Real Estate and Business Agents Supervisory Board and Morgan Realty Pty Ltd and Ors
[2010] WASAT 161
•4 NOVEMBER 2010
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: VOCATIONAL REGULATION
ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)
CITATION: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD and MORGAN REALTY PTY LTD & ORS [2010] WASAT 161
MEMBER: JUSTICE J A CHANEY (PRESIDENT)
MR G POTTER (SENIOR SESSIONAL MEMBER)
MS B HOLLAND (SESSIONAL MEMBER)
HEARD: 25 MAY 2010
26 MAY 2010
DELIVERED : 4 NOVEMBER 2010
FILE NO/S: VR 153 of 2009
BETWEEN: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD
Applicant
AND
MORGAN REALTY PTY LTD
First RespondentPHILLIP DAVIES-MORGAN
Second RespondentSALVATORE MESSINA
Third Respondent
Catchwords:
Real Estate agents - Whether authority to act may be comprised in more than one document - Whether authority to act is valid if executed after services to which it relates have been provided - Whether commission can be received prior to settlement of transaction - Whether contracts authorised early payment of commission - Whether person in bona fide control of business property supervised agency business
Legislation:
Interpretation Act 1984 (WA), s 10, s 19
Land Agents Act 1922 (WA), s 12
Real Estate and Business Agents Act 1978 (WA), s 4(2), s 60, s 61, s 61(4), s 61(5), s 103, s 103(2)(d), s 103(4)(d)
Result:
Allegations proved and penalties imposed
Category: B
Representation:
Counsel:
Applicant: Mr PN Bevilacqua
First Respondent : Mr MF Dwyer
Second Respondent : MR MF Dwyer
Third Respondent : Mr MF Dwyer
Solicitors:
Applicant: Ms J King
First Respondent : Mendelawitz Morton Commercial Lawyers
Second Respondent : Mendelawitz Morton Commercial Lawyers
Third Respondent : Mendelawitz Morton Commercial Lawyers
Case(s) referred to in decision(s):
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] 187 CLR 384
de Pedro v Young (1940) XLII WAR 79
Grljusich v Andrews [2003] WASCA 206
Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] 218 CLR 273
Newcastle City Council v GIO General Ltd [1997] 191 CLR 85
Settlement Agents Supervisory Board and Poulton [2010] WASAT 65
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The Real Estate and Business Agents Supervisory Board brought allegations of various breaches of the Real Estate and Business Agents Act 1978 (WA) against Morgan Realty Pty Ltd, Mr Phillip DaviesMorgan, a representative of that company, a Mr Salvatore Messina, an agent and the person in bona fide control of Morgan Realty Pty Ltd's business.
The allegations concerned the payment to Morgan Realty Pty Ltd of commission prior to settlement of the relevant transactions. It was also alleged that the commissions were paid without there being a valid authority to act complying with the requirements of the Real Estate and Business Agents Act 1978 (WA) Act.
The Tribunal was called upon to determine whether the statutory requirement that commissions not be paid prior to settlement was subject to any agreement between vendor and agent to the contrary. It was also required to consider whether an authority to act could be constituted by more than one document, and whether it was possible to recover commission when the authority to act was executed after some or all of the services had already been provided. The issue also arose as to whether a commission specified as a single lump sum in relation to a number of transactions complied with the requirements of the Real Estate and Business Agents Act 1978 (WA).
The Tribunal found all allegations were established and imposed penalties on each of the respondents.
Introduction
Morgan Realty Pty Ltd holds a real estate and business agent's licence granted pursuant to the Real Estate and Business Agents Act 1978 (WA) (REBA Act). It conducts business under the name Morgan Realty.
Mr Salvatore Messina holds a licence as a real estate and business agent under the REBA Act. He is the person in bona fide control, and a director of, Morgan Realty.
Mr Phillip DaviesMorgan holds a licence as a real estate and business sales representative, and is the director of Morgan Realty. Mr Messina is Mr DaviesMorgan's fatherinlaw.
After operating his own real estate agency under the name 'S Messina Estate Agency' for 15 years, Mr Messina operated a business known as Centrewest Estate Agency for approximately three years at Joondanna. He employed a real estate representative, Mr Robert D'Onofrio. For a period in 2007, Mr DaviesMorgan joined Mr Messina at Centrewest Estate Agency. During that time, Mr DaviesMorgan met Mr Ken Fraser, a property developer.
Subsequently, in September 2007, Mr Messina closed down the Centrewest Estate Agency, and the business of Morgan Realty was formed.
According to Mr DaviesMorgan, the business of Morgan Realty was solely to market and sell proposed lots in land development projects undertaken by Mr Fraser or his related entities. Mr Fraser, and his related companies, were the only clients of Morgan Realty. Morgan Realty and Mr Fraser occupied adjoining offices in a city building at Level 1, 533 Hay Street, Perth.
It is in the context of actions associated with Mr Fraser's development projects that the allegations brought against each of Morgan Realty, Mr DaviesMorgan and Mr Messina arise. The details of the relevant transactions will be outlined more fully below.
In these proceedings, the Real Estate and Business Agents Supervisory Board (the Board) makes a number of allegations against each of the three respondents.
As against Morgan Realty, the Board alleges that there is a proper cause for disciplinary action on the basis that it acted contrary to s 61(4) and s 61(5) of the REBA Act by receiving valuable consideration for services rendered in its capacity as agent in respect of a transaction prior to settlement of that transaction. It also alleges that contrary to s 60(1) and s 60(3) of the REBA Act, Morgan Realty received a commission, reward or other valuable consideration for a service when it did not have a valid appointment to act as agent for the seller, Sabrina Developments at Baldivis Pty Ltd (Sabrina Developments), in respect of certain properties known as 'proposed Lot 41 of Lot 515 Sabrina Road, Baldivis'. On the basis of those transactions, the Board alleges that Morgan Realty is unfit to hold a real estate and business agent's licence.
In relation to Mr DaviesMorgan, the Board alleges that he failed to act fairly and honestly, contrary to the requirements of s 5(1) of the Code of Conduct for Agents and Sales Representatives (Code of Conduct) in that he directed the early payment of commission to be received by Morgan Realty and paid directly to him when he was aware that that direction was contrary to the REBA Act. That early payment of commission was also alleged by the Board to be contrary to the terms of certain contracts for the sale of proposed lots in Sabrina Road, Baldivis, and that Mr DaviesMorgan is, for those reasons, unfit to hold a certificate of registration as a real estate representative.
In relation to Mr Messina, the Board alleges that he failed to properly supervise the business of Morgan Realty and take reasonable steps to ensure that Morgan Realty and Mr DaviesMorgan complied with the provisions of the REBA Act and the Code of Conduct in respect to the matters which form the subject of the complaints against each of Morgan Realty and Mr DaviesMorgan.
The Sabrina Road project
A company known as Frasers - The Project Managers Pty Ltd (Project Managers) was incorporated on 25 May 2005. Mr Fraser's wife, Mrs Morag Fraser was the sole director and company secretary of Project Managers. Mr Fraser was the general manager.
In March 2007, the company called The Project at Baldivis Pty Ltd (Project at Baldivis) was registered. Mrs Fraser was sole director. Up until September 2008, the registered principal place of business of Project at Baldivis was Level 1, 533 Hay Street, Perth.
On 23 May 2007, Sabrina Developments was incorporated. Mrs Fraser was the sole director and shareholder of Sabina Developments.
On 29 August 2007, Project at Baldivis became the registered proprietor of land at 515 Sabrina Road, Baldivis.
On 15 November 2007, Sabrina Developments contracted to purchase from Project at Baldivis land described as 'proposed Lot 41 of Lot 515 of Sabrina Road, Baldivis' for an amount of $1 million. The contract contained a special condition which read:
The purchaser is aware of the overall sub-division of Lot 515 and this offer is subject to that sub-division being approved and Lot 41 being created.
Mr Fraser appears to have signed that contract on behalf of Sabrina Developments. Mrs Fraser signed on behalf of Project at Baldivis.
