Port City Pty Ltd v De Freitas and Ryan Property Consultants Pty Ltd [No 2]
[2015] WASC 265
•24 JULY 2015
PORT CITY PTY LTD -v- DE FREITAS & RYAN PROPERTY CONSULTANTS PTY LTD [No 2] [2015] WASC 265
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 265 | |
| Case No: | CIV:2100/2010 | 15 - 17 APRIL 2015 | |
| Coram: | KENNETH MARTIN J | 24/07/15 | |
| 45 | Judgment Part: | 1 of 1 | |
| Result: | Answers provided | ||
| B | |||
| PDF Version |
| Parties: | PORT CITY PTY LTD GLENDA RAE OMACINI as Trustee for the Omacini Family Trust DE FREITAS & RYAN PROPERTY CONSULTANTS PTY LTD RODNEY DOUGLAS RYAN RODNEY DOUGLAS RYAN as Trustee for the R D Ryan Superannuation Fund |
Catchwords: | Preliminary issues Two real estate businesses Corporate structure for businesses Principals as shareholders Quasi partnership Agreed dissolution and separation of relationships Share sale agreement Comprehensive apportionment of assets of businesses as part of assessing consideration payable for transferred shareholdings Arrangements final and conclusive Transaction fully executed in 2007 Assertion of entitlement to vendor paid sales commission inconsistent with share sale agreement Misconceived assertion as to statutory constraints as regards sales commissions Turns on its own facts |
Legislation: | Real Estate and Business Agents Act 1978 (WA) |
Case References: | Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- First Plaintiff
GLENDA RAE OMACINI as Trustee for the Omacini Family Trust
Second Plaintiff
AND
DE FREITAS & RYAN PROPERTY CONSULTANTS PTY LTD
First Defendant
RODNEY DOUGLAS RYAN
Second Defendant
- First Plaintiff
GLENDA RAE OMACINI as Trustee for the Omacini Family Trust
Second Plaintiff
AND
DE FREITAS & RYAN PROPERTY CONSULTANTS PTY LTD
First Defendant
RODNEY DOUGLAS RYAN as Trustee for the R D Ryan Superannuation Fund
Second Defendant
Catchwords:
Preliminary issues - Two real estate businesses - Corporate structure for businesses - Principals as shareholders - Quasi partnership - Agreed dissolution and separation of relationships - Share sale agreement - Comprehensive apportionment of assets of businesses as part of assessing consideration payable for transferred shareholdings - Arrangements final and conclusive - Transaction fully executed in 2007 - Assertion of entitlement to vendor paid sales commission inconsistent with share sale agreement - Misconceived assertion as to statutory constraints as regards sales commissions - Turns on its own facts
Legislation:
Real Estate and Business Agents Act 1978 (WA)
Result:
Answers provided
Category: B
Representation:
CIV 2100 of 2010
Counsel:
First Plaintiff : Ms K J Levy & Mr D K J Danagher
Second Plaintiff : Ms K J Levy & Mr D K J Danagher
First Defendant : Mr W G Spyker
Second Defendant : Mr W G Spyker
Solicitors:
First Plaintiff : Slater & Gordon Lawyers
Second Plaintiff : Slater & Gordon Lawyers
First Defendant : Cornerstone Legal
Second Defendant : Cornerstone Legal
CIV 2151 of 2010
Counsel:
First Plaintiff : Ms K J Levy & Mr D K J Danagher
Second Plaintiff : Ms K J Levy & Mr D K J Danagher
First Defendant : Mr W G Spyker
Second Defendant : Mr W G Spyker
Solicitors:
First Plaintiff : Slater & Gordon Lawyers
Second Plaintiff : Slater & Gordon Lawyers
First Defendant : Cornerstone Legal
Second Defendant : Cornerstone Legal
Case(s) referred to in judgment(s):
Nil
1 KENNETH MARTIN J: This was a trial of the following preliminary issue and its internal sub-issues:
Issue 1, whether it is the first named plaintiff [PC Corp] or the first named defendant [D & R Corp] that was entitled to receive the commission arising out of the lease or sale of the listings contained in the schedule attached and marked SSA_H(1).
Sub-issues to Issue 1
(a) whether the commission arrangements for the properties identified in Sch SSA_H(1) which are mentioned in the Share Sale Agreement ('the SSA'), are governed by the terms of the SSA.
(b) whether the properties identified in Sch SSA_H(1), which are not mentioned in the SSA, are governed by the terms of the SSA;
(c) whether an oral agreement existed between the parties and if so, what are the relevant terms and ramifications of that oral agreement, particularly as regards commission arrangements for the properties identified in SSA_H(1). (unable to be proceeded with)
(d) on the assumption that an oral agreement did exist between the parties on the basis as contended for in paragraph 22 of the defendants' Defence and did relevantly apply to the commission arrangements for the properties identified in SSA_H(1), whether that oral agreement is nevertheless rendered unenforceable by provisions contained in the Real Estate and Business Agents Act 1978 (WA) (REBA Act);
(e) if the SSA did relevantly apply to the commission arrangements for the properties identified in Sch SSA_H(1), whether the SSA is nevertheless rendered unenforceable by provisions contained in the REBA Act.
Issue 2, if, within the meaning of the REBA Act it is the first plaintiff that was entitled to receive commission arising out of the lease or sale of the listings contained in Sch SSA_H(1), is the first plaintiff nevertheless estopped from receiving that commission.
2 Separated from the sub-issues, issue 1, in essence, only asks who is entitled to commission funds - in other words, who wins or who loses as regards various commission amounts. Commission amounts are assembled in the referred schedule, which identifies a series of real estate property listings.
3 To pose such a bland question as issue 1, in the context of a pending civil dispute, is ultimately unhelpful, viewed alone. It omits a necessary identification of the accompanying and inherently associated series of underlying questions, including the following:
(i) what is the cause or causes of action relied upon by the moving party in order to obtain the relief it ultimately seeks;
(ii) has the moving party made good the essential ingredients of each of its causes of action;
(iii) has the resisting party raised any defences of merit which inhibit or defeat the moving party's causes of action;
(iv) if the cause of action relied upon by the moving party is an action for damages for breach of contract, then what is the relevant contract relied upon and, even more particularly, what are the relevant terms of that contract which are said to have been breached; and
(v) are there any discretionary considerations inhibiting the relief that is ultimately sought by the moving party?
4 None of those fundamental enquiries underlying a moving party's case is sufficiently identified or explored by a bland question formulated by the outcome interrogation posed by issue 1, in the present case.
5 Given a high level of obscurity underlying issue 1 here, attention must inevitably flow to its sub-issues. Clearly, they must be addressed and answered before the issue 1 win/lose outcome scenario is capable of being resolved.
6 So here it is that issue 1, by itself, as framed, is essentially contextual, in providing a framework for the underlying sub-issues which were posed.
7 Before proceeding to an evaluation of the sub-issues, it is necessary to clarify some further matters by way of preliminary observations.
Some underlying preliminary observations
8 First, the preliminary issue evaluation exercise currently being undertaken is unfolding in the undeniable context of the litigation which is the consolidated actions CIV 2100 of 2010 and CIV 2151 of 2010 - where the parties over some time have pleaded out their respective positions at length, after the action was commenced in 2010. The present exercise therefore unfolds within an issues framework that has been established by and is now confined by the parties' current pleadings. Hence, the current preliminary issue evaluation does not take place outside of or inconsistently to what has been set down under the parties' respective pleaded cases.
9 Second, another action, CIV 2151 of 2010, between effectively the same parties, was commenced by way of an originating summons filed on 27 July 2010, that sought to transfer three Magistrates Court General Procedure Claims (being No 1635 of 2008, No 1441 of 2009, and No 1474 of 2009) to the Supreme Court for hearing pursuant to s 39 of the Magistrates Court (Civil Proceedings) Act 2004 (WA). The trigger for transferring these matters to the Supreme Court was the action of the plaintiffs, on 19 July 2010, filing, with the Supreme Court, and serving the writ of summons against D & R Corp and Mr Ryan, which began action CIV 2100 of 2010. All parties consented to the Magistrates Court matters being transferred to the Supreme Court, by way of a minute of consent orders filed on 27 July 2010, and orders to that effect were subsequently made by Registrar Powell on 17 October 2010. Little else occurred with respect to that action. Orders were made in the CIV 2100 of 2010 action on 20 December 2010 consolidating CIV 2151 of 2010 with CIV 2100 of 2010; the current proceedings that are presently before me. The Magistrates Court proceedings involved claims by the defendants against the plaintiffs for small amounts of money said to be due to the defendants under the terms of the SSA. These amounts are the object of the defendants' pleaded counterclaim against Ms Omacini. They are not presently under my consideration in the currentcontext of the preliminary issues (and sub-issues) now being determined.
10 Third, it is necessary to make a seemingly trite observation in a plenary refutation of some arguments that were advanced by the plaintiffs' counsel at points during the hearing of the preliminary issues. In short, there is no liberty for the plaintiffs to proceed in the present exercise by reference to what are wholly unpleaded causes of action. That in principle constraint is even more applicable to circumstances like the present proceedings, which have been on foot since 2010 and, as will be seen, are somewhat uncommercial in their parameters as to the underlying monetary claims.
11 Fourth, as regards the underlying causes of action relied upon by the plaintiffs to obtain their relief, it is clear from multiple sources (ie, the plaintiffs' writ, their pleadings, written and oral submissions by counsel) that the cause of action that is raised by them as regards a pleaded entitlement to receiving commission moneys from the defendants is in contract or, more specifically, in damages for alleged breach of contract. Identification of a cause of action lying in contract, of course, leads immediately to a further sub-question, namely, 'What contract?' The answer to that sub-question is also clear. The relevant contract upon which the plaintiffs seek relief against the defendants is an agreement that is referred to as the 'Share Sale Agreement' or the 'SSA'. The SSA is agreed as between these parties uncontroversially to be comprised of two typed documents (with their annexures) of 15 June 2007. Plainly, the two documents of that date are to be read and interpreted together and given a sensible commercial meaning. I will say a lot more about the SSA in these reasons, but I would simply add at this point that the two documents are plainly not drawn with the benefit of professional legal assistance but, nevertheless, are typed, signed, witnessed and comprehensive in their ambit.
