Straight Course Pty Ltd - v - Mizzicorp Pty Ltd
[2013] VCC 1382
•23 October 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised |
COMMERCIAL LIST
GENERAL CASES DIVISION
Case No. CI-13-02430
| STRAIGHT COURSE PTY LTD (ACN 087 545 686) | Plaintiff |
| v | |
| MIZZICORP PTY LTD (ACN 101 565 271) | Defendant |
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JUDGE: | HER HONOUR JUDGE KENNEDY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 October 2013 | |
DATE OF JUDGMENT: | 23 October 2013 | |
CASE MAY BE CITED AS: | Straight Course Pty Ltd – v – Mizzicorp Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 1382 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and Procedure – application for summary judgment under section 61 Civil Procedure Act 2010 (Cth) – claim for estate agent’s commission – whether defendant has a real prospect of success in defending the claim on the basis of statutory unconscionability and/or unilateral mistake and/or an alleged breach of statutory duty – summary judgment granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N. Kaskani | Jafer Lawyers |
| For the Defendant | Mr A. Felkel | Henley Legal Lawyers |
HER HONOUR:
1 This is the return of the plaintiff’s summons filed 9 September 2013 in which, inter alia, it seeks summary judgment in an amount of $121,000 against the defendant pursuant to section 63 of the Civil Procedure Act 2010 (Cth).
2 The application arises in the context of a claim by an estate agent for 2.2% commission pursuant to an agreement appointing it to sell a property dated 26 March, 2012 (the commission agreement). A claim for commission based on an agreement appointing the agent to lease the property was not pursued.[1]
[1]See email correspondence dated 11 October 2013 wherein it was made clear that no commission was sought in respect of the lease.
3 Although various matters appeared to be raised in the Defence dated 26 June, 2013, Counsel for the defendant accepted that, prima facie, the plaintiff was entitled to its commission under the commission agreement.
4 However, 3 matters (only) were raised as constituting defences as follows:
· Statutory unconscionability under the Australian Consumer Law (ACL);
· unilateral mistake; and
· a breach of the estate agent’s statutory obligations.[2]
[2]A defence based on quantum was withdrawn as reflected also in the email of 11 October 2013.
5 The sole issue before the court is therefore whether or not the defendant has a real, as opposed to a fanciful, prospect of success in raising the 3 defences identified.
Background
6 The plaintiff, which trades under the business name “Weda Property”, is an estate agent.
7 The defendant was the owner of a property at 82-86 Bulla Road Strathmore. Mr Mizzi is the director of the defendant.
8 Mr Weda is the uncle of Mr Mizzi’s ex-brother in law. Mr Mizzi claims that Mr Weda was in fact his “friend” and further that Mr Weda was well aware of his “difficult financial circumstances”.[3]
[3]Affidavit of Mark Mizzi of 4 October 2013 [5].
9 On 26 March 2012 the plaintiff and defendant entered an agreement whereby the defendant appointed the plaintiff as its agent to sell the defendant’s property on an exclusive authority basis for 120 days and continuing for a further 60 days from the end of the exclusive authority period (up to 22 September 2012).
10 The commission agreement provided that the plaintiff would be entitled to a commission of 2.2% of the agreed selling price if the property was “sold” in the sense that a binding offer was obtained which resulted in an enforceable contract (item 1 and general conditions 1.18 and 1.4).
11 During the period 26 March 2012 to 10 May 2012, Weda Property offered the property for sale by tender for $5 million with settlement in 90 days, but obtained no acceptable offers.
12 At this stage it appears that the defendant indicated it would be prepared to lease the property where upon it appointed Weda Property to lease the property by agreement of 22 June 2012.
13 During the period 22 June to 1 September 2012 Weda Property offered the property for lease.
14 In August, 2012 Mr Weda of Weda Property claims that he “introduced” the property to Mr Feeney, a director of Hard Rock Developments Pty Ltd, which led to negotiations between the defendant and Hard Rock.
15 Mr Weda further claims that by 13 September Mr Mizzi advised that the defendant would sell the property to the purchaser for $5.5 million without the payment of a deposit on a 2 year settlement coincidental with the purchaser entering into a lease agreement to lease the property for 2 years at an annual rental of $180,000. Mr Weda claims that he suggested to Mr Mizzi that the purchaser ought pay at least a nominal deposit of $5,000 with which he agreed.[4]
[4]Affidavit of Peter Bernard Weda of 29 August 2013 [21].
