Sultana Investments Pty Ltd v Cellcom Pty Ltd
[2007] QDC 247
•26 October 2007
DISTRICT COURT OF QUEENSLAND
CITATION:
Sultana Investments Pty Ltd v Cellcom Pty Ltd [2007] QDC 247
PARTIES:
SULTANA INVESTMENTS PTY LTD
Plaintiff
AND
CELLCOM PTY LTD
Defendant
FILE NO/S:
BD1897/05
DIVISION:
Civil
PROCEEDING:
ORIGINATING COURT:
District Court, Brisbane
DELIVERED ON:
26 October 2007
DELIVERED AT:
Brisbane
HEARING DATE:
19 and 20 March 2007
JUDGE:
Nase DCJ
ORDER:
1. Judgment is given to the plaintiff on the claim in the sum of $77,000 together with interest at the rate of 10 percent per annum from the 22 February 2005 to judgment
2. The counterclaim is dismissed
CATCHWORDS:
COUNSEL:
Mr DR Kent for the plaintiff
Mr D Quail for the defendant
SOLICITORS:
O’Reilly Lillicrap for the plaintiff
Greg Chapman for the defendant
Introduction
Martin Comer is a financial planner (and finance broker) from New South Wales. Together with a Trudy Sultana he operates a Sydney based financial planning business through Sultana Investments Pty Ltd.
The Mews is a residential development at Bowen Hills, Brisbane. Although The Mews was developed by the SSI Group, the particular corporate manifestation of the SSI Group in this case is Cellcom Pty Ltd.
George Vasiliou was employed by the SSI Group (or Cellcom) in the sales and marketing of The Mews development. Vasiliou was responsible to George Petersen, who is a development manager for the SSI Group. In late 2002 SSI were pre‑selling units preparatory to construction. In September 02 Cellcom gave PRD Realty Pty Ltd the sole and exclusive right to sell units in the development.
While PRD Realty enjoyed a sole and exclusive right to sell, the agency agreement[1] set out a range of fees payable to third parties for purchasers associated with or introduced by third parties. Those identified as third parties in the agreement are local real estate agents, The House of Bethlehem, Total Conveyancing, Real Estate Express, The Siti Group, and other “agents/investment groups, etc”. The fees payable to the various third parties except for the last group (“other agents/investment groups, etc”) are set out in the agency agreement.[2]
[1]Exhibit 20 is the agreement.
[2]Exhibit 20 schedule 2.
The agency agreement with PRD Realty was entered on 11 September 2002. Later in September Vasiliou telephoned Comer to explore whether any of Sultana Investments clients would be interested in the purchase of units at The Mews. As a result of this phone call, Comer and Trudy Sultana flew to Brisbane for a meeting with Vasiliou. At this meeting (23 September 2002) agreement in principle was reached that Sultana Investments would be paid $10,000 for each unit taken by one of their clients. At this meeting there was also discussion about the disclosure requirements imposed by the Property Agents and Motor Dealers Act 2000 (Qld).
After the meeting Vasiliou wrote to Sultana Investments in Sydney offering seven apartments to Sultana Investments’ clients at a discounted price. He also offered Sultana Investments a $10,000 consultancy fee for each apartment sold. As the letter is dated 25 September 2002, I will refer to it as the “September letter”. The letter was written with the authority of Petersen (and the Cellcom board), and checked by Cellcom’s solicitor.
Vasiliou subsequently telephoned Comer, who verbally accepted the offer set out in the September letter.
Overall, Sultana Investments’ clients took a total of 22 apartments from The Mews. Each signed contract, together with a deposit in the form of a deposit bond, was forwarded by Sultana Investments to Vasiliou in Brisbane. Fourteen of the contracts subsequently went on to settlement. The eight contracts that did not settle were each rescinded by Cellcom. At the time the contracts were rescinded, Comer was in the process of organising finance and obtaining extensions of time for settlement. The rescission of these 8 contracts led to ill‑feeling between Comer and Petersen.
At the time the contracts were rescinded a dispute also surfaced between Comer and Petersen about how the consultancy fees due to Sultana Investments under the September letter should be calculated. Cellcom asserts Sultana Investments is only entitled to retain payments for the 14 contracts which went to settlement. Sultana Investments asserts it is entitled to a payment for each unconditional contract and an additional payment on the settlement of each contract. In these proceedings Sultana Investments asserts a claim to recover unpaid consultancy fees it claims is owed under the September agreement.