12 Fifth, although the terms of issue 1 when divorced from its following sub-issues do not mention the SSA, each of issue 1's sub-issues, save for sub-issue 1(d) referring to an earlier oral agreement of mid-2006 (as will be seen), sub-issues (a), (b) and (e) all address the SSA. A proper understanding of the true meaning and workings of the SSA is therefore very much at the heart of the present exercise. As I mentioned, the two typewritten documents of 15 June 2007, which together make up the SSA, are elaborate. They contain a number of annexures, with some annexures being common to both agreements - albeit distinctly numbered. It almost goes without saying, but say it I will nevertheless, that the two documents making up the SSA need to be afforded a sensible commercial interpretation in accordance with orthodox contractual construction principles. They should be assessed apart from their text in the light of the commercial purposes and objects of the underlying commercial transactions, assessed on an objective basis as at the time the SSA was entered in mid-June 2007.
13 Sixth, it will be helpful if I note at the outset that the SSA deals with (as the name suggests) a share transfer scenario, involving the sales of shares in two corporations, namely the first plaintiff, PC Corp and then in the first defendant, D & R Corp. The 2007 share transfers the subject of those SSA contractual arrangements have been implemented and fully performed. The SSA therefore, as regards the share transfers, reflects a transaction which has long been completed.
14 Seventh, what lies very much at the heart of the analysis that follows is a need to identify the underlying legal consideration, provided for under the SSA of June 2007, in respect of the shares which were being sold and transferred in each corporation at the time. The two documents comprising the SSA reflect an elaborate drawing together of factors bearing upon determining what ultimately became the respective sale prices for the passing shares which were transferred between the principals in each corporation.
15 Eighth, it will be helpful to remember that the SSA of June 2007 effectively governed the transfers, for valuable consideration, of parcels of shares held in the two corporations, PC Corp and D & R Corp. Those corporations at the time effectively operated two different real estate businesses. These were the businesses of Port City Real Estate (PCRE) and, secondly, the business of Port City Southern Suburbs (PCSS). These were businesses operated respectively by PC Corp as regards PCRE and D & R Corp (albeit then named differently) as regards PCSS. In June 2007 the natural person principals who were shareholders in each corporation were separating or, in their terms, under the SSA, were seeking to 'dissolve' their 'partnerships', and then go their separate ways. In short, Mr Ryan was disposing of his half-shareholding interest in PC Corp and thereby in the PCRE business to Ms Omacini - who would as a result become the exclusive 100% shareholder of PC Corp and its residual business, as she has. A purchase price for Mr Ryan's 50% shareholding needed to be determined to be paid to him by Ms Omacini. As a counterpart to that PCRE separation, Ms Omacini was selling out her one-quarter shareholding interest in the corporation, D & R Corp, the operator of the PCSS business. She was selling her one-quarter shareholding interest for value to Mr Ryan. He would thereupon become an equal 50% shareholder (rising from the 25% interest as previously held) to become an equal shareholder with Mr De Freitas, who held the other 50% shareholding interest in D & R Corp and the residual business of PCSS. That also happened in mid-2007. None of this is in dispute. As a part of the separation process, a price needed to be worked out for Mr Ryan to pay Ms Omacini for her then one-quarter shareholding interest in D & R Corp and thereby her share in the business PCSS, which she was selling out and separating from.
16 So, two purchase prices for the transferred shareholdings moving and changing hands in each corporation (and thereby in each business) needed to be worked out. Once sale prices for the shareholdings had been worked out for each share disposition, they could be set off - with Mr Ryan, as the party entitled to a greater amount in the end, receiving a nett payment. In the process there were some adjustments made for assets of the two businesses by way of payments to sales representatives and employees in both businesses.
17 The flashpoint dispute issue underlying the present exercise concerns the real estate businesses' entitlements to sales commission from vendors of properties who had listed their properties for sale with either business.
18 Ninth, the terms of the SSA delivered a determination of the respective sale prices worked out for the respective shareholdings of Mr Ryan in PC Corp and Ms Omacini in D & R Corp - as the respective considerations for the shares which would be sold and transferred, either to Mr Ryan, or to Ms Omacini. At the time, in the context of dealing with the worth of the assets and income of two operating real estate businesses where the principals were separating, the situation as regards sales commissions payable by diverse vendors to the businesses at settlement upon their properties being sold, broadly, fell under three possible characterisations, namely:
(a) settlement on the sale of a listed property had been achieved, with the sales agent's commission being fully received from the vendor of the property in question and banked into a business trust account; or
(b) alternatively, a binding offer and acceptance had been effected on behalf of a vendor, and sales commission was not yet received, but was due to be paid to the real estate business at a looming settlement of the sale at some point in the future; or
(c) alternatively, a vendor had entered into a listing agreement providing for a commission to be payable to their commission agent business but, albeit listed, the listed property in question had not become the subject of any binding offer and acceptance by sale agreement. In other words, the property remained 'on the books' of the agent and business, but no commission was then in prospect until a binding sale agreement had been achieved and then settled upon.
19 Broadly speaking, those were the three possible scenarios as regards vendor sales commissions and the two businesses, PCRE and PCSS in mid-2007.
20 The two SSA documents of June 2007 speak and deal at some length about sales commission apportionments, as regards Mr Ryan's entitlements or Ms Omacini's entitlements (more correctly as regards commission payable by a particular vendor, the entitlement of the business operators, PC Corp, as the relevant sales agent, or D & R Corp, as the relevant sales agent). But it must be kept in mind at all times that what the share sales transactions under the SSA actually reflect is not any reallocation of a particular party's direct entitlement to receive commission from a particular vendor. Rather, the SSA, at times by taking account of notional corporate income tax liabilities of the businesses, seeks to value the worth of a shareholder's end trickle down entitlement to the proceeds of an asset of the business. The shares changing hands are being, in effect, valued for sale and pricing purposes, under an overall equation that sets sales prices vis-à-vis Ms Omacini and vis-à-vis Mr Ryan by reference to the assessed and calculated worth of the assets of each business, including the anticipated future income receipts.
21 This was all perfected on a transaction for the sale and transfer of these shares in the two corporations that was implemented and fully executed by at least the end of June 2007 - and is not now at any level sought to be disturbed as regards reversing the sale, disposition or acquisition of the transferred shares in the two corporations at the prices worked out under the SSA.
22 Tenth, arguments have emerged on the part of the plaintiffs, arising by reference to sub-issues (d) and (e), raising what appear to be general assertions as to statutory transgression or illegality, contrary to various provisions of the Real Estate and Business Agents Act 1978 (WA), in particular s 60 of that legislation as regards commission arrangements for the businesses - entered as far back as 2006 or 2007. These illegality arguments are not ventilated with any great precision. But what is important to note at the outset is that, in the end, notwithstanding what sub-issue 1(e) might otherwise suggest, the position of the plaintiffs at trial was that the SSA was not rendered unenforceable by any aspect of it transgressing a provision of the Real Estate and Business Agents Act. The matter was explained as follows by counsel for the plaintiffs (ts 184):
KENNETH MARTIN J: Yes. Or you can view them as one agreement, of 15 June 2007, completely valid and enforceable, not tainted by illegality.
LEVY, MS: Properly construed. Yes.
KENNETH MARTIN J: All right. Fine.
LEVY, MS: On the plaintiffs' case. Yes. And we say that those agreements, properly understood, do not affect a transfer of any listings of properties, or of any moneys between the first plaintiff and the first defendant.
23 As regards sub-issue 1(e), therefore, the relevant focus of the plaintiffs' arguments is to the first part of that question, essentially on the basis of a contention that, somehow, the SSA did not apply to the commission arrangements for the properties as are identified in the schedule SSA_H(1).
24 That concludes the preliminary considerations which I have endeavoured at the outset to highlight, in an attempt to alleviate some unusual fogginess bedevilling the limited issues I was called upon to navigate.
Procedural history
25 Shortly before the hearing of issues was due to commence, a late affidavit from the defendants indicated that they would be seeking to have the issues trial deferred. The foreshadowed application was on the basis of the late emergence of further key evidence, arising out of the forensic investigations of the defendants' computer expert - indicating that ongoing disputes over the issue of alleged inadequate discovery from the plaintiffs were still so unresolved in ambit that it would be, in effect, unfair to the defendants to proceed.
26 Given what is already an unusual history of delays for a matter, particularly in bringing even relatively confined issues to a point of potential determination, I was reluctant to accede to this eleventh hour application. Accordingly, after hearing the submissions of counsel on both sides concerning the adjournment, I eventually resolved, in conjunction with counsel, that the ambit of the issues to be determined would need to be further narrowed - to avoid an excursion into areas that remained in factual controversy in a situation of potential inadequate discovery. Both parties accepted the impracticability of proceeding with what was sub-issue 1(c) and with issue 2 (ts 132 - 133). Clearly, there remained a high level of factual disputation discernible in the parties' proposed witness statements concerning the existence and ambit of a 2006 oral agreement and related considerations, including the asserted estoppel arising under issue 2.
27 Nevertheless, there still seemed a degree of utility in attempting to proceed with residual aspects of some aspects of issue 1, particularly bearing in mind the parties' starkly differing positions towards the correct contractual interpretation of what was uncontroversially accepted on both sides as a binding SSA agreement of June 2007.
28 Having considered the parties' written submissions filed and exchanged prior to the hearing of these issues (namely, the plaintiffs' written summary of submissions of 1 April 2015 which were responded to by the defendants' written outline of submissions of 15 April 2015) it presented that lying fundamentally at the heart of the parties' continuing disagreement, was the proper understanding of and the ambit of the SSA.
29 As regards sub-issue 1(d), whilst there was the underlying factual dispute as to the existence of any such alleged oral agreement, it nevertheless seemed feasible to proceed on the hypothetical basis of making the assumption as to the existence of an oral agreement in the terms contended for by the defendants (effectively an oral agreement in the terms as pleaded under par 22 of the defendants' defence) and then, assessing the implications, if any, of such an agreement as between Ms Omacini, Mr Ryan and Mr De Freitas in June 2006. The hypothetical approach explains alterations underlying new sub-issue 1(d) in contrast to former sub-issue 1(c) now abandoned. As matters have transpired, it is my end conclusion that any such 2006 oral agreement as is contended for might at best provide some limited context with it preceding and leading up to the far more significant written provisions of the parties' SSA of June 2007. In the end, it is the proper interpretation and ramifications of the SSA which I assess to be of overwhelming significance to a viable resolution of the parties' current disputation.
