The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd (in liq)

[2023] NSWCA 291

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd (in liq) [2023] NSWCA 291

Hearing dates:

13 February 2023

Decision date:

06 December 2023

Before:

White JA at [1];
Kirk JA at [124];
Griffiths AJA at [152]

Decision:

(1) The appeal be allowed in part.

(2) Set aside the order dated 12 August 2022.

(3) Subject to order (4), remit the proceedings to the primary judge for the purpose of considering making orders for judicial sale.

(4) Within 14 days hereof, the parties are to seek to agree the form of a declaratory order which gives effect to these reasons, as well as seek to agree costs of the proceeding both below and on appeal. If they are unable to reach agreement, each should within that time provide a brief written outline of submissions, not exceeding four pages in length, in support of their respective positions. The remaining issues will then be finalised on the papers and without a further oral hearing.

Catchwords:

CONTRACTS – Rectification – Common intention – Proof of common intention – Proof by inference – Where appellant and respondent executed Sole Agency Agreement for marketing and sale of units in residential development – Where appellant as selling agent entitled under Agreement to “Commission” upon sale of units – Where “Commission” as defined in Agreement limited to commission payable on certain units in development – Where appellant asserts common intention that “Commission” should have extended to commission accrued prior to execution of Agreement – Where directors and managers of respondent not called to give evidence on intention as at execution of Agreement – Whether uncontradicted evidence of sole director of appellant amounts to clear and convincing proof of common intention by inference – Relief in nature of rectification denied

REAL PROPERTY – Caveats – Caveatable interests – Grant of caveatable interest – Where appellant asserts caveatable interest in nature of equitable charge entitling it to judicial sale of units in development – Where Sole Agency Agreement confers right on appellant to compel sale of specified units at fixed price to itself or others and offset outstanding commission against purchase price – Where Agreement authorises appellant to lodge caveats in order to protect its entitlement to Commission – Whether grant of right to compel sale constitutes express grant of equitable charge – Whether grant of right to lodge caveats constitutes implied grant of equitable charge – Appellant held impliedly to have been granted equitable charge over units in development

AGENCY – Property, stock and business agents – Restrictions on real estate agent obtaining beneficial interest in property – Where appellant as real estate agent asserts rights as equitable chargee under Sole Agency Agreement – Where appellant had not obtained client’s consent in writing in form approved by Secretary prior to execution of Agreement – Where interpretation clause in Agreement purports to sever any term or provision of agreement repugnant or contrary to any law – Whether appellant obtained beneficial interest in property in contravention of Property and Stock Agents Act 2002 (NSW) s 49(1) – Whether interpretation clause accordingly severs clauses of Agreement that impliedly grant equitable charge to appellant – Held that clauses impliedly granting equitable charge to appellant not severed from Agreement

Legislation Cited:

Property and Stock Agents Act 2002 (NSW), ss 46, 47, 48, 49

Real Property Act 1900 (NSW), ss 74F, 74MA

Trade Practices Act 1974 (Cth) s 52

Cases Cited:

Aged Care Services Pty Ltd v Kanning Services Pty Ltd (2013) 86 NSWLR 174; [2013] NSWCA 393

Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54; [1930] HCA 38

Bonhote v Henderson [1895] 1 Ch 742

Bonhote v Henderson [1895] 2 Ch 202

BP v State of New South Wales [2019] NSWCA 223

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833

Broken Hill Proprietary Co Ltd v Commissioner of Stamp Duties [1998] 1 Qd R 452

Bush v National Australia Bank Ltd (1992) 35 NSWLR 390

Coleman v Bone (1996) 9 BPR 16,235

Concept Television Productions Pty Ltd v Australian Broadcasting Corporation (1988) 12 IPR 129

Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662

CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121

Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55

Fowler v Fowler (1859) 4 De G & J 250; 45 ER 97

Gan v Xie [2023] NSWCA 163

Johnson v Synnex Australia Pty Ltd [2017] SASCFC 165

Johnson Matthey Ltd v AC Rochester Overseas Corporation (1990) 23 NSWLR 190

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Joscelyne v Nissen [1970] 2 QB 86

Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381

King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; (2005) 13 BPR 25,077

Kramer v Stone [2023] NSWCA 270

Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11

Ling v Pang [2023] NSWCA 112

MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152

Mackay v Wilson (1947) 47 SR (NSW) 315

Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23

McNab v Director of Publication Prosecutions (NSW) (2021) 106 NSWLR 430; [2021] NSWCA 298

Morris Finance Ltd v Brown (2017) 252 FCR 557; [2017] FCAFC 97

Murphy v Wright (1992) 5 BPR 11,734

Newey v Westpac Banking Corporation [2014] NSWCA 319

Overlook v Foxtel [2002] NSWSC 17

Pukallus v Cameron (1982) 180 CLR 447; [1982] HCA 63

Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2004] NSWSC 880; (2004) 12 BPR 22,319

RHG Mortgage Corporation Ltd v Ianni [2016] NSWCA 270

Roberts v Investwell Pty Ltd (in liq) [2012] NSWCA 134; (2012) 88 ACSR 689

Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39

RPS v The Queen (2000) 199 CLR 620; [2000] HCA 3

Ryledar Pty Ltd v Euphoric (2007) 69 NSWLR 603; [2007] NSWCA 65

Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53

Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47

Swiss Bank Corporation v Lloyd’s Bank Ltd [1982] AC 584

Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24; (2019) 19 BPR 39,153

Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489; [2011] NSWSC 1562

Taylor v Johnson (1983) 151 CLR 422; [1983] HCA 5

The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd [2021] NSWSC 1175

Troncone v Aliperti (1994) 6 BPR 13,291

Watson v Foxman (1995) 49 NSWLR 315

Zelden v Sewell Henamast Pty Ltd [2011] NSWCA 56

Texts Cited:

Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters)

Category:

Principal judgment

Parties:

The Property Investors Alliance Pty Ltd (Appellant)
C88 Project Pty Ltd (in liq) (Respondent)

Representation:

Counsel:
S A Lawrance SC with J C Lee (Appellant)
D Neggo (Respondent)

Solicitors:
Rutland’s Law Firm (Appellant)
Macpherson Kelley Lawyers (Respondent)

File Number(s):

2022/261766

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division

Citation:

[2022] NSWSC 1081

Date of Decision:

12 August 2022

Before:

Rees J

File Number(s):

2021/22126

HEADNOTE

[This headnote is not to be read as part of the judgment]

Pursuant to a Sole Agency Agreement (“SAA”) executed on 20 April 2018, the appellant, The Property Investors Alliance Pty Ltd (“PIA”), undertook to market and promote the sale of specified units — designated as “Agency Lots” — in a residential development being constructed by the respondent, C88 Project Pty Ltd (“C88”). Under the SAA, it was agreed that where PIA, as selling agent, was the effective cause of sale of an Agency Lot, it would be entitled to “Commission” from C88, calculated at 5.5% of an Agency Lot’s “Contract Price”. So as to protect its right to payment of “Commission” or its “commission entitlement”, cll 12.9, 12.10, and 12.11 of the SAA cumulatively conferred a right upon PIA to lodge a caveat or caveats over units in the development where C88 defaulted in punctual payment of its Commission. Similarly, cll 12.15 and 12.16 conferred a right upon PIA, in the same circumstances, to direct C88 to sell an Agency Lot to it or to its nominee or to a third party at a fixed price, which was to be capable of being offset against any accrued commission entitlement.

Prior to execution of the SAA, PIA and C88 had, with respect to the same development, entered into two Exclusive Agency Agreements, under which PIA came to be owed a significant amount of outstanding commission payments. As at the date upon which the SAA was executed, PIA had come to be owed even more, on a contingent basis, insofar as it had caused sales of units in the development not being Agency Lots. Notwithstanding the amounts owing to PIA for its prior work, however, cl 1.1(g) of the SAA limited the terms “Commission”, “commission entitlement”, and “agent commission” only to the sums payable to PIA for its sale of Agency Lots. One consequence of that limitation was that any amounts owing to PIA prior to the execution of the SAA fell beyond the ambit of the protections accorded to PIA by cll 12.9–12.11 and 12.15–12.16 thereof.

At trial, the sole director of PIA, Mr Justin Wang, gave evidence of conversations with a director of C88 which, PIA contended, showed that it had been the parties’ common intention that the SAA should secure all amounts then and thereafter owing by C88 to PIA. Mr Wang’s evidence was uncontradicted by evidence from those involved in the management of C88 prior to its entry into liquidation, and was accepted by the primary judge as credible. Notwithstanding the primary judge’s acceptance of Mr Wang’s evidence, relief in the nature of rectification was denied on the basis that the appellant had not proffered clear and convincing proof that Mr Wang’s understanding of the purview of cl 1.1(g) was common to that of the managers of C88.

The primary judge also rejected the claim that the appellant had been expressly granted an equitable charge by cll 12.15 and 12.16 or impliedly granted an equitable charge by cll 12.9, 12.10 and 12.11. A submission proffered by C88 that, even if the SAA did expressly or impliedly confer an equitable charge on PIA, any such charge would be excised from the agreement as being repugnant or contrary to s 49(1) of the Property and Stock Agents Act 2002 (NSW) was rejected.

On appeal, the issues before the Court were:

1. Whether the primary judge had erred in refusing to order rectification of cl 1.1(g) of the SAA, in circumstances where Mr Wang’s evidence was unopposed by countervailing evidence adduced by C88 and where the liquidators of C88 had not called the company’s former managers to give evidence as to their intentions regarding the scope of cl 1.1(g);

2. Whether the primary judge had erred in holding that cll 12.15 and 12.16 of the SAA did not expressly grant an equitable charge to PIA;

3. Whether the primary judge had erred in holding that, as a matter of construction, cll 12.9, 12.10, and 12.11 did not evince an intention to confer a proprietary interest in the units of the development on PIA as security for payment of its Commission, so as impliedly to grant a charge to it; and

4. Whether the primary judge had erred in holding that, in the event that the SAA did grant an equitable charge to PIA, a contravention by PIA of s 49(1) of the Property and Stock Agents Act was not such as to excise the clauses granting the charge from the SAA, as contemplated by cl 1.2(h) thereof.