The issues
There are two main issues. The first is a relatively straightforward construction point. The letter recording the agreement between Sultana Investments and Cellcom relevantly provides:
“2.A $10,000 consultancy fee for each apartment sold. $5,000 payable 30 days after the sale goes unconditional and $5,000 30 days after the properties settle. This fee will be plus GST.”
Cellcom contends that the word “sold” in the first sentence means “sold and settled” and that accordingly Sultana Investments is not entitled to any fee for the eight contracts which were rescinded.
Sultana Investments contends it is entitled to a payment of $5,000 for each unconditional contract of sale, and to an additional $5000 on settlement of each contract. On this view the first sentence (“A $10,000 consultancy fee for each apartment sold”) merely sets out the entitlement to a payment in general terms, but the actual content of the entitlement is found in the body of the paragraph.
The second issue is whether ss 128, 140, and 160 of the Property Agents and Motor Dealers Act 2000 (Qld) prevent Sultana Investments from recovering the money it claims as consultancy fees, and from retaining the consultancy fees it has already been paid under the agreement. As Sultana Investments is not a licensed real estate agent in Queensland, the Act prevents it from recovering any unpaid fees if, in locating a purchaser, it acted as a real estate agent. Cellcom relies on the statutory prohibition to both resist the claim and to counterclaim for recovery of the payments already made by it under the September agreement.
A real estate agent is defined in the Act as someone who, as an agent for others for reward, performs any one of a number of activities.[3] The relevant activities here are … buying or selling residential apartments[4] or … negotiating for the buying or selling of residential apartments.[5] The Act then prevents anyone not a licensed real estate agent from recovering or retaining any payment for the performance of any of the defined activities “as a real estate agent”.[6] The statutory definition of a real estate agent (s 128) is therefore imported into the prohibition section (s 140).
[3]S 128.
[4]S 128(1)(a).
[5][5] S 128(1)(e).
[6]S 140.
Sultana Investments conducts a business in New South Wales as a financial planner (and finance broker) and not surprisingly it is not a licensed real estate agent under the Queensland Act. In these proceedings Cellcom claims Sultana Investments acted as a real estate agent in introducing purchasers to Cellcom and, as a consequence, is prevented from recovering any payment to which it may be entitled under the September agreement, and that it must also disgorge any payments it has received under the agreement.
The issues which arise on the claim and counterclaim are whether Sultana Investments performed any of the defined activities, and whether it acted, in performing any of the defined activities as an agent for reward for Cellcom (or possibly for its own clients). This latter question entails consideration of the nature of the relationship between Sultana Investments and its New South Wales clients, and between it and Cellcom, as well as a consideration of the scope of the Queensland Act.
Finally, Sultana Investments assert that Cellcom is estopped from relying on the statutory prohibition because of its own conduct.
The construction of the September letter
The sale of units before construction necessarily involves a delay between the contract date of any sale, and the eventual settlement of the sale. In this case all the contracts (22) were signed by the middle of the 2003 year.[7] The apartments were not constructed until the second half of the 2004 year (settlement became due under the contracts on 29 September 2004). The time gap between contract and settlement explains the arrangement for a payment of $5,000 when a contract became unconditional, and for the balance ($5,000) on settlement. Comer was at pains to explain that once a contract became unconditional the seller was protected by the deposit, which always substantially exceeded $5,000, in the event the purchaser failed to complete. At the same time the attractiveness of an inducement delayed for a period of one to two years is obviously diluted by the delay. There seems also to have been a belief on the part of Vasiliou that all the contracts would settle.
[7]T 65.
I think the arrangement in the September letter is reasonably clear. The first sentence sets out the payment if an apartment is taken by one of Sultana Investments’ clients. The word “sold” is used in the first sentence. The word “sold” is not used in any precise sense, and is not defined in the letter. In its common meaning, a property is sold once a contract of sale is brought into existence by the parties,[8] or, possibly when the contract becomes unconditional.[9]
[8]An example of this common usage is provided by the auctioneer, who utters the word “sold” as he/she concludes an auction in favour of the highest bidder.
[9]I note that in the agency agreement between Cellcom and PRD Realty Pty Ltd a property is deemed to have been “sold” immediately upon the signature of the purchaser to a contract of sale including terms which the developer has approved: Exhibit 20 para 16(b).
