Oliver Hume Apartments (Vic) Pty Ltd and; Oliver Hume (Australia) Pty Ltd v; Troy Barkly Nominees Property Group Pty Ltd
[2013] VCC 398
•18 April 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Not Restricted |
COMMERCIAL LIST
EXPEDITED DIVSION
Case No. CI-12-04395
| OLIVER HUME APARTMENTS (VIC) PTY LTD (ACN 093 469 162) | First Plaintiff |
| and | |
| OLIVER HUME (AUSTRALIA) PTY LTD (ACN 068 318 712) | Second Plaintiff |
| v | |
| TROY BARKLY NOMINEES PROPERTY GROUP PTY LTD (ACN 146 937 117) | Defendant |
---
JUDGE: | HIS HONOUR JUDGE GINNANE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 -13 March 2013 | |
DATE OF JUDGMENT: | 18 April 2013 | |
CASE MAY BE CITED AS: | Oliver Hume Apartments (Vic) Pty Ltd and | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 398 | |
REASONS FOR JUDGMENT
---
CONTRACT – agency agreement for sale of units – termination of agreement – entitlement to commission upon termination of the agreement
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J P Tomlinson | Strongman & Crouch |
| For the Defendant | Mr B Gibson | SBA Law |
HIS HONOUR:
1 The plaintiffs (Olive Hume) sue the defendant (Troy Barkly) for commission of $349,000.10, which they allege is owing in respect of the sale of apartments, which formed part of an off-the-plan development at Barkly Street, West Footscray. The development was to consist of 77 residential apartments.
2 The issue for determination is: on the proper construction of the Agreement between the parties, was any commission payable to the plaintiffs upon its termination?
The Marketing and Sales Agreement
3 On 11 July 2011, Troy Barkly and the first plaintiff (Oliver Hume Apartments), which is a real estate agent entered into a marketing and sales agreement (the Agreement) under which Troy Barkly appointed the first plaintiff as agent exclusively for the sale of the proposed 45 apartments listed in Schedule 2.
4 The Agreement was signed by the second plaintiff, Oliver Hume (Australia) Pty Ltd. But the party to the Agreement is described under the name of the first plaintiff i.e. Oliver Hume Apartments (Victoria) Pty Ltd. No issue arose as to who was the correct plaintiff. In this judgment, I will refer to both plaintiffs on occasion as the plaintiffs or as Oliver Hume.
5 There was no dispute that, with one exception, the maximum commission payable to Oliver Hume on a direct sale was 2.5% of the purchase price. On a sale through its “channel partners”, the commission was 7% of the purchase price, with 5% payable to the channel partners and 2% to Oliver Hume.
6 The exception was Lot 1.21 for which the commission was 2.5% of the sale price as Oliver Hume did the work and did not engage a channel partner.
7 Channel partners were a form of sub-agent, or third parties, whom the plaintiffs could use to procure purchasers.[1]
[1]Transcript (“T”) 8, 95
8 The first plaintiff introduced to the development 18 purchasers who executed sale contracts for which deposits were paid.
9 On 23 March 2012, the defendant terminated the Agreement in the manner described below.
Terms of the Agreement
10 Clause 5 of the Agreement is headed “Fees” and states:
“5.1Commission for Sale Contracts executed by the Developer and Purchaser
(a) The Developer following the written approval to the Sales Advice to the Agent agrees to pay the Commission to the Agent if a Purchase that was introduced to the Development by the Agent executes a Sale Contract.
(b) The Developer agrees that the First Instalment of the Commission in connection with a Sale Contract (plus GST in respect of the full amount of the Commission) shall become payable to the Agent 14 days after the date that a Sale Contract becomes an Executed Sale Contract.
(c) The Developer acknowledges that the Agent cannot receive any monies due to it by way of Commission from the Deposit while the Deposit is held on trust and that the Developer will be required to pay the Agent an amount pursuant to this clause 5.1 from funds other than those held on trust as a Deposit.
(d) The balance of the Commission in connection with a Sale Contract shall become payable to the Agent 14 days after the date that Settlement of that Sale Contract occurs.
(e) In the event that Settlement of a Sale Contract does not occur, then the Developer shall not be liable to pay the balance of the Commission in connection with a Sale Contract pursuant to clause 5.1(d) and the Agent will provide the Developer with the appropriate adjustment in accordance with clause 17.