The Court (per Kirk JA and Griffiths AJA, White JA dissenting in part), allowing the appeal in part and remitting the proceedings to the Equity Division, held:

As to issue (i) per Kirk JA:

1. Rectification based upon mutual mistake requires clear and convincing proof of the parties’ common intention. While the fact that a defendant to a suit seeking rectification has not gone into evidence does not necessarily foreclose the availability of rectification, the onus remains with the claimant to make the claim good. In the circumstances of this case, none of the conversations that Mr Wang deposed to having with the managers of C88 indicated agreement to the position, and an intention, that the SAA should safeguard all outstanding payments then and thereafter owing to PIA: [131]-[143].

2. Inferential reasoning by recourse to Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 does not permit the bridging of gaps in evidence. In circumstances where there was no evidence that the managers of C88 had the same subjective intention and understanding as that of Mr Wang, there was no basis either to infer that their evidence would not have assisted the respondent’s case or to draw an inference adverse to C88 with greater confidence: [144]-[149].

Kuhl v Zurich Financial Services Ltd (2011) 243 CLR 361; [2011] HCA 11, applied.

Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53; RHG Mortgage Corporation Ltd v Ianni [2016] NSWCA 270; CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121; Ling v Pang [2023] NSWCA 112, followed.

As to issue (i) per Griffiths AJA:

1. A party seeking rectification of a written document carries the onus of establishing both the substance and detail of a common intention between the parties and the document’s departure therefrom in the clearest and most satisfactory manner, by reference not only to objective material but also to evidence of the parties’ subjective states of mind: [157]-[165].

Fowler v Fowler (1859) 4 De G & J 250; Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54; [1930] HCA 38; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65; Newey v Westpac Banking Corporation [2014] NSWCA 319; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47, cited.

1. The primary judge did not err in holding that the appellant had not established a common intention departed from in the SAA to the standard required in a suit for rectification. Although Mr Wang’s evidence was accepted by the primary judge, his recall of the discussions said to evidence the parties’ common intention was admittedly imperfect notwithstanding their reduction to direct speech. Mr Wang’s evidence, moreover, relayed equivocations as to whether the relevant representatives of C88 actually concurred in his proposal to encapsulate all moneys owing to PIA in the SAA, such equivocations occurring in ongoing and earnest commercial negotiations: [179]-[205].

Concept Television Productions Pty Ltd v Australian Broadcasting Corporation (1988) 12 IPR 129; Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17; Watson v Foxman (1995) 49 NSWLR 315; Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381, approved.

Gan v Xie [2023] NSWCA 163, cited.

1. While the principle in Jones v Dunkel can apply in a rectification suit, and such a suit should not be successfully defended simply by the defendant not going into evidence, no such inference could be drawn in the circumstances of this case. The appellant’s failure to discharge its onus of establishing the claimed common intention foreclosed any inference that the evidence capable of being given by C88’s former managers would not have assisted C88: [207]-[215].

Ling v Pang [2023] NSWCA 112, followed.

Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, cited.

As to issue (i) per White JA dissenting:

1. Where a party intends to give effect to a document as worded, but also intends to enter into a transaction which has a different effect from that for which the document provides, then the availability of rectification depends upon the intention to achieve a legal effect being clearly predominant over the intention to give effect to the document as it is worded. In the circumstances of the present case, a fair inference was that the former managers of C88 shared an intention with Mr Wang that cl 1.1(g) would include, and thus the caveat provisions would protect, all moneys owing by C88 to PIA. In light of the long business relationship between the parties, it should not be lightly inferred that C88’s former managers knew of Mr Wang’s intention and kept silent knowing that he might be labouring under a mistake: [58]-[62].

Bush v National Australia Bank Ltd (1992) 35 NSWLR 390, cited.

1. The inference that the parties shared a common intention of the kind asserted by PIA was strengthened by the fact that C88 had not called witnesses that it might otherwise be expected to have called. Accordingly, an inference adverse to C88 available from evidence led by PIA could more readily be drawn: [63]-[70].

RPS v The Queen (2000) 199 CLR 620; [2000] HCA 3; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, applied.

As to issue (ii):

1. The primary judge was correct to hold that cll 12.15 and 12.16 of the SAA did not amount to the express grant of an equitable charge to PIA. Although those clauses did confer a proprietary interest upon PIA as security for payment of accrued commission, that proprietary interest was in the nature of a call option rather than an equitable charge. The inability of PIA, under those clauses, to enforce its security by appointment of a receiver or by judicial sale was inconsistent with the supposed grant of a charge thereby to it: [71]-[77] (White JA); [126] (Kirk JA); [153] (Griffiths AJA).

Swiss Bank Corporation v Lloyd’s Bank Ltd [1982] AC 584, followed.

Broken Hill Proprietary Co Ltd v Commissioner of Stamp Duties [1998] 1 Qd R 452; King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; (2005) 13 BPR 25,077; Morris Finance Ltd v Brown (2017) 252 FCR 557; [2017] FCAFC 97; Johnson v Synnex Australia Pty Ltd [2017] SASCFC 165, cited.

As to issue (iii):

1. The contractual grant of authority to lodge a caveat in respect of the grantor’s land does not necessarily imply the grant of a caveatable interest in the grantor’s land, whether in the form of an equitable charge or otherwise. In each case, the question is one that calls for construction of the terms of the contract as a whole: [85]-[108] (White JA); [128] (Kirk JA); [153] (Griffiths AJA).

Murphy v Wright (1992) 5 BPR 11,734; Coleman v Bone (1996) 9 BPR 16,235; Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489; [2011] NSWSC 1562; Aged Care Services Pty Ltd v Kanning Services Pty Ltd (2013) 86 NSWLR 174; [2013] NSWCA 393, considered.

Troncone v Aliperti (1994) 6 BPR 13,291, explained.

Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314; Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2004] NSWSC 880; (2004) 12 BPR 22,319; Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24; (2019) 19 BPR 39,153, cited.

1. The primary judge erred in holding that cll 12.9, 12.10, and 12.11 did not impliedly grant an equitable charge to PIA to protect its entitlement to Commission from C88. In circumstances where C88 was a special purpose vehicle whose ability to satisfy PIA’s Commission depended upon the sale of units in the development, the parties must have intended that PIA was to have more than a mere right to restrain completion of contracted sales of unit by caveat: [110]-[112] (White JA); [128] (Kirk JA); [153] (Griffiths AJA).

As to issue (iv):

1. Even assuming that the implied conferral of an equitable charge upon PIA contravened s 49(1) of the Property and Stock Agents Act, that would not of itself necessitate the severance of cll 12.9, 12.10, or 12.11 from the SAA. The primary judge was correct to conclude that any such contravention would not void the SAA and that, accordingly, the excisive effect of cl 1.2(h) of the SAA was not enlivened: [114]-[122] (White JA); [125] (Kirk JA); [153] (Griffiths AJA).

JUDGMENT

1. WHITE JA: This is an appeal from orders of the Equity Division (Rees J) dismissing claims by the appellant that it is entitled to an equitable charge over certain units in a development known as “The Somerset” to secure moneys owing to it pursuant to an agency agreement called a “Sole Agency Agreement” under which the appellant acted as agent for the respondent to sell units in the development. The appellant also sought rectification of a provision in the Sole Agency Agreement relating to the definition of “Commission” and “commission entitlement” to which the provisions in the Sole Agency Agreement said to have given rise to the equitable charge referred (The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd (in liq) [2022] NSWSC 1081).

1. The appellant carries on business as a real estate agent. Between 2015 and 2019, it entered into a number of agency agreements with the respondent for the sale of apartments in the Somerset situated at Carlingford. The primary judge recorded that the appellant had sold 317 apartments in the development and had received some $10 million in commission but remained owed some $18 million (at [1]). The respondent was a special purpose vehicle incorporated by Dyldam Developments Pty Ltd (“Dyldam”) for the purpose of developing the Somerset. It is now in liquidation.

2. On 13 September 2021, summary judgment was given for the appellant for the amount of outstanding commission in the sum of $18,055,076.20 plus interest (The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd [2021] NSWSC 1175). The respondent was placed into external administration on 14 April 2022 and, on 31 May 2022, a meeting of creditors resolved that it be wound up.

3. The appellant claims that it is entitled to an equitable charge over 27 specified lots in the development to secure its claimed entitlement to commission. It relies upon the following clauses of the Sole Agency Agreement that it entered into with the respondent on 20 April 2018:

“12 COMMISSION

…

12.9   The Owner agrees that the Agent may lodge and maintain caveat or caveats on any units in the Development, the title of which has not been transferred to a third party, where the Owner is in default of its obligations to make payment of Commission to the Agent.

12.10   The Owner acknowledges that the caveat provision gives an absolute right to the Agent to protect the Agent's interest to commission entitlement or compensation or damages as the case may be.

12.11   Where the right of the Agent to lodge and maintain caveat or caveats arise, the Owner is taken to have and is deemed to have duly given consent to the Agent to the lodgment or lodgments and maintaining of caveats and the Agent is only obligated to remove the caveat or caveats on full receipt of its Commission entitlements and this clause shall provide a full and complete defense to any action of the Owner to seek removal of the caveat or caveats.

