Peebles v Cross

[2012] QDC 44

DISTRICT COURT OF QUEENSLAND

CITATION:

Peebles v Cross & Ors [2012] QDC 44

PARTIES:

DAVID LINDSAY PEEBLES
(Appellant)

and

KELLIE LEE-ANN CROSS
(Respondent)

and

DAVID LINDSAY PEEBLES
(Appellant)

and

RONALD MALCOLM CROSS
(Respondent)

and

DAVID LINDSAY PEEBLES
(Appellant)

and

CROSS COUNTRY REALTY PTY LTD
(Respondent)

FILE NOS:

146/2011, 148/2011 and 150/2011

PROCEEDING:

Appeals from Southport Magistrates Court

DELIVERED ON:

27 March 2012

DELIVERED AT:

Southport

HEARING DATE:

20 February 2012

JUDGE:

Judge C F Wall QC

ORDERS:

1.       Appeals allowed.

2.       Decision of the Magistrate to dismiss charges set aside.

3.       Charges remitted to the Magistrates Court at Southport with a direction that the Magistrate proceed according to law.

4.       The respondents pay the appellants costs of the appeals to be assessed on the standard basis unless agreed.

LEGISLATION:

Property Agents and Motor Dealers Act 2000, sections 10, 138, 598
Acts Interpretation Act 1954, sections 14, 14A, 14D, 32D, 49

CATCHWORDS:

Appeal – Principal and Agent – Prosecution – Real Estate Agent – Statutory obligation on selling agent to disclose person receiving benefit and amount, value or nature of benefit – Property Agents and Motor Dealers Act s.138(1)(c) – Extent to which identity of beneficiary and amount, value or nature of benefit should be disclosed.

COUNSEL:

Mr A M Preston and Ms A Freeman for the Appellant in each Appeal

Mr B Walker SC and Ms P Morrow for the Respondent in Appeal 146

Mr M J Byrne QC and Ms R O’Gorman for the Respondent in each of Appeals 148 and 150

SOLICITORS:

Crown Law for the Appellant in each Appeal

Peter Shields Lawyers for the Respondent in each Appeal

Introduction

1. These appeals involve the interpretation to be placed on s.138(1)(c) of the Property Agents and Motor Dealers Act 2000.

1. Glossary

PAMDA –  Property Agents and Motor Dealers Act 2000

AIA –  Acts Interpretation Act 1954

ParkTrent –  ParkTrent Investments Pty Ltd and ParkTrent Real Estate Pty Ltd

1. Section 138 of PAMDA provides, so far as is relevant –

“138 Disclosures to prospective buyer

(1) A residential property agent for the sale of residential property must disclose the following to any prospective buyer of the property—

(a) any relationship, and the nature of the relationship (whether personal or commercial), the agent has with anyone to whom the agent refers the buyer for professional services associated with the sale;

Examples of relationships for paragraph (a)—
1 a family relationship
2 a business relationship, other than a casual business relationship
3 a fiduciary relationship
4 a relationship in which 1 person is accustomed, or obliged, to act in accordance with the directions, instructions, or wishes of the other

(b) whether the agent derives or expects to derive any benefit from a person to whom the agent has referred the buyer and, if so, the amount or value of the benefit;

(c) the amount, value or nature of any benefit any person has received, receives, or expects to receive in connection with the sale, or for promoting the sale, or for providing a service in connection with the sale, of the property.

Examples for paragraph (c) of persons who may receive a benefit—
• finance broker
• financial adviser
• financier
• property valuer
• residential property agent
• seller
• solicitor

Maximum penalty—200 penalty units.

(2) The disclosure is effective for subsection (1) only if it is—

(a) given to the prospective buyer in the approved form; and

(b) acknowledged by the prospective buyer in writing on the approved form; and

(c) given and acknowledged before a contract for the sale of the residential property is entered into.

(3) Also, for subsection (1)(c), disclosure in compliance with the approved form is sufficient.

(4) In this section—

benefit means monetary or other benefit…”

1. The respondents were charged with numerous offences against s.138(1)(c) of failing “to disclose to a prospective purchaser the amount of any benefit any person expects to receive in connection with the sale of property”.

1. The issues at trial and on appeal involve the extent of the obligation to identify the “person” (the beneficiary – the one to whom the benefit was to be paid) and particularise or describe the benefit that person was to receive in connection with the sale of property. 