(f) Notwithstanding clause 5.1(b), clause 5.1(d) and clause 5.1(e), a Commission payable in connection with an Executed Sale Contract shall become immediately payable to the Agent, on the earliest of the following events occurring:
(i)21 days after the date on which the Developer terminates this Agreement;
(ii)21 days after the Term expires; or
(iii)21 days after the date on which the Developer breaches clause 3.2(a)(v).
(g) Prior to the sale of each apartment, the Developer and Agent will agree to the commission payable for that particular sale.
5.2Break Fee for Sale Services
(a) The Developer shall become liable to pay the Agent a Break Fee, if:
(i)the Developer terminates this Agreement other than in accordance with clause 11.2;
(ii)the Developer does not proceed with the Development;
(iii)each and every Purchaser that has executed a Sale Contract with the Developer is able to rescind or otherwise avoid a Sale Contract;
(iv)planning approval for the Development is not obtained;
(v)the Developer does not obtain finance for the Development; or
(vi)the Developer breaches clause 3.2(a)(v).
(b) The Break Fee shall be the sum of:
(i)one hundred (100) percent of the amount payable to the Agent by way [of] Commission for each Executed Sale Contract;
(ii)reimbursement of all the Agent’s out of pocket expenses; and
(iii)a further $20,000, if either:
(A)the Developer terminates this Agreement (other than in accordance with clause 11.2); or
(B)the Developer does not proceed with the Development.
(c) The Break Fee shall be payable on the earlier of the following dates:
(i)21 days after the date on which the Developer terminates this Agreement;
(ii)21 days after the date the Developer determines not to proceed with the Development;
(iii)21 days after the date on which an event occurs that allows each and every Purchaser that has executed a Sale Contract with the Developer to rescind or otherwise avoid a Sale Contract;
(iv)21 days after the date on which the Developer’s application for a planning approval for the Development is rejected without any further right of substantive appeal or its finance for the Development is rejected on more than three occasions;
(v)21 days after the date on which the Developer or Developer’s Associate commits a default that grants the Agent a right to terminate this Agreement under clause 11; or
(vi)21 days after the date on which the Developer breaches 3.2(a)(v).
5.3Additional Service fee
If the Agent is required to provide services in addition to those services expressly stated in the Sale Services then the Agent may charge the Developer such additional amount as will have to be agreed by the parties to this Agreement prior to the additional services being provided.
5.4The parties agree that the obligations of this clause 5 shall survive the expiration of the Term or the termination of this Agreement.”
11 The First Instalment of Commission was 50% of the Commission. The Second Instalment of Commission was the balance. See Clause 5.1(d).
12 Clause 11 of the Agreement is headed “Termination” and states:
“11.1A party (Non-defaulting Party) may terminate this Agreement immediately by giving written notice to the other party (Defaulting Party) if:
(a) the Defaulting Party breaches any of its obligations under this Agreement and does not remedy that breach within 28 days, which commences upon receipt of written notice (Default Notice) by the Defaulting Party from the Non-defaulting Party, giving full particulars of the failure and requiring it to be remedied;
(b) the Defaulting Party breaches any of its obligations under this Agreement and that breach is not capable of remedy;
(c) a receiver or receiver and manager or administrator or other controller is appointed to all or any part of the assets of the Defaulting Party;
(d) the Defaulting Party enters into any arrangement or compromise with its creditors or any class of them or indicates its intention of endeavouring to do so;
(e) the Defaulting Party suspends payment of its debts or is unable to pay its debts within the meaning of section 95A of the Corporations Act 2001;
(f) a liquidator or provisional liquidator is appointed to the Defaulting Party; or
(g) the Defaulting Party ceases, or threatens to cease, to carry on business.
11.2The Developer may terminate this Agreement if the Agent does not complete 22 Executed Sale Contracts in accordance with Schedule 7 within two months of the Development Launch Date.
11.3Any fees earned prior to termination under this clause shall not be affected by the termination and shall be paid in accordance with this Agreement.”