…

Further Right of the Agent In Respect of Accumulated or Accrued Commission Entitlement

12.15    The Agent has the right from time to time, to:

(a)   direct the Owner to pay accrued commission which is due and payable to the Agent, in whole or in part to any third party as the Agent may direct; or

(b)   Nominate any party, including itself or any person to acquire any Agency Lot, which is not subject of exchanged contracts, as stock for re-sell in the future. Such nomination may be on more than one occasion, and where the Agent makes such nomination the Owner must sell to the nominated party (including the Agent itself) and the price of the Agency Lot concerned shall be the MSP for the Agency Lot concerned.

12.16   For the contracts on the sale of any Agency Lot to the Agent or the party nominated by the Agent, the Owner agrees:

(a)   the sale price (inclusive of GST) is the MSP for the Agency Lot concerned;

(b)    notwithstanding any other provision in this Agreement, no deposit is payable and the Agent shall be absolutely entitled to apply set off against the Commission due and payable by the Owner to the Agent towards the deposit and balance payable at completion of contracts for the or each Agency Lot concerned;

(c)    completion to be not longer than 6 weeks from the date of exchange; and

(d)    the Owner at the Owner's own cost must do all things and sign all documents to transfer unencumbered title to the Agency Lot concerned to the Agent or its nominee as the case may be.”

5. The appellant put its case for the existence of an equitable charge on two bases. The first, was that cll 12.15 and 12.16 contained an express equitable charge. Alternatively, it submitted that cll 12.9, 12.10 and 12.11 created a charge in its favour by implication.

6. Whatever the proper characterisation of those provisions, they protect the Agent’s right to “Commission” or its “commission entitlement”. Clause 1.1(g) includes the following definitions:

“1.1 Definitions

…

(g)   ‘Commission’ or ‘commission entitlement’ or ‘agent commission’ means the commission plus interest for any late payment of the commission in accordance with this Agreement, which the Owner has agreed to pay to the Agent for the sale of each Agency Lot.”

7. “Agency Lots” is defined as follows:

“(d)   ‘Agency Lots’ mean only the residential units (whether described as apartments, units or lots) listed in the Agency Lot Schedule.”

8. The schedule to the Sole Agency Agreement contained a list of 34 Agency Lots and the respective MSPs (Minimum Selling Prices) for each Agency Lot. By a later agreement, additional apartments in the development were added to the definition of Agency Lots.

9. The effect of the definition of Commission was that even if cll 12.9 - 12.11, 12.15 and 12.16 conferred on the appellant the rights of an equitable chargee, the only debt secured by the charge would be for any commission earned from the sale of the listed Agency Lots.

10. At the time the Sole Agency Agreement was entered into, the appellant was owed $3,203,862 in outstanding commissions in relation to the sale of other apartments in the Somerset development, which had settled. It also had a contingent entitlement to substantial further commissions that would be payable on completion of the sale of apartments where contracts had been exchanged but not yet settled. As at 20 April 2018 the appellant had effected the unconditional exchange of 295 lots within the Development.

11. The Sole Agency Agreement of 20 April 2018 was the third written agreement entered into between the parties in relation to the development. In 2015, the parties entered into an “Exclusive Agency Agreement” for a term of four months. That agreement was replaced by a further “Exclusive Agency Agreement” on 21 May 2015. The terms of those agreements are not directly relevant to this appeal. They are summarised in the reasons of the primary judge at [17]-[26].

12. The sole director of the appellant is Mr Yue (Justin) Wang. The primary judge accepted his evidence. He deposed that, in or around the end of March or early April 2018, the respondent wanted the appellant to sell unsold units in the Somerset, including some unsold units the subject of the second Exclusive Agency Agreement, under a new Sole Agency Agreement. (We were informed that the difference between the two forms of agreements is that, under an exclusive agency agreement, an agent has the right to sell a property even to the exclusion of the vendor. Thus, the agent would be entitled to commission even if the vendor, and not the agent, were the effective cause of the sale. Under a Sole Agency Agreement, the agent would not be so entitled to commission if the vendor were the effective cause of the sale.)

13. The earlier Exclusive Agency Agreement of 21 May 2015 had not included provisions to the same effect as cll 12.9, 12.10, and 12.11. It did include provisions to the same effect as cll 12.15 and 12.16.

14. Mr Wang’s evidence, referred to below, was to the effect that cll 12.9, 12.10, and 12.11 were introduced because of his concern about the delay in payment of outstanding commission for several developments including, but not limited to, units in the Somerset. Mr Wang gave evidence that it was his intention that he needed a right to caveat to protect the appellant’s whole commission for the whole project. It was not until he received legal advice that he learnt that the definition of Commission was confined to the commission to be derived from the sale of each Agency Lot, being the lots specified in the Agency Lot Schedule attached to the Sole Agency Agreement (as subsequently amended when additional lots were added). The primary judge recorded (at [46]) that, as drafted, the caveat provisions applied to protect the Agent’s Commission on the 34 apartments only (being Commission of some $641,000), rather than all unpaid commission. The appellant sought an order for rectification of the definition of “Commission” so that the definition reads as follows:

“1A   Order that definition of Commission in the Sole Agency Agreement be rectified as to read:

‘commission’ or ‘commission entitlement’ or ‘agent commission’ means the commission that is agreed between the Owner and the Agent for the sale of each Agency Lot, and for any lot in the Development which the Agent has already caused the sale of for the benefit of the Owner prior to the date of this Sole Agency Agreement.”

15. The primary judge correctly observed that, before construing the Sole Agency Agreement to determine whether it gave rise to an equitable charge, it was necessary to identify the true terms of the agreement to be construed. Hence, the primary judge dealt with the appellant’s claim for rectification first (at [70]).

Rectification

16. The appellant relied upon the evidence of Mr Wang. He deposed to discussions that he had primarily with Mr Sam Fayad, whom he understood to be one of the owners of Dyldam. Mr Fayad was a director of the respondent. The other directors of the respondent were a Mr Joseph Khattar and his wife, Ms Chahida Khattar.

17. By 20 April 2018, the appellant had introduced purchasers who had exchanged unconditional contracts for the purchase off-the-plan of 295 lots. Around March 2018, when the South, East and West buildings of the Somerset were nearly ready for settlement, Mr Fayad called Mr Wang. Mr Wang deposed that they had a conversation to the following effect:

“Sam:   Brother, I need your help, at settlement our funder only allowed you to deduct 3.3% of contract price from the deposit you hold. The balance is required to be provided at settlement for payment to our funder.

Justin:   No, I can't agree with this. This is only opportunity for PIA [the appellant] to get our full commission for the sale.

Sam:    Brother, we have problem with our cash flow. lf you do not agree with this the settlement will not happen. Then you, we and your buyers will all be in trouble.

Justin:    How will PIA commission be protected?

Sam:    North building will be settled next year. You can keep all deposit for North building for outstanding commission when North building starts settle.

Justin:   If the deposits are not enough to pay all balance of commission I need put caveat on your remaining units.

Sam:   It is ok, but please make sure your caveat will not affect our sale and settlement.”

18. He deposed that Chahida Khattar called him around the same time and they had a conversation to a similar effect of the conversation to which he deposed he had with Mr Fayad.

19. Mr Wang agreed to Mr Fayad’s request and received only 3.3% of the contract price towards payment of its commission on sales of units in the East, West and South buildings. The respondent admitted the appellant’s allegation that, at the date of the entry into the Sole Agency Agreement, the amount of commission unpaid that was owing under the former Exclusive Agency Agreement amounted to $3,203,862. ^[1]

    1. The respondent did not plead to the allegation and is therefore taken to have admitted it: Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 at [62]-[63]; Zelden v Sewell Henamast Pty Ltd [2011] NSWCA 56 at [8].

20. Mr Wang deposed to having had further conversations with Mr Fayad concerning delays in payment of commission in several developments to the following effect:

“Justin:   Please help with payments. Payments are outstanding in Viewpoint, Vivo and Northgate. Dyldam has also delayed in making payments for the Somerset sales. PIA has to honour the payment to its sales consultants even PIA has not received payment Please follow up and make some payments to help with my cash flow.

Sam:   If you can settle sold units and sell few more units, we will pay you all outstanding commission, otherwise PIA, we and your clients are all in trouble. You will be fully paid when North building settles.”

21. He deposed that he and Mr Fayad agreed to change the commission rate to 5.5% for further sales on the sole agency basis and there was a further discussion with Mr Fayad as follows:

“Justin:   Can you and Joe provide personal guarantee to pay all unpaid commission and interest on late payments?

Sam:   No, you know I do not like to provide personal guarantee. I do not think Joe would be agreeable to providing personal guarantee as well. At least you hold 10% deposit, it is enough for your commission and penalty interest.

Justin:   I need some security for the significant amounts owing to PIA in Somerset.

Sam:       What security do you want?

Justin:   I need add caveat clause in our agency agreement. I will send you the agency agreement on terms like the replacement exclusive agency agreement of 2015, but changing to sole agency agreement, commission rate at 5% plus GST and caveat provisions to protect PIA.

Sam:   OK. My office will send you the list of the further units. Put them in your sole agency agreement and send to me. We can discuss further afterwards.”

22. The primary judge found that it was not clear whether Mr Fayad’s quoted “OK” expressed agreement to Mr Wang’s request or simply acknowledged the changes which Mr Wang wished to make to the agency agreement. Her Honour favoured the latter characterisation on the basis that Mr Wang and Mr Fayad continued to negotiate about the inclusion of the caveat clauses when they next spoke (at [32]).

23. Nonetheless, Mr Fayad had already expressed agreement to the appellant’s having “protection” for its outstanding commission on units it had already sold, either by recourse to the deposits it held as stakeholder, or by the use of caveats.