16 However, Mr Mizzi denies that he had the conversation alleged by Mr Weda and says that he only found out that the purchaser was to pay a deposit of $5,000 on the day of the signing. However, he does accept that Mr Feeney had indicated to him in August that although he agreed to purchase the property for $5.5 million, settlement would be in 2 years and he would be unable to pay the 10% deposit. Mr Mizzi then proposed a lease arrangement and left the deposit issue “open”.[5]
[5]Affidavit of Mark Mizzi of 4 October 2013 [7] and [8].
17 On 13 September Mr Weda forwarded a draft contract to both Mr Mizzi and Mr Feeney, which was also forwarded to Slater and Gordon, solicitors for the defendant (however, the attached draft is not included as part of the exhibit).[6]
[6]Affidavit of Peter Bernard Weda of 29 August 2013 [22]; and Exhibit “PBW 7”.
18 In the result, on 17 September 2012, the defendant and Hard Rock Developments Pty Ltd executed a contract for the sale of the property at Mr Mizzi’s restaurant in Niddrie. The consideration for the sale was $5.5 million with settlement due on 1 November 2014 and with a deposit payable of $5,000. The contract was prepared by Slater and Gordon, the defendant’s solicitors.
19 The parties also executed a lease on the same date which provided for annual rental of $180,000 per annum inclusive of GST.
20 Mr Mizzi alleges that he “did not understand or read the contract. I signed where Peter Weda told me to sign. I trusted Peter Weda that the contract was in order and that it was in my interest to sign it.”[7]
[7]Affidavit of Mark Mizzi of 4 October 2013 [12].
21 However, it does appear that a number of handwritten amendments/corrections were made to the typed contract (which Mr Weda says occurred on the day of signing).
22 Mr Weda thereafter sought his commission (and included some proposals for payment). However, the commission has not been paid.
Principles
23 Section 63 of the Civil Procedure Act 2010 (Cth) empowers the court to give summary judgment if satisfied that a defence “has no real prospect of success”.
24 The principles which guide the court in relation to summary judgment have been summarised in the recent Court of Appeal decision in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd,[8] as follows:
Upon the present state of authority:
a)the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
b)the test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
c)it should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
[8][2013] VSCA 158 [35].
Unconscionability
25 The defendant relied on section 21 of the ACL which provided that a person must not, in trade or commerce, engage in unconscionable conduct in connection with the supply of goods and services (and which section was not limited by the unwritten law relating to unconscionable conduct – see s21(4)(a)). The defendant highlighted that a court’s consideration may include consideration of the manner in which a contract is “carried out” (section 21(4)(c)(ii)).
26 Section 22 sets out matters the court may have regard to for the purpose of section 21. The defendant did not suggest that any of those factors applied.
27 However, the essence of the defence raised was that, given the surrounding circumstances, it was incumbent upon the agent to remind the defendant of his obligation to pay commission prior to finalisation of the sale contract given the deposit funds would be insufficient.
28 The surrounding circumstances were not identified with precision although they appeared to include the family relationship; the alleged “trust”; the failure to read the contract; the “fact” that Mr Weda was said to have negotiated the deposit; and Mr Weda’s knowledge of the “financial situation”. It was also suggested that the only means of paying the commission was out of the deposit or settlement monies. [9]
[9]Affidavit of Mark Mizzi of 4 October 2013 [30].
29 The defendant also accepted that some “moral” fault was involved in the concept of unconscionability which usually involved some deliberate or reckless act.
30 In my view, a party should be taken to be aware of his/her own contractual obligations and it should not be incumbent on another person to bring this to that party’s attention. Thus, any omission to remind a party of a contractual obligation could only amount to negligence, at the absolute highest, and could not involve some “moral taint” or “moral obloquy”.[10]
[10]Director of Consumer Affairs Victoria v Scully & Anor [2013] VSCA 292.
31 I also do not consider that any of the surrounding circumstances could give rise to some obligation to “remind” in this case.