30 Lastly, respective counsel were also agreeable to a further sub-issue 1(e) being pursued (ts 132 - 133). Sub-issue 1(e) mirrors sub-issue 1(d), save that the question is now addressed as to the effect of the SSA. As I have earlier indicated as part of the preliminary observations, it transpired at the hearing that there is, in the end, no statutory illegality or unenforceability challenge advanced by the plaintiffs against the SSA. Rather, the contention appears to be over the first component of sub-question (e), with the plaintiffs submitting that it ought be concluded that the SSA did not relevantly apply to the commission arrangements for the properties identified in the nominated schedule.
31 In a technical sense, that submission is correct since, as between a would-be vendor of any particular listed real estate, the commission arrangements would be governed, as between the vendor and the business agent, by the contractual terms of the listing agreement applicable as between them. But the first part of the question under issue 1(e) is not to be so narrowly read. The question has to be assessed in the context of the pleaded issues arising in the present action where one or other (or both) of the plaintiffs seek to recover from one or other (or both) of the defendants the aggregate of the moneys as are identified under a schedule - upon the basis of a cause of action which is pleaded. As will be seen, the sole pleaded cause of action as is relied upon by the plaintiffs to pursue these moneys is the cause of action for damages, for breach of contract. The relevant contract is, undeniably, the SSA. This was all accepted during argument at the hearing. At the heart of the argument lies the plaintiffs' bald contention that the plaintiffs hold entitlements to receive moneys from vendors in respect of various properties listed in the schedule with the PCRE business, which entitlements have not and could not have been altered or impacted against by the provisions of the SSA.
32 Putting aside for a moment the fact that this is not the plaintiffs' pleaded case, the argument calls for an examination of the terms of the SSA and an understanding of its provisions, especially as regards sales commission payable by vendors to the two businesses. That examination will follow. In essence, however, I reach a conclusion that the provisions of the SSA do very significantly bear upon commission arrangements as between the persons bound by the provisions of the SSA including, as I assess matters, not just Ms Omacini, Mr Ryan and Mr De Freitas, but also the two corporations, PC Corp and D & R Corp, as well.
33 Hence, by something of a last minute salvage exercise, the as-revised sub-issues under issue 1 emerged for my determination.
Evidence adduced at the trial of revised issues
34 The scope of the evidence adduced from the parties for the determination of the revised sub-issues was, in the end, greatly reduced. For the plaintiffs, only four documentary exhibits were relied upon. They became, respectively, exhibits A1 through A4. Exhibits A1 and A2 together are the two written dissolution agreements of 15 June 2007, which the parties accept constitute the share sale agreement or, as they have called it, the SSA. The two written agreements of 15 June 2007 need to be read and assessed together.
35 Exhibit A1 is entitled 'Agreement to dissolve partnership in Port City Real Estate'. The document is of some 40 clauses. Uncontroversially, this document can be seen, subsequent to cl 40, as being signed off as an agreement and dated by Ms Omacini and Mr Ryan. Their signatures can be seen to be witnessed.
36 There are seven nominated annexures to the first dissolution agreement (see annexures A through G).
37 Exhibit A2 presents as a similarly constructed typewritten agreement. It is entitled 'Agreement to dissolve partnership in Port City Southern Real Estate'. Exhibit A2 is also dated 15 June 2007. Exhibit A2 is of some 27 clauses. Like exhibit A1, it is signed off by Ms Omacini and Mr Ryan. Their signatures are also witnessed. But distinct to exhibit A1, this agreement is also signed by Mr De Freitas.
38 Like exhibit A1, exhibit A2 has a series of annexures attached. In exhibit A2's case, its annexure A is equivalent to annexure F to exhibit A1. Annexure B of exhibit A2 is equivalent to annexure G of exhibit A1.
39 But annexure C to exhibit A2 appears to be unique. It shows an elaborate calculation in respect of lots at the 'Forrestdale industrial park', generating a gross amount for the 'Company' of $161,992 from which is deducted a 30% amount for tax (obviously an attempt to calculate corporate income tax, at that percentage) resulting in a deduction of $48,598. From a nett amount of $113,394 is then calculated an amount given a description 'GO' (obviously Ms Omacini) of 25%, adjacent to the ultimate calculated figure of $28,349. Plainly, that calculation reflects the effort to derive a corporate commission entitlement figure (clearly for D & R Corp) then making certain adjustments for marketing and superannuation for Mig (clearly a reference to Miguel, ie, to Mr De Freitas) as regards his 'Super', superannuation entitlement, which is nominally deducted. The process works out in the end a payment as a proportion of the businesses' commission that would have 'trickled down' as possibly a shareholders' dividend to Ms Omacini, which number is then factored into a calculation of the price she receives for her quarter share in the PCSS business.
40 The plaintiffs also tendered exhibit A3 which, on its face, carried a description, 'Shareholders Agreement'. The face page of that document displays the date 15 September 2006. It presents to have been executed as a deed by D & R Corp (then named Port City Southern Pty Ltd (ACN 120 146 241)) and as well by Mr De Freitas, Ms Omacini and Mr Ryan (and Mrs Melita Regina Ryan). Nevertheless, no submissions were made to me about the significance of document A3 at the hearing. At best then, it provides some more context for the SSA. But its end relevance seems to have been largely overtaken by the two agreements of 15 June 2007, which together are the SSA.
41 The plaintiffs' last exhibit, A4, is a series of disparate documents which were individually identified by counsel during the hearing (see ts 138 - 153). The compilation making up exhibit A4 is mostly of authority to sell documents concerning various of the locations concerning the real estate properties found in the schedule, which is SSA_H(1). The contended significance of this series of documents lies in a submission of the plaintiffs' counsel that these various sale authority agreements are made as between diverse vendors and, generally, the PCRE business (thereby the first plaintiff, PC Corp), rather than being commission agreements with the first defendant trading as Port City Southern Suburbs (PCSS). From all that emerges the submission of the plaintiffs that no party, other than PC Corp (obviously vis-à-vis each lender), has ever held a lawful basis to receive sales commissions payable by the vendors who are party to such agreements upon the settlement of the sale of these properties - all assembled together under schedule SSA_H(1).
42 For their part, the defendants tendered a limited number of documents at the hearing. They became exhibits B through M. Hence, there was no viva voce evidence led from witnesses at the hearing.
43 It is not necessary to specifically refer to any of the documents tendered by the defendants at this point.
44 The defendants also tendered a limited number of extracts from what would otherwise have been evidence adduced by witnesses under witness statements at the hearing. These extracts are identifiable from the transcript for day two of the hearing (between ts 169 - 181). Some limited evidence from the witness statements was extracted and read into the transcript as I explain below.
45 From Mr De Freitas's proposed witness statement emerged some matters, effectively put forward as surrounding circumstances going towards a proper construction and interpretation of the two agreements, ultimately forming the SSA of 15 June 2007 - see pars 158 and 159. From Mr De Freitas' witness statement was read into the transcript this evidence under his pars 158, 159, 161 and 162:
[158] As from early January 2007, we put a sign 'Port City Southern Suburbs' on Shop 41, and also put up in our window a display of properties that were being sold by PCSS.
[159] Our respective offices, being shop 41 for PCSS and shops 43 - 45 for PCRE, were some 10 m apart. Shop 41 was in fact directly opposite shop 45, being separated by only a small arcade.
[161] These properties were all advertised by way of photographs in the window of shop 41 and also by way of full-page weekly newspaper advertisements. Further, these properties were all advertised on PCRE's webpage as well as under PCRE's account on realestate.com.au and reiwa.com.au, where they were identified as being PCSS properties by way of the PCSS phone number and nominating either myself, Mr Luxembert, or Mr Castaldi as the selling agent.
[162] Similarly, PCRE's properties were advertised within the window of shops 43, 44 and 45. They were also advertised on the PCRE webpage and the internet accounts, but under their phone number and sales representatives.
46 In response to that evidence, I then received from the plaintiffs via Ms Omacini's responsive witness statement (responding to par 161 of Mr Ryan's witness statement) this evidence, which was at par 203:
I was not aware that this was done. Mr Ryan was in charge of the marketing and the sales side, it appears that this has been some arrangement Mr De Freitas and Mr Ryan entered into. I did not know and did not authorise it.
47 So be it. It matters not, as will be seen.
48 Counsel for the defendants, Mr Spyker, also sought to have tendered pars 131 and 132 from Ms Omacini's first witness statement concerning her having prepared and typed up the two written documents of 15 June 2007, which had become exhibits A1 and A2. Ms Levy objected to this for some reason. By way of resolution of that objection it was eventually agreed I could receive as limited evidence the objective fact that it was Ms Omacini who had typed up the two agreements: see ts 178.
49 With some later augmentations concerning the content of documents adduced by the defendants as exhibits B through M, that constitutes all I need say about what turned out to be the largely documentary evidence adduced for my determination of the revised issues.
50 I can now move to discuss some of the other core ingredients involved in the revised preliminary issue exercise.
Fundamental ingredients in assessing issue 1 and its sub-issues
51 As may be observed from the revised issues, the following three mentioned aspects present as integral to a proper evaluation of the issues presented by each question.
52 First, the underlying writ and pleadings in CIV 2100 of 2010 and CIV 2151 of 2010. There is particular need to examine the relief claimed under these foundational documents. As I have mentioned at the commencement of these reasons, the underlying pleadings set the parameters and constraints underlying this exercise.
53 Secondly, there is a need for some further examination and clarification of the schedule which is tied to the sub-issues. As will be seen, this is something of an evolved document which has been prepared by the plaintiffs' representatives. An earlier version of schedule SSA_H is found appended to the plaintiffs' statement of claim. Iteration H(1) attached to the present issues is an evolved iteration of that document. Of itself, the plaintiffs' compiled document carries no particular evidentiary significance. It is simply an assembled group of real estate properties put together by the plaintiffs underlying the plaintiffs' money claim to amounts of 'commission' not from vendors - but from the defendants, with an aggregate total of commissions claimed.
54 It is interesting to notice the somewhat diverting preface to this schedule which is SSA - an acronym which could only reflect an intended reference to the share sale agreement (SSA) of 15 June 2007. That in itself is curious given the plaintiffs' later arguments that the terms of the SSA did not bear upon their claims to these funds.
55 The third matter to observe upon and by far the most important is the content and significance of the SSA itself. I have already mentioned the two non-legally prepared typewritten documents of 15 June 2007, which are to be read together and accepted as constituting the SSA. A lot more needs to be said about these documents.