Mr and Mrs Fraser intended that they would subdivide Lot 515 so as to create Lot 41. It is not clear from the materials provided to the Tribunal how many other lots were to be created by that subdivision, or what proportion of Lot 515 was within the proposed Lot 41. It was intended then to subdivide proposed Lot 41 into eight residential lots, and to sell those lots (Sabrina Road project).
Before either subdivision could proceed, a Town Planning Scheme amendment was required to rezone Lot 515. It appears that, in early 2007, discussions were under way between Mr Fraser on behalf of Project at Baldivis or Project Managers, and the Western Australian Planning Commission and the local government about the proposed scheme amendment, and a scheme amendment report had been prepared. The evidence before the Tribunal does not enable us to make any assessment of precisely what stage the amendment process had reached, but it is apparent that the proposed amendment was not well advanced by the first half of 2007, and no amendment has in fact proceeded, at least so far as Lot 515 is concerned.
Sabrina Road project
Morgan Realty was engaged to sell the lots to be created by the proposed subdivision of the proposed Lot 41.
On April and May 2007, Mr DaviesMorgan approached a number of potential purchasers of lots in the Sabrina Road project and obtained a payment described as an 'expression of interest fee'. A document, on Project Managers' letterhead, explained the expression of interest fee and the Sabrina Road development. It described the site, and attached a preliminary sketch showing eight available lots, two of which were to be duplex lots. The purchase price of the lots was $145,000 for the six single lots and $290,000 for the two duplex lots. The arrangements for funding and an explanation of the expression of interest payment was then provided in the following terms:
Funding
A finance package is being created for investors to assist them with the purchase price.
Each investor will be required to pay an initial 'expression of interest fee' of $25,000 per lot upon signing this document.
They will then be required to pay an amount of approx. $40,000 for the funding package, still to be confirmed. These funds must be provided from the investors own means.
This $40,000 amount will be due approx. Dec 2007 at which time Lot 41 will be created. Settlement for the overall lot 41 will then take place and development of the lot into the subdivided lots will commence.
The individual lots should be available for settlement approx. Mar 2009.
Expression of Interest Outline
It is the intention of FTPM to acquire Expressions Of Interest (EOI) for the 10 sites. Investors are required to sign the attached expressions of interest with confirmation of their decision to purchase on or before 30th May 2007.
To secure a lot, $25,000 will be required upon signing this form, payable to Sabrina Developments Pty Ltd.
This $25,000 EOI Fee is included in the $145,000 price of each site.
Finance will be made available to approved investors and this process will be dealt with on an individual basis.
After subdivision, land settlement and the grant of Title, investors will be free to sell, build on, or hold their block/lot. This is anticipated to be March 2009 approx.
FTPM will endeavour to assist those investors wishing to progress to the 'House package' with another finance package that will not require any further cash input from the investor. This will depend on the Lenders due diligence of the equity in the total investment at this time (March 2009).
It has been our experience that the majority of investors are able to proceed to the building stage (with the Bank or Lenders support) and thus significantly improve their profit on the total investment with minimal outlay.
If the investor is unable to arrange finance to build a house at this stage the land can be sold with the full assistance of FTPM.
Please take independent financial advice on your investment in this project.
Project Management Fee Breakdown
To clarify the FTPM's project management role, we itemise the areas of input as follows:
1. Sourcing and securing the site.
2. Council and WAPC zoning approvals.
3. Initial concept design sketches further to the above enquiries.
4. Preliminary feasibilities (including financing, real estate values etc).
5. Sourcing investors and securing funding for the site.
6. Design development drawings.
7. Preliminary expression of interest.
8. Administration of contracts (including legal input).
9. Finalise drawings for surveyor to commence subdivision and
building fees.
10. Supervise subdivision amalgamation work.
11. Liaise with authorities as required and payment of associated fees.
12. Finalising title issues and individual settlements.
As stated above, this work only covers the subdivision process and FTPM will charge a separate project management fee for the building stage.
Feasibility
For discussion purposes only, with no guarantee.
Cost of land freehold: $145,000
Build house cost: $160,000
Includes; Render walls
Tile roof
Garage (including auto door)
Earthworks
Paved Driveways and Paving (including Crossover)
Total (house & land) $305,000
Sales Price $559,000
Note: Dec 2009
Overall Potential Profit $254,000
Please Note: The above figures are provided in good faith and are
based on our experience, but cannot be guaranteed.
The document concluded with a section in which the proposed investor was required to acknowledge that they understood 'the obligation to proceed with the purchase of the land'. The expression of interest fee was specified as $25,000 due by 3 May 2007, with 'Land Settlement $120,000' due by 'approx Dec 2007'.
A document entitled 'Exclusive Listing Document' was signed by Mr Morgan and Mr Fraser on 15 November 2007 on behalf of Morgan Realty and Sabrina Developments respectively. The document reads as follows:
This document, signed on the 15th DAY of November 2007
Between
Morgan Realty Pty Ltd (the agency)
And
Sabrina Developments Pty Ltd (the vendor)
Assigns an exclusive listing on the properties known as
Proposed lot 41 of lot 515 Sabrina Rd, Baldivis (The Property)
And proposed lots until all are sold.
The vendor authorises the agency and its agents, to sell the proposed lots at the agreed price of $146,000 each, plus development cost (incl GST).
The price includes a $25,000 expression of interest fee, previously paid to the vendor or its agents, and $40,000 to be paid via the agents trust account.
The balance to be paid at an agreed date between the vendor and the buyer.
The commission will be paid in advance buy [sic] the vendor.
We note in passing that, as will be explained below, by the time the exclusive listing document was executed, all eight lots in the Sabrina Road project were the subject of signed expressions of interest which included a commitment to purchase the lot concerned.
After the signing of the exclusive listing document, Mr DaviesMorgan set about having the investors who had paid an expression of interest fee execute contracts for the purchase of their respective proposed lots.
The subdivision of Lot 515 to create Lot 41 did not eventuate. Consequently the further subdivisions of lots for the Sabrina Road development also never proceeded. The reasons for that were not fully explored in the evidence before the Tribunal, although there was evidence that problems were encountered in relation to connection of sewage which made it likely that submission of Lot 515 could not proceed, at least for some years.
Contract for sale of proposed Lot 7
As mentioned above, Mr Robert D'Onofrio was at one point an employee of Mr Messina at Centrewest Estate Agency. He was there when Mr DaviesMorgan joined that business. He got on well with Mr DaviesMorgan, and he, Mr DaviesMorgan, and Mr D'Onofrio's soninlaw, Mr David Moore, began looking for investment properties together. In early April 2007, they invested in one of Mr Fraser's projects in Maddington. Later in April 2007, Mr DaviesMorgan approached Mr D'Onofrio and Mr Moore, in relation to the Sabrina Road development. He proposed that they purchase what he described as 'part Lot 7 of proposed Lot 41 of Lot 515 Sabrina Road, Baldivis'. It was a 950 square metre duplex block.
Mr D'Onofrio said:
When Phil came to us to discuss the offer he was so confident, it sounded like he had done all the homework, that the project was a sure winner and that he was doing us a favour by giving us the opportunity.
On 1 May 2007, Mr D'Onofrio signed an 'expression of interest'. Although provision was made in the form produced by Mr D'Onofrio to insert the particular lot number, no number appears on the form signed by Mr D'Onofrio. The form recites an expression of interest fee of $25,000 due by 30 May 2007, with the 'land settlement' of $120,000 due in December 2007, although those figures relate to a single lot rather than the duplex lot that Mr D'Onofrio and Mr Moore intended to purchase.
Mr Moore, in his witness statement, attests that he also signed an expression of interest form on 1 May 2007, although that document was not produced at the hearing. Nevertheless, on 1 May 2007, Mr Moore gave a cheque to Mr D'Onofrio for $33,340. Mr D'Onofrio wrote a cheque on behalf of a company which he controlled, Gemworth Pty Ltd for $16,666, and both of the cheques totalling $50,000 were given to Mr DaviesMorgan. Mr D'Onofrio said that it was his understanding that the money paid by way of an expression of interest fee was to be used for the development of the land.