I do not think the word “sold” is used to convey any precise meaning beyond referring to the execution of a valid contract of sale by the parties. This use of the word is consistent with the use of the word “sale” in the second sentence (“$5,000 payable 30 days after the sale goes unconditional”). The general statement that Sultana Investments is entitled to a payment of $10,000 for each apartment sold is subject to the two sentences which immediately follow it. These following sentences therefore give both meaning and precision to the first sentence. The sentences specify a payment of $5,000 30 days after the sale goes unconditional, and a further payment of $5,000 30 days after settlement. On this construction Sultana Investments is entitled to a payment of $5,000 when a contract of sale becomes unconditional, and a further payment of $5,000 on settlement. Importantly, the agreement does not provide for the return of the first $5,000 in the event that the contract ultimately fails to settle. It was foreseeable that any one contract might not settle (even if both Comer and Vasiliou shared a high expectation that every contract would settle). As that possibility was foreseeable, why not provide for the return of the first payment if that was the intent of the parties?
Moreover, only a moment’s reflection raises the possibility a failure to settle could be due to the fault of either the purchaser or the seller (Cellcom).[10] The failure to make any provision for the return of the first payment of $5,000 suggests the parties did not intend the payment to be refunded if the contract ultimately failed to settle.
[10]The agency agreement between PRD Realty Pty Ltd and Cellcom expressly provided for these contingencies (Exhibit 20 schedule 4 ).
The view I have reached on this aspect is that Sultana Investments is entitled to a payment of $5,000 30 days after the sale becomes unconditional, and to a further $5,000 30 days after the property settles. Giving the words in the introductory sentence (“a $10,000 consultancy fee for each apartment sold”) their natural meanings, it states in summary form the agreement between the parties. The following sentences then set out the content of their agreement. The agreement makes no provision for the refund of the first payment if for any reason the contract of sale does not settle. On the proper construction of the agreement I am satisfied that Sultana Investments is entitled to a payment of $5,000 for each unconditional contract of sale (whether or not the contract of sale ultimately settles), and is entitled to a further payment of $5,000 if the contract of sale does settle. The plaintiff is therefore entitled to succeed in the action unless it is caught by the statutory prohibition in the Act.
The statutory prohibition: a general introduction
The following is a general account of Sultana Investments’ actions insofar as they are revealed by the evidence. Sultana Investments was contacted by Vasiliou, who telephoned Comer. I assume Vasiliou was in Brisbane, and Comer in Sydney. The initial telephone contact led to a visit to Queensland (Brisbane) by Comer and Trudy Sultana. At the meeting with Vasiliou an agreement in principle was reached. Vasiliou (Cellcom) agreed to make a number of units (seven) in the proposed development available for purchase at $10,000 below the list price by clients of Sultana Investments. As an inducement to Sultana Investments, Cellcom agreed to pay Sultana Investments $10,000 for each unit sold.[11] The agreement was subsequently reduced to written form by Vasiliou, and after he obtained authorisation, and the letter was checked by Cellcom’s solicitor, it was posted to Sultana Investments. A few days after the letter had been posted, Vasiliou telephoned Comer. Vasiliou was in Brisbane, and Comer in Sydney. In this conversation Comer verbally accepted the offer in the letter.
[11]Strictly speaking the evidence is only that Cellcom offered to pay a “consultancy fee” for each apartment sold. That the consultation fee was an inducement to Sultana Investments is merely an inference I have drawn.
Over the next six months or so, Sultana Investments sent a total of 22 signed contracts, together in each case with a deposit to Vasiliou (or to the solicitor acting for the purchasers).
On the evidence it is not entirely clear whether blank contracts (and associated documentation) were posted to Sultana Investments in bulk, or whether the documentation was posted to Sultana Investments only as it notified Vasiliou that one of its clients wanted to purchase a particular unit.
Comer was at pains in his evidence to say that he did not “negotiate” the sale of any of the units or act as a real estate agent. He said that he passed on a brochure to each purchaser and arranged for each purchaser to fly to Brisbane to inspect the site. He said he encouraged the purchasers to speak to local real estate agents before deciding whether or not to purchase a unit.
Sultana Investments did, however, select and then approach each of the client purchasers, and provided information to each of them about the apartments. Comer told each client purchaser his impression of the development and gave advice about the advantages or disadvantages of acquiring an apartment within the framework of a financial plan. For this advice, Sultana Investments charged each client purchaser a fee.
During the construction phase Cellcom dealt directly with Sultana Investments over a number of construction and fit‑out issues.