32 The relationship is not that “close” and there is no evidence of any abuse of any “trust”. The failure to read the contract is a matter of the defendant’s own choosing. Even if Mr Weda negotiated the $5,000 deposit, this is also insufficient in circumstances where the defendant retained a lawyer and, on his own evidence, was aware that the deposit was an issue. Although there is some evidence that Mr Weda was aware of “cash flow” issues,[11] the alleged “financial situation” was not the subject of any detailed evidence. Moreover, the defendant could have met the obligation for commission on the basis of the rental to be received (in less than a year given it was $180,000 per annum).
[11]Exhibit “PBW 12” of Affidavit of Peter Bernard Weda of 29 August 2013.
33 Even accepting the evidence of Mr Mizzi at its highest, there is no real prospect of success of a defence based on statutory unconscionability.
Mistake
34 The defendant placed reliance on paragraph 26 of the affidavit of Mr Mizzi of 4 October 2013. This reads as follows:
I had always understood that commission was payable on settlement. Had I known otherwise, I would have insisted on a deposit from the Purchaser which would be sufficient enough to cover the Plaintiff’s commission. I believe Peter Weda knew this because he knew of our financial situation.
35 Counsel for the defendant then relied on the following passage in Taylor v Johnson,[12] as follows:
It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware
that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension (emphasis added).
[12]Taylor v Johnson (1983) 151 CLR 422 [14].
36 The evidence about a mistake at the time of entry into the commission contract is not completely satisfactory. Thus, although there is specific evidence that Mr Mizzi did not read the contract of sale, there is no evidence whatsoever that he did not read the commission contract in March. The highest the evidence goes is that he had “always understood” that commission was payable on settlement.
37 In any event, there is simply no evidence at all from which the defendant could suggest that the plaintiff was aware that the defendant was entering the commission contract under some serious mistake or misapprehension back in March 2012.
38 An awareness of his “financial situation” does not show that Mr Weda knew he was entering the commission contract on the basis of the mistake alleged, namely, that, contrary to the explicit terms, the commission was not payable until any settlement.
39 I also do not consider that any omission to remind Mr Mizzi of his obligations later on could constitute a deliberate setting out to ensure that he was not aware of the existence of any mistake.
40 A defence based on unilateral mistake also has no real prospects of success.
Breach of estate agent obligations
41 The defendant finally submitted that there was a breach of the Estate Agents (Professional Conduct Regulations) 2008 (Vic) to avoid a conflict of interest and act in the plaintiff’s best interests.
42 Reference was made to regulation 12 which deals with the potential conflict of interest of an estate agent.
43 The relevant parts of Regulation 12 provides as follows:
(1) An estate agent must always act in a principal’s best interests except where it would be unlawful, unreasonable, improper or contrary to the principal’s instructions to do so.
(2) An estate agent must not accept an engagement from, or act for, a person where to do so would place the agent's interests in conflict with that of the person.
44 There was some difficulty in identification of the precise nature of the potential “conflict” being raised. However, it appeared to be a conflict of interest between the interests of the agent in securing the sale and commission (which was about to expire) and the interests of the client in being able to meet their obligations.
45 It was again suggested that to avoid this alleged “conflict” the agent was obliged to remind the defendant of his entitlement to commission immediately prior to the signing of the agreement given the deposit funds would be insufficient.
46 For reasons given already, I do not consider that there was any obligation on the agent to “remind” the defendant of his obligations, particularly where he had retained lawyers. Moreover, although an estate agent must act in the principal’s best interest under regulation 12(1), it is not reasonable to elevate the obligations of an estate agent in this way.
47 I also do not consider that the situation cited could give rise to any defence based on a breach of regulation 12(2).
48 Even if there was some “failure” to remind the defendant of his obligations under the contract, this did not amount to the “acceptance of an engagement or acting for a person” as provided for in regulation 12(2).
49 I do not consider that there are any prospects of any defence based on a breach of regulation 12(2).
50 The defendant also did not identify precisely what cause of action would flow even if a breach of regulation 12 was sustained. However, in the light of my findings it is unnecessary to consider this further.
51 A defence based on an alleged breach of the estate agent’s statutory obligations also has no real prospects of success.
Conclusion
52 The power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried.
53 However, none of the defences raised have a “real” chance of success pursuant to the principles summarised above.
54 The plaintiff is therefore entitled to judgment in the amount of $121,000.
55 I will hear from the parties on the question of costs.
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