On 28 November 2007, Gemworth Pty Ltd, and a company associated with Mr Moore, Bacala Investments Pty Ltd signed an offer and acceptance for land known as 'Part Lot 7 of proposed Lot 41 of Lot 515 Sabrina Road, Baldivis'.
Attached as Annexure B to the offer and acceptance is a site plan said to be 'illustration only subject to change' which shows eight lots fronting Sabrina Road. The lot shown as Lot 7 as an area of 950 square metres and the plan is initialled by Mr D'Onofrio, Mr Moore, and Mr Fraser. The price of Part Lot 7 was $290,000, with a deposit of $130,000 'of which $50,000 is paid herewith and $80,000 shall be paid within five days of acceptance to be held by Morgan Realty Pty Ltd Trust Account'. The settlement date of the proposed transaction was specified as January 2009. Annexure A to the offer and acceptance contained special conditions (Annexure A conditions) which read as follows:
1 This offer is subject to and conditional upon a new title being issued in respect of the Property and the Buyer acquiring the property by 31st March 2009. If a new title has not been issued and the buyer had not acquired the property by this date, then this Contract shall be at an end and the following shall apply:
(a)the Seller will immediately sell the property on the open market at a fair market price;
(b)from the proceeds of the sale a deduction shall be made for project management fees, subdivision and development costs and the Seller's reasonable expenses incurred in selling the land;
(c)the balance proceeds of sale will be divided equally between the 8 Buyers and any lots retained by the seller
(d)Neither party shall have any further action or claim against the other in respect of this Contract.
2. In addition to the relevant matters referred to in the General Conditions for the Sale of Land, the property is sold subject to:
(a)All reservations (if any), easements and restrictive covenants that are registered as an encumbrance on the certificate of title to the property;
and
(b)Any other easement, encroachment, restriction, covenant, leases, licenses, agreements or requirement of any authority.
3. The Buyer agrees that the deposit monies paid under this contract are released to the seller and may be utilised by the Seller with respect to the acquisition and development of the Land prior to a new title being issued for the Property and settlement of this contract.
4. This Agreement does not create a relationship between the parties of Principal and Agent, partnership or Joint Venture.
5. Clause 13 of the Joint Form General Conditions for the Sale of Land shall not apply to this contract. The Seller will use its best endeavours to have new certificates of title issued for each lot on the site plan as soon as reasonably possible.
6. For the purposes of sections 7 and 14 of the Sale of Land Act 1970 the Buyer is aware that the Seller is intending to obtain financial accommodation ('Financial Accommodation') from a Lender for the purchase and development of the Land situated at Lot 515 Sabrina Road, Baldivis being land comprised in Certificate of Title 2132 Folio 860 (the 'Land').
7. The Buyer agrees on request by the Seller to promptly:
(a)enter into a Deed of Consent and Subordination with the Lender on terms prescribed by the lender and agrees to the Lender having a first registered mortgage over the whole of the Land and also a charge over all the assets of the Seller as security for the Financial Accommodation, notwithstanding Special Condition 1 above.
8. The Seller may make any changes to the proposed site plan and to the property as may be required by any competent authority or otherwise to procure the registration of the Certificate of Title for each lot. Subject to such modification not materially prejudicing or otherwise affecting the size or value of the Property, the Buyer shall raise no objection, requisition or claim for compensation in respect of any such modification of the proposed site plan or the Property.
9. The Buyer must accept the Property in the condition it is in at the settlement date.
10. Subject to the provisions of this contract, Frasers the Project Managers will carry out and complete the project management, and the Seller will carry out and complete the subdivision and project development work:
(a)in a proper and workmanlike manner;
(b)to the satisfaction of any authority;
(c)in a reasonably expeditious manner; and
(d)according to such standards as are accepted as satisfactory in the building industry.
11. (a) Prior to Landgate issuing a separate certificate of title in respect of the Property the Buyer agrees to not lodge any caveat against the title to the Land or any part of the Land to protect the Buyer's interest under this contract.
(b) If the Buyer lodges a caveat to protect their interest as Buyer under this Contract and the Seller requests in writing ('the Notice in Writing') for the caveat to be removed, the Buyer must at the Buyer's cost prepare and execute a registrable withdrawal of caveat form and deliver the same to the Seller within 7 days of the date of the Notice In Writing together with the required Landgate fee payable for the Withdrawal of caveat.
Each of Mr D'Onofrio and Mr Moore then provided a cheque for $40,000 to Morgan Realty, and it was paid into Morgan Realty's Trust Account.
Mr D'Onofrio said that he had briefly read the annexure to the offer and acceptance, and that Mr DaviesMorgan did not explain the annexure to him. In particular, Mr D'Onofrio said that Mr DaviesMorgan did not explain to him that money would be taken out of the trust account and used for any purpose.
Mr Moore also said that he understood that the deposit paid by him would remain in Morgan Realty's Trust Account, and that Mr DaviesMorgan did not say anything to the contrary. He said that Mr DaviesMorgan did not explain in any detail the terms contained in the Annexure A conditions.
Mr DaviesMorgan explained that the expression of interest document was designed to enable a purchaser to secure a particular lot in a subdivision. He said that the expression of interest fee was always paid by the purchaser straight to the relevant Fraser Company, in this case Sabrina Road developments. He said that the expression of interest was never paid into the Morgan Realty Trust Account. That is, of course, inconsistent with the specification on the offer and acceptance which was eventually signed, where the initial deposit of $50,000 was represented by the amount already paid by way of expression of interest fee, but the whole deposit was said to be held in the Morgan Realty Trust Account. Mr DaviesMorgan said that he did not draft any of the contracts, but rather that they were drawn up and prepared at Mr Fraser's office. Mr Fraser's evidence was that Annexure A had been prepared by a solicitor in relation to an earlier project, and the contract documents for the Sabrina Road developments were prepared by Mr DaviesMorgan. Nothing in particular turns upon who prepared the documents, but we are satisfied that the inclusion of the special conditions in Annexure A was a matter of which both Mr DaviesMorgan and Mr Fraser were fully aware.
Mr Fraser was asked about the purpose of including cl 3 of the special conditions which provided for release of deposit monies to the seller and those monies 'may be utilised by the Seller with respect to the acquisition and development of the Land prior to a new title being issued for the Property and settlement of this contract'. Mr Fraser said that 'we were short of funds from the initial purchase of the overall block and therefore there was going to be a shortfall of funds to develop the block of land'. He was then asked whether the short fall of funds related to development of the eight lots to be subdivided from proposed Lot 41. He responded 'it was also for the block next door but effectively we would be producing all of those blocks of land at the same time'. By the 'block next door', Mr Fraser was referring to 'the balance of Lot 515'.
After signing the offer and acceptance and paying the deposit in late 2007, Mr D'Onofrio and Mr Moore heard nothing more about the development until towards the end of 2008, when Mr DaviesMorgan told Mr D'Onofrio that it was 'getting hard to complete the development' and that it was likely that the whole block would be sold. At the date of the hearing, Mr D'Onofrio and Mr Moore's understanding was that the project was not proceeding, and they had not received any return of any of the money paid by them.
Contract for sale of proposed Lot 3
On 28 November 2007, Saul Frank as trustee of the Frank Family Trust entered into an offer and acceptance for property described as 'part Lot 3 of proposed Lot 41 of Lot 515 Sabrina Road Baldivis with an area of approximately 464 square metres for a price of $145,000.' The offer and acceptance attached the Annexure A conditions. Provision was made for a deposit of $65,000 of which $25,000 was said to be 'paid herewith', and the balance was payable by instalments of $20,000 within five days of acceptance, and by a second instalment on 24 December 2007.
This transaction was not the subject of oral evidence in the Tribunal, but the statement of agreed facts suggest that only the first instalment of $20,000 was paid on 28 November 2007. It is assumed that the initial $25,000 had already been paid by way of an expression of interest payment, but nothing turns on that fact.
