn 14 December 2020, a sixth affidavit of Mhairi Jane Reid Stewart affirmed 30 June 2021 and an affidavit of Jeremy Joseph Nipps sworn 24 June 2022. The relevant facts which emerge from these affidavits is as follows.
At all material times, the first defendant held a real estate and business agent licence and had previously traded as Rosehill Realty. From 8 January 2019, the third defendant has been a director of the first defendant. The third defendant, at the relevant time, did not hold a real estate agent licence. From 14 December 2018 to 14 May 2020, and then from 14 August 2020 to 11 December 2020, the second defendant was a director of the first defendant. The second defendant at all relevant times, had a real estate agent licence.
The third defendant's son, Mr Peter Bourke, was a director and the company secretary of the first defendant at all material times until 8 January 2019. Thereafter, he was one of the two directors and the company secretary of the plaintiff at all material times until 21 September 2018. The other director of the plaintiff during this time was Ms Ting Lee.
In 2016, the plaintiff and the first defendant entered into a Marketing and Sales Agreement (Agreement) by which the first defendant was the exclusive real estate agent for the plaintiff's development. Under the Agreement, the first defendant would receive commissions from the sale of land and home packages on the plaintiff's development. The first defendant received deposits from buyers which were deposited into its real estate agent trust account, which it was statutorily required to hold.
By 2019, a dispute had arisen between the plaintiff and the first defendant as to the correct commission to be paid to the first defendant under the Agreement. This is referred to by the parties as the 'Commission Dispute'. To enable the settlement of the sale of lots to buyers to proceed in an orderly manner, it was agreed between the plaintiff and the first defendant that, upon settlement of each lot, the amount in excess of the commission rate specified in the Agreement claimed by the first defendant would be held by the first defendant in its trust account, pending the resolution of the Commission Dispute. This occurred with respect to eight lots which settled between January 2019 and October 2019. The difference in commissions was calculated as $106,041.80. This is referred to by the parties as the 'trust amount'.
Since June 2019, the first defendant has not acted as the real estate agent for the development. On 17 October 2019, the plaintiff entered administration. The first defendant proved as a creditor of the plaintiff. On 9 December 2019, the plaintiff entered into a Deed of Company Arrangement (DOCA). The first defendant was served with the originating summons and supporting affidavits in this proceeding on 17 December 2020. On or around 24 February 2021, the trust amount was disbursed from the trust account into the first defendant's general account. At the time of the disbursement, the third defendant was the sole director of the first defendant. On 1 June 2021, administrators were appointed to the first defendant. As at 1 June 2021, the first defendant reported holding $42,963.05 in bank accounts. On 23 July 2021, the first defendant entered into a Deed of Company Arrangement (Centreplex DOCA). In the end of administration return lodged 27 July 2021, the administrators for the first defendant noted the cash at bank was $0. On 8 December 2021, on application by the plaintiff, the court ordered the first defendant to pay the trust amount into court pending resolution of the dispute. The funds were paid into court on or about 9 December 2021.
In its written submissions, the plaintiff deals first with the Agreement and the alleged variation thereof. As I have noted, by the Agreement, the plaintiff appointed the first defendant as its agent for marketing and selling the house and land packages. Clause 3 of the Agreement provided for the plaintiff to pay the first defendant 'the commission' on each sale. The rate of commission was 5.87% and was calculated on the total sale price of the land contract plus the building contract. In addition, the plaintiff was also to pay a 'marketing fee' of up to $2.5 million in respect of 'marketing activities'. Mr Peter Bourke was to oversee the management of the marketing activities. The parties expressly contemplated that sales might be made to overseas investors and made provision for overseas marketing expenses in the marketing plan. By cl 17 of the Agreement, the plaintiff and the first defendant agreed that the Agreement 'may only be varied by deed'.
The first defendant asserts that the commissions payable were discussed between Mr Peter Bourke on behalf of the first defendant and Ms Lee on behalf of the plaintiff at a marketing and sales meeting on 19 October 2017. References were also made to a subsequent telephone call between Mr Peter Bourke and Ms Lee on 21 October 2017. The first defendant asserts that as a result of the discussion and telephone call, the first defendant and the plaintiff agreed to two variations of the Agreement. First, the rate of commission payable for the next 30 sales to overseas buyers (that is, sales subsequent to the telephone discussions) would carry a commission rate of 8% rather than the previously agreed 5.87%. Second, the first defendant alleges it was agreed there would be a flat rate commission based not on the actual 'sale price' for each package, but on the average house and land sale price of $600,000.
The plaintiff does not admit the conversations took place – or at least does not admit that the conversations were to the effect alleged by the first defendant. The plaintiff sought to have the defendants' witnesses cross-examined on this issue but for reasons which I will explain below, that is not necessary. Even assuming the variation as alleged by the defendants was agreed, it is in my view, as a matter of law, of no force and effect.