Legislative background

1. The main object of PAMDA, so far as concerns the appeals, is to provide a system for licensing and regulating real estate agents that achieves an appropriate balance between –

(a)        the need to regulate for the protection of consumers; and

(b)        the need to provide freedom of enterprise in the market place.

(s.10(1))

1. For the purposes of s.138(2) the approved form is Form 27b. The form is approved for use under the Act by the chief executive (s.598). The examples given in s.138(1)(c) are part of the Act and do not limit but may extend the meaning of the provision and the examples and the provision are to be read in the context of each other and the other provisions of the Act. Also, in the interpretation of a provision the interpretation that will best achieve the purpose of the Act is to be preferred to any other interpretation (AIA ss.14(3), 14D and 14A(1)).

1. In an Act a reference to a person generally includes a reference to a corporation as well as an individual (AIA s.32D(1)).

1. Strict compliance with Form 27b is not necessary; substantial compliance is sufficient.  If a form approved under an Act requires

(a)        the form to be completed in a specific way; or

(b)        specific information…. to be included in…. or given with the form

the form is not properly completed unless the requirement is complied with (AIA s.49(1) and (2)).

Factual background

1. In the sales the subject of the charges and the appeals ParkTrent was in fact the beneficiary (the person) for the purposes of s.138(1)(c).

1. Some time before the sales the subject of the charges ParkTrent entered into an Administration Agreement with the developer/vendor whereby ParkTrent agreed “to advertise the properties” the vendor wished to market.  ParkTrent was described in the agreement as “The Marketer”.   ParkTrent was to be paid an “administration fee” (for “administration and marketing expenses”) calculated in accordance with a set formula.  Once the administration fee was calculated (which occurred after the sale) it was stated in an ‘Irrevocable Authority’ relating to each sale in which it was agreed ParkTrent would be paid that amount.

1. The Administration Agreement also contained this term:

“Confidential
The terms and conditions of this agreement are confidential between the Vendor and Marketer.  Details shall not be released to any person or entity”.

1. Consistent with that term no details were disclosed of ParkTrent or the benefit it was in fact to receive in connection with the sale.  

1. Form 27b relating to Lot 81 (sale to Stoddart) was referred to in argument as a representative form.  The form states

“This form must be completed and handed to the buyer before the contract for sale of residential property is entered into.”

1. The form contains a “Buyer’s Acknowledgment” as follows

“I/we have not yet entered into a contract for the purchase of the property….”

1. In each case the selling agent, to use the appellant’s outline, “purported to satisfy its disclosure obligation under s.138(1)(c) by attaching to Form 27b a document headed Annexure A” in the following terms:

Annexure A

Part 6 Selling Agent’s Disclosure of Benefits

Selling Agent     1.        Commission of 5% of the first $18,000, and

2.5% of the balance of purchase price.

2.The agent has a business relationship with Easy Plan Financial Services.  Kellie Cross as Queensland Manager of Cross Country Realty is a director of Easy Plan Financial Services but receives no financial gain.

Easy Plan Financial Services offers the following services

Providing Tax Depreciation Schedule

Providing the best finance to suit particular situations

Financial Planning

Providing Insurance solutions for clients.

Developer’s

Consultants:           A fee of up to 1.5% of the purchase price with respect to each of the following services –

1.Consultation and advisory services with respect to each of the following services

2.Assisting with the drafting and preparation of  advertising and promotional material; assisting with design, structure and implementation of ongoing advertising and marketing programs.

3.Assisting with the Co-ordination and supervision of service providers with respect to sales and marketing, including advertising and public relations providers: provision of reports to the developer with respect to matters the subject of this agreement.

4.Consultation services with respect to project marketing the development: provision of sales information centre/s: conducting and staffing sales information centres.

5.Liaising with real estate agents to introduce buyers to the project: undertaking promotional activities with respect to the development including; property exhibitions, database marketing mail-outs, letter-box drops etc.

6.Provision of and access to and use of database/s.

7.The payment of expenses including advertisements, printing and stationary, postage and sign-writing and general expenses."