13 Clause 14 is headed “Survival of obligations” and states:
“All of the rights and obligations of each party to this Agreement which are expressed to survive termination or expiry of this Agreement, or which by their nature or context must survive termination or expiry of this Agreement, will survive the termination or expiry of this Agreement.”
14 The Agreement contained the following definitions:
“Apartment means a strata title that is proposed to be registered on the certificate of title for the Property and listed in Schedule 2;
Commission means the commission payable in respect of an Apartment as specified in Schedule 2 or such other authorised selling price as prescribed by the Developer from time to time;
Executed Sale Contract means a Sale Contract that has been:
i)executed by a Purchaser in accordance with the written requirements previously provided by the Developer to the Agent;
ii)provided to the Developer and signed by the Developer or its agent; and
iii)for which the Deposit has been paid in full to the Developer.
Sale Contract means the legally binding contract of sale for an Apartment prepared for the Developer for use in connection with the Development.
Settlement means the settlement of a Sale Contract at which the Developer transfers title to an Apartment to another person.”
15 The settlement date for many of the contracts was fixed as follows:
“SETTLEMENT is due on the latest to occur of:
a. 14 days after the Vendor notifies the Purchaser of the registration of the Plan of Subdivision; and
b. 14 days after the Vendor provides the Purchaser with an occupancy permit for the Property.”[2]
[2]Defendant’s Court Book (DCB) 123 - these dates or time periods varied in some of the contracts see e.g. DCB 115
The variation of the Agreement
16 No Executed Sale Contracts were achieved within the two month period, but the defendant elected to give the plaintiffs further time to sell and market the development.
17 By 11 November 2011, four months after the Agreement was made, the plaintiffs had only achieved three executed contracts of sale and only two were unconditional – the third contract was conditional upon approval from the Foreign Investment Review Board. The delay in pre-sales was impacting the cash flow of the development. By that date, all forty-five pre sales that were required before the defendant was able to access construction funding were expected to be achieved.
18 Although there was some argument about whether there was consideration for the variation, as I understood it, that argument was not maintained by the plaintiffs. The consideration would appear to consist, at least, in the defendant not exercising its right to terminate the Agreement.
19 On 25 November 2011, Mr P Chiodo, the project manager, on behalf of the defendant, emailed Mr J Kay, a director of the plaintiffs, stating:
“As discussed in our meeting yesterday, due to the project not being able to achieve the required sales target, the additional project holding cost has provided additional cash flow pressures on the developers. As outlined yesterday, it was understood that the OH payments will be delayed and made part payable as part of our construction draw down.
The proposal is as follows:
1. OH entire 1% Override fee comprises (2% Override fee in total) once the Contract of Sales has become un-conditional will be postponed and paid with the Construction Draw Down process of the project.
2. It is anticipated the construction will commence in March 2012.
3. The sales channels under management by OH will still be paid as pr their entitlement.
4. Troy to pay OH $500 per un-conditional sales as part of OH costs recovery.
Please let me know your thoughts on the above as it’s in line with our discussion.
Once you have approved the above, we will document the revised position for a matter of completeness.
Should you require any changes to the above, please don’t hesitate to call me.”
20 The main effect of the variation was on the payment of the first instalment of Oliver Hume’s commission, which thereafter became payable as follows:
(a) $550, including GST, of Oliver Hume’s commission was payable 14 days after the date that a Sale Contract became an Executed Sale Contract; and
(b) the balance of the first instalment of Oliver Hume’s commission was payable 14 days after the first draw-down of Troy Barkly’s construction loan for the development.[3]
[3]T15,19
21 The balance, or second instalment, of Oliver Hume’s commission payable under clause 5.1 (d), became payable if a Sale Contract settled, at which time it became payable 14 days after the date of settlement.
22 The parties agreed[4] that the proposal contained in Mr Chiodo’s email was adopted and constituted a variation of clause 5.1(b). The result of the variation was that commission became payable to Oliver Hume at three stages:
(a)$500 plus GST became payable 7 days after a Sale Contract became an Executed Sale Contract;
(b)the balance of Oliver Hume’s first instalment commission (1% less $550) became payable “7 days after the first Draw Down of the construction facility” (Draw Down commission);
(c)the balance of the commission (or the second instalment) remained to be paid 14 days after the date of settlement i.e., as clause 5.1(d) states 14 days after the date that settlement of the Sale Contract occurs.