At the end of the construction phase Sultana Investments arranged or endeavoured to arrange finance for all of their client purchasers. Where necessary, it (Comer) negotiated extensions with Cellcom for its client purchasers. When finally some of the contracts were rescinded by Cellcom (because the time allowed for settlement, as extended from time to time, had passed) Comer lobbied Cellcom to reconsider termination of the contracts.[12] The decision to terminate the eight contracts led to ill‑feeling between Comer and Petersen, who by that stage had taken over responsibility for Cellcom’s marketing functions from Vasiliou.
[12]Letter dated 24 January 05 (Exhibit 14). .
Sultana Investments is a Sydney based financial planner, and I think that it acted throughout as a financial planner. I believe that Cellcom saw it as a financial planner acting for a group of investors. This is evident in the language used in the September letter which specified prices “for your client” and in which the hope is expressed that Cellcom’s proposal “will meet your company’s investment criteria”. Moreover, the conflict of interest between Sultana Investments as financial planner for its client purchasers and Cellcom as the seller was clearly exposed in the period leading up to the rescission of the eight contracts. The point taken in these proceedings, however, is that Sultana Investments in fact acted as a real estate agent and as a consequence is prevented from recovering any money owed to it under the September letter.
The statutory framework
The statutory definition of a real estate agent fixes on the activities of buying or selling places of residence (s 128(1) (a)) and negotiating for the buying or selling of places of residence (s 128(1) (e)). These activities are regulated when performed in Queensland as an agent for others for reward (s 128). In other words, the critical nexus for the exercise of legislative supervision is the place where the activity is performed, not the place where the residence is located (see Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418).
The definition also requires the defined activity be performed as an agent for others for reward. The term “agent” imports the idea of acting on behalf of a principal, that is, in this context, of acting on behalf of a vendor or purchaser in the sale or purchase of land (or place of residence). At common law the relationship of principal and agent is a fiduciary one. The fiduciary nature of the relationship is implicitly preserved by the Act and regulations.[13] The regulations confirm the obligation to act in the client’s best interests,[14] and the statutory Code of Conduct makes it clear that the agent cannot act or continue to act as an agent in cases where the agent is faced by a conflict of interest.[15]
[13]Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001, s 6.
[14]S 9.
[15]S 17.
The prohibition is set out in s 140 of the Act, which provides:
“Restriction on recovery of reward of expense—no proper authorisation etc.
(1)A person is not entitled to sue for, or recover or retain, a reward or expense for the performance of an activity as a real estate agent unless, at the time the activity was performed, the person—
(a) held a real estate agent’s license; and
(b) was authorised under the person’s licence to perform the activity; and
(c) had been properly appointed under division 2 by the person to be charged with the reward or expense.
(2) A person who sues for, or recovers or retains, a reward or expense for the performance of an activity as a real estate agent another than as provided by subsection (1) commits an offence.
Maximum penalty for subsection (2)—200 penalty points.”
Discussion and conclusion
Although Sultana Investments acted in the course of its business as a financial planner when it approached its client purchasers and when it facilitated the purchases by them of apartments in The Mews, if its actions amounted to buying or selling, or negotiating for the buying or selling, of the apartments as an agent, it may nonetheless be caught by the statutory prohibition. Looking at the acts performed by Sultana Investments, they undoubtedly constitute buying or selling or negotiating for the buying or selling of apartments, despite Comer’s disavowal in evidence that he acted as a real estate agent.
An important question (which was not really addressed in the submissions of counsel) is whether the activity is outside the prohibition because it was performed in another State.
The Act, as we have seen, fixes on activity with a sufficient nexus with Queensland. Sultana Investments conducted its activity from and in New South Wales. It did receive documentation posted from Queensland, and in turn it posted back the executed contracts and associated documentation to Queensland. I assume also that some telephone calls were made from Cellcom to Sultana Investments or Sultana Investments to Cellcom. Is this contact a sufficient nexus to Queensland so that the activity in the other State is controlled by the Queensland Act? I doubt that it is, but I think that a stronger reason emerges for holding that Sultana Investments is not caught by the prohibition.
The definition[16] requires the activity be performed “as an agent for others”. Both Vasiliou and Petersen said that, until recently, they believed Sultana Investments was licensed as a real estate agent in Queensland. Vasiliou said his belief was an assumption.[17] Why a New South Wales financial planner should be assumed to be licensed as a real estate agent in another State is not clear to me, and I suspect their claimed belief is one assumed for the purposes of the action. Elsewhere in his evidence Vasiliou said he thought Sultana Investments was a marketeer.[18] I think this concession is closer to the truth. A marketeer under the Act is anyone involved directly or indirectly in any way in any sale.[19] Marketeers are not required to be licensed under the Act, but certain obligations are imposed on them by the Act.