56 I turn to examine each of these three respective key elements, at greater length.
The plaintiffs' writ and pleadings
57 The point of the following analysis is to show the following key aspects as being overwhelmingly clear, namely:
(a) the cause of action pleaded as being relied upon by the plaintiffs to obtain $1,052,049 from the defendants is damages for breach of contract;
(b) the relevant contract pleaded as being contended to have been breached is the SSA of 15 June 2007;
(c) the particular term or terms of the SSA contended to have been breached in order to generate the monetary entitlement or damages remains perennially and unacceptably obscure; and
(d) the plaintiffs' writ and statement of claim, on analysis, are undeniably assembled upon a premise that the first plaintiff, PC Corp, and the first defendant, D & R Corp, are bound by and entitled to receive the benefits of the covenants under the SSA. It is too late to try and resile from that - as was attempted at this hearing.
58 It is necessary to make those fundamental observations at the outset since at the hearing of preliminary issues it seemed to me that by the end of the hearing, counsel for the plaintiffs was attempting to resile from all of elements (a), (b) and (d) above. This is simply not permissible.
59 The analysis is assisted at the outset by an examination of the plaintiffs' writ in CIV 2100 of 2010. It is in these terms:
The first and second plaintiffs' claim is for:
1. Monies owed to the first plaintiff and/or second plaintiff, alternatively damages, arising out of or incidental to a breach of contract made between the first plaintiff and second plaintiff and the first and second defendants on or about 15 June 2007, with respect to the:
a. dissolution of partnership of Port City Real Estate; and
b. dissolution of partnership of Port City Southern Suburbs.
2. Further or in the alternative, the first plaintiff's and second plaintiff's claim is against the first defendant and second defendant for a declaration that the first defendant and second defendant contravened the Real Estate and Business Agents Act 1978 (WA).
60 The Relief sought upon the endorsement to the writ, putting aside interest in costs:
A. A declaration that the first defendant and second defendant contravened the Real Estate and Business Agents Act 1978 (WA);
B. An order that the first defendant and second defendant pay to the first plaintiff and second plaintiff, monies that the first plaintiff and second plaintiff say they are entitled to under the dissolution of partnership agreements in Port City Real Estate and Port City Southern Suburbs; and
C. Further or alternatively damages.
61 Putting aside irrelevant distractions such as the references to dissolution of partnership under par 1 above, it is clear that the cause of action upon which relief is sought is breach of contract, and that the contract referred to of 15 June 2007 must be the two agreements which have come to be referred to together as the SSA. Furthermore, the premises of par 1 above concerning PC Corp and Mrs Omacini being parties to a contract 'made between' D & R Corp and Mr Ryan is also explicit. I can then move to the plaintiffs' statement of claim in the consolidated action CIV 2100 of 2010 (the pleadings being filed on 22 December 2010). Putting aside smallish amounts and concentrating upon the monetary claim concerning $1,052,249, it is abundantly clear that that sum is the total amount of the 'EST. COMSN' column of a two-page attachment entitled 'SSA_H' to the pleading. Clearly, that is a reference to estimated commission. It culminates after an assembly across two pages of 101 properties in columns, followed by references to their respective 'sale date' and then 'sale price' before the estimated commission column. As mentioned, schedule SSA_H(1) referred to in the ensuing sub-issues presents as something of an evolved iteration of a schedule initially attached to the statement of claim.
62 Next I would note that, putting aside relatively uncontroversial introductory issues I have already canvassed, the statement of claim at par 5 identifies an agreement, eventually defined as the 'share sale agreement'. The plea at par 5 is admitted by the defendants' defence (see par 5). As pleaded, it is in the following terms:
5. By an agreement made on or before 15 June 2007:
(a) the second plaintiff agreed to sell all of her shares, being 25, in the first defendant to the second defendant; and
(b) the second defendant agreed to sell all of his shares, being one, in the first plaintiff to the second plaintiff.
(Share Sale Agreement)
Particulars
(1) the agreement is evidenced in a written document:
(A) titled 'Agreement to dissolve partnership in Port City Real Estate' dated 15 June 2007, signed by the second plaintiff and the second defendant; and
(B) titled 'Agreement to dissolve partnership in Port City Southern Real Estate' dated 15 June 2007, signed by the second plaintiff and the second defendant.
64 Paragraph 9 of the statement of claim mentions various sections of the Real Estate and Business Agents Act 1978 (WA) and in particular s 55(1), s 55(2), s 55(3), s 60 and s 68. However, save for a rolled up reference in the ensuing par 16, which I will mention below, the significance of those provisions (if any) is not further developed in the pleadings.
65 As regards an amount of estimated commission the subject of SSA_H, the significant pleas in the statement of claim present as follows, commencing at par15 under a heading, 'Causation, loss and damage'.
Causation, loss and damage
15. Each of the properties set out in attachment SSA_H were listed for sale by an agreement in writing made between the vendor and the first plaintiff.
Particulars
- (a) The written listing authorities are made on the first plaintiff's listing authority form by a person employed by or in the service of the plaintiff at the time the listing authority was granted by the vendor;
- [This being an intended reference, as I would assess it, to the documents assembled by the plaintiffs under exhibit A4.]
(b) certain of the contracts are recorded on the first plaintiff's Offer and Acceptance form; and
(c) certain of the contracts are recorded on the first plaintiff's the (sic) sales sheets.
- 16. By reason of the matters pleaded in paragraphs (sic) and 1(b), 1(c), 3(e), 3(f), 4(b), 9, 15, the properties listed in attachment SSA_H of the statement of claim are and were listings and sales of the first plaintiff.
[Paragraph 16 is a talismanic conclusionary plea which remains perennially and unacceptably obscure, other than for its concluding reference to PC Corp.]
17. The properties listed in attachment SSA_H of the statement of claim have been sold.
18. By reason of the matters pleaded in paragraphs 15 to 17, the first plaintiff [ie, PC Corp] is entitled to $1,052,149 [being the culmination of the estimated commission summation across 101 properties as seen under attachment SSA_H] sales commission.
Particulars
- (a) The properties are listed in attachment SSA_H; and
(b) the sale price for each property is listed in attachment SSA_H.
19. The first defendant [ie, a reference to the corporation D & R Corp] has failed to pay to the first plaintiff [PC Corp] the sales commission pleaded in paragraph 18.
20. By reason of the breaches pleaded in paragraphs 13(a), (c) to (g) and 14 [a reference to the eight contended breaches of the SSA by the second defendant or the first defendant under paragraph 13 or other breaches of a so-called commission agreement referred to in paragraph 14] and the failure pleaded in paragraph 19, the first plaintiff [ie, PC Corp] has suffered loss and damage, being:
…
(f) $1,052,149, less amounts reasonably and properly deductible from the gross commission in the ordinary course of business.
AND THE PLAINTIFFS CLAIM
A. A declaration that the properties listed in attachment SSA_H are listings of the first plaintiff;
B. An order that the first defendant [ie, D & R Corp] pay:
a. to the first plaintiff [ie, to PC Corp] the sum of $1,230,172
- [being a summation of $1,052,149 plus $178,023, which is the culmination of pars 20(a) through 20(e), arrived at by reference to distinct and presently irrelevant pleas]
b. to the second plaintiff the sum of $28,349.
68 In a quest to determine a meaning of the equally obscure par 18 above with the plea as to PC Corp's entitlement to $1,052,149 sales commission, I explored that issue at some length with counsel for the plaintiffs during the hearing of issues. It is necessary to set out these extracts from ts 127 - 128 with some passages I have emphasised in bold:
KENNETH MARTIN J: But hence you say, "Well, we were the party always, in law, entitled to that money. You've wrongly got it, give it to us", don't you?
LEVY, MS: We say that with the benefit of contract between us and the first defendant.
KENNETH MARTIN J: Yes. Okay.
LEVY, MS: The benefit of a share sale contract - - -
KENNETH MARTIN J: Yes.
LEVY, MS: - - - which provides specifically that all listings are to remain with the entity that those listings belong to. Now, I haven't used the words exactly and it's a matter for construction, but that's what they promised each other. They also promised each other to return - - -
KENNETH MARTIN J: Right. So I'm just trying to pigeon-hole your cause of action. Your cause of action is damages for breach of contract?
LEVY, MS: It is, yes. And it - - -
KENNETH MARTIN J: Are you sure about that?
LEVY, MS: There may be a rectification argument that we alluded to earlier, but that arises because of the conflict in the written document between the schedule and the primary terms - the terms of the contract itself. I will come to that in a moment. But what the obligation was under this share sale agreement was for the entities to each give each other back any paperwork, any property - - -
KENNETH MARTIN J: Well, we can interpret the share sale agreement under issues (a) and (b). So that would be helpful to this argument.
LEVY, MS: Yes. Yes, it would, your Honour.
KENNETH MARTIN J: I understand that.
LEVY, MS: Yes.
KENNETH MARTIN J: But I just want to get a crystal clear understanding of the basis of your cause of action, now, nine years after the event, to cause the first defendant to pay the plaintiff the 'million dollars worth of commission'. And you put it on the basis of damages for breach of contract.
LEVY, MS: It is pleaded - - -
KENNETH MARTIN J: And that to be absolutely crystal clear is the Share Sale Agreement of 15 June 2007.
LEVY, MS: Yes.That is the contract that is being referred to read in conjunction with obviously the listing authorities which are governed by s 60 of the REBA Act. You can't - - -
KENNETH MARTIN J: Well, that's a question of application of the workings of the contract to the facts. I understand that. But your cause of action is still contract.
LEVY, MS: It is. It's definitely pleaded as contract and I want to clarify one little point. Although the claim is for the million dollars, your Honour will note that in the statement of claim it is specifically pleaded that the first plaintiff accepts and acknowledges that it's not to keep that one million, it has got obligations to pay the sales representative that was responsible. Now, it may be that sales representative has already received that sum of money, but that's just a mathematics exercise.
So there's no attempt to double dip here. There's no attempt to get more than the first plaintiff would otherwise have been entitled to. The damages claim arises because we say there was a breach of obligations that the defendants were required to perform under that written agreement, which there is - and it's pleaded out - the causal link that gets us to that commission payment ought to - that value ought to have come to the first plaintiff. It may be that sitting in there is also a claim for misleading and deceptive conduct in relation to that - - -
KENNETH MARTIN J: Well, that's not pleaded.