[4]T194 and paragraph 4 of the amended reply
23 From 19 December 2011, Oliver Hume issued credit notes for invoices that had been rendered prior to that date and re-issued invoices in accordance with the Agreement as varied. Payments were made and accepted in accordance with the Agreement as varied.
24 On 21 February 2012, the plaintiffs forwarded a written version of the Agreement to Troy Barkly for execution.[5] It was intended to document the variation that had been agreed. Troy Barkly did not execute the document because it purported to be conditional on the execution of personal guarantees.
[5]DCB 273
Termination of the Agreement
25 On 23 March 2012, the defendant terminated the Agreement in accordance with clause 11.2 in a letter sent to Mr J Kay of Oliver Hume Apartments. The letter stated:
“TRIO APARTMENTS MARKETING & SALES AGREEMENT
This letter formally advises our termination of the Sales and Marketing Agreement with Oliver Hume Apartments for our TRIO Apartments project as you and Paul Chiodo discussed when you previously met.
As you are aware, the number of sales achieved by Oliver Hume Apartments sales has not met the anticipated sales program. We are now exercising our termination rights under clause 11.2.
Unless it complicates the termination arrangements we will be pleased to complete the sale contracts for the outstanding reservations. We confirm our commitment to the agreement commission payment arrangements.
I will also liaise with you on the return of the unused contracts and the set of colour boards.”[6]
[6]DCB 282
26 On 10 April 2012, the first plaintiff wrote to the Mr M Laing of Troy Apartments referring to the termination letter of 23 March and stating:
“I note that under the terms of clause 5.1(f) of our Marketing and Sales Agreement dated 11 July 2011, our full commission becomes immediately payable 21 days after the date on which the Developer terminates the Agreement.
The sums in the attached schedule are according due and owing as of 14 April.
We enclose our tax invoice and look forward to receiving payment on the due date.
We agree that completion of the sale contracts for the outstanding reservations does not complicate the termination arrangements and the agreed commission payment arrangements will apply to those sales, as we are entitled under the Agreement to commission for sales to purchasers introduced by us.”[7]
[7]DCB 283
27 The attached schedule was a Tax Invoice claimed commission totalling $480,670.77.
28 The plaintiffs accepted that the Agreement had been validly terminated.[8]
[8]T12
29 The defendant has paid the plaintiffs each payment of $550 due in respect of the 18 Lots with the exception of Lot 1.14. All first instalment amounts payable to commission partners (or channel partners) of Oliver Hume have been paid.
30 On the plaintiffs’ construction of the Agreement, the outstanding amounts due for the first instalment of Commission in respect of the 18 Lots, for which an Executed Sale Contract existed totalled, $73,017.91.
31 The total sum of the second instalment of Commission that is claimed in respect of the 18 Lots is $275,432.19.
The oral evidence
32 The defendant submitted that because the meaning of clause 5 was ambiguous, evidence of surrounding circumstances was admissible to assist in the interpretation of the Agreement.[9] That evidence is of the objective framework of facts within which the contract came into existence.
[9]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337,352 and Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd [2012] VSCA 134
33 I permitted the defendant to call evidence, over the objection of the plaintiffs[10], that gave, from the defendant’s perspective, some of the history of the of the financing of the development, how the commission rate was agreed and how it came to be varied. The evidence was from Mr Laing and Mr McGregor, who are directors of the defendant.
[10]T100
34 No oral evidence was called on behalf of the plaintiffs.
35 Mr Laing gave evidence that the defendant acquired the property as a vacant site in 2010 and obtained a permit for 77 apartments. The defendant initially had funds of $2.5 million available from investors and $2.5 million from bank finance.[11]
[11]T93
36 Mr Laing gave evidence that the purpose of the agency arrangement entered into with the plaintiffs was to assist the defendant receive $19.5 million from the pre-sale of approximately 45 apartments. This was required in order to obtain, and be able to draw-down, the construction finance, which in turn, was a pre-condition to the commencement of construction.