24. At some point, and the evidence did not reveal precisely when, the respondent sent to the appellant a schedule of the Agency Lots that were to be the subject of the Sole Agency Agreement. Mr Wang or his staff prepared a Sole Agency Agreement that incorporated the caveat clauses 12.9, 12.10, and 12.11 quoted above. Mr Wang deposed that he had a further discussion with Mr Fayad in around early April 2018 to the following effect:

“Justin:   It is changed to sole agency and not exclusive. The interest provision remains the same. There is no personal guarantee, and the added part is the security provisions in clauses 12.9, 12.10 and 12.11 to safeguard the commission and interest which C88 has failed to pay for the sales and further sales and the extension of the agency period and payment of the first instalment of the commission.

Sam:       Can you leave out the caveat part?

Justin:    No, the caveat part is necessary and important. If PIA is not paid upon completion of contracts of the sold agency lots since 2015 or any further sales PIA will lodge.

Sam:    Okay, but can you agree not to lodge caveats until the remaining stages have completed and the strata plans registered, and PIA has still not received payment for settlement of the sold lots?

Justin:    Okay.”

25. After this conversation, Mr Wang and Mr Fayad signed the Sole Agency Agreement for their respective companies. It was signed on or about 20 April 2018.

26. The appellant’s claim to rectify the definition of “Commission” or “commission entitlements” was based upon its claim that it was the parties’ common intention that the provisions which it contended gave rise to an equitable charge would secure its entitlement to past commissions and not merely the commissions to be earned from the sale of the Agency Lots specified in the Schedule. No claim was advanced for the rectification of the instrument on the ground of the appellant’s unilateral mistake, that is, on the basis that the respondent had deliberately set out to ensure that the appellant did not become aware of the existence of the mistake (Taylor v Johnson (1983) 151 CLR 422 at 432-3; [1983] HCA 5).

27. Mr Fayad did not give evidence. The appellant submitted at trial and on appeal that an inference should be drawn favourable to the appellant on the principles in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 arising from his failure to do so.

28. The primary judge rejected this submission on the basis that, by the time of the trial, the respondent was in liquidation and Mr Fayad could not be described as “in the camp” of the respondent that was then being administered by the liquidator merely by reason of his having been a director of the company (at [6]).

29. There was evidence from the solicitors retained by the liquidator as to their unavailing attempts to try to contact Mr Fayad to ascertain whether he would be willing to give evidence (at [8]).

30. The primary judge’s reasoning is challenged by ground 3 of the Notice of Appeal which contends that the primary judge erred in declining to draw an inference that any evidence given by Mr Fayad or Ms Chahida Khattar, who also did not give evidence, would not have assisted the respondent.

31. The hearing of the trial commenced on 23 June 2022. Administrators had been appointed to the respondent on 14 April 2022.

32. Mr Wang’s affidavit, parts of which have been quoted above, was filed on 12 October 2021. The primary judge recorded that the respondent had first been ordered to put on its evidence by 25 February 2022 and recorded the liquidator’s submission that that order had been varied to require its evidence to be served by 28 March 2022 (at [5]).

33. That submission was not an accurate description of the relevant orders. On 9 December 2021, Ball J ordered that the appellant file and serve any further evidence in chief on which it intended to rely in respect of the “equitable charge and judicial sale relief” by 28 January 2022 and that the respondent file and serve any evidence in reply by 25 February 2022.

34. On 24 January 2022, the appellant’s solicitors advised the respondent they had served their evidence, save for valuation evidence, which was outstanding. This, they said, was partly due to the Christmas and New Year holiday period and also because the respondent was yet to provide keys for access to certain units. On 31 January 2022, Hammerschlag J made the following orders:

“…

2.    The plaintiff to file and serve valuation evidence in which it intends to rely in respect of the equitable charge and judicial sale relief by 28 February 2022.

3.    The defendants to file and serve any evidence in response by 28 March 2022.”

35. Any evidence Mr Fayad could have given was due to have been served by 25 February 2022.

36. The respondent’s then-solicitors filed a notice of ceasing to act on 25 March 2022.

37. The primary judge’s reasons for not drawing a Jones v Dunkel inference from the respondent’s failure to serve an affidavit by Mr Fayad after the appointment of administrators did not address its failure to have served an affidavit from Mr Fayad prior to 25 February 2022. That failure was unexplained.

38. The primary judge drew an inference “generally adversely to the agent” arising from its failure to adduce documentary evidence which might have been expected to be brought forward to support its case for rectification (at [11]). The primary judge recorded that the liquidator submitted that an adverse inference should be drawn from the agent’s failure to adduce any corroborative documents of anything that was said, in particular, “the email or cover letter by which the agent sent the Sole Agency Agreement to C88” (at [9], [11]).

39. It would have been open to either party to tender any email or covering letter accompanying the draft of the Sole Agency Agreement, assuming that there was such an email or letter and, after a lapse of three years or more, it was still preserved. It was not suggested to Mr Wang in his cross-examination that he had made a file note of his conversations with Mr Fayad.

40. The primary judge referred (at [11]) to the absence of any drafts or notes created in the course of preparing the agreement and observed that this was a little surprising in light of the quantity of apartments to be sold and the quantum of the appellant’s anticipated commission.

35. The Sole Agency Agreement was not prepared by the appellant’s solicitor, a Mr Cheung. From about 2009 or the end of 2010, Mr Cheung provided templates of a form of agency agreement or agreements for the appellant’s use. He prepared the caveat provisions, cll 12.9,12.10, and 12.11, in one of those templates in, he believed, 2011 or 2012 or thereabouts. Mr Wang or one of his staff used a template document that had earlier been provided by Mr Cheung in preparing the Sole Agency Agreement.

36. The primary judge referred to the relevant legal principles concerning rectification of written instruments, noting in particular the requirement of clear and convincing proof that the parties had a common intention concerning their agreement which is not reflected in the written instrument (Fowler v Fowler (1859) 4 De G & J 250 at 265; 45 ER 97 at 103; Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54; [1930] HCA 38; Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662 at 664-5; Joscelyne v Nissen [1970] 2 QB 86 at 98; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349; [1973] HCA 23; Pukallus v Cameron (1982) 180 CLR 447 at 452; [1982] HCA 63; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [41]) .

37. The primary judge accepted Mr Wang’s evidence as to the terms of the conversations he had with Mr Fayad (at [78]). Her Honour accepted Mr Wang’s evidence as to his intention and understanding at the time (at [88]), which was that he understood that the provisions providing for the entitlement of the appellant to lodge caveats on the properties in the development would include protection for the appellant in relation to commissions which were then owing to it by the respondent, and for commissions in relation to properties in that development which had already been sold by the appellant. The primary judge was not satisfied that that was also Mr Fayad’s intention. In relation to the conversation quoted at [17] above her Honour said that it was not entirely clear whether Mr Fayad’s agreement at the time to the lodgement of caveats depended upon its becoming clear that the deposits for stage 4 would not be enough to pay unpaid commission from stages 1, 2 and 3 and, in any event, his consent to the lodgement of caveats was qualified by his request to “…please make sure your caveat will not affect our sale and settlement” (at [79]).

38. These reservations did not address the issue whether recourse to the deposits, or the protection envisaged by the lodgement of caveats, would apply to arrears of commission.

39. In relation to the conversation deposed to by Mr Wang in paragraph 18 of his affidavit, quoted at [20] above, the primary judge observed that it was unclear whether Mr Fayad had in mind that the agent would be paid all outstanding commissions in respect of the Somerset when the North building was sold, or whether this means of payment would extend to commissions owing to the agent in respect of other developments (at [80]). That is true, but the conversation at least established that Mr Fayad was promising to pay all outstanding commissions in respect of the Somerset development. It was in that context that the discussions about caveats, which were the subject of the next conversation to which Mr Wang deposed, took place. That conversation is quoted at [21] above and, as noted at [22] above, the primary judge found in respect of it (at [32]) that Mr Fayad’s “OK” should be understood as merely acknowledging Mr Wang’s request for the addition of a caveat clause in the agency agreement to provide security for significant amounts owing to the appellant in Somerset rather than voicing agreement with it.

40. Mr Fayad ultimately did accede to the inclusion of cll 12.9, 12.10 and 12.11 in the Sole Agency Agreement and could not have been in doubt that those clauses were requested by Mr Wang so as to provide security for arrears of commission.

41. The primary judge observed (at [84]) that, if the caveat clauses were taken straight from Mr Cheung’s template without amendment, then it is unsurprising that they did not address the problem of arrears in commission. Her Honour observed that, as unpaid commissions then exceeded $3 million, it might have been a matter on which Mr Cheung’s assistance would have been sought. Mr Cheung’s unchallenged evidence was that his assistance was not sought. Her Honour said:

“As the Court has neither the template nor any notes or drafts, it is not possible to say precisely what happened, save that no attempt appears to have been made to draft such a clause. I infer that such documents, which may be expected to be in the possession of the agent in respect of the preparation of the Sole Agency Agreement would not have supported its claim.”

48. With respect, this reasoning is difficult to follow given her Honour’s finding that it was Mr Wang’s intention and understanding that the caveats would secure arrears of commission. If there were any such notes or drafts, and there was no evidence that there were, they would only have been adverse to the appellant’s claim if an amendment to the definition of Commission had been drafted but then rejected. But that would have been inconsistent with Mr Wang’s intention. The primary judge accepted Mr Wang’s evidence of his intention. The existence of such notes or drafts could not be relevant to the respondent’s intention.

49. In rejecting the rectification claim, the primary judge also had regard to evidence of a conversation to which Mr Wang deposed that he had with Mr Fayad in August 2019. Mr Wang deposed:

“Around August 2019, the North building were ready to settle. Sam informed me that I cannot keep full deposit but can keep 3.3% of contract price from holding deposit. I had a few conversations with Sam separately –

Justin:   Hi Sam, you agreed that I can hold all deposit for North building for commissions including for paying part of outstanding commission east, south and west building.