69 So then, as regards the underlying landscape set by the plaintiffs' writ and statement of claim, providing the relevance framework for an evaluation of these sub-issues, it was confirmed by counsel, as seen above, that the cause of action relied upon for the relief sought by PC Corp of $1,052,149 against D & R Corp (see par 19 of the statement of claim) was damages for breach of contract, with the relevant contract in question said to have been breached being the SSA of 15 June 2007. Accordingly, it is necessary to turn in even greater detail to the provisions of that agreement. Before doing that, however, I should say something more about schedule SSA_H(1) which is tacked on to each of the sub-issues.
Schedule SSA_H(1)
70 The sub-issues to preliminary issue 1 display the invariable reference to a schedule, identified as SSA_H(1).
71 This is obviously an evolved iteration of a document which, as has now been seen, is first found appended to the plaintiffs' statement of claim. Originally, the schedule identified some 101 real estate locations. Now, as iteration SSA_H(1), it identifies 104. This schedule document as such holds no evidentiary significance, other than reflecting the plaintiffs' internal compilation of, by its assessment, what is asserted to be the first plaintiff's, PC Corp's, 'commission' claim, put against the first defendant, D & R Corp.
72 Under the latest iteration of the Schedule, the aggregate end total of the various commissions under the latest iteration is now $728,031. By reason of excisions accepted during the course of the issues hearing, the claimed amount seems to be further reduced to $706,284 (see ts 151). After an excision of item 102 (see exhibit C) which I was told is no longer pursued, the aggregate amount further reduces to $704,284 (see ts 157 - 158). Then there are the unquantified further (substantial, as I see it) reductions mentioned by counsel for the plaintiffs in the transcript just mentioned as being payable to sales representatives (see ts 128), placing the claims at the margins of economic viability from an expenses of litigation perspective.
73 The defendants are critical of schedule SSA_H in any form.
74 On their submission, it confuses and unacceptably mixes up at least four discrete categories of transaction, relevant to a possible sales commission receivable around mid-2007 by either real estate business. First are the three categories I have already mentioned (being (a) where a settlement on sale has occurred and the vendor's sales commission due to the selling agent has been received and banked; (b) where there is a binding offer and acceptance but the vendor's sales commission payment, whilst expected, has not yet been received by reason of the settlement on the transaction not yet being perfected; and (c) scenarios where a property had only been listed to be on the books of either the PCRE business or the PCSS business as at 15 June 2007, and the property had not yet been sold under a binding offer and acceptance). To those three categories the defendants add a fourth, namely, where Schedule SSA_H(1) refers to locations, as to which they say they simply hold no knowledge whatsoever, concerning a sale of such a property, suggesting that even a prospect of sales commission being received by anyone is unlikely. The defendants' written opening submissions at pars 16 and 17 sub-classify the 104 properties in schedule iteration SSA_H(1) according to their four-fold sub-classification.
75 It will have been noticed already that sub-issues 1(a) and 1(b) distinguish as between properties 'identified' in schedule SSA_H(1), on a basis of whether they are either mentioned, or not mentioned in the SSA. What is actually meant by that identification/non-identification distinction involves the assessment and understanding of the SSA and its annexures (namely the two documents of 15 June 2007 and their annexures). Some of the SSA's annexures - such as annexure C to exhibit A2 as already seen - mention specific properties from a commission amount calculation apportionment perspective vis-à-vis the selling and separating shareholder principals. This is in the context of the prices (ie, the legal considerations) then being worked out for the respective sales of the shares which are being sold and transferred from and to both Ms Omacini and Mr Ryan respectively, under those share sale arrangements covering the corporate operators of the two distinct real estate businesses, PCRE and PCSS.
76 As we will see, there are plenary references to property locations within the body of those documents and specific references to some properties in some annexures to the SSA.
77 Sub-issues 1(a) and 1(b), framed as they are, by reference to schedule SSA_H(1), both use the term 'governed', in reference to the terms of the SSA. Accordingly, it is necessary to turn back to the SSA agreement, as the most important element of the evaluation exercise.
The SSA of 15 June 2007
78 As already mentioned, the two written typed agreements (now respectively exhibits A1 and A2), together, are accepted to constitute the SSA.
79 Towards these two written agreements, which obviously must be read together, I have already noted that neither presents as having been drawn with professional legal drafting assistance. But they were both typed up, as was ultimately accepted, by the second plaintiff, Ms Omacini.
80 To the extent that both SSA documents, by their headings, display reference to agreements to 'dissolve' (either the 'partnership' in Port City Real Estate or the 'partnership' in Port City Southern Real Estate) a legal partnership, the dissolution characterisation is not legally accurate. That is by reason of the underlying business operations being run through two corporations. Nevertheless, from the point of view of establishing, objectively, the commercial purpose and object of the transactions under the agreements, the lay parties' chosen terminology of 'dissolution' of 'partnerships', as regards two underlying businesses, does provide some insight. In short, in a context of two different real estate businesses, run by two corporations, where natural person principals were the shareholders, it is objectively clear that the commercial purpose and object of each transaction, as is evidenced by the written agreements, was to effect a separation of two principals who had held proportionate interests in both businesses. Hence, Ms Omacini, in effect, was to go it alone in future with the continuing business of PCRE, and Mr Ryan would leave the PCRE business to Ms Omacini and for the future join Mr De Freitas as an equal 'shareholder' in the continuing business of PCSS.
81 Before I embark upon a consideration of particular clauses in the SSA, it is helpful to reiterate that what both do, operating together, in the end, is fix purchase prices (as the legal considerations) for the shareholdings to be sold and changing hands in the two particular corporations operating the continuing business in mid-June 2007. These share transfer transactions were then, as is accepted, fully implemented and effected in mid-2007. There is no question then, therefore, of any partially incomplete or executory share transaction requiring the court's assistance to enforce or to complete or to rectify or rescind. In short, this is a long finished dual share sale transaction for valuable considerations passing as between Ms Omacini and Mr Ryan and completed, since mid-2007.
82 I will also record that particular clauses of the two agreements of 15 June 2007 which I am about to examine are being evaluated in the further context of late submissions by counsel for the plaintiffs at the hearing of issues to the effect that:
(a) the first plaintiff corporation, PC Corp, and the first defendant corporation, D & R Corp, are not bound by the covenants of the SSA, since they were not expressly named as being made parties to these agreements (in contradistinction to the natural person principals who are named as parties) and have not, as corporations, executed either agreement; and
(b) the terms of the SSA do not bear upon or impact against PC Corp's continuing entitlement, arising by reference to diverse vendors, being the owners of various properties as listed in schedule SSA_H(1), to receive (from the defendants) amounts of 'sales commission' that were payable upon a settlement of the sale of any of those properties and that D & R Corp must pay over that amount of money to PC Corp.
83 Both submissions are misconceived and must be rejected.
84 It is apparent from the terms of the SSA that albeit underlying shareholder principals were selling out and separating, two real estate businesses were continuing. As part of 'dissolution' arrangements, the SSA's parties comprehensively addressed questions arising around a dispersal of the business assets in each continuing business as operated by each corporation. As a part of that separation and share 'buy-out' process, the SSA comprehensively addressed, as will be seen, the topic of vendor sales commissions then earned by, or expected in future, as part of the income of both real estate businesses and flowing on to sales representatives who were individually working within those businesses.
Exhibit A1
85 I turn first then to the 'Agreement to dissolve partnership in Port City Real Estate' and its annexures (A - G) - which became exhibit A1.
86 After cl 40 this four-page document (excluding the following annexures A through G) was signed by Ms Omacini and Mr Ryan, under the date 15 June 2007. Their signatures in each instance were witnessed by a witness, Mr Darren Spence.
87 I note at first the following clauses (exhibit A1 and exhibit A2 as reproduced in these reasons have not been corrected to remove their spelling and grammatical errors):
1. Rodney Douglas Ryan to resign as a Director and a shareholder of Port City Pty Ltd at settlement.
2. Rodney Douglas Ryan to resign as a Director and a shareholder of Port City Projects Pty Ltd at settlement.
3. Rodney Douglas Ryan indemnifies Glenda Rae Omacini for Port City Pty Ltd and Glenda Rae Omacini indemnifies Rodney Douglas Ryan for Port City Southern Pty Ltd.
4. All Plant and equipment of Port City is to remain with Port City. The depreciated value of the plant and equipment is $19,146, Glenda Omacini to pay Rod Ryan 50% of this value.
…
6. Rod Ryan to return all keys and sales data and graph sheets on performance of Port City sales and commercial sales and all advertising books, documentation and files relating to Port City Pty Ltd at settlement.
88 Pausing at this point, the following aspects of the initial clauses can be noted. Objectively assessed, exhibit A1 shows the parties considered the position of all three corporations around which the two businesses operated. In cl 2 there is a reference to a further company, Port City Projects Pty Ltd. Cross-indemnification provisions under cl 3 are mutual as regards including the two corporations which operated the two businesses. The real estate businesses are obviously continuing, but with changes in the underlying shareholding positions of the two corporations which had operated and would continue to operate those businesses. Any suggestion Mr Ryan and Ms Omacini had not applied their minds to the position of the associated corporations as regards the two businesses is fanciful. True it is that there is no express mention of a 'sale' of Mr Ryan's 50% (one share) shareholding to Ms Omacini, but that is the overriding inference of this unprofessionally drawn document.
89 Next then follow clauses 7 through 14 dealing with issues around the rent roll of the PCRE business.
90 The value for a rent roll of the PCRE business is effectively seen to be apportioned, as a valuable asset of the PCRE business as between Ms Omacini and Mr Ryan, with Ms Omacini agreeing to pay Mr Ryan 50% of the value of the rent roll, on the basis she is effectively acquiring his 50% share in the business.
91 In clauses dealing with the rent roll, Annexures A, B and C are mentioned as regards various named Port City Real Estate rent roll properties. Under cl 9, Ms Omacini is to pay 50% of the value of the rent roll to Mr Ryan, subject to adjustments.
92 By reference to Annexure B an amount of $179,410, payable by 'Glenda' to 'Rod Ryan', is ultimately seen as derived (after longhand initiallings and crossings out).
93 By cl 10 Mr Ryan is to pay Glenda Omacini '50% of the value of the Rent roll he is to take with him as per the Schedule breakdown'. The amount of $78,024 is seen derived as payable to Ms Omacini by Mr Ryan.