Contract for sale of proposed Lot 2
Mr Garry Ameduri and Mrs Gina Ameduri became acquainted with Mr DaviesMorgan through their respective childrens' school. Through their social contact, they heard from Mr DaviesMorgan about investment opportunities.
On 25 April 2007, Mr Ameduri received a text message on his mobile phone from Mr DaviesMorgan to the effect that a block was available in Baldivis. Mr and Mrs Ameduri subsequently met with Mr DaviesMorgan and were shown an expression of interest form. Mr Ameduri initialled an expression of interest, and they paid a $25,000 payment. The receipt for that payment dated 1 May 2007 was then issued on Project Managers' letterhead. They were told that they would be required to pay a further deposit of $40,000 at a later date.
In November 2007, Mr DaviesMorgan again contacted Mr Ameduri and arranged to sign a contract of offer and acceptance for the property. On 29 November 2007, they completed an offer and acceptance containing the Annexure A conditions. The purchaser was designated as the G & G Ameduri Trust and was for 'part Lot 2 of proposed Lot 41 of Lot 515 Sabrina Road, Baldivis with an area of approximately 463 square metres'. The deposit to be paid was $65,000, which included the expression of interest fee of $25,000. The deposit of $40,000 was paid on 5 December 2007 and deposited into the Morgan Realty Trust Account.
Mr and Mrs Ameduri said that Mr DaviesMorgan did not go into any detail as to the contents of the Annexure A conditions, but merely told them that they should initial each page. In cross-examination both confirmed that Mr DaviesMorgan did not explain the terms of the contract to them.
In early 2008, Mr Ameduri attended a meeting, at which Mr DaviesMorgan was present. At that meeting, attendees were told that there were going to be delays with having the sewage put in, and there was discussion of selling the land.
Mr Ameduri later heard that Mr Fraser's business was closed down and was being investigated by the Australian Securities and Investments Commission. Subsequent discussions were held with Mr Davies-Morgan about recouping the funds invested in the Sabrina Road project, but those discussions were unfruitful and the Armeduris have received nothing for their investment.
Contract for sale of proposed Lot 5 and Lot 6
Mr Salvatore Manera and Mrs Judith Manera also had children at the school attended by Mr DaviesMorgan's children. The Maneras had become friendly with Mr DaviesMorgan by reason of that connection.
The Maneras were also friendly with Mr Michele Martino and Mrs Maria Martino.
In early 2007, Mr Manera received a text message on his mobile phone from Mr DaviesMorgan which said words to the effect of 'cheap blocks in Baldivis'. Subsequently Mr DaviesMorgan delivered an expression of interest document to the Manera's home and had a discussion with the Maneras about the Sabrina Road development. Mr DaviesMorgan showed them the figures contained in the expression of interest form which showed the potential earnings when the development was complete. Mr Manera said that he 'still thought Phil was just an investor who was doing us a favour'.
The Maneras then organised a meeting with Mr and Mrs Martino with whom they had previously discussed the possibility of a joint investment. According to Mr and Mrs Martino, Mr DaviesMorgan attended that meeting and showed them the expression of interest documents. A decision was taken to invest jointly in two lots, Lot 5 and Lot 6 in the Sabrina Road development. At the meeting at the Manera's house, Mrs Manera gave Mr DaviesMorgan a cheque for $50,000 being the expression of interest fee for both the Maneras and the Martinos. The Martinos subsequently reimbursed the $25,000 paid on their behalf by the Maneras.
On 12 November 2007, Mr DaviesMorgan wrote on behalf of Morgan Realty, to the Maneras inviting them to 'attend a meeting for a presentation of the offer and acceptance contract in regard to your purchase of the above mentioned lot'. The letter also advised that a 'progress payment of $40,000 as per contract will be due within 7 days of this meeting'. The meeting was set for 20 November 2007.
It is not clear from the evidence whether Mr Manera attended the meeting, but nothing turns on that fact.
On 27 November 2007, Mr Manera wrote a cheque for $40,000 and gave it to Mr DaviesMorgan, who had called at his home to collect it. A receipt was issued by Morgan Realty.
On the same day, Mr Martino wrote a cheque for $40,000 payable to Morgan Realty Trust Account by way of a deposit on a block the Sabrina Road development. According to Mr and Mrs Martino, that cheque was handed to Mr DaviesMorgan at a seminar conducted by Project Managers where they were promoting other land subdivisions. A Morgan Realty receipt dated 27 November 2007 was issued.
On 4 December 2007, the Martinos went to the Manera's house where they met with Mr DaviesMorgan. He presented them with offer and acceptance documents for each of 'part Lot 5' and 'part Lot 6' of proposed Lot 41 of Lot 515 Sabrina Road Baldivis. The offer and acceptances in respect of each lot were in the names of the Maneras and the Martinos. Each contract provided for a deposit of $65,000 'of which $25,000 is paid to you herewith and $45,000 shall be paid within five days of acceptance to be held by Morgan Realty Pty Ltd Trust Account'. The payments of the expression of interest fee and the subsequent $40,000 deposits previously paid were treated as satisfying the deposit requirements. Settlement was stipulated as January 2009.
Each of Mr and Mrs Martino, and Mr Manera gave evidence at the hearing. Each denied that Mr DaviesMorgan explained to them in any detail the terms of the Annexure A conditions which were attached to each of the contracts in relation to Lot 5 and Lot 6.
In February 2008, the Martinos and the Maneras were told that the sewage connection was not going to proceed for another five years causing the failure of the development. The deposits paid totalling $130,000 have not been recovered.
Contract for sale of Lot 1
On 5 December 2007, Nicholas Andronic signed a contract of offer and acceptance for land described as 'part Lot 1 of proposed Lot 41 of Lot 515 Sabrina Road Baldivis' for a purchase price of $145,000. A deposit of $65,000 was payable of which $25,000 was said to be 'paid herewith' and $40,000 to be paid within five days of acceptance.
A payment of $40,000 was made by Mr Andronic by cheque and paid into Morgan Realty's Trust Account on 5 December 2007. Morgan Realty issued a receipt for that payment.
Mr Andronic did not give evidence and the payment of $25,000 initial deposit was not dealt with in the statement of agreed facts. It can be safely assumed that an expression of interest fee was paid by Mr Andronic some time prior to 7 December 2007 as with all of the other contracts.
As with the other contacts, Mr Andronic's contract contained the Annexure A conditions.
Application of the deposit monies
In all, a total of $175,000 was paid by way of 'expression of interest fees' in relation to the Sabrina Road development. Mr DaviesMorgan said, and we accept, that those payments were made direct to Project Managers. The evidence before us does not identify how those funds were utilised, but that is of no moment for present purposes. The balance of the deposit payable for the Sabrina Road contracts was, in each case, paid into the Morgan Realty Trust Account. The total of the payments made in November and December 2007 by way of deposits on Sabrina Road development contracts came to $260,000.
Around 3 December 2007, Mr DaviesMorgan attended the offices of Sabrina Developments and met with Mr Fraser. It will be recalled that the 'exclusive listing document' signed by Mr DaviesMorgan and Mr Fraser on 15 November 2007 recited that commission would be paid in advance by the vendor, but the amount or method of calculation of commission was not dealt with in the document.
On 3 December 2007, Mr DaviesMorgan presented a letter. It was a letter addressed to Morgan Realty with provision for signature by Mr Fraser as a director of Sabrina Developments. The letter read:
Further to discussions, please release deposits collected from the 8 proposed lots (of Lot 41) to Morgan Realty in the form of sales commissions to the total of $240,000. The balance of the funds should be made payable to Frasers the Project Managers.
Mr Davies-Morgan was questioned as to when and how the sum of $240,000 was agreed as commission payable in respect of the sale of the Sabrina Road lots. He said that the $240,000 commission payment was agreed some time between the signing of the exclusive listing document and 3 December 2007. As to the method of calculation, Mr DaviesMorgan said at T 75:
I was owed previous commission from other jobs that hadn't settled or had settled but I hadn't been paid and he nominated to rather than - because he couldn't pay me for the previous jobs, he nominated the commission of $40,000 per sale to add up to $240,000. So he released the funds to me for that basically.