1. At the end of the prosecution case (following a no case submission) the Magistrate dismissed the charges on the basis that:

(a)        “developer’s consultants” sufficiently identified ParkTrent as a beneficiary because of the knowledge acquired by the prospective buyers during the marketing campaign; and

(b)        “up to 1.5%” of each of 6 stated services sufficiently stated the benefit ParkTrent was to receive even though that bore no realistic relationship to the benefit ParkTrent was in fact to receive.

1. The appellant challenges this decision and these findings.

Identification of beneficiary

1. The form identified Cross Country Realty as the selling agent.  It did not identify ParkTrent as a developer’s consultant.  The appellant submits it should have.  The Magistrate found (para 23) that the evidence established that ParkTrent was a developer’s consultant and that it did perform marketing services and that prospective buyers “would know that ParkTrent fell into the category of Developer’s Consultant because of direct contact with ParkTrent in its role of marketing the property”.  His Honour continued:

“25.  There is nothing in PAMDA which says greater precision is required in naming the beneficiary.  Indeed, there is nothing in the notes contained in the form which require greater precision.  To my mind, the objects of the legislation do not require greater precision, provided the prospective purchaser is told who is getting the benefit, which is what happened here.  Perhaps a different conclusion might be reached if the buyer had no idea who the Developers Consultants were.  But that is not the case here.”

1. The respondents understandably submit that the Magistrate is correct. The Magistrate seems to say that s.138(1)(c) may have different meanings in different fact situations and that, with respect, cannot be correct.

1. The appellant submits that because s.138(2)(a) provides that disclosure is effective only if its given in the approved form, the identity of the developer’s consultant should be apparent from the form itself and not as a result of knowledge otherwise acquired by the buyer. I agree. There is no scope in s.138 for a prospective buyer to be informed in any way other than by the form. The prospective buyer can only be “told who is getting the benefit” by Form 27b. In the present cases it was known that the beneficiary was ParkTrent and that should have been disclosed in the form. It is not apparent from the form that ParkTrent was to receive a benefit. The form does not identify any of the developer’s consultants or ParkTrent as a consultant.

1. Absent identification of the particular beneficiary a prospective buyer may not, before deciding upon an offer, be able to make an informed judgment about the nature and extent of the relationship between that person and the vendor and its relevance, if any, to how much the buyer is prepared to offer.

1. Disclosure is required in relation to what has been done and by whom at the time the form is given to the prospective buyer, not what may be done by someone in the future.   What may not then be known is the precise $ amount of the benefit that person will receive should the sale proceed because that may, like the selling agent’s commission, depend on the amount of the purchase price.

1. The selling agent is required by s.138(1)(c) to disclose to a prospective buyer in Form 27b the benefit and the beneficiary to the extent that those details are known at the time the form is given. Partial or selective disclosure of either is not disclosure of the nature envisaged by the provision. Disclosure in Form 27b of facts to the extent that they are known is what is required and should not be difficult. What was disclosed in the form here was of no practical assistance to the prospective buyer in relation to matters relevant to an assessment of the amount to offer for the property. According to the form, unnamed developer’s consultants were to receive up to 9% of the purchase price. The fact that ParkTrent’s benefit was less than that is not to the point.

1. Disclosure of known relevant facts clearly would not stifle or adversely impact upon “freedom of enterprise in the market place”.  To this extent the disclosure obligation is relatively simple with easy to understand parameters.

1. In my view the examples given in the provision are examples of persons or categories of persons that are required to be specifically identified by name and it is not sufficient that unidentified categories simpliciter be stated. The identity of any beneficiary as opposed to a class description would be known (as a known fact) at the time the form is given to the prospective buyer and should be stated in the form.  The form does not, for example, require disclosure of details of a financier arranged by the vendor for the purchaser after the price has been agreed and the contract for sale entered into.

Extent to which the benefit should be stated

1. In the present case the buyer was not able to ascertain from Form 27b what the benefit was beyond that it could be up to 9% of the purchase price. For the Stoddart purchase (Lot 81 – unit) all the form indicated was that developer’s consultants could receive up to 9% of $305,000 (purchase price later agreed to) viz $27,450. ParkTrent (the only s.138(1)(c) beneficiary apart from the selling agent) in fact received $6,925.

1. To take another example, for the Murdocca purchase (Lot 62 – unit) all Form 27b indicated was that developer’s consultants could receive up to 9% of $192,500 (purchase price later agreed to) viz $17,325.  ParkTrent (again the only beneficiary apart from the agent) in fact received $9,737.50.