37 Mr McGregor’s evidence was that the development had only made provision to pay first instalment of the commissions out of the initial investments.[12] Mr Laing communicated these financial circumstances of the development and the purpose of the transaction to Oliver Hume.[13] The balance of the commissions, i.e. the settlement commissions were to be funded from the proceeds of the settlement of the apartment sales upon the completion of the project.[14]
[12]T 124
[13]T 94
[14]T124-125
38 Mr McGregor gave evidence that the defendant had a fixed amount of investment funds available to fund the project through to the draw down of the construction finance.[15]
[15]T 124
39 The lack of sales created cash flow issues that necessitated the variation in the payment arrangements for commissions.[16] This variation was made and Oliver Hume re-issued its past invoices and issued its further invoices in accordance with the variation.
[16]T 123
40 The next phase of funding was due be available at the start of construction which was estimated for initially January 2012, through a mortgage and $3.5 million through a secondary investment group.[17].
[17]T 93
41 The defendant needed to cover its debts and that required sales of about 40-45 apartments. The bank which was financing the development required an amount of pre-sales to be achieved prior to the draw down of the construction funding. Only an enforceable contract was accepted by the bank for that purpose.[18]
[18]T128-129
42 Upon receiving the plaintiffs’ demand in April 2012, Mr Laing and Mr McGregor informed the bank and the defendant’s investors that there was an outstanding liability of $480,000. The construction facility was never drawn down. The project was sold to another entity in September 2012.[19]
[19]T112
The plaintiffs’ submissions
43 The plaintiffs submitted that the meaning of clause 5 was unambiguous and not inconsistent with the remainder of the Agreement. The Agreement was to be construed in accordance with the objective principles of construction.
44 Clause 5.1 created the primary liability to pay commission once the three conditions for an Executed Sale Contract were met. They were that there is a Sale Contract that has been:
(a) executed by a Purchaser in accordance with the written requirements previously provided by the Developer to the Agent;
(b) provided to the Developer and signed by the Developer or its agent; and
(c) for which the Deposit has been paid in full to the Developer.
45 Clause 5.1 (a) imposed an immediate liability, as a debt, on the defendant to pay Commission to the Agent on the satisfaction of the conditions in clause 5.1(a).
46 The contract was not ambiguous and was to be read in accordance with the objective principles of interpretation. There was no requirement that commission was only payable if sales targets were met. The failure of the plaintiffs to meet sales targets only enabled the defendant to terminate the Agreement and did not give it the right to withhold payments of commissions earned by meeting the pre-conditions in clause 5.1 (a).
47 The plaintiffs’ case was that upon termination of the contract, the defendant was liable to pay the plaintiffs the commission that they claimed under clause 5.1(a). The three conditions in that clause were met. There was a purchaser, who was “introduced to the development” by the Agent and who “executed a Sale Contract”.
48 Commission became “immediately payable” on settlement: see clause 5.1(f).
49 The use of the words “instalment” and “balance” in clauses 5.1(b) and (d) refer to parts of the whole commission. The whole commission was the commission referred to in clause 5.1(a) and (f).
50 After the variation had been agreed, the Agreement continued “otherwise on the terms and conditions set out in the agreement.”[20]
[20]Amended Defence paragraph 5A
The defendant’s submissions
51 The defendant submitted that clause 5.1(a) only operated to create an obligation to pay commission that was payable under the other provisions of clause 5. The remainder of clause 5 contained the circumstances in which commission was payable.
52 The maximum amount of commission payable in respect of any Sale Contract was set out in clauses 5.1 (b), (d) and (e) of the Agreement.
53 Clause 5.1(f) dealt with the payment of commission after termination of the Agreement and made commission payable 21 days after termination for Executed Sale Contracts only where settlement had occurred. Under clause 5.1(e), Troy Barkly was not liable to pay commissions on Sale Contracts that did not settle.
54 The defendant submitted that the plaintiffs’ construction of the Agreement was not consistent with its commercial purpose. It would have the result that on termination of the Agreement pursuant to clause 11.2 by Troy Barkly for Oliver Hume’s non-performance, Oliver Hume would become entitled to the maximum commission to which it would have been entitled had each contract that it procured been executed, and the draw-down of finance and settlement occurred. The plaintiffs’ construction of the Agreement was that the commission that was payable on the termination of the Agreement was the maximum commission. That construction would penalise Troy Barkly for exercising its right to terminate the Agreement under clause 11.2 because Oliver Hume had not achieved the sales target.