94 Under cl 11 a nett subtraction, as between the two rent roll calculated payments, is derived of $101,386 - payable to Mr Ryan. Clearly, the separating and selling principal shareholders are dealing at this point with apportioning, in the context of deriving a sale price, the value of one of the valuable business assets (the rent roll) as between themselves, in a continuing business owned and operated by PC Corp - in which they have to that point been equal shareholders, but with Mr Ryan to sell his 50% shareholding interest to Ms Omacini, rendering her a 100% shareholder and, through corporation PC Corp, as sole effective controller of that corporation and its continuing PCRE business.
95 Next, and again as I would assess it in a context of dealing with the rent roll asset of the PCRE business, cl 13 by reference to Annexure C, addresses a 'schedule of properties to be handed over to [D & R Corp] at settlement and all necessary documentation transferring management authority by Port City Pty Ltd to Port City Southern Pty Ltd'.
96 The very nature of these elaborate separation, price valuation, or acquisition of business asset arrangements, as is well illustrated by cl 13, render the plaintiffs' late submission that the respective corporations, by which the natural person principals ran the two businesses, are not bound by the SSA arrangements perfected as between the parties - as they dissolved the two business 'partnerships' - untenable. So, for instance, again see, as regards the rent roll asset, cl 14:
Remaining properties of Port City Pty Ltd are to remain with Port City Pty Ltd.
97 An outcome whereby the first defendant D & R Corp is not bound by that covenant through Mr Ryan, would generate a commercial nonsense. Likewise, for PC Corp.
98 At cl 15, the parties address minor issues concerning sundry assets of the businesses such as Mr Ryan's laptop, desk, chair, whiteboard, filing cabinets, bookcase, wall unit, and Ms Omacini's desk, chair and filing cabinets in a back office of shop 41. Again, this reflects, objectively, a level of separation in almost obsessive detail which the parties, objectively assessed, relied upon in terms of their 'dissolution' under these documented arrangements.
99 Commencing from cl 16 of this agreement, Ms Omacini and Mr Ryan now begin to address the controversial area of business sales commissions. As seen, they once again do so in very comprehensive fashion.
100 It is necessary to set out clauses 16 through 22. I add some observations of my own along the way.
16. All sales prior to the 1st of May 2007 that have sold and not yet settled as per the schedule 50/50 of the net commission be payable to Rod Ryan payable at the end of each calendar month period preceding the settlement. Reference schedule marked annexure D.
101 Annexure D mentioned is a four-page document specifically identifying various property locations at pages 1 and 3 - either under the heading Residential or Commercial. There is a compilation of specific property locations, along with reference to a settlement date, list agent, sell agent, total commission, GST, marketing and amounts of money under the heading Company. Clearly, such property locations have been identified - for the purpose of answering sub-issue 1(a) in the affirmative.
102 There ensues a calculation of aggregate amounts at a right-hand column, followed by certain notional adjustments, including for tax (which I assess to be corporate income tax). A nett figure is ultimately derived, followed by the 50-50 apportionment of that nett figure. For the residential table the end amount of $32,546 is calculated. For the commercial table an end 50-50 figure is calculated of $27,473.
103 At the end, therefore, cl 16 read with annexure D sees Mr Ryan and Ms Omacini meticulously working out an asset value, for the purposes of reaching an element of sale price for Mr Ryan's departing 50% shareholder interest (taking account of likely corporate income tax payable by PC Corp some time in the future) in respect of sales likely for location properties (ie, future sales commission income for the PCRE business) prior to 1 May 2007 'that have sold and not yet settled'. That aspect is clearly addressed.
104 Clause 17 then provides:
17. It has been agreed that commissions on settled sales held in the Trust Account as per the Trial Balance Schedule dated 15/5/2007 (refer to Annexure 'E') is to be offset with Commissions due from sold properties by Port City Southern that have not yet settled. The balance due will be proceeds less GST and Company Tax. The offset commissions due to Glenda Omacini from Port City Southern, refer Annexure 'F'.
105 Clearly, this provision must be read along with the dissolution agreement concerning the Port City Southern Real Estate agreement (exhibit A2), dealing with the sale and transfer of the one-quarter shareholding interest of Ms Omacini in the PCSS business to Mr Ryan, thereupon elevating him to a position of becoming a 50% equal shareholder, with Mr De Freitas, in D & R Corp. A clear interrelationship as between the two agreements (exhibits A1 and A2) emerges when considered together, as they must be.
106 It is apparent, however, from cl 17, that it addresses a position of the business commission income that has effectively been received, upon settled property sales. Hence, these are funds held in a trust account of PC Corp, as operator of the PCRE business. Examination of annexure E shows the express identification of 20 specific property locations, a commission amount, then, after adjustments for GST and company tax income, the nett derived amount of commission - seen to be split 50-50.
107 Hence, cl 17 deals explicitly with those situations where a property settlement had been achieved, with the consequence that the sales commission payable by a particular vendor had then been received as a current asset (income) by PC Corp.
108 The as calculated 50-50 entitlement is effectively a 50% shareholder's pari passu dividend receipt position - reflecting equal distribution of nett amounts as between the two shareholders - effecting a 'trickle down' effect in the real estate corporate business deriving that income.
109 But cl 17 goes further, effectively via annexure F. It calculates a 25% entitlement of GO, concerning residential properties in the amount of $4,872.
110 Concerning commercial properties, once again, by the like splitting and apportioning methodology, a 25% entitlement after expenses and corporate income tax at 30% of $51,384.43, is seen to be reached.
111 The PCSS business is therefore, via Annexure F, assessed as generating the notional end dividend entitlement to Ms Omacini in respect of real estate locations which have been sold, but have not yet settled. The calculated amounts have their genesis as vendor payments of sales commission to the business - but the SSA arrangements are dealing with the asset values to derive a price (that was paid) for a shareholder's interest in the business income received, or likely to be received, by the corporate business.
112 The effect of cl 17 is effectively to reduce the amount of the purchase price for Ms Omacini's 50% shareholding otherwise payable to Mr Ryan from a calculated entitlement price due to him of 50% of the funds actually received by the PCRE business and held in trust - by deducting from the payment due to him a calculated 25% entitlement for moneys calculated as likely benefiting Ms Omacini in the future if, or when, property settlements occurred as regards PCSS properties which are the subject of annexure F (residential or commercial).
113 Consequently, it may be clearly seen at this point that, under the first business dissolution agreement as regards the PCRE business, the parties took into account the PCSS business assets and income (actual and projected). They (objectively assessed) elaborately dealt with issues surrounding vendor commissions receivable by either business - both for where a settlement had actually occurred and also for where a settlement remained pending (and therefore the commission payable to the business was also pending). The purchase prices for the shares were worked out on that basis and then paid on that basis.
114 Clauses 18 - 21 provide:
18. It has been agreed that Glenda Rae Omacini is not entitled to any sales commissions and any other moneys other than the Sales for SAS Global, Forrestdale Business Park, conducted prior to 23 May 2007.
19. Any Sales that have fallen through where Glenda Rae Omacini has been paid through Port City Southern Pty Ltd will be reimbursed on a sale by sale basis at the end of each month to Rodney Douglas Ryan.
20. All listings taken from Port City Real Estate by Travis Lindstrom (refer to special annexure) will be paid at settlement 20% of the Gross Commission inclusive of GST once the properties have sold and settled, the money is to be paid to Port City Real Estate. Refer annexure G.
21. Settlement date to be upon all transfer documents, lease documents and Director resignations and Company Tax returns being finalised. The specified date for calculations is the 30th April 2007.
115 Notwithstanding the SSA documents were obviously prepared without professional legal drafting assistance, they are undeniably detailed and comprehensive. At times, as would only be expected, fine legal distinctions were not precisely grasped or appreciated, although at the end what was sought to be accomplished presents as clear enough, objectively assessed. For instance, these would include imprecise references to 'dissolve' a partnership(s) as I have already mentioned.
116 From the perspective of lay persons seeking to sell out and separate two continuing businesses, cl 18 is very significant.
117 Clause 18 refers to Ms Omacini not being entitled to any 'sales commissions' and 'any other moneys' other than in respect of the Forrestdale Business Park. Of course, it is plain that the respective PCRE and PCSS real estate businesses were being conducted through the medium of corporations. Hence, strictly speaking, commission entitlements from vendors would be enjoyed by the corporations operating the real estate businesses - rather than by the individual shareholder principals. Nevertheless, understandably for non-lawyers, the principals who were the shareholders in a 'quasi-partnership' scenario would tend to view the proportion of their respective shareholdings as giving them personally held entitlements to proportionate shares of corporate assets, or in the corporate income, when, of course, that is not strictly the position at law in a corporation.
118 Here there is absolutely no room for doubt that the objectively assessed intent underlying cl 18, as regards the as expressed, otherwise limited, entitlements of Ms Omacini to 'sales commission' or any 'other money', was to constrain the 'commission' entitlement position of Ms Omacini personally, but also to constrain and bind the corporate first plaintiff and corporate first defendant, as regards the two businesses.
119 In short, it is simply not credible for PC Corp to now try to distance itself from the force of cl 18, on a basis that, as regards confined sales commission entitlements and 'other moneys', cl 18 was a covenant that only constrains Ms Omacini, not PC Corp. Plainly, a sensible holistic construction of the two agreements of 15 June 2007 is rendered a commercial nonsense, if the two corporations who owned and were operating the two businesses being addressed under the SSA arrangements were not bound by the covenants that were settled and agreed upon, as between the shareholders who were the principals of the businesses and directors of the corporations used as integral aspects of the quasi partnership arrangements then being dissolved.
120 A last observation to be made concerning these clauses is that cl 19 embodies repayment arrangements binding Ms Omacini (and, as I would conclude, also binding PC Corp) to repay (all or part of) the 25% entitlement which she received as a credit (within the overall share price payment calculation exercise) as an offset credit via cl 17, if, or when, PCSS sales the subject of the assessment made by reference to identified locations of properties under Annexure F had 'fallen through'. That repayment aspect covenant of the SSA appears to be the subject of the defendants' claims put against Ms Omacini in the Magistrates Court - but which ultimately now lie within the counterclaim in these proceedings, as issues to be addressed in the future (see ts 81 - 82).
121 Following cl 21, the remainder of the covenants found in exhibit A1 address disparate issues between the parties, corporations and businesses, including separating business assets, including a Commander phone system contract (cl 24), GST, PC Corp's five-year lease over shops 43 and 44 so it could carry on the business of PCRE (cl 29), phone cabling, office desks, home phone accounts, mobile phone accounts and other matters.