Sam:   Brother, I am sorry for this. We have not enough money to pay funder, GST etc. You can keep 3.3% of contract prices, please release the balance. Please agree with this for some settlement and enable us to pay some cost. Then you can keep 5.5%.

Justin:   I have concern that you keep breaking your promise. With normal practice your funder should allow you keep amount for paying commissions and GSTs.

Sam:   Brother, the problem is we never tell our funder how much we owe PIA.

Justin:   Same question, what is the security for PIA?

Sam:   As what I said before, after paying off our funders we have a lot of profit left. I have some units without any mortgagee.

Justin:   Can I put caveat on those unit.

Sam:   Yes You can, not now, please don’t disturb our funders and affect settlement.”

50. The primary judge said that if there were a common intention that a caveat lodged under the Sole Agency Agreement secured commissions payable prior to entry into that agreement, it would not have been necessary for Mr Wang to ask the question “what is the security for PIA?” (at [89]).

51. But Mr Wang’s questions were only relevant to his understanding as to whether the caveat provisions applied to arrears of commission. They were not relevant to Mr Fayad’s understanding. The primary judge accepted that Mr Wang’s intention and understanding was that the caveats did secure commission in respect of arrears of commission (at [88]). The respondent’s notice of contention does not challenge that finding. Mr Fayad’s acknowledgement that the appellant could place a caveat on the units, but his request not to do so at that time, in the context of the conversation which related to recovery of arrears, was confirmatory of Mr Fayad’s intention that arrears of commission would be secured by the caveat provisions.

52. The appellant has not sought rectification of cll 12.9, 12.10, or 12.11, so Mr Fayad’s intentions as to what those provisions were intended to achieve is not relevant. But if cll 12.9, 12.10, and 12.11 do imply the grant of an equitable charge to secure the payment of commission, Mr Fayad’s statement as recounted by Mr Wang is confirmatory of Mr Fayad having the intention that arrears of commission would be secured by those provisions.

53. The Sole Agency Agreement included an “Whole Agreement” clause in the following terms:

“22 WHOLE AGREEMENT

22.1   The contents of this Agreement together with the Price List record the entire agreement between the parties. All representations, communications and prior agreements in relation to the subject matter of this Agreement are merged in and superseded by this Agreement.

…

22.3   All understandings, agreements, warranties or representations (whether express or implied) are excluded other than those which are set out in this Agreement.”

54. This clause does not preclude the availability of rectification (MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152 at 155-6). But it is relevant to whether Mr Wang’s or Mr Fayad’s dominant intention was to be bound by the document as worded.

55. Mr Wang’s evidence was that he probably did not read the clause, which was part of the template which he believed was there to protect him, and had “no impression [that] I particularly paid attention for this clause when I prepared the Sole Agency Agreement…I [am] confident that this, this is all good for us” (at [83]). The primary judge accepted Mr Wang as a witness of credit.

56. The primary judge found:

“[88] Whilst I accept Mr Wang’s evidence as to his intention and understanding at the time, the more difficult question is whether that intention was shared by Mr Fayad as, effectively, the intention of C88. Where C88's clear preference was that there be no caveat clauses at all, it is at least equally likely that C88 had no intention to enter into an agreement other than in the terms of the document proffered by the agent. Where the clauses of the Sole Agency Agreement were tolerably clear, the act of Mr Fayad signing the written document is consistent with a conclusion that he did not intend agree to anything further.”

57. The reasoning that the terms of the document were tolerably clear must be a reference to a reading of the caveat clauses which were the subject of the negotiations with their reference to the defined term “Commission”.

58. In Bush v National Australia Bank Ltd (1992) 35 NSWLR 390, Hodgson J (as his Honour then was) dealt with the position where a party both intends to give effect to the document as worded, but also intends to enter into a transaction which has a different effect from that for which the document provides. His Honour said at 407 that, in those circumstances, rectification will be available if the intention to achieve a legal effect, which is not the true legal effect of the words used, is clearly predominant over the intention to give the effect of the document as it is worded.

59. A fair inference is that Mr Fayad had the same intention as Mr Wang that the caveat provisions would provide “protection” not only in respect of commissions to be earned from the sale of the Agency Lots listed in the Schedule, but for arrears of commission. That had been the subject of their negotiations.

60. A second possibility is that Mr Fayad had that intention but also intended to give effect to the document as worded.

61. A third possibility is that Mr Fayad either read the terms of the document, or was advised on the terms of the document, and either believed, or was advised, that the effect of the document, as worded, was that the caveat provisions would only give “protection” for commissions to be derived from the sale of the Agency Lots listed in the Schedule and not for arrears of commission.

62. Mr Wang and Mr Fayad had done business together since 2009, when the appellant was first engaged to market and sell a development conducted by a special purpose vehicle of Dyldam’s in Castle Hill. From about 2014, the appellant was Dyldam’s principal external selling agent. It should not lightly be inferred that Mr Fayad, knowing Mr Wang’s purpose in including the new caveat provisions in the Sole Agency Agreement, would have signed the agreement knowing that the agreement as worded did not provide protection in respect of arrears of commission and kept silent. If Mr Fayad had given evidence to that effect, it might have been anticipated that the appellant would have submitted that it was entitled to rectification on the ground of its own mistake known to the respondent, who had deliberately set out to ensure that it did not become aware of the existence of the mistake.

63. The respondent submitted that no adverse Jones v Dunkel inference should be drawn against it because Mr Wang had not given evidence concerning the respondent’s intention other than what could be gleaned from the conversations. As those conversations were not disputed, there was nothing which the respondent was required to explain or contradict.

64. I do not accept that submission. A consequence of not calling a witness who might be expected to be called is not only that it can be inferred that the witness would not have advanced the case of the party who might be expected to have called him or her, which will often not take the matter further. It is also that an inference available from the evidence that has been led by the opposite party, adverse to the party who might be expected to call the witness, may more readily be drawn (Jones v Dunkel at 308, 312, 320; RPS v The Queen (2000) 199 CLR 620; [2000] HCA 3 at [26]; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63]).

65. There is no reason that that principle should not apply to rectification suits where the plaintiff has the burden of establishing the opposite party’s intention by clear and satisfactory evidence, or convincing proof. It should not be thought that a party facing a claim for rectification, where an inference as to that party’s intention as to the legal effect of the document is available on the evidence adduced by the plaintiff, can successfully defeat the claim by not going into evidence itself, but by propounding alternative inferences by argument, unsupported by evidence, and submitting that the proof proffered by the plaintiff is not convincing because the alternatives have not been rebutted. It may be a question of degree. But in this case, the primary judge erred in concluding that the appellant had not established that it was the parties’ common intention that arrears of commission be “secured” or “protected” by the caveat provisions.

66. The primary judge accepted Mr Wang’s evidence as to his intention and the conversations to which he deposed were not disputed. The fair inference that Mr Fayad had the same intention as Mr Wang should be drawn in the absence of evidence from Mr Fayad to the contrary.

67. The respondent submitted that, even if a common intention were established, the appellant’s proposed amendment to rectify the Sole Agency Agreement would be inconsistent with that common intention. The primary judge had observed that the caveat provisions as drafted did not include qualifications requested by Mr Fayad that caveats not be lodged until the remaining stages had been completed, the strata plans had been registered, and the appellant had not received payment for settlement of the sold lots. Mr Wang agreed. That was not a matter relevant to whether the “protection” to be provided by the caveat provisions would extend to arrears of commission. It is not relevant to the claim for rectification of the definition of “Commission” and “commission entitlement”.

68. Mr Wang adhered to his agreement with Mr Fayad not to lodge the caveats until those events had passed.

69. The respondent’s submissions did not otherwise identify why, if the common intention of the parties were established, the proposed rectification of the definition of “Commission” and “commission entitlements” did not give effect to that intention. The respondent did not submit that rectification of the definition should be confined to the use of the defined term “Commission” in cll 12.9, 12.10, and 12.11.

70. For these reasons, the definition of “Commission” or “commission entitlement” in the Sole Agency Agreement should be rectified as sought in paragraph 1A of the Amended Summons.

Express charge

71. What would be secured by an equitable charge is relevant to the construction of cll 12.9, 12.10, and 12.11 in that it informs the construction of the infinitive “to protect” in cl 12.10 (see below at [111]).

72. The appellant’s primary submission on appeal was that cll 12.15 and 12.16 conferred on it the right to compel a sale of the Agency Lots and set off outstanding Commission against the purchase price. The appellants submitted that this was “a charge by another name” because the Agency Lots had been expressly made liable for the discharge of the Commission owed by the respondent to the appellant. It submitted that it enjoyed a right of immediate recourse to identifiable property, exercisable upon its demand for the satisfaction of that debt.

73. The primary judge dealt with this submission as follows:

“[129] The agent’s reliance on clauses 12.15 and 12.16 was not pleaded. However, as the liquidator addressed the matter in submissions in the event that I was minded to hear the argument, and as the issue turns on the terms of the Sole Agency Agreement, I will deal with it; it does not require any additional evidence and the liquidator has been able to consider the matter. I note, however, that these clauses were not referred to by Mr Wang when he spoke to Mr Fayad after having circulated the proposed Sole Agency Agreement and described the “security provisions”: see [36]. Nor were these clauses cited in the caveat when describing the equitable charge: see [61]. More importantly, the same provisions were included in the second agency agreement (see [24]-[25]), executed before there was any discussion about “security”. If the agent’s submission is correct, then the agent had an equitable charge all along and did not know it.