55 On the plaintiff’s construction, in a theoretical case, Oliver Hume, having breached the Agreement, and the defendant having terminated it, on a ground other than that contained in clause 11.2, would be entitled to the maximum commission that could be payable on each contract under clause 5.1 (f)(i) and also the same amount again, plus $20,000 plus disbursements as a “break fee” under clause 5.2
56 This result would be inconsistent with clause 11.3 which provided in effect that termination under clause 11 was intended to preserve those fees earned prior to termination, but not other fees. It would also be inconsistent with clause 5.1 (e) which expressly provides that commission was not payable on contracts that did not settle and with clause 5.4 which provides that the obligations of clause 5, including therefore clauses 5.1(b) to (e), survived the expiration of the Term or the termination of the Agreement. The parties should not be taken as intending to penalise Troy Barkly for terminating the Agreement because Oliver Hume had not achieved the sales target.
57 Settlement commissions were only intended to be funded from the settlement of Executed Sale Contracts. On the plaintiffs’ construction, they would be entitled to be paid commission years before the completion of construction of the apartments and those commissions would have to be paid by the defendant from their initial funding.
58 The Agreement needed to be read as a whole. As it contained an ambiguity concerning the payment of commission on termination, the surrounding circumstances existing at the time that it was created, including the evidence of Mr Laing and Mr McGregor, needed to be taken into account, in construing it.
Conclusion on submissions
59 I accept the defendant’s submissions. I approach the construction of the contract objectively[21] and by reading all of its provisions together.[22]
[21]See the authorities discussed in Bytan Pty Ltd v BB Australia [2012] VSCA 233 at [10]–[12] per Warren CJ
[22]Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99,109
60 Clause 5.1(a) does not create an entitlement to any particular amount of commission. It says nothing about when commission is payable. It creates the overarching obligation to pay commission in accordance with the Agreement. The amount of the maximum commission payable in respect of any particular sale contract is set out in clauses 5. 1(b), (d) and (e). The plaintiffs’ argument attributes too great an influence to clause 5.1 (a).
61 Under clause 5.1(b), the first instalment of commission shall become payable to the Agent 14 days after the date that a Sale Contract becomes an Executed Sale Contract. That occurs when an Executed Sale Contract was provided to the Developer and the Deposit under that contract had been paid in full to the Developer. As a result of the variation, apart from the payment of the amounts of $550, the balances of the first instalments of commission were payable 14 days after the first draw-down of the defendant’s construction loan for the development.
62 The Second Instalment or the balance of the commission became payable pursuant to clause 5.1 (d) to the Agent 14 days after the date that settlement of the Sale Contract occurred.
63 There is nothing in clause 5.1(a) to support the conclusion that the plaintiffs are entitled to the maximum commission payable on a Sale Contract even if the construction loan is not drawn-down or the Contract does not settle.
64 Clause 5.1(e) provides that, in the event that settlement of a Sale Contract does not occur, then the Developer shall not be liable to pay the balance of commission in connection with a Sale Contract pursuant to clause 5.1 (d) and the Agent will provide the Developer with the appropriate adjustment in accordance with clause 17.
65 The parties expressly provided in the Agreement that Troy Barkly was not liable for any commission on Sale Contracts that did not settle (clause 5.1 (e)).
66 Clause 5.1(f) makes commission payable in connection with an Executed Sale Contract immediately payable to the Agent, 21 days after the date on which the Developer terminates the Agreement.
67 The principal purpose of clause 5.1(f) is to protect commissions that are payable to the Agent at the time of termination of the Agreement and not to make other commissions payable. The key word is “payable” i.e. payable in connection with an Executed Sale Contract at the time of termination, because of events that have occurred prior to termination.
68 I accept the defendant’s submissions that the opening phrase of clause 5.1(f) “notwithstanding clauses 5.1 (b), clause 5.1 (d) and clause 5.1(e)” is intended to bring to account commissions that are payable, (in this case) 21 days after the date after termination of the Agreement, where the preconditions for payment have been satisfied i.e. there is an Executed Sale Contract. It provides an additional 7 days after execution or settlement, in addition to the 14 days provided in clause 5.1(b) and (c). The additional period gives the Agent the opportunity to finalise any negotiations that were then in progress and to achieve Executed Sale Contracts.