[16]S 128.
[17]T 107 .
[18]T 128,136 .
[19]The definition is set out in a schedule to the Act as follows “… a person directly or indirectly involved in any way in the sale, or promotion or the sale, or provision of a service in connection with the sale, of residential property, a loan, or with others under a formal or informal arrangement … the definition includes a person who provides advisory, management, legal, accounting, administrative or other services in connection with the sale, or for promoting the sale, or for providing a service in connection with the sale, of residential property.” (Schedule 2)
At the September meeting both Vasiliou and Comer said they discussed the compliance requirements of the Act. Comer said that he told Vasiliou he was not a real estate agent, and that the form of the disclosure (and all other documentation) was left to Cellcom. I accept this aspect of his evidence.
At the time of the September meeting, Cellcom had given PRD Realty Pty Ltd an exclusive and sole right to sell The Mews. The appointment was in writing, and I assume in the required form. The agreement between Cellcom and Sultana Investments (the September letter) did not appoint Sultana Investments as a real estate agent for the sale of the seven apartments,[20] and it was not intended to be an appointment.[21] That the letter was not intended to appoint Sultana Investments as selling agent is reflected in the payment agreed. The agreement with PRD Realty Pty Ltd provided for payments to third parties for “other purchasers associated with or introduced by any other agents/investment groups, etc”[22] to be the subject of agreement. The payments to Sultana Investments and PRD Realty Pty Ltd were apparently made under this provision. In the selling agent’s disclosure statement, PRD Realty Pty Ltd is identified as the selling agent. The disclosed payments were 1% of the purchase price to the selling agent, and the agreed $10,000 fee to Sultana Investments. I think the reality is that Cellcom throughout treated Sultana Investments as an investment advisor/financial planner who was acting in the interests of its client purchasers, and not on behalf of Cellcom[23].
[20]Sections 133, 134.
[21]PRD Realty Pty Ltd had just been appointed the sole and exclusive selling agent for the apartments (Exhibit 20).
[22]Exhibit 20 schedule 2(g).
[23]This is implicit in Vasiliou’s concession that he treated Sultana Investments as the agent for the purchasers: T120
The conclusion I have reached on this aspect of the action is that the agreed payment of $10,000 to Sultana Investments was in the nature of a kickback or inducement. Financial planners in the course of their business may receive payments from a supplier of a financial service whenever the service is used by the planner’s clients. The apartments made available to Sultana Investments’ clients for purchase as part of a financial plan were effectively in the same position as a financial service as far as Sultana Investments was concerned. In other words, I am satisfied to the required standard that Sultana Investments was never in a relationship of principal and agent with Cellcom. And accordingly, that Sultana Investments is not prohibited, by the provisions of the Act, from recovering the fees it is owed under the agreement with Cellcom[24]. This conclusion is essentially a conclusion of fact which I have reached on the evidence placed before me at trial.
[24]That is, that Sultana Investments did not act as “an agent for (Cellcom) for reward”
For completeness I have also considered whether Sultana Investments performed activity as a real estate agent as an agent for its client purchasers (rather than for Cellcom) for reward. Comer said he (Sultana Investments) did not, and that each of the client purchasers made their own inquiries. His evidence on this aspect was not contradicted in the sense that none of the client purchasers gave evidence. In the circumstances I accept his evidence on this point. This conclusion sufficiently disposes of this issue in favour of Sultana Investments. As well, however, I am not satisfied Sultana Investments actions in the other State as a financial planner fall within the scope of the Queensland Act[25].
[25]Moreover, while the consequence of acting as a real estate agent for its client purchasers, if caught by the prohibition, would prevent Sultana Investments recovering any charges owed to it by its client purchasers, it is not clear the Cellcom “kickback” payments would also come within the prohibition as payments “for the performance of an activity as a real estate agent”.
And finally, because of the conclusion I have reached on the other issues it is not necessary to consider the estoppel point.
Orders:
1. Judgment is given to the plaintiff on the claim in the sum of $77,000 together with interest at the rate of 10 percent per annum from the 22 February 2005 to judgment
2. The counterclaim is dismissed
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