122 Non-solicitation clauses and commitments by Mr Ryan and Ms Omacini are then provided for, under cl 34 and cl 35 respectively, as regards the clients of either of the PCRE and PCSS businesses.
123 Clause 40 of this first agreement concludes in terms:
Compliance with this agreement by Glenda Rae Omacini will be full and final satisfaction of all and any claims Rodney Douglas Ryan and Miguel De Freitas or De Freitas and Ryan Pty Ltd has or may have from Glenda Rae Omacini and Port City Pty Ltd.
124 Clearly, PC Corp was intended to benefit by cl 40, along with Ms Omacini. The clause is also seen to place a burden upon D & R Corp.
125 So by cl 40, the two associated corporations, D & R Corp and PC Corp, are specifically addressed. As will be seen there is a similar concluding clause in the other agreement (exhibit A2 at cl 27). The two agreements and their concluding clauses need to be read together. Allowing again for the fact the two agreements were not professionally drawn with legal assistance, they nevertheless set out to and, in the end, do accomplish a comprehensive, once and for all, business separation as between the parties - effective upon the settlement on the respective share sale dispositions and acquisitions by the principals and shareholders in the corporations operating the two continuing real estate businesses.
126 I turn to the second agreement (exhibit A2).
Exhibit A2 agreement to dissolve partnership in Port City Southern Real Estate.
127 The document is seen to be similarly constructed to exhibit A1.
128 I have already noted that it has a distinguishing feature of being signed by Mr De Freitas as well as Mr Ryan and Ms Omacini. This 'extra' is readily understandable, in a context of Ms Omacini's disposal of her one-quarter shareholding in the first defendant corporation, D & R Corp, as operator of the PCSS business, upon the basis of her receiving a price (legal consideration) worked out under the proportionate separation and valuation of discrete business assets and income methodology of this instrument - with Mr De Freitas being the residual 50% shareholder.
129 This agreement commences:
1. Glenda Omacini will transfer her share in Port City Southern at settlement to Rodney Douglas Ryan.
2. Any properties managed or for sale by Port City Southern to be transferred to De Freitas & Ryan Pty Ltd at settlement.
3. Rod Douglas Ryan and Miguel De Freitas indemnify Glenda Rae Omacini for Port City Southern Pty Ltd and Glenda Rae Omacini indemnifies Rod Douglas Ryan and Miguel De Freitas for Port City Pty Ltd.
4. All plant and equipment of Port City Southern is to remain with Port City Southern. Port City Southern to pay Glenda Omacini $7,500 being her 25% share in the setting up costs and the plant & equipment.
130 Again, these clauses reflect, objectively assessed, a clear intention of the parties to both benefit and bind the principals' associated corporations as owner operators of the two real estate businesses in which Mr Ryan was either departing (PC Corp and PCRE), or increasing his shareholder interest to become an equal shareholder with Mr De Freitas (ie, D & R Corp and PCSS).
131 Ms Omacini received a benefit of an indemnity, as regards any exposures she might suffer after disposing of her 25% shareholding in D & R Corp and so in the PCSS business.
132 Likewise, she correlatively indemnifies Mr Ryan and Mr De Freitas for any of their exposures in PC Corp. For the two corporations not to be bound by such comprehensive arrangements is again seen to be a nonsensical commercial proposition.
133 Next, I consider cl 7. It appears to be a counterpart offset clause to cl 17 in the first agreement. It provides:
All sales prior to 23 May 2007 that have sold and not yet settled as per the schedule 25% of the commission be payable to Glenda Omacini less GST, Tax, advertising expenses, superannuation & commission to agents. This money has been offset against other settled sales held in Port City which are payable to Rod Ryan. Reference schedule is marked annexure A.
134 It can be seen that annexure A to the second agreement is the same document as the residential/commercial compilation of properties, ultimately generating the 25% payment entitlement to GO (Ms Omacini). In other words, it is the same document as annexure F to the first agreement.
135 Arrangements under cl 7 with its annexure A, read alongside cl 17 of the first agreement and its Annexure F, show yet again that these parties, objectively assessed, made very comprehensive separation adjustments as regards all perceived future entitlements of the two businesses to commission income. Ms Omacini's payment for her 25% shareholding interest in D & R Corp and its PCSS business was clearly assessed as one element of this process of division, separation, valuation of assets, and an end determination of sale prices for the sold shares of the existing shareholders, calculated as at 23 May 2007.
136 Clause 8 addresses a particular position of the listings of a sales representative, Mr Travis Lindstrom. It is the equivalent of cl 20 in the first agreement. The reference to Annexure B is equivalent to the reference to annexure G, concerning the same Mr Lindstrom, in the first agreement.
137 Clause 10 of this agreement deals with a distinct entitlement arising out of the PCSS business, towards the worth of the 25% share of Ms Omacini being disposed of to Mr Ryan. Annexure C, from a starting perspective of sales commissions likely to be received by D & R Corp as the operators of PCSS, can be seen to calculate, after deductions and allowances, for 30% corporate (income) tax and then ultimately derive an amount for the worth of Ms Omacini's quarter share, at $28,349. This amount has been worked out by an assessment of the sales commission that could be derived as corporate business income from various lots in the Forrestdale Industrial Park.
138 In contra-distinction to payment arrangements under the first agreement by cl 17 for Ms Omacini to receive the valued benefit of offsetting moneys upon scenarios for properties under Annexure F which had not settled, as against amounts otherwise payable to Mr Ryan derived from the PCRE trust account, now the position by cl 10 is linked to the Forrestdale Industrial Park and is different.
139 Clause 10 in exhibit A2 specifies that 'the money is to be paid at settlement of those sales' (referring to Annexure C). The differentiation of treatment as between the rival clauses, as contrasted, reinforces what is, objectively assessed, meticulous attention given to bringing to account the worth of the assets of the two businesses either past, current or future anticipated commission income entitlements or expectations, upon settlements of various properties - all in the context of working out purchase price nett amounts payable as acquisition prices of the shareholdings being sold and acquired in the two corporations operating the two continuing real estate businesses.
140 To contend, as the plaintiffs, in effect, do, that the parties to the SSA, objectively assessed, did not apply their minds to all aspects of settled, pending and possible future sales commissions for both businesses, as at the time of their separation in 2007, is simply untenable.
141 As regards settled (ie, paid and recouped) commissions of the PCSS business, cl 15 is explicit concerning the purchase price valuation implications for Ms Omacini's disposed of shareholder interest. It said:
15. When all adjustments have been made to the 23 May 2007 including commissions to agents, tax, superannuation, company tax, GST, annual leave, leave pay, The Port City Southern General Account Held with the ANZ Bank Fremantle account number 016307 492758394 Glenda Omacini will be paid out her 25% share of the bank account.
142 By further provisions in the second agreement, addressed by cl 17, Mr Ryan and Mr De Freitas agreed to cease to trade under the Port City Southern name or brand within four months of the settlement.
143 Clause 19 addresses the name Port City Southern remaining 'with Port City Pty Ltd and Port City Real Estate'. See also cl 20 as regards a required change of the corporate name Port City Southern Suburbs Pty Ltd, to De Freitas and Ryan.
144 Leasing agreements for the continuing PCSS business are addressed under cl 21 and cl 23, as are issues such as phone cabling in shop 41, office desks and even by cl 25 'the grey visitors' chairs' around the glass table - and the glass table in shop 41.
145 Exhibit A2 concludes under cl 26 and cl 27 in terms:
26. This agreement is conditional on Rod Ryan selling his interest in Port City Pty Ltd to Glenda Omacini, and Glenda Omacini selling her interest to Rod Ryan in Port City Southern. Rodney Douglas Ryan and Miguel De Freitas hereby agree to cease to use the Company and Business name Port City Southern within four months of signing this agreement.
27. Compliance with this agreement by De Freitas & Ryan will be full and final satisfaction of all and any claims Glenda Omacini has or may have from De Freitas Ryan and Port City Southern Pty Ltd.
Outcomes under the SSA
146 The share sale transactions under two agreements, seen as exhibits A1 and A2, were fully implemented and carried out in 2007. The purchase prices for the shares being sold were received. The respective sales and transfers of shares in the corporations, as contemplated, followed. The two real estate businesses operated by the two corporations continued. There was and is nothing left unperformed requiring the assistance of the court to perfect.
147 As mentioned earlier, the SSA agreements are no longer contended in the end to be unlawful, notwithstanding what the latter part of sub-issue 1(e) might otherwise suggest. Counsel for the plaintiffs made that clear at ts 183:
LEVY, MS: Yes. The share sale transfer agreement is that there is no question of illegality but there is also no transfer of listings.
KENNETH MARTIN J: So, hang on. There is no question of illegality - - -
LEVY, MS: On the plaintiffs' construction.
KENNETH MARTIN J: - - - of the sharesale agreement.
LEVY, MS: There's no - on the plaintiff's construction of the sharesale transfer agreement there is no - the plaintiff says there is no illegality at all.
148 Culmination of a close examination of the two documents of 15 June 2007 which make up the SSA brings a clear conclusion that there can be no serious issue as to the separation arrangements effected by the parties, as regards the two corporate real estate businesses, both comprehensively and explicitly addressing as between themselves all issues over sales commissions receivable by those businesses as business income. They did so in a context of bringing their assessments as to the worth of that business income to account, for the purpose of calculating purchase prices payable for the shares of Mr Ryan and Ms Omacini. A large number of separation factors as between Mr Ryan and Ms Omacini as vendor shareholders were factored into these valuation, pricing and separation calculations. Mr Ryan was departing the PCRE business he held a 50% interest in. Ms Omacini was departing the PCSS business in which she had only a 25% interest. They were selling their respective shareholdings to each other.
149 For the plaintiffs to suggest, as they do, that the corporations which operated the two businesses, namely PC Corp and D & R Corp, were not fully bound by and benefited under these separation arrangements of 2007, merely because the corporations were not named as parties to the SSA documents and did not formally execute them as corporate parties in accord with the Corporations Act 2001 (Cth) (in documents drawn up at the time by laymen without legal help) - is a proposition to be rejected as a commercial nonsense. So also is the plaintiffs' allied contention that because PC Corp happened to be the nominated entity upon various sales commission contracts (ie, exhibit A4) with vendors of properties, that corporation is now free to ignore what was settled as regards vendor commissions as business assets under the SSA in June 2007 - to allow PC Corp to pursue an independent claim against the defendants to claim 'commission' funds argued to have been received from vendors of properties without any entitlement to those funds. The entitlement to funds as between Ms Omacini, Mr Ryan, Mr De Freitas and the corporations PC Corp or D & R Corp was, as we have now seen, comprehensively resolved, once and for all time, under the provisions of the SSA.