Mr Davies-Morgan said that the amount of commission owed in relation to earlier sales was in excess of $240,000 and that:
The debt was quite in excess of that from the sale of another property, another development, but they just didn't have the money that they'd already authorised me to have so they said, 'well you know, what we'll do is we'll make the commission on each of these $40,000. We'll give you $240,000 and at least you've got something.' I needed - I needed the money at the time so that's what they gave me.
Mr Davies-Morgan contended that the commission paid in relation to these transactions was not in satisfaction of the earlier debt, and that he still had a claim in relation to earlier commissions but there was no point in following that up.
Mr Davies-Morgan also confirmed that, about that time, he was due to settle on a purchase of a property in Madora which required a payment of approximately $214,000. On 4 December 2007, an amount of $214,367.38 was transferred out of Morgan Realty's Trust Account to a settlement agent's trust account in order to complete that transaction.
The balance between the amount of the commission used to settle Mr DaviesMorgan's Madora purchase and the total commission of $240,000 was paid to Mr DaviesMorgan.
Mr Fraser also gave evidence concerning the payment of commission and the letter of 3 December 2007. He said that Mr DaviesMorgan wanted the sales commission to be paid and he worked out a fee structure which he put to Mr Fraser. In his written statement he said:
I signed what he wanted me to sign as the real estate agent, even though it seemed like a ridiculous amount of money, but if that's what I had to pay that's what I had to pay.
Mr Fraser's evidence conflicted with Mr DaviesMorgan's evidence on that point. Mr Davies-Morgan, in his written statement of evidence, said that Mr Fraser set the amount of commission and that he (Mr DaviesMorgan) did not suggest a figure, nor did he ask why Mr Fraser had decided on the figure of $40,000 per lot.
Mr Davies-Morgan also gave evidence that he had planned to purchase two of the lots in the Sabrina Road project himself, and had signed expression of interest forms for Lot 4 and Lot 8 of the Sabrina Road development. He said that he paid Project Managers a $25,000 expression of interest fee for each lot, but subsequently decided not to sign an offer and acceptance for each lot because he did not have sufficient funds at the time to pay the deposits.
Mr Fraser's evidence was that he had understood that the commission payable in relation to the sale of each lot in the Sabrina Road development was $25,000. When it was pointed out that the commissions related only to six lots and amounted to $240,000, Mr Fraser was unable to explain the calculation of the amount. He said, however, consistent with Mr DaviesMorgan's evidence that 'in essence this wasn't just from Sabrina Road these commissions were paid for'. (T: 45)
Mr Fraser said that he considered the payment of commission to be an expense related to the development of the land and to thus be a permissible use of deposit monies in accordance with cl 3 of the Annexure A conditions.
Allegation of breach of s 61(4) and s 61(5) of REBA Act by Morgan Realty
Morgan Realty is alleged to have acted contrary to s 61(4) and s 61(5) of the REBA Act by receiving commission prior to settlement of the relevant transaction. Section 61(4) provides:
The remuneration of an agent for services rendered by him in his capacity as agent in respect of a transaction he has negotiated is payable only on settlement of the transaction unless there is a failure to settle the transaction and that failure is due to the fault of the agent’s principal.
Section 61(5) makes it an offence to demand to receive any commission in contravention of s 61.
In this case there is no dispute that Morgan Realty received commission in relation to the sale of the proposed lots in the Sabrina Road development prior to settlement. Indeed, it received commission before the town planning scheme amendment, which would have made possible the subdivision of Lot 515 and the subsequent subdivision of Lot 41, had been substantially progressed.
The respondents' answer to the allegation of a breach of s 61(4) involves the following contentions:
·The Tribunal has no jurisdiction to make a finding of a breach of the REBA Act where a breach amounts to an offence.
·The proscription in s 61(4) is not an absolute prohibition, but early payment of a commission is permissible where there is agreement between the vendor and the agent concerned.
The first of those contentions was explained by counsel for the respondents in closing. He made it clear that it was not suggested that the Tribunal is unable to find, in the context of disciplinary proceedings, that a licensee has breached a requirement of the Act, but only that the Tribunal cannot impose the fines applicable to the relevant offence under the Act. That contention is obviously correct. The offence provision enables prosecution in a magistrate's court for an offence against the Act. The Tribunal is, however, entitled to consider an allegation that a licensee had breached an Act, and if so found, the Tribunal is able to impose any of the disciplinary penalties provided for in s 103 of the REBA Act. Neither party asserted otherwise.
The second, and main, contention of the respondents in relation to s 61(4) of the Act is that the legislative history of the section demonstrates that the words of the section were intended to create 'a prima facie rule' rather than an absolute prohibition on early payment of commission. The argument is that the prohibition is subject to any agreement between the vendor and the agent to pay commissions in advance of settlement.
The respondents acknowledge that the words of s 61(4) are clear and that the subsection does appear to contain an absolute rule (subject only to the exception where there is a failure to settle the transaction and that failure is due to the fault of the agent's principal). They rely, however, on the Law Reform Commission of Western Australia Report on a Review of the Land Agents Act, Project No 37, January 1974, and the Working Paper dated 18 June 1973 (Working Paper) in relation to that report, and various passages from Hansard in relation to the enactment of the REBA Act, to demonstrate that an alternative construction of s 61(4) is to be preferred to its literal interpretation.
In seeking recourse to these extrinsic materials, the respondents are not, as we understand the position, relying on s 19 of the Interpretation Act 1984 (WA) (Interpretation Act). That section permits the use of extrinsic material in the interpretation of a provision of a written law in certain circumstances, namely to confirm the ordinary meaning of the words used, or to determine the meaning of the words where they are ambiguous or obscure, or where they lead to a result which is manifestly absurd or unreasonable. The respondents acknowledge that the words of the section are 'clear on their face', but say that the true purpose or object of the provision is revealed by an examination of the extrinsic material. They contend that the common law permits recourse to extrinsic materials on a broader basis than is provided by s 19 of the Interpretation Act.
In support of that contention, the respondents cite CIC Insurance Ltd v Bankstown Football Club Ltd [1997] 187 CLR 384 at 408 where Brennan CJ, Dawson, Toohey, Gaudron and Gummow JJ said:
It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.
The same approach was adopted in Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] 218 CLR 273 at 280 and by McHugh J in Newcastle City Council v GIO General Ltd [1997] 191 CLR 85 at 112. It is on that basis that we move to consider the materials relied upon by the respondent.
The context of the enactment of s 61(4) commences with the Working Paper. Under the heading 'Duties of a land agent', the Working Paper contained the following discussion:
22. There are no statutory provisions as to the circumstances under which an agent's entitlement to commission arises. The terms of the agreement between the agent and his client are frequently vague and there is divergence of authority as to entitlement to commission in such cases. In R. J. Mabarrack Pty. Ltd. v. King (1971) 1 S.A.S.R. 313, Bray C.J. said at p.318 -
'According to one set of authorities the prima facie rule is that the commission ispayable when the agent procures a purchaser approved by the vendor who executes a binding contract to buy the property on the vendor's terms ... According to the other set the prima facie rule is that the commission is payable only on completion unless the failure to complete is due to the fault of the vendor'.
24. Section 8 provides that a land agent is required to apply all money received by him in respect of a land transaction first in payment of expenses, commission and other charges, and then in payment of the balance to the person legally entitled or authorised to receive it. Until payment, such a balance must be paid into a trust account at a bank (refer to paragraphs 20 to 22 of the working paper in Appendix I to this paper).
Subsequently, at [68] the Working Paper provides:
Any doubts that now exist in determining when entitlement to commission arises could be overcome by enacting a prima facie rule that commission is payable only on completion of the transaction unless the failure to complete is due to the fault of the agent's principal (see paragraph 22 above). It might be desirable to go even further to protect the principal and make this an absolute rule, notwithstanding anything contained in the agency agreement to the contrary (compare the Queensland Auctioneers and Agents Act 1971-1972, s.70(3)).