1. The amount of the benefit was calculated by a fixed formula seemingly unrelated to the actual work performed by ParkTrent.  This formula was known to the selling agent at the time the form was given to the prospective buyer but was not stated in the form.  The amount of the benefit ultimately depended on the purchase price  which meant that the $ amount could not (contrary to the appellant’s argument) be stated in the form but the formula by which it was calculated could and in my view should have been disclosed in the form, just as the formula by which the selling agent’s commission was to be calculated was disclosed.  Anything short of this would not, in my view, be sufficient disclosure.  What is required here, like the identification of the beneficiary, is no more than the simple statement of the formula by which the benefit was to be calculated, nothing more and nothing less.  Mr Byrne QC submitted that “disclosure need not be to the fullest extent possible according to the knowledge of the agent”.  In the circumstances of the present case I cannot agree if he meant that the formula by which the benefit would be calculated should not have been disclosed.

1. It is common ground that ParkTrent was a marketer of the properties and was actively involved in marketing and promoting them.  The formula was dependent in the first place on the purchase price, once that was known.  From that the selling agent’s commission was calculated using the REIQ percentages stated in the form.  The commission was then deducted from a standard $15,000 (the same for all units – B grade stock) resulting in the fee or benefit ParkTrent would receive.  GST was payable on that fee and on the selling agent’s commission.  The formula was simple and could be stated simply:

“$15,000 – REIQ commission on purchase price” = benefit.

1. The fee was calculated as follows in the two sales previously referred to

Lot 81

$15,000.00
$  8,075.00  –     agent’s commission on $305,000
$  6,925.00  =     benefit

Lot 62

$15,000.00
$  5,262.50  –     agent’s commission on $192,500
$  9,737.50  =     benefit

Had there been the same prospective buyers for both properties they may have queried the different amounts for what may have seemed to them the same work.

1. In the case of a house and land package (A grade stock) the starting point was $20,000 not $15,000.

1. Form 27b is to be given to the prospective buyer before the contract for sale is entered into; the buyer in fact acknowledges that he has not yet entered into a contract for the purchase of the property.  The purchase price may not be agreed then but the selling agent then knew how the benefit to ParkTrent was to be calculated (by the fixed formula) and that should have been disclosed in the form.  Absent agreement on the purchase price – the contract – the exact $ amount of the benefit to ParkTrent was not then known.  The purchase price is not necessarily known when Form 27b is given to the prospective buyer.

1. Using the formula the prospective buyer could calculate the $ amount of the benefit depending on what the purchase price was.  The ability to do this and the resultant likely benefit to the beneficiary (here ParkTrent) could be material to negotiations leading to a decision as to the amount a prospective purchaser was prepared to offer and sign a contract for.  It is not possible to arrive at even an approximation of the benefit using the “up to 1.5%” of each of 6 services “formula”.

1. The benefit to ParkTrent was not one calculated in accordance with the “formula” stated in Form 27b (“up to 1.5% x 6 services”) rather it was one calculated according to the formula agreed to in the Administration Agreement.  Nowhere in that agreement is ParkTrent described as a “developer’s consultant” rather it is described as “the marketer”.

1. Similar reasons to those supporting disclosure of the formula also support disclosure of the name of the beneficiary.  The prospective buyer could then make an informed judgment about the nature and extent of that person’s involvement in the sale and his relationship, if any, to others involved in the sale and the likely benefit to be received depending on the purchase price.  Such information is, in my view, relevant to the sale process and the calculation of an offer price.

1. In my view s.138(1)(c) required the selling agent to give to the prospective buyer a Form 27b which at least identified ParkTrent as a beneficiary and stated the formula – from the Administration Agreement – by which the benefit ParkTrent expected to receive could be calculated.

1. During argument it seemed to be accepted that the service performed by the beneficiary should also be disclosed.  In the present case the Administration Agreement described those services as “administration/marketing” and that would be a sufficient description.

1. In the present case the Administration Agreement prevented (in all probability contrary to public policy) disclosure of the names of the parties to the agreement and the formula.  This may be why a factually incorrect and inadequate description of beneficiaries and benefit was stated in Form 27b.