The difficulty with the defendants' argument revolves around s 60 of the Real Estate and Business Agent's Act 1978 (WA). That section reads as follows:
60. Agent not entitled to commission etc. unless licensed and validly appointed
(1)An agent is not entitled to receive any commission, reward, or other valuable consideration in respect of his services in that capacity unless —
(a)he is licensed in that capacity and he holds a current triennial certificate in respect of his licence when he renders the services; and
(b)he has a valid appointment to act in that capacity which is in writing signed by the person for whom the services are or are to be rendered or by some other person lawfully authorised to sign on behalf of the person for whom the services are or are to be rendered.
(2)An appointment to act as an agent is not valid unless —
(a)it is contained in a document which —
(i)clearly sets out the services that are or are to be rendered; and
(ii)where specific property is to be the subject of those services, clearly identifies the property; and
(iia)clearly sets out the method by which the amount of any commission, reward or other valuable consideration to be received for those services is to be calculated; and
(iii)contains such other information, if any, as is prescribed;
and
(b)the document is not an offer or acceptance or a contract, or a document purporting to be an offer or acceptance or a contract, binding or purporting to bind a party thereto to a transaction; and
(c)the person obtaining the signature to the document gives a true copy thereof to the signatory immediately after the signing thereof (the onus of proof of which is upon the person obtaining the signature).
(3)A person shall not demand or receive any commission, reward, or other valuable consideration in contravention of subsection (1) or (2), or both.
Penalty: $5 000.
(4)Any commission, reward, or other valuable consideration received in contravention of subsection (1) or (2), or both, may be recovered as a civil debt recoverable summarily in any court of competent jurisdiction.
The plaintiff does not dispute the agreement satisfied subsections (1) and (2). However, the alleged variation which deals with the amount of commission was not in a document and was therefore not 'in writing signed by the plaintiff'. It is not to the point to say that the original commission rate was in writing and therefore an oral variation as to the amount of the commission was not captured by the terms of the legislation. To accept that argument would undermine the central tenant of the Act. It is designed to ensure the rate of commission to be charged by the agent is specified in writing. That clearly requires any variation to the commission rate to be specified in writing. As that was done, the variation, assuming there was one, is of no force and effect. Accordingly, the first defendant has no claim to the trust amount.
In its written submissions, the plaintiff dealt at some length with the 'no oral modifications' clause in the Agreement. In doing so, it referred to the United Kingdom Supreme Court decision in Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2019] AC 119. That case determined that there could be an oral variation to an agreement even in the face of a no oral variation clause. In Australia, the position on that issue is still open - remarkably enough, the issue has not been directly addressed either by the High Court or an intermediate appellate court. For the purposes of these reasons, it is unnecessary for me to consider this issue in detail. I am satisfied the provisions of the Act operate so as to prevent any oral variation of the commission rate being effective.
Furthermore, I am satisfied that the first defendant's claim (if it has one) has been compromised by the DOCA. The trust amount relates to the sale of eight house and land packages that settled between 17 January 2019 and 17 October 2019. During 2019, various court and arbitration proceedings were commenced by the parties. Relevantly, the first defendant claimed in proceedings in this court, damages from the plaintiff for alleged failure to pay commissions including in respect of six of the eight lots relating to the trust amount. On 17 October 2019, the plaintiff entered administration. On 28 October 2019, the first defendant submitted an informal proof of debt. This included a claim for 'unpaid commissions' in the amount of $260,000 with the remark 'Supreme Court action'. This proof of debt was submitted not withstanding the first defendant held the trust amount in its trust account. By the terms of the Agreement, the first defendant had no immediate entitlement to those funds which were held on trust for the plaintiff.
When the plaintiff and its administrators entered into the DOCA, it included the first defendant as a pool creditor, both in respect of the DOCA and the creditor's trust facilitated by the DOCA. The DOCA provided for a moratorium on claims against the plaintiff before the termination of the DOCA and the creditor's trust. It also 'discharged, satisfied, released and extinguished' all creditor's claims, including the first defendant's claim. Accordingly, I am satisfied the first defendant's claims to the trust account were extinguished by the execution of the DOCA. The first defendant's claim for unpaid commissions is to be determined by the trustees of the creditor's trust.
In summary then, the first defendant has no claim to the monies held in court and they should be paid out to the plaintiff.
Subsequent to the hearing of the special appointment in this matter, and without leave, the defendants filed two further affidavits of Mr Peter Bourke. One was dated 18 October 2022 and the second was dated 8 November 2022. After hearing argument in this matter, I had indicated to the parties I was satisfied the funds held in court ought be paid to the plaintiff. It would appear the defendants filed these two affidavits of Mr Peter Bourke with the intention I should reconsider my decision. In my view, it was inappropriate to file either affidavit without leave. Furthermore, I had determined the matter. Reasons were to be delivered at a later date but I did not indicate to the parties and it was not my intention there would be any variation from the result I had indicated immediately after the hearing. On that basis, I have not taken into account either affidavit and these reasons and my decision reflect the material before the court as at the date the matter was heard.
There is no reason why the costs in this matter should not follow the event. If the defendants wish to file submissions on this issue, they should do so within seven days of the publication of these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MM
Associate
3 MARCH 2023