The Commission subsequently prepared its report which was published in January 1974. In relation to [68] of the working paper, the Commission reported:
43. The Commission in paragraph 68 of the working paper suggested a prima facie rule, subject to any agreement to the contrary, making commission payable only on the completion of a transaction, unless the failure to complete was due to the fault of the land agent's principal. The Commission in the same paragraph thought it might be desirable to go even further and make this an absolute rule notwithstanding any agreement to the contrary. Both the Land Agents Supervisory Committee and R.E.I.W.A. were in favour of a prima facie rule.
The Commission is divided on the question as to whether an absolute rule should be enacted. Such a rule would protect a person from liability to pay commission arising out of an undertaking contained in small print which the person did not read or did not fully understand. On the other hand such a rule would interfere with freedom of contract.
The Commission is unanimously of the view that at least a prima facie rule should be enacted in order to remove doubts as to the correct law presently applicable in this State. Completion should be defined as occurring at the time of settlement for cash sales, and at the time when possession is given for terms sales. (see Recommendation 22).
Recommendation 22 of the report was:
That a rule should be enacted that in the absence of an agreement to the contrary, a land agent's entitlement to commission only arises upon completion of a transaction, unless failure to complete is due to the fault of the agent's principal.
A Real Estate and Business Agents Bill was introduced into the Legislative Assembly in 1978. Clause 61 of the Bill dealt with agent's remuneration but contained no provision dealing with the time at which commission was to be payable.
The second reading of the Bill commenced on 20 April 1978. Mr O'Neill, the Member for East Melville moved the second reading. He commenced by saying that:
…
the Bill is the result of a complete review of the present Land Agents Act. Members may recall that the Report on the Law Reform Commission's Review of the Land Agents Act was tabled in the Parliament early in 1974. Subsequently several interested bodies made submissions to the appropriate Minister and the Bill follows close examination of the Report and those submissions.
The second reading debate resumed on 22 August 1978. The Member for Yilgarn Dundas, Mr Grill, spoke on behalf of the opposition. He foreshadowed an intention to move a number of amendments, including an amendment in respect of the payment of commission. He said (Hansard, 22 August 1978 at p 2482):
Another amendment will be in respect of the payment of commission, or the time at which the commission should be paid. The Law Reform Commission unanimously agreed that the commission should be paid on the completion of a transaction unless the failure to complete the transaction was due to the fault of the agent's principal. The Law Reform Commission defines the time of settlement, or the time of completion, as being the time of settlement in respect of cash sales and the time of possession in respect of term sales. We wonder why that provision has not been included in the Bill.
Amendments to the Bill were then dealt with in Committee. Mr Grill moved an amendment to insert a new subclause 6 which read:
(6)Commission shall only be paid on completion of the transaction unless the failure to complete was due to the fault of the agent's principal.
Mr Grill explained that proposed amendment in the following terms:
(Hansard, 22 August 1978 at p 2503):
In other words the real estate agent should not get his commission until the transaction has been complete, with the one exception where the person instructing him - that is, the vendor, has been responsible for the transaction not going ahead.
In further support of the amendment, Mr Grill made reference to para 43 of the Law Reform Commission Report and read it in full. He then said:
We are suggesting only the adoption of the prima facie rule; we are not suggesting the adoption of the absolute rule.
In response, Mr O'Neill on behalf of the government said (at p 2504) that he was not prepared to accept the amendments, but gave 'an undertaking to the Honourable member that, as I see a little merit in them, I will have them looked at, and if they are considered to be desirable, necessary, and in the right form, I will see that they are considered in another place.' Mr Grill said that he accepted the undertaking of the Chief Secretary.
When the Bill was referred to the Legislative Council, Mr McKinnon the Leader of the House, moved an amendment to insert subclause 4 of cl 61 in the terms which s 61(4) of the REBA Act now appears. Mr McKinnon said that the amendment was the result of the undertaking given by the Chief Secretary, Mr O'Neill. He said that 'the addition of this proposal would clarify the law as to the time at which the remuneration would be payable to an agent and it will remove problems and confusion which has occurred in this area in the past'. The Honourable Grace Vaughn, on behalf of the opposition, thanked the Leader of the House for including the amendment 'because it was one which was suggested by the opposition of the Legislative Assembly and it is almost a direct recommendation from the Law Reform Commission's review of the Land Agents Act'. The amendment was then put and passed.
It is against that background that the respondents argue that the reference by Mr Grill to seeking only to introduce the 'prima facie rule', when read in the context of the explanation of what was meant by that expression contained in para 43 of the Law Reform Commission Report, identifies the object and purpose of the Parliament in enacting s 61(4). Whist we recognise some force in that submission, we do not accept it. There are several reasons for that conclusion.
First, the plain words of the section suggest that the only exception to the entitlement to commission on settlement is where the failure to settle is due to the fault of the agent's principal. In that sense, the rule is not absolute because there is an exception, although we accept that the sense of the Law Reform Commission Report suggests that an absolute rule would be one where there was no capacity to agree otherwise. The use of the word 'only' reinforces the conclusion that no exceptions other than that specified in the subsection are to be made.
Second, we note that the Law Reform Commission recommendation 22 was for an enactment that 'in the absence of an agreement to the contrary, a land agent's entitlement to commission only arises upon completion of the transaction, unless failure is due to the fault of the agent's principal'. If the Parliament intended that it was open to the principal and the agent to agree a different time for the entitlement to commission to arise, a similar form of words could obviously have been enacted to make that position clear. The omission of the words to the effect 'in the absence of an agreement to the contrary', suggests the ultimate intention of the legislature was not to provide for that exception.
We note that the Honourable Grace Vaughn described the amendment as 'almost a direct recommendation from the Law Reform Commission's Review'. In a context where the original bill contained no provision as to when an entitlement to commission arose, the introduction of an amendment which provided for such a provision was of itself a recognition of the Law Reform Commission's recommendations. It does not follow that Parliament intended to adopt the recommendation that the rule would only apply in the absence of agreement to the contrary as recommendation 22 contemplated. As we have said, the absence of reference to agreement to the contrary suggests that that exception to the rule was not intended to be applied.
It follows that the allegation that Morgan Realty breached s 61(4) and s 61(5) of the REBA Act by receiving valuable consideration for services rendered in its capacity as agent in respect to the Sabrina Road development contracts is established.
Allegation of breach of s 60(1) and s 60(3) of the REBA Act by Morgan Realty
The Board alleges that Morgan Realty acted contrary to s 60(1) and s 60(3) of the REBA Act in that it received commission when it did not have a valid appointment to act as agent for Sabrina Developments in respect of the Sabrina Road project.
Section 60(1), s 60(2) and s 60(3) provide:
(1)An agent is not entitled to receive any commission, reward, or other valuable consideration in respect of his services in that capacity unless -
(a)he is licensed in that capacity and he holds a current triennial certificate in respect of his licence when he renders the services; and
(b)he has a valid appointment to act in that capacity which is in writing signed by the person for whom the services are or are to be rendered or by some other person lawfully authorised to sign on behalf of the person for whom the services are or are to be rendered.
(2)An appointment to act as an agent is not valid unless -
(a)it is contained in a document which -
(i)clearly sets out the services that are or are to be rendered;
(ii)where specific property is to be the subject of those services, clearly identifies the property;
(iia)clearly sets out the method by which the amount of any commission, reward or other valuable consideration to be received for those services is to be calculated; and
(iii)contains such other information, if any, as is prescribed;
(b)the document is not an offer or acceptance or a contract, or a document purporting to be an offer or acceptance or a contract, binding or purporting to bind a party thereto to a transaction; and
(c)the person obtaining the signature to the document gives a true copy thereof to the signatory immediately after the signing thereof (the onus of proof of which is upon the person obtaining the signature).
(3)A person shall not demand or receive any commission, reward, or other valuable consideration in contravention of subsection (1) or (2), or both.
Penalty: $5000.
The basis of the Board's allegation is that the 'exclusive listing document', signed on 15 November 2007 does not clearly set out the method by which the amount of any commission is to be received for the services to be provided.