69 Clause 5.4 protects the Agent’s rights to commissions that are not payable on termination, but become payable later, e.g. when a settlement of a Sale Contract occurs after termination.
70 Clause 5.1(a) does not operate upon the termination of the Agreement to accelerate the payment of commission that otherwise would not be payable until the settlement of the Contract, which occurs at a time later than the termination date.
71 Oliver Hume’s right to claim commissions payable on draw down or settlement is expressly preserved by operation of clauses 5.4 and 14. Oliver Hume argued that this right was illusory because the Development has been sold to a third party who was not liable to pay the commissions. However, the parties agreed on a method of compensating Oliver Hume if the defendant decided not to proceed with the Development. That compensation is the right of Oliver Hume to obtain the break fee. But the parties expressly excluded any right of Oliver Hume to a break fee when the contract was terminated under clause 11.2, as had occurred here.
72 I have reached this a conclusion as to the proper construction of clause 5 by reading the Agreement as a whole and without regard to the evidence of Mr Laing and Mr McGregor as to the factual background known to the parties at or before the date of the contract.
73 It is the case however, that where there is an ambiguity in a contract, the Court can have regard to the factual background known to both parties at or before the date of the contract.[23] However, regard cannot be had to the intentions and expectations of one party.
[23]Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337,348
74 If it had been necessary to have regard to the evidence of Mr Laing and Mr McGregor to resolve an ambiguity, that evidence would have supported the conclusion that, at least at the point of the variation, the factual background known to the parties included that the second instalment of commission was to be paid out of settlement moneys. There is force in the defendant’s submission that, as the parties contemplated that settlement commissions be funded from payments received on settlement, that if the agent’s own performance made fulfillment of that condition impossible, upon termination of the Agreement, the plaintiffs could not be entitled to receive the commissions they would have received if they had performed their obligations.
75 Neither party suggested that an appropriate construction of the Agreement would entitle the plaintiffs upon the termination of the Agreement to receive the balance of the first instalment of commission, but not the second instalment or the settlement commissions. The terms of clause 5 appear not to allow such a distinction.
Penalty defence
76 The other defence on which the defendant relied, namely the argument that a penalty existed because of the theoretical entitlement of the plaintiffs to commission as well as the break fee, does not have to be decided.[24] There is no claim for a break fee here and therefore no occasion for considering whether that fee is a penalty. The break fee is not payable where termination occurs under clause 11.2 as it did in this case.
[24]The defendant relied on the decision of the High Court in Andrews v Australia and New Zealand Banking Group Limited (2012) 290 ALR 595
Estoppel
77 The defendant also indicate a reliance on an estoppel by convention if a variation of the Agreement had not been formally established, to prevent the plaintiffs asserting that the Agreement remained in its initial form. As I understood it, the plaintiffs did not dispute that a variation had occurred. It is therefore strictly unnecessary to determine the argument about estoppel. If I had been required to determine the point, I would have found that an estoppel binding the plaintiffs existed because of the manner in which the parties acted in reliance on the intended variation. On or around 20 December 2011, credit notes were issued for invoices issued prior to that date, new invoices were issued that were consistent with the variation and payments were made in accordance with the Agreement as varied and not otherwise. There was evidence that the defendant would not have continued with the Agreement unless the variation had been agreed to.
78 I would have considered that the estoppel applicable was an estoppel by conduct.[25]
[25]Grundt v Great Boulder Gold Mines Ltd (1937) 59 CLR 641 at 674-675 and Legione v Hately (1983) 152 CLR 406 at 430
The defendant’s set-off - the Lot 1.11 Issue – this is the one lot
79 It is not strictly necessary to decide this issue, but as it was argued in some detail, I will express my views concerning it.
80 The defendant relied by way of set-off against any liability it had to the plaintiffs on the fact that it had paid commission in respect of Lot 1.11 It asserted that it had no liability to pay commission because no unconditional contract for the sale of Lot 1.11 had come into existence.