[130] Consideration of these sub-clauses requires application of the principles summarised in Roberts v Investwell [Pty Ltd (in liq) [2012] NSWCA 134; (2012) 88 ACSR 689], as described at [92]-[96]. Sub-clauses 12.15 and 12.16 do not appropriate property of C88 to the agent for payment of a debt, nor give the agent a present right to have the property made available for the payment of its debt. The first option given in sub-clause 12.15(a) is that the agent can direct C88 to pay accrued commission to the agent’s nominee. The second option given in sub-clause 12.15(b) is that the agent may nominate an apartment to be transferred to the agent at the MSP. At most, the sub-clauses are an agreement to create a charge in favour of the agent on request, which does not create an equitable charge as no immediate proprietary interest or right to recourse to a particular asset is conferred on the creditor: Roberts v Investwell at [30]. The sub-clauses do not refer to a charge, or mortgage or anything other than the ability, on request, to require C88 to sell an apartment to the agent at a set price, which price could be off-set against the commissions owing. Whilst I do not agree with the liquidator that the agent was entitled to exercise this option in the absence of being owed commission, nor do I consider that these sub-clauses evince an intention to confer a proprietary interest as security for a present or future debt. There was no equitable charge. It follows that the agent is not entitled to orders for judicial sale.”

74. The appellant submitted that the primary judge conflated the concept of creating an equitable charge on request with the exercise of the mechanism to enforce that equitable charge on request.

75. There is a more fundamental difficulty with the appellant’s submission. In Swiss Bank Corporation v Lloyd’s Bank Ltd [1982] AC 584, Buckley LJ said (at 595):

“An equitable charge which is not an equitable mortgage is said to be created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realisation by judicial process, that is to say, by the appointment of a receiver or an order for sale…”

76. That passage has been cited with approval in a number of decisions of intermediate appellate courts in this country (see, eg, Broken Hill Proprietary Co Ltd v Commissioner of Stamp Duties [1998] 1 Qd R 452 at 458; Morris Finance Ltd v Brown (2017) 252 FCR 557; [2017] FCAFC 97 at [38]; Johnson v Synnex Australia Pty Ltd [2017] SASCFC 165 at [56]).

77. I accept that cll 12.15 and 12.16 do confer a proprietary interest on the appellant as security for the payment of accrued commission. But the security provided is in the form of a call option, exercisable by the agent with the right of set-off of the accrued commission against the purchase price payable on the exercise of that option. The mechanism agreed by the parties for the enforcement of the security is not a judicial process for the appointment of a receiver or for judicial sale, which are the remedies granted to an equitable chargee in the event of default in the payment of the secured debt (King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; (2005) 13 BPR 25,077 at [50]-[51], [81] (Campbell J)). Exercise of the call option with a right of set-off is the only remedy the parties contemplated. It excludes recourse to the Court for the appointment of a receiver or for an order for judicial sale.

78. The appellant has not sought to exercise that option. The appellant submitted that this Court should make a declaration as to its entitlement to exercise the option as an alternative declaration as to the proper construction of cl 12.15(b). It sought leave to amend its notice of appeal accordingly. But that was not an issue in the proceedings below. The respondent is in liquidation. Counsel for the respondent submitted that defences might be available to the liquidator if the appellant now sought to exercise the option, including that the appellant’s right to commission has merged in the judgment (at [3] above). No issues relevant to the alternative relief sought were ventilated below. It would be inappropriate to make any declaration or order. I would refuse leave to amend. It suffices to say that cll 12.15 and 12.16 do not confer on the appellant the rights of an equitable chargee.

Implied Charge

79. Clauses 12.9 – 12.11, 12.15 and 12.16 are quoted at [4] above. By cl 12.9, the respondent agreed that the appellant may lodge and maintain a caveat or caveats on any “units in the Development”. “Development” was defined in cl 1.1(l) as follows:

“‘Development’ means the development on the Land of new multi storey residential apartments to be under strata title, with such s96 EPA modifications as may be approved by Council.”

80. The “Land” meant land known as 7-13 Jenkins Road and 2-14 Thallon Street, Carlingford, being the site of the Somerset development.

81. “Unit” or “Units” was defined in cl 1.1(z) as a reference to the “respective Agency Lot in the Development, or as a general reference to the residential apartment(s), unit(s) [sic] in the Development, as the context may require”.

82. Clause 12.9 uses the word “units” in lower case and not the defined term “Units”. The right to lodge and maintain caveats conferred by cl 12.9 was therefore a right that related to all units in the Somerset development which had not been transferred to purchasers, in contradistinction to the call options conferred by cl 12.15 which related only to the specified Agency Lots. This would follow even if “units” were to be read as “Units” in the defined sense. This is because the context, in particular the express reference in cll 12.15 and 12.16 to Agency Lots, would suggest that even a reference to Units would be to all units in the Development.

83. Clause 22.1 (the Whole Agreement clause referred to at [53] above) precludes recourse to the negotiations between Mr Fayad and Mr Wang in construing cll 12.9 – 12.11, even in so far as those negotiations reveal matters of objective fact (Johnson Matthey Ltd v AC Rochester Overseas Corporation (1990) 23 NSWLR 190 at 196; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [440]). But that clause does not preclude regard being had to the objective facts that must have been known to both parties at the time the Sole Agency Agreement was entered into, namely, that the appellant was owed millions of dollars in outstanding commission with more commission becoming payable as the settlement of exchanged contracts proceeded.

84. At all material times, s 74F of the Real Property Act 1900 (NSW) has provided that a person who claims to be entitled to a legal or equitable estate or interest in land under the provisions of that Act may lodge with the Registrar-General a caveat prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled.

85. The call options provided for by cl 12.15 undoubtedly conferred on the appellant a caveatable interest in respect of the Agency Lots (see, eg, Mackay v Wilson (1947) 47 SR (NSW) 315 at 325). But because the right granted by cl 12.9 extends to the lodgement of caveats on units in the development other than the Agency Lots specified in the schedule to the Sole Agency Agreement, cll 12.9 – 12.11 are not to be read down by reference to cl 12.15.

86. In Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489; [2011] NSWSC 1562, Bryson AJ observed that:

“[60] In my view the meaning conveyed by a contractual document, including what is conveyed by implication, must be understood by addressing the terms and the whole terms of the document in question, and there is no principle or true principle establishing what implication must be drawn in all cases from authority to lodge a caveat in connection with an obligation to pay money.”

87. That observation has been approved by this Court in Aged Care Services Pty Ltd v Kanning Services Pty Ltd (2013) 86 NSWLR 174; [2013] NSWCA 393 at [82] – [83] (Gleeson JA, with whose reasons Meagher and Leeming JJA agreed) and Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24; (2019) 19 BPR 39,153 at [98] (Bathurst CJ, Beazley P and Macfarlan JA)).

88. Nonetheless, consideration of cases in which it has been held that a right to lodge a caveat does or does not impliedly confer the grant of an interest in land by way of equitable charge may be instructive.

89. In Murphy v Wright (1992) 5 BPR 11,734, a deed of guarantee provided that, in the event of default by the principal borrower in payment of moneys due under the “Security Documents” (being a deed of loan between the lender and borrower and a registered mortgage given by the borrower over its land), the lender would be entitled

“…to attach the debt due to any of the assets of the Guarantor…whether such assets be real or personal and further the parties hereto agree that in the event of such default the Lender may register a caveat against any property registered in the name of [the Guarantor] until the Moneys Secured are repaid”

(The Moneys Secured were the principal debts secured by the guarantee).

90. On an application for an order extending the operation of a caveat lodged by the lender in respect of property of which the guarantor was the registered proprietor, there was an order for the separate determination of the question whether, by that clause, the guarantor agreed to grant any security interest in any asset to the lender.

91. By majority (Priestley and Handley JJA, Sheller JA dissenting), that question was answered in the affirmative.

92. Handley JA held that the clause conferred on the lender an option which, when exercised, created an equitable charge over the subject property. He construed the clause as a conditional contract by the guarantor authorising the lender to attach the debt to her property in respect of her property other than her Torrens title land. As to such other property, the option failed because the manner of its exercise had not been specified. But in relation to the Torrens title land, the manner of exercise of the option was specified by the lender having the right to “register” [sic] a caveat. Handley JA held that attaching a debt to a property involved charging the property with the debt (at 11,739). He reasoned that, unless this construction were adopted, the clause would be meaningless. Priestley JA held that only the construction favoured by Handley JA gave the clause some effect (at 11,735).

93. The reasons of Handley JA and Priestly JA focused on the right of the lender to attach the debt due to any assets of the Guarantor. The right to lodge a caveat was consequential on the meaning attributed to those words.

94. In Troncone v Aliperti (1994) 6 BPR 13,291, the loan agreement did not in terms provide for any security for repayment of the loan, but included a clause which provided:

“The Debtor authorises the Creditors to lodge a Caveat on any property owned by the Debtors (sic) to protect his interest.”

95. Mahoney JA held (at 13,292):

“It is a fundamental principle of construction that ‘Whoever grants a thing is deemed also to grant that without which the grant itself would be of no effect’…

A caveat cannot be entered against land unless the caveator has the relevant proprietary interest in the land: see Real Property Act 1900 s 74F(1) ("a legal or equitable estate or interest in land"). Therefore, unless there be evident an intention to the contrary, the grant to the creditors of an authority to lodge a caveat on the relevant property carried with it by implication such an estate or interest in land as was necessary to enable the authority to be exercised. There was, in the present case, no intention to the contrary…

In order to determine the present appeal, it is not necessary to determine what is the precise nature of the interest in the land which, by this implied grant, was passed to the creditors. It is, in my opinion, sufficient to conclude that it was an interest which, within the Real Property Act 1900, would support the lodgment of the caveat.”

96. Mahoney JA concluded that the caveator’s sufficient interest to support the lodgement of the caveat was the registered proprietor’s covenant that he would not sell or deal with the land until the loan was repaid and that a right to restrain a dealing with the land was an interest in the land “within this branch of the law” (at 13,293).