The respondents accept that the exclusive listing document did not set out the method of calculation of commission. They say, however, that the exclusive listing document can be read together with the letter signed by Mr Fraser on 3 December 2007, which fixed the commission at $240,000. That contention raises three issues.
The first is whether the appointment to act can be contained in more than one document. The second is whether an appointment to act which post dates the performance of the services to which it refers is a valid appointment for the purposes of s 60(1). The third is whether, if the two documents together constitute an appointment to act, whether the letter of 3 December 2007 clearly sets out the method by which the amount of any commission is to be calculated.
As to the first issue, we do not consider that, to be valid, an appointment in writing to act must be contained in a single document. While s 60(2) refers to the appointment being 'contained in a document' and makes reference to 'the document' in para (d) and para (c), s 10 of the Interpretation Act provides that in any written law, words in the singular include the plural. There is no reason why the intent and object of the REBA Act is inconsistent with a construction of s 60 which permits an appointment in writing to be contained in more than one document. The object of the section is to create certainty and clarity as between the agent and the principal as to services to be undertaken, the consideration to be received and any other prescribed information. There is no reason why, if those matters are adequately contained in more than one document, the documents should not satisfy the requirement of s 60. A conclusion to that effect was reached by Wolff J in de Pedro v Young (1940) XLII WAR 79 in relation to s 12 of the Land Agents Act 1922 (WA) which provided that an agent was entitled to commission only where the agent's appointment to act is in writing.
The second issue is whether it is necessary that the appointment to act pre-date the provision of the services to which it relates. The Board submits that the use of the words 'are or are to be rendered' contained in s 60(1)(b) and s 60(2)(a)(i) suggest a contemporaneous or future application, and had Parliament intended that the appointment could relate to services already provided, then the words 'or have been rendered' would have been easily included.
The difficulty with the Board's argument is giving sense to the expression 'are rendered' in contradistinction to the expression 'are to be rendered'. The latter expression clearly contemplates the provision of future services. The expression 'are rendered' must, however, be a reference to a services already rendered. The requirement in s 60(2)(a) that the appointment be contained in a document which 'clearly sets out the services that are … rendered' cannot be, as the Board apparently suggests, a reference to the contemporaneous provision of services, so that it means 'services that are being rendered'. That is because the usual services of an agent are provided over a continuum of time, whereas the valid appointment to act comes into existence at the point of provision of the signed copy of the document as required by s 60(2)(c). The statutory purposes of s 60 is to provide certainty as to the obligation to pay, and the quantification of, commission in respect of a real estate transaction. An agent who undertakes the provision of services without a valid appointment to act has no entitlement to a payment of commission in relation to those services. Where services are provided by an agent without a valid appointment to act, the principal has no obligation to sign appointment to act in relation to past services. Where, however, a principal elects to execute an appointment to act in relation to services already provided, and the appointment meets the requirements of s 60(2), permitting the agent then to recover commission is not inconsistent with the purposes and object of s 60.
We should add that this conclusion should not be seen as any encouragement to agents to provide services prior to obtaining a valid appointment to act. The duties under cl 5 of the Code to act fairly and honestly, and not to knowingly mislead and deceive parties in negotiations or transactions, create a risk for an agent who conducts himself as though he holds a valid appointment to act. Any agent acting without a valid appointment does so with the high risk that the proposed principal will, as it is entitled to do, decline to sign any appointment, thus leaving the agent without any entitlement to remuneration for the work done.
The third issue in relation to this allegation is whether the letter of 3 December 2007 clearly sets out the method by which the amount of any commission is to be calculated. In our view, that requirement of s 60(2) is not met.
The letter of 3 December 2007 speaks of releasing deposits 'collected from the 8 proposed lots (of Lot 41) to Morgan Realty in the form of sales commissions to the total of $240,000'. On the face of the document, therefore, it appears that the commission relates to the sale of eight lots. In fact, because Mr DaviesMorgan had, apparently unilaterally decided not to proceed with the purchase of two of the lots, the commission could only have related to six sales. Mr Fraser, when questioned during the hearing, was unable to explain how (what he described as) 'a ridiculous amount of money' was calculated. Mr Fraser's understanding that the commission in relation to each lot was $25,000 bears no relationship to the amount paid. Whether at the instigation of Mr DaviesMorgan or Mr Fraser, the amount of $240,000 was clearly intended to compensate Mr DaviesMorgan in relation to unpaid commissions in respect to other lots. Mr DaviesMorgan was unable to satisfactorily explain the extent to which, if at all, the payment of $240,000 satisfied his claims in relation to other lots.
The finding against Morgan Realty that it breached s 61(4) and s 61(5) gives rise to greater concern in the context of this case. In relation to that allegation, the Board submits that the conduct should result in the cancellation of the first respondent's licence. Because the facts underlying the breach by Morgan Realty of s 61(4) and s 61(5) are essentially the facts which underlie the two complaints against Mr DaviesMorgan, it is convenient to consider those matters together.
There are several factors which are relevant to penalty in relation to the early payment of commission.
First, the concern about the early payment was raised by Mr Messina but passed over by him after Mr DaviesMorgan showed him the vendor's letter of authority to pay the commission. Both Mr Messina and Mr DaviesMorgan, having been alive to the irregularity of the payment, simply dismissed the problem.
Second, both Mr Messina and Mr DaviesMorgan knew that settlement on the lots was not to occur for some long time. For settlement to occur, it was necessary that there be an amendment to a town planning scheme, a subdivision of Lot 515 to create Lot 41, and a subsequent subdivision of Lot 41 to create the lots the subject of the sales to which the commissions were said to relate. It was clear at the time that the payments were made that, whatever negotiations may have been proceeding with the planning authorities, no substantive steps had been taken to commence the town planning's scheme amendment process, notwithstanding that the prospective purchasers had signed expressions of interest in the project some seven months earlier. Although it can be accepted that at least Mr Messina, and probably Mr DaviesMorgan, thought that the project was still proceeding, any reasonable assessment of the position must have raised questions as to whether the project would proceed as planned.
Third, the purchasers were entirely unsecured in relation to the money they had paid towards the purchases. Their investments were poorly documented and were entirely speculative. Any reasonable assessment of the project would have shown that the investors faced a substantial risk that they might not ultimately be able to complete their purchases.
Fourth, as we have found, the utilisation of the deposit monies for the payment of commission on the Sabrina Road lots was not authorised by cl 3 of the Annexure A conditions. Morgan Realty held the deposits as stakeholder, albeit subject to cl 3 of the Annexure A conditions. It was, therefore, obliged to apply the funds only in accordance with the contracts under which they were held. It failed to do so.
Fifth, the commission which was taken in advance of the settlements was an extraordinarily high commission when viewed against the value of the lots sold. It was a commission at a much higher rate (whether it applied to six or eight lots) than had been agreed to be paid by entities associated with Mr Fraser to Morgan Realty in relation to other projects. We have no doubt that the amount of the commission was fixed having regard to Mr DaviesMorgan's need for funds to complete the Madora purchase, and to somehow compensate or placate Mr Davies-Morgan in relation to commissions on other projects which had not been paid by the relevant entities associated with Mr Fraser. In those circumstances, Mr DaviesMorgan showed a complete disregard to the interests of the purchasers of lots in the Sabrina Road development, and did so for his personal convenience and in his own financial interest.
In those circumstances, we consider that the early payment of commission to Morgan Realty, and Mr DaviesMorgan's conduct in directing that payment to be made, is a serious matter. The duty to act fairly and honestly is an important duty for those involved in the real estate industry. A serious failure to observe that duty warrants a significant penalty, especially in circumstances where the breach of duty has resulted in very significant losses to the purchasers who had entrusted their funds to Morgan Realty.
In our view, those circumstances lead to the conclusion that the licence held by Morgan Realty should be suspended for a period of two years. The breach of s 5 of the Code of Conduct by Mr DaviesMorgan calls, in our view, for an order that his certificate of registration as a sales representative be suspended for a period of two years.