1. Before the Magistrate and before me the appellant argued that the $ amount of the benefit should have been disclosed/stated in Form 27b but that could not be done until the purchase price was agreed to and Form 27b had to be given to the prospective buyer  before a contract for the sale of the property was entered into.  The Magistrate was correct to reject the appellant’s argument.  He was not, with respect, correct in then concluding that it was sufficient to state the benefit as “up to 1.5%” of the 6 stated services.  His Honour said:

“34. The buyer is thereby made aware of any conflict of interest Park Trent may have in the transaction, and the buyer might renegotiate the price based on these figures.  In other words, the disclosure satisfies the need for consumer protection.  It is not necessary to speak it out in greater detail.”

1. With respect there was no way that the prospective buyer could arrive at a realistic approximation of the benefit ParkTrent expected to receive using the “formula” disclosed in Form 27b.

1. Much of the argument on the appeals centred around the appellant’s contention that the actual $ amount of the benefit later received by ParkTrent should have been disclosed in Form 27b.  The respondents contended, correctly in my view, that this could not be expressed as an exact amount at the time Form 27b was given to the prospective buyer because the purchase price may not have then been agreed and that disclosure to the extent only of stating “up to 1.5%” of 6 stated services was sufficient. All parties seemed to assume that “amount” means an actual amount in dollars and cents (a $ amount).  The respondents from their standpoint needed only to argue that this was not known and could not be stated in Form 27b at the time that was given to the prospective buyer.  Associated with this argument was the contention that “up to 1.5%” of 6 stated services was a sufficient description of the value or nature of the benefit the developer’s consultants (whoever they may have been) expected to receive.

1. The appellant submitted, consistently with Form 27b and the notes to the form, that “amount, value or nature of any benefit” means “amount ($), value (%) or nature of any benefit”. In my view such an interpretation would unnecessarily limit or restrict the extent to which and the ways in which the disclosure required by s.138(1)(c) may be expressed. There may be different ways of describing or expressing the same benefit; “amount” for example, does not necessarily mean a precise $ figure. The amount, value or nature of the benefit can be expressed in different ways depending on what it is and how it is calculated, described or valued. Clearly if a fixed $ figure is the benefit that is the amount which should be stated as the benefit but that is not the only way the amount of a benefit can be described or expressed.

1. Some examples will suffice to show why this is so.  In the present case the expected benefit could have been expressed as:

“an amount for administration/marketing expenses calculated as follows:  $15,000 – REIQ commission on purchase price”

or

“an administration fee for administration/marketing expenses calculated as follows:  $15,000 – REIQ commission on purchase price”

or

“administration /marketing expenses calculated as follows:  $15,000 – REIQ commission on purchase price”

or

“commission for administration/marketing expenses calculated as follows:  $15,000 – REIQ commission on purchase price”

or

“payment for administration/marketing expenses calculated as follows:  $15,000 – REIQ commission on purchase price”

or

“the value of the benefit will be calculated as follows:  $15,000 – REIQ commission on purchase price and is for administration/marketing expenses”

or

“a benefit to the value of  $15,000 – REIQ commission on purchase price for administration/marketing expenses”

or

“a marketer’s fee for administration/marketing expenses calculated as follows:  $15,000 – REIQ commission on purchase price”

The benefit can thus be described in a number of different ways each conforming to “amount, value or nature”.

1. The appellant’s argument assumed that in each case the purchase price was known at the time Form 27b was given to the prospective buyer.  That is not necessarily so; what was known then was the formula by which the $ amount of the benefit could be calculated and that amount depended on agreement having been reached – by the contract of sale – as to the purchase price.  The $ amount of the benefit would not be able to be calculated with precision until the purchase price was agreed; it could not be so calculated when Form 27b was given to the prospective buyer. 

1. The appellant also seemed to suggest that if the benefit was a monetary amount that amount could always be stated in Form 27b and that cannot, with respect, be correct.  If the $ amount is known when Form 27b is given to the prospective buyer it should be stated otherwise the amount, value or nature of the benefit should be described accurately with as much particularity as is then known.  In the present case to describe the benefit as “up to 1.5%” of 6 stated services was not sufficient.

1. It follows that the appeals should be allowed and the decision of the Magistrate to dismiss the charges should be set aside.  The charges will be remitted to the Magistrates Court at Southport with a direction that the Magistrate proceed according to law.  The matter will of course have to continue before the same Magistrate.

1. The respondents are to pay the appellants costs of the appeals to be assessed on the standard basis unless agreed.