97. However, this was not the ratio decidendi of the Court of Appeal’s decision in Troncone v Aliperti.

98. Priestley JA agreed with Mahoney JA’s construction of cl 5 of the loan agreements and with his conclusion. He did not agree with his reasoning. Priestley JA regarded the case as being indistinguishable from Murphy v Wright, where the majority concluded that the caveat was supportable by the charge created, in that case, by the clause providing for the attachment of the debt to the property (at 13,293).

99. Meagher JA initially stated that he agreed with Mahoney JA’s reasons and his proposed orders, but his Honour went on to say that the interest which the debtor intended to grant to each of his lenders could only be an equitable charge because, unless the clause were construed as granting a charge, it would be meaningless (at 13,293).

100. In Coleman v Bone (1996) 9 BPR 16,235, the de facto husband of the plaintiff lent the plaintiff’s daughter and her de facto partner $50,000 to assist them to purchase a home unit from the plaintiff and her de facto husband. A document was prepared without legal assistance which provided for the terms of the loan of $50,000. The terms included:

“About the $50,000 I shall want to put caveat on the property.

If you wish to sell you repay me $50,000 plus one third share of capital gain…

As the caveat will safe guard my investment, and you are over borrowing, I will not remove it unless you can (when you wish to sell) repay the $50,000 plus my share of capital gain…”.

101. In holding that the lender was entitled to an equitable charge to secure repayment of the loan of $50,000 plus any capital gain, McLelland CJ in Eq said (at 16,239):

“So far as the “caveat’’ is concerned, it has been held by the Court of Appeal (in Troncone v Aliperti (1994) 6 BPR 13,291 ; NSW ConvR 55-703 ) that if in a contract between A and B, A grants B authority to lodge a caveat in respect of property of A, that grant carries with it by implication such estate or interest in the property as is necessary to enable that authority to be exercised. Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money (Troncone at BPR 13,293–4; ConvR 60,020 per Meagher JA). In the present case the terms of the loan document support such an implication, and in my view the result of the transaction was that the plaintiff became entitled to an equitable charge over the Lane Cove property to secure to her the payment of the $50,000 and any share of capital gain to which she might become entitled calculated in accordance with the loan document.”

102. In Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2004] NSWSC 880; (2004) 12 BPR 22,319, I referred (at [21]) to other first instance decisions in which Troncone v Aliperti had been characterised as a case of an implied charge.

103. In Taleb v National Australia Bank Ltd, Bryson AJ did not agree with the observations of McLelland CJ in Eq in Coleman v Bone (at [60]) but they were cited with apparent approval by Gleeson JA in Aged Care Services Pty Ltd v Kanning Services Pty Ltd (at [83]). In Taleb, a lender advanced money to a company that carried on the business of pawning motor cars. The deed acknowledging the loan included a term that the company agreed to the following term:

“1.3 the Debtor will grant to the Creditor the right to register a Caveat over the Debtor's interest in property located at [address] (‘the secured property’)”.

104. Bryson AJ held that this provision did not impliedly grant an equitable charge. His Honour said:

“[61] The circumstances that there was a debt and that there is to be a caveat, together with the nature of the caveat, certainly direct attention to whether it was intended that the debt should be protected by a charge or some other interest. It is quite likely that there was some such intention in the mind of one party or of both, but if that intention is not found expressed or by implication in their document there is no equitable interest. Authorisation to lodge a caveat does not create by necessary implication the conclusion that there must have been an intention to create an equitable interest, and that there must have been the further intention that that interest should be a charge over the property.

…

[63] My experience with commercial documents has shown that the advantages sought by provisions such as these is not always the advantage of owning an equitable interest such as a charge; there are real advantages in having a caveat on the register and impeding the registered proprietor's dealings in that way, whether or not one owns an interest in the land; once a caveat is lodged it is a complicating factor and an impediment for the registered proprietor's dealings, and getting rid of the caveat involves a certain amount of difficulty. The conclusion that contractual authorisation to lodge a caveat means what it says and no more is not irrational at all. Registered proprietors may agree to put up with an inconvenience as a term of their dealings, and in my experience from time to time they do.

…

[65] In the Deed of Acknowledgement there is no reference to a charge, or to any steps which the creditor might take against the property in the event of non-payment of the debt, or in any event it all. The operative provisions of clause 1.3 come earlier; the reference to the property comes after the operative provisions have concluded. There is no other reference to the property, except as the address of the Debtor. In clause 1.3 the property is referred to parenthetically as ("the secured property") but there is no other use of that expression anywhere in the deed. This is not an operative provision, all it does is restate the reference to the address as a defined expression, yet that defined expression is not used. To refer to the property as "secured" is not to say that the creditor has security over it: the word "secured" does not indicate that in any way. If there were a mortgage or charge the creditor would be secured, not the property. In my opinion clause 1.3 shows an intention of the debtor, as it says in plain language, to grant to the creditor the right to register a caveat over the debtor's interest; it does not express or convey in any way an intention to give the creditor any interest, whether a charge or any other interest, in or over the debtor's property. The grant is to happen in the future, but no event or condition is stated in which it is to happen. All this is too insubstantial matter out of which to spin a filament of implication.”

105. In Aged Care Services Pty Ltd v Kanning Services Pty Ltd, Gleeson JA said:

“[82] Whether it is possible to discern from the authorisation to lodge a caveat (given by a registered proprietor), an intention to create a charge which would support a caveat is the subject of conflicting views in the authorities. The conflict relates to whether there is a principle establishing what implication must be drawn in all cases from the authority to lodge a caveat in connection with an obligation to pay money, or whether each case is to be addressed by reference to the terms of the contractual document to discover what it means, by expression and by implication: Taleb v National Australia Bank Ltd [2011] NSWSC 1562; 82 NSWLR 489 at [60] per Bryson AJ.

[83] In my view, Bryson AJ was correct to observe in Taleb that the statements of Mahoney JA and Meagher JA in Troncone v Aliperti (1994) 6 BPR 13,291 are not to be taken as such a principle. Rather, they are to be taken as a proposition to be derived from the facts in Troncone."

106. What emerges from this review of the authorities is that the principle that where A grants B authority to lodge a caveat in respect of the property of A, the grant carries with it by implication such estate or interest in the property as is necessary to enable the authority to be exercised, is to be qualified by the fact that the agreement to lodge the caveat does not necessarily imply a grant of an interest in the land (s 74F(1)). This is because the existence of a contract authorising the lodgement of caveat may be a good discretionary reason for refusing an application under s 74MA of the Real Property Act for an order that the caveat be withdrawn (Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314 at 11,318-9). In Troncone v Aliperti, where the clause provided that the right to lodge the caveat was “to protect” the lender’s interest, the Court of Appeal did not consider this alternative.

107. After referring to the authorities, the primary judge reasoned as follows:

“[125] Clause 12.10 provided that the caveat provision entitled the agent ‘to protect’ its interest to commission, compensation or damages. It was not suggested that the agent had any proprietary interest to secure any entitlement to compensation or damages which, by the very nature of such claims, are ordinarily unsecured. This may suggest that nor was a proprietary interest intended ‘to protect’ the agent’s right to recover unpaid commission. Also noteworthy, notwithstanding the conversation between Mr Wang and Mr Fayad (described at [31] and [36]), the word ‘security’ was not used in clause 12.10. Rather, the use of the words ‘to protect’ in clause 12.10 is similar to the clause in Troncone v Aliperti, which only one member of the Court of Appeal found created an equitable charge (cf Redglove Projects v Ngunnawal Local Aboriginal Council [2004] NSWSC 880 at [20] per White J).

[126] Clause 12.11 dealt with the circumstances in which the caveat might be removed, being on the agent’s ‘full receipt of its Commission …’ Clause 12.11 provided a contractual bar to an application to remove the caveats, which would be unnecessary if the sub-clauses were intended to create a charge.

189. To similar effect, the following observations of Barrett J in Overlook v Foxtel [2002] NSWSC 17 at [114] ring true in the present case:

A statement made by one party in the course of commercial negotiation between sophisticated corporate parties that it understands or appreciates a position stated by the other will most often be no more than what it appears to be, namely, a statement of awareness of the other’s position. It is commonplace in such situations for one party to say that it cannot accept a particular position or can do so only if some concession is made. That is part and parcel of the negotiating process. But one party’s representations about what is vital or important to it and the other’s response that it understands or appreciates the first’s position are most commonly steps in the formulation of a complete bargain where the party who holds the particular aspect to be vital or important effectively bears the onus of putting that matter squarely on the table and obtaining an explicit promise that the other party will honour or respect it. Furthermore, a statement that it is appreciated or understood that a matter is considered vital cannot, of itself and without more, amount to a representation that the matter will be accepted or respected or not departed from. It might be different where the parties are dealing on unequal terms or one is entitled to place some reliance upon the other. But here the parties were sophisticated corporations represented by experienced businessmen and assisted by lawyers.

190. The four relevant conversations here occurred in the context of ongoing and robust negotiations over several weeks or months regarding Mr Wang’s concern that the plaintiff be paid outstanding commission. His own strongly stated position was that he needed to have the capacity to lodge caveats on the remaining units. He made this clear in the first and third of their conversations. It is equally plain that Mr Fayad’s strong personal position was that the plaintiff’s commission was adequately protected because he was willing for it to keep all the deposit for the sale of units in the North building of the development (which the primary judge found was a reference to Stage 4 of the development and the strata plan for that stage was ultimately registered on 12 July 2019), to be applied to any outstanding commission at that time. In their first conversation, Mr Wang responded by saying that if the deposits were not enough to cover the balance of commission, he needed to “put caveat on your remaining units”. Mr Fayad is said to have responded by saying “it is ok, but please make sure your caveat will not affect our sale and settlement”.