81 The contract for the sale of Lot 1.11 was dated 10 August 2011. Clause 23 states:
23 FIRB – ADDENDUM
(a) The Purchaser warrants that he has an Australian Permanent Resident visa as at the Day of Sale. Should the Purchaser lose or be unable to renew his Australian Permanency Residency status prior to settlement or becomes a foreign person as defined by the Foreign Acquisitions and Takeovers Act 1975 due to any other reason, the Purchaser shall notify the Vendor within 2 business days of the Purchaser becoming aware that he has lost his Permanency Residency Status (“the Purchaser’s written notification”)
(b) This Contract will then be subject to and conditional upon the Purchaser obtaining any approvals pursuant to the Foreign Acquisitions and Takeovers Act 1975 for his purchase of the property under this Contract of Sale, provided that the Purchaser shall forthwith make the relevant applications and comply with all relevant requests of the Treasurer and do all in his power to ensure that such an application is successful. The Vendor agrees to provide all necessary information that may be required of it by the Foreign Investment Board to procure such approval. Such approval to be obtained 30 days after the Purchaser’s written notification to the Vendor (‘the approval date”), or the Purchaser may terminate this contract in writing to the Vendor after expiry of the approval date. The deposit and all moneys paid under the contract by the Purchaser to the Vendor or its agents or representatives must immediately be returned to the Purchaser in full.
82 On 4 December 2011, Mr McGregor of the defendant sent an email to Ashleigh Farrugia of the plaintiffs referring inter alia to Lot 1.11 and stating:
“I confirm that these four sales are unconditional and that the Oliver Hume commissions are now payable (the sales channel commissions having already been settled directly).”[26]
[26]DCB 265
83 On 3 August 2012, the solicitor for the purchaser of Lot 1.11 wrote to Troy Barkly’s solicitor stating:
“We refer to the above matter and Special Condition 23 – FIRB- ADDENDUM of the contract.
We are instructed by our client to notify your office and the Vendor that the Purchaser is unable to renew his Australian Permanent Residency status and has become a foreign person as defined by the Foreign Acquisitions and Takeovers Act 1975.
In accordance with Special Condition 23 (b), this contract is now subject to and conditional upon the Purchaser obtaining FIRB approval. The approval date is 30 days after this notification, being 2 September 2012. Should the approval is not granted by FIRB and the contract is terminated by the Purchaser pursuant to Special Condition 23 (b), the deposit and all moneys paid under the Contract by the Purchaser to the Vendor or its agents or representatives must immediately be returned to the Purchaser in full.”[27]
[27]DCB 292
84 On 12 November 2012, the solicitor for the purchaser of Lot 1.11 sent an email to the channel agent stating that:
“Our client advised that he has gotten the FIRB approval on the purchase on 15 August 2012.”[28]
[28]PCB Tab 10
85 The plaintiffs submitted that, as at the date of termination of the Agreement on or about 23 March 2012, the contract for the sale of Lot 1.11 was an Executed Sale Contract. The termination date was the relevant date, because on the plaintiffs’ argument, at that time, the commission that it claimed became payable. The issue was whether the contract was an unconditional contract at that time. The plaintiffs argued that the defendant confirmed the contract was unconditional by email of 4 December 2011.
86 The defendant submitted that a binding contract had not been entered into because the contract was not unconditional. The term “Sale Contract” as defined meant a legally binding contract prepared for the Developer for use in connection with the development. Only an unconditional contract qualified under that definition. A contract which was subject to a special condition which was enlivened was not a legally binding contract that could be enforced or that could be used in connection with the Development. Mr McGregor’s evidence established that the defendant could not use a conditional contract to obtain finance.
87 I would have accepted the plaintiffs’ argument on this point. There was a valid Enforceable Sale Contract at the date of termination of the Agreement. Until the purchaser exercised the rights given by Clause 23, the contract was enforceable. That is in the nature of a condition subsequent.[29]
[29]Suttor v Gundowa Pty Ltd (1950) 81 CLR 418
The Lot 1.14 liability
88 The defendant accepted that it had a liability to pay the plaintiffs $550 in respect of Lot 1.14. It said that the failure to pay the amount was due to an error.[30]
[30]Defendant’s final written submission [67]
Conclusion
89 Save for that payment of $550, the plaintiffs have not established their entitlement to the commissions that they claim.
90 I will hear the parties about the appropriate orders.
- - -
0
10
0