150 Above and beyond those somewhat self-evident observations, the defendants tendered evidence which pointed out examples where properties found within schedule SSA_H(1) and claimed now to be the subject of commission claims against D & R Corp - in somewhat astonishing circumstances of funds initially received into the bank accounts operated by PC Corp. Examination of exhibits K and M as tendered by the defendants on the preliminary issue shows as regards item 6 of schedule SSA_H(1) that a property, 87 Dixon Road, Rockingham (which forms the subject of a commission claim under the schedule in that amount of $30,000 under item 6 of the schedule) within an asserted sale date of 1 August 2006, is by reference to the first defendant's bank statement with the ANZ Bank (see exhibit M) - the subject of a deposit into the first defendant's bank account on 14 November 2006. The source of the $30,000, as per the bank statement, is clearly identified as 'transfer from Port City Real E 87 Dixon Road'.
151 Likewise, in respect of property 42 on schedule SSA_H(1) for 16 Spinnaker Way, Yangebup, with an asserted sale date of 25 September 2006, and an underlying gross commission claim of $16,500 (exhibit M). The first defendant's bank statements show the amount of $16,500 being paid into its account also on 14 November 2006 from the first plaintiff. The source of those funds is clearly recorded on the bank statement as 'transfer from Port City Real E 16 Spinnaker'.
152 On the face of it, therefore, those two commission amounts, as now claimed, would appear to have been paid by the vendor in question, to the first plaintiff, PC Corp. Hence, sales commission appears to have been received in the first instance for those two properties by PC Corp. Then, an amount of equivalent commission funds is seen to be transferred to D & R Corp. That position presents as wholly in accord with the separation and apportionment of assets arrangements implemented between the parties by their SSA.
153 Given those circumstances, to suggest, by reason of the real properties once being subject of a vendor sales commission arrangement with PC Corp, that PC Corp thereby holds an entitlement to sales commission for all time, in the face of the SSA, reflects an inability to confront reality and a stance of self delusion.
The 2006 oral agreement assumed for the purpose of issue 1(d)
154 In this context it is necessary to set out the terms of an oral agreement of 2006 pleaded under par 22 of the defendants' defence (and denied by the plaintiffs).
[22] The defendants say that in or about June 2006, [Ms Omacini], [Mr Ryan] and Mr De Freitas agreed to an oral agreement ('the PCSS - De Freitas Agreement') on the following terms:
(a) the parties would form a new real estate agency to be known as Port City Southern Suburbs ('PCSS') in which Mr De Freitas would have a 50% interest, Ms Omacini a 25% interest and the second defendant a 25% interest;
(b) PCSS would be incorporated and licensed as a real estate agency as soon as possible, but would not operate a trust account until the expiry of the auditing year ending 31 December 2006;
(c) during the transitional period, being as from the date of the PCSS - De Freitas Agreement until such time as PCSS could have listings in its own name ('Transitional Period'), all listings would be under the name of [PC Corp] and all deposits would be held in the Trust Account of [PC Corp], subject to the following conjunction arrangement ('Conjunction Arrangement')
(i) if the listing was sourced by PCSS or Mr De Freitas, and the property was sold by PCSS or Mr De Freitas, then [PC Corp] would remit 100% of the commission to PCSS;
(ii) if the listing was sourced by PCSS or Mr De Freitas, and the property was sold by [PC Corp], then [PC Corp] would remit 60% of the gross commission to PCSS;
(iii) if the listing was sourced by [PC Corp], and the property was sold by PCSS or Mr De Freitas, [PC Corp] would remit 40% of the gross commission to PCSS.
(d) during the Transitional Period, Mr De Freitas was authorised to execute Sale Authorities on behalf of [PC Corp];
(e) following the Transitional Period, all listings that had been sourced by PCSS or Mr De Freitas under paragraphs (c)(i) and (c)(ii) above would be transferred to PCSS, and any deposits paid in relation to such listings would also be transferred to the PCSS trust account;
(f) that the Conjunction Arrangement would continue to apply until the parties agreed otherwise.
156 Given that the existence of any such oral agreement is heavily disputed and the SSA is not, the utility of wasting much time upon exploring its hypothetical implications presents as minimal.
157 But even if there was to be found an agreement perfected in such terms dealing with a transitional period and conjunction arrangements - it is clear that the new real estate agency business of PCSS was, indeed, then established. The consequences of par 22, even if such an agreement were proved in 2006, appear to go nowhere.
158 It is the SSA of 15 June 2007 which overtakes any such oral agreement of 2006, even if proved. It is the SSA of 2007, not the contended oral agreement of 2006, which is overwhelmingly significant to a resolution of the parties' positions.
Outcomes
159 As mentioned, issue 1 read alone without its ensuing sub-issues is essentially meaningless. Therefore, it is necessary to address the sub-issues.
Sub-issue 1(a) and 1(b)
(a) whether the commission arrangements for the properties identified in Sch SSA_H(1), which are mentioned in the Share Sales Agreement ('SSA'), are governed by the terms of the SSA.
(b) whether the properties identified in Sch SSA_H(1), which are not mentioned in the SSA, are governed by the terms of the SSA.
160 As regards sub-issues (a) and (b) to issue 1, the answer to both is in the affirmative. But it ought now be apparent from the analysis of the SSA that, on my assessment, its terms both bind and benefit PC Corp and D & R Corp, as well. Although not named as parties to the SSA as such, the shareholders, objectively assessed, proceeded on the unmistakable basis that those corporations would be bound by and benefit from its covenants.
161 Consequently, late arguments by the plaintiffs' counsel at the hearing to the effect that PC Corp is not bound by the terms of the SSA, must be rejected.
162 Added to that consideration is the fact that on my assessment of the two documents comprising the SSA of 15 June 2007, the agreement deals comprehensively with commission entitlements as between all parties including the two corporations - addressing all future scenarios in relation to vendor sales commissions be they commission funds actually received, anticipated but not yet received, or howsoever - as between the two real estate businesses and the underlying principals.
163 The SSA delivered a conclusive, comprehensive and final separation of the two real estate businesses, once and for all. The contrary suggestion is commercially untenable. Consequently, as regards sub-issues 1(a) and 1(b) - both must be answered in the affirmative, as between the parties to this litigation.
164 In terms of the obligations of a particular vendor who has paid sales commission, to either the first plaintiff or to the first defendant, that issue is irrelevant in the context of the present litigation.
Sub-issue 1(d)
(d) on the assumption that an oral agreement did exist between the parties on the basis as contended for in paragraph 22 of the defendants' Defence and did relevantly apply to the commission arrangements for the properties identified in SSA_H1, whether that oral agreement is nevertheless rendered unenforceable by provisions contained in the Real Estate and Business Agents Act 1978 (WA) (REBA Act);
165 Given the clear subsequent existence and enforceability of the SSA approximately 12 months after any such oral agreement (even if proved) with the SSA being legally certain, enforceable and perfected in its implementation, the operative effect of arrangements under such a 2006 oral agreement would have been totally subsumed by and overtaken by the SSA. At best, such an oral agreement would provide context for what followed as the SSA in mid-2007. Accordingly, it is unnecessary to explore the hypothetical question posed under this issue further.
Sub-issue 1(e)
(e) If the SSA did relevantly apply to the commission arrangements for the properties identified in Sch SSA_H(1), whether the SSA is nevertheless rendered unenforceable by provisions contained in the REBA Act.
166 The SSA is not rendered unenforceable by provisions of the REBA Act, as was ultimately accepted (see ts 183 referred to earlier).
167 As to sub-issue 1(e), therefore, the only live component of the question (it being accepted that the SSA was not impugnable for statutory illegality) is whether or not it did relevantly apply to commission arrangements for properties identified in schedule SSA_H(1). The answer to that component of the question is plainly yes - as between all the parties to this litigation.
Issue 1: plenary
Issue 1, whether it is the first named plaintiff [PC Corp] or the first named defendant [D & R Corp] that was entitled to receive the commission arising out of the lease or sale of the listings contained in the schedule attached and marked SSA_H(1).
168 As I have said, there was no utility in addressing plenary issue 1, divorced from the context of its residual sub-issues, which I have now addressed. Having addressed the sub-issues in the context of the pleadings in the underlying litigation, it can be seen that as formulated the plenary question is misconceived.
Consequences for the continuation of the action
169 A number of conclusions somewhat painfully emerge from the foregoing analysis. Briefly summarised, they are as follows. First, the plaintiffs' cause of action seeking $1,052,149 in sales commission moneys against D & R Corp (see par 19 of the statement of claim) can only be as an action for damages for breach of the SSA. A claim on that basis is wholly untenable. There is a failure to disclose any reasonably arguable cause of action.
170 Second, the deficiencies of a breach of contract action seem to have led counsel for the plaintiff at one point to submit that the plea under par 20 of the statement of claim as regards the first plaintiff was actually a typographical error (see ts 232). I reject that assertion as untenable. She then effectively sought to contend that there was a simple solution by adding a plea to the effect that the first defendant holds the moneys the subject of par 20(f) on a constructive trust for the first plaintiff (see ts 234). Hence, the whole nature of the claim to those funds would alter to become an equitable claim. This, she attempted to contend, was a 'missing plea'. There was a late attempt to amend to contend for a constructive trust. In the midst of the hearing of already obscure enough preliminary issues, I declined that application at the time. It would have constituted a significant shifting of ground by the plaintiffs, in the context of the parties' arguments at the time. That was so, particularly in light of the way the case was articulated by reference to being a contract claim for damages for a breach of the SSA.
171 Any attempt to amend to contend for a cause of action predicated upon the existence of a constructive trust associated with sales commissions, also looks to me in 2015 to face very formidable limitation of action obstacles - by reference to provisions of the Limitation Act2005 (WA), namelys 13 and s 27.
Implications
172 I have now answered the questions posed under each sub-issue. The defendants should formally extract orders in those terms within 14 days of the publication of these reasons.
173 As to the costs of this exercise, they must be borne by the plaintiffs. They have substantially failed in terms of positions advocated upon each question. The defendants should receive their taxed costs of this determination.
174 As to the further direction of this matter, there should now be a conferral between the parties before a subsequent directions hearing to be fixed at a convenient future date.
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