We do not accept the Board's submission that Mr DaviesMorgan should be permanently disqualified from obtaining registration as a sales representative. In Grljusich v Andrews [2003] WASCA 206 the Full Court considered that permanent disqualification was appropriate where the findings against, and conduct of, the agent demonstrated that he was a person who was incapable of reestablishing himself as a person fit for registration under the Act in due course (at [160]).
Whilst Mr DaviesMorgan conducted himself in a manner which served his selfinterests, and demonstrated a disregard of the interests of the purchasers who he had encouraged into the transaction, we do not consider that the evidence establishes that he is incapable of re-establishing himself as a person fit for registration. Mr DaviesMorgan has been operating a real estate franchise for over two years since these events took place, and the Tribunal was provided with a reference which suggested that there have been no complaints in the context of that business. The penalty of suspension is likely to have a significant impact on that business and it is suggested by the respondents that it may well cause it to close. Suspension is thus a harsh penalty but in our view it is necessary to demonstrate that the duty of those in the real estate industry to act fairly and honestly is a serious obligation, breach of which will have significant consequences. It is necessary to demonstrate to the public that such conduct is dealt with seriously.
In relation to Mr Messina, we also consider that his failure to properly supervise the business of Morgan Realty and to take steps to avoid breaches of the REBA Act and Code of Conduct by the sales representative employed by the business is a serious matter. Mr Messina in effect left Mr DaviesMorgan to conduct the business of Morgan Realty as he saw fit, and it is apparent that he had only the barest knowledge of the activities of the business.
In our view, a suspension of two years is appropriate in relation to Mr Messina's failure to properly supervise the business. The consequence of his failure to ensure that the requirements of the REBA Act was met was that, a large sum of money held by Morgan Realty was applied in breach of the REBA Act and the purchasers suffered substantial losses. It is important that those in control of a real estate business exercise diligence and care, and ensure that they are familiar with the important aspects of the business operations and finances. They should exercise careful oversight of the business trust account. Mr Messina failed to meet those requirements.
Orders
Being satisfied that proper cause exists for disciplinary action against each of Morgan Realty, Phillip DaviesMorgan and Salvatore Messina:
1.In relation to the finding that Morgan Realty breached s 60(3) of the Real Estate and Business Agents Act 1978 (WA), Morgan Realty is to pay a fine of $1,000 within 21 days of the date of this order.
2.In relation to the finding that Morgan Realty breached s 61(4) and s 61(5), of the Real Estate and Business Agents Act 1978 (WA), Morgan Realty's real estate licence is suspended for a period of two years from the date of this order.
3.In relation to the finding that Phillip DaviesMorgan acted in breach of s 5 of the Code of Conduct for Agents and Sales Representatives, Mr DaviesMorgan's registration as a sales representative is suspended for a period of two years from the date of this order.
4.In relation to the finding that Mr Salvatore Messina failed to properly supervise the business of Morgan Realty and take steps to prevent breaches of the Real Estate and Business Agents Act 1978 (WA) and the Code of Conduct for Agents and Sales Representatives, Mr Messina's licence as a real estate agent and any triennial certificate in respect thereof is suspended for a period of two years from the date of this order.
5.Any application by the applicant for costs is to be made by letter to the Tribunal within 14 days of the date of this order.
I certify that this and the preceding [160] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE J A CHANEY, PRESIDENT
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: VOCATIONAL REGULATION
ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)
CITATION: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD and MORGAN REALTY PTY LTD [2010] WASAT 161 (S)
MEMBER: JUSTICE J A CHANEY (PRESIDENT)
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 4 NOVEMBER 2010
SUPPLEMENTARY
DECISION :17 AUGUST 2011
FILE NO/S: VR 153 of 2009
BETWEEN: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD
Applicant
AND
MORGAN REALTY PTY LTD
First RespondentPHILLIP DAVIES-MORGAN
Second RespondentSALVATORE MESSINA
Third Respondent
Catchwords:
Costs - Disciplinary proceedings - Real Estate Agent - Findings against respondents after hearing - Whether costs should be awarded
Legislation:
State Admistrative Tribunal Act 2004 (WA), s 87(2)
Result:
Costs to be paid by the respondents
Category: B
Representation:
Counsel:
Applicant: Mr PN Bevilacqua
First Respondent : Mr MF Dwyer
Second Respondent : MR MF Dwyer
Third Respondent : Mr MF Dwyer
Solicitors:
Applicant: Ms J King
First Respondent : Mendelawitz Morton Commercial Lawyers
Second Respondent : Mendelawitz Morton Commercial Lawyers
Third Respondent : Mendelawitz Morton Commercial Lawyers
Case(s) referred to in decision(s):
Medical Board of Western Australia and Roberman [2005] WASAT 81 (S)
Real Estate and Business Agents Supervisory Board and Morgan Realty & Ors [2010] WASAT 161
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
Following a two day hearing, each of the three respondents to these proceedings had their registration under the Real Estate and Business Agents Act 1978 (WA) suspended for a period of two years. The Real Estate and Business Agents Supervisory Board sought an order that the respondents pay the Board's costs of the proceedings.
The Tribunal applied the general approach taken in relation to professional disciplinary matters where a complaint is upheld, and ordered that the respondents pay the costs sought by the applicant.
The issue for determination
After a hearing before the Tribunal over two days, the Tribunal delivered reasons for decision, and made orders suspending the registration of the first and second respondents as real estate agents, and the registration of the second respondent as a sales representative for a period of two years - see Real Estate and Business Agents Supervisory Board and Morgan Realty & Ors [2010] WASAT 161. The Tribunal also ordered that any application to the costs was to be made by letter within 14 days of the date of its order.
In accordance with that direction, the Real Estate and Business Agents Supervisory Board (Board) made an application for costs in the sum of $7,000. The question for determination is whether those costs should be ordered to be paid.
Should an order be made?
While the Tribunal is generally a no costs jurisdiction, it has the power to order a party to proceedings to pay the costs of another party under s 87(2) of the State Administrative Tribunal Act 2004 (WA). In the context of vocational regulatory proceedings, the Tribunal has generally followed an approach that, where a complaint is successfully made out by a regulatory authority, the respondent will generally be ordered to pay the reasonable costs of the regulatory authority. The reason for that approach was explained by the Tribunal in Medical Board of Western Australia and Roberman [2005] WASAT 81 (S) (Roberman) at [30] where the Tribunal said:
Section 87(2) gives the Tribunal the discretion to order the payment by a party of all or any of the costs of another party. Where a regulatory authority successfully brings a complaint of conduct which, if proved, justifies disciplinary action by the Tribunal, there will usually be a strong case for the exercise of that discretion in favour of the regulatory body. That is because such bodies perform a function which promotes the public interest, and usually with limited resources. The financial burden of bringing disciplinary action if the body had no capacity to recover some or all of its costs may be such as to provide a disincentive to bring disciplinary action, or when brought, to ensure that the allegations against the practitioner concerned are properly and thoroughly presented. It is in the public interest that such bodies have an expectation that, if the allegations are made out, the offending professional will meet or at least contribute to the costs incurred in bringing the application. The question of an award of costs is, of course, a matter of discretion to be exercised in the circumstances of each case
There is no reason why that approach should not be taken in this case. It is appropriate that there be an order that the respondents pay the Board's costs.
Quantum
In its application, the Board sought costs in the sum of $7,000. No explanation was provided as to the breakdown of that amount. Notwithstanding that, in my view, the amount claimed is reasonable.
The hearing lasted two days. The documentation was substantial. The case involved the examination of a number of different but related transactions. The complaints were strenuously defended. The Board was represented by independent counsel.
In the circumstances, a claim for a lump sum of $7,000 is a relatively modest claim for the work done. It is appropriate that costs be awarded in that amount. Liability for the costs ought to be allocated equally between the three respondents.
Orders
1.Morgan Realty Pty Ltd, Phillip Davies-Morgan and Salvatore Messina are each to pay the Real Estate and Business Agents Supervisory Board costs fixed at $2,333.
I certify that this and the preceding [9] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE J A CHANEY, PRESIDENT
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