191. Viewed in isolation, Mr Fayad’s response on this occasion might provide some support in establishing the common intention but, significantly and as a matter of context, the negotiations did not end there. In the second conversation, which according to Mr Wang took place towards the end of March 2018 (i.e., approximately three weeks before the SAA was executed), Mr Wang again raised the need for outstanding commissions to be paid. Mr Fayad simply repeated that the plaintiff would be fully paid when the North building settled. Notably, Mr Wang did not suggest that either he or Mr Fayad raised in this particular conversation the issue of caveats protecting the plaintiff’s past commission. This issue was simply not part of the negotiations which occurred at that time. This assumes that this particular conversation occurred earlier than the third conversation, to which I now turn.

192. In the third conversation (noting that it is unclear whether it formed part of the second conversation in late March 2018 or early April 2018 or some other time but possibly within that period), it is plain that the parties were still in robust negotiations. Apparently for the first time Mr Wang raised whether Mr Fayad and his business partner could provide personal guarantees to pay all unpaid commission and interest on late payments. Mr Fayad rejected that suggestion. Again, he sought to reassure Mr Wang that his commission and penalty interest were sufficiently protected by the fact that the plaintiff as agent held 10 per cent of the deposit. When Mr Wang insisted that he needed some security, Mr Fayad asked what security he wanted. This led Mr Wang to say that he needed to add a “caveat clause in our agency agreement”. Mr Fayad is recorded as saying “OK” and that his office will send Mr Wang a list of the further units to be included in a sole agency agreement and that they can “discuss further afterwards”. Plainly, therefore, Mr Fayad kept open the prospect of further negotiations. I respectfully agree with the primary judge’s finding that Mr Fayad’s use of the term “OK” on this occasion should not be viewed as an express agreement to Mr Wang’s request, but rather amounted to an acknowledgment of the changes which Mr Wang wished to make in the proposed sole agency agreement so as to protect the plaintiff regarding outstanding commission.

193. The fourth point (which is weaker than the earlier points) relates to Mr Wang’s command of English. I mean no disrespect to him when I say he clearly had difficulties with the English language, it being his second language. As the primary judge noted at PJ[11], Mr Wang said that he left the preparation of documents to his staff whose “English is better than me”. This evidence was given in the context of the following exchange during Mr Wang’s cross-examination:

Q.   Carla doesn’t sound like a person who would have any particular capability to do a legal drafting document. Do you accept that?

A.   Maybe not in a legal sense but the - grow here, the English is better than me.

194. Under cross-examination, Mr Wang freely acknowledged that his English was not good as is evident from the following exchange:

Q.   I am talking about amendments to the template document, not using the template document to create agency agreements for each project. Do you understand that?

A.   Sorry, I bit confused. Most – sorry, my English, yeah?

195. If further evidence of Mr Wang’s difficulties with the English language is required, reference can be made to the following extracts from his cross-examination:

Q.   Are you saying here the template document was held in the office of PIA at Sydney Olympic Park?

A.   Yeah.

Q.   And are you also saying that the sole agency agreement document was prepared in the office of PIA at Sydney Olympic Park?

A.   The drafter over what is prepared by solicitor before for the previous project.

Q.   The template?

A.   Yeah, the template but there may be like some modification for particular case is by my staff, for my memory, yeah.

196. Mr Wang did not give evidence with the assistance of an interpreter. I am not suggesting that because of his difficulties with English as his second language his evidence deserved no weight. That would be inconsistent with the primary judge’s acceptance of his evidence regarding the terms of the four conversations. Rather, the point I am making is that considerable caution needs to be exercised in attaching significance to, or drawing strong inferences from, Mr Wang’s account of his recollections of particular words used by Mr Fayad. Mr Wang’s difficulties with the English language is relevant to the weight to be given to matters upon which linguistic skills depend. Naturally, these reservations do not apply to any reasonable inferences drawn from conduct, as opposed to words.

197. With those four points in mind, I will now explain why I consider that the primary judge was correct in concluding that the plaintiff failed to discharge its heavy onus regarding common intention.

198. In his reasons for judgment at [23], after referring to the primary judge’s interpretation of Mr Fayad using the word “OK” in the third conversation, White JA states that, nonetheless, Mr Fayad “had already expressed agreement to the appellant’s having ‘protection’ for its outstanding commission on units it had already sold, either by recourse to the deposits it held as stakeholder, or by the use of caveats”. His Honour may be referring to what was said at the conclusion of the first conversation with Mr Wang, when Mr Fayad said: “It is ok, but please make sure your caveat will not affect our sale and settlement”.

199. With respect, I do not agree. As I have emphasised, Mr Wang and Mr Fayad were engaged both then and subsequently in ongoing and earnest negotiations. This is evident not only from the terms of the relevant conversations, but Mr Wang himself frankly acknowledged during his cross-examination that he too was still in the course of negotiating when he forwarded a copy of the draft SAA for Mr Fayad’s review. The following exchange occurred concerning this matter:

Q.   PIA was taking an opportunity to submit the document to C88 via Sam Fayad to see whether they would agree to it?

A.   Yes.

Q.   You were using this as an opportunity to negotiate new clauses--

A.   Yeah.   

Q.   --being clauses that, from your point of view, were improvements to the document?

A.   From our side, yeah.

Q.   From your side. They were better for you?

A.   That’s right.

Q.   And what you were doing by providing that document to Mr Fayad is saying to him, “This is the deal I want to do.”

A.   Sorry, say that – what’s the deal like--

Q.   “This document--"

A.   Yeah.

Q.   “--contains the deal I want to do with you.”

A.   With Sam Fayad, yeah, that’s right.

200. No doubt each negotiator was seeking to advance and secure his own commercial position throughout the course of the negotiations. The fact that Mr Fayad is recorded as saying at the end of the first conversation after the issue of caveats was raised by Mr Wang that: “it is ok…”, does not mean that he had expressed final agreement to Mr Wang’s proposal regarding caveats.

201. The fourth conversation (which is set out at [21] of Mr Wang’s affidavit) occurred in early April 2018, which was several weeks before the SAA was executed. It may be inferred that Mr Wang had sent Mr Fayad a copy of the proposed SAA before the fourth conversation occurred. The draft included the caveat provisions at cll 12.9, 12.10 and 12.11, as well as the definition of “commission” as set out at [6] of White JA’s reasons for judgment. Mr Wang explained to Mr Fayad that there was no personal guarantee but that the added part of the proposed SAA was “the security provisions in clauses 12.9, 12.10 and 12.11 to safeguard the commission and interest which C88 has failed to pay for the sales and further sales and the extension of the agency period and payment of the first instalment of the commission”. Consistently with his earlier position, Mr Fayad asked whether the caveat part could be left out. Plainly, he was still negotiating. Mr Wang refused to delete the caveat provisions, describing them as “necessary and important” and that caveats would be lodged if the plaintiff was not paid upon completion of contracts for lots sold since 2015 or any further sales. That led to Mr Fayad then saying what is attributed to him at the end of the fourth conversation, including the significance of his use of the term “okay”. But then he immediately asked whether Mr Wang would agree not to lodge caveats unless certain things occurred. Mr Wang recalls he then said “okay”.

202. Thus, it is evident from Mr Wang’s account of the fourth conversation that both he and Mr Fayad continued to negotiate right up to the end of that conversation notwithstanding that, by this time, Mr Fayad had been provided with a copy of the proposed SAA.

203. Finally, as noted above, the primary judge also attached some significance to the terms of a conversation which Mr Wang and Mr Fayad had in August 2019 (i.e., well after the SAA was executed), around the time when the North building was ready to settle. The terms of that conversation are set out at [49] of White JA’s reasons for judgment.

204. The primary judge attached significance to the fact that Mr Wang again raised with Mr Fayad the question of the plaintiff’s security. Her Honour reasoned that if there was a common intention that a caveat lodged under the caveat clauses of the SAA secured commissions payable prior to 20 April 2018, it would not have been necessary for Mr Wang to ask that question.

205. I respectfully agree with that reasoning. Moreover, Mr Fayad sought to assuage Mr Wang’s concerns by saying that the defendant would have “a lot of profit left” and that there were some units (presumably in the North building) without any mortgagee. It was in that context that Mr Wang asked him whether he could put a caveat on those particular units, to which Mr Fayad responded affirmatively but asked that no such lodgement occur which would disturb the funders and affect settlement. I do not regard this exchange as indicating an acceptance on Mr Fayad’s part that caveats could cover arrears of commission. Viewed in the wider context, the statements are equivocal and open to more than one interpretation. In my respectful view, they are insufficient to discharge the appellant’s heavy onus.

206. For these reasons, I reject ground 2 of the notice of appeal.

Jones v Dunkel

207. Grounds 3, 4 and 5 of the amended notice of appeal all relate to the principle in Jones v Dunkel. I have summarised her Honour’s reasons on this matter at [176] above.

208. I agree with White JA that the principle can apply in a rectification suit. In particular, I agree with his Honour’s observation that such a suit should not be successfully defended simply by the other party not going to evidence itself. Ultimately, the issue whether or not the principle applies depends on the particular circumstances and, as his Honour correctly points out, may involve a question of degree.

209. The Jones v Dunkel principle was recently considered by Kirk JA (Leeming and Mitchelmore JJA agreeing) in Ling v Pang [2023] NSWCA 112 at [20]-[28]. As Kirk JA observed at [21], after referring to Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63], there are two types of inferences which may be drawn where the principle applies (citations omitted):

The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. ... The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.

210. I respectfully agree with Kirk JA’s statement at [27] as to the rationale underlying the principle:

What underlies the principle in Jones v Dunkel is that the failure to call the witness “serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party”: Jones v Dunkel (1959) 101 CLR 298;[1959] HCA 8; at 320-1 at 320-321 per Windeyer J; see also Fabre v Arenales (1992) 27 NSWLR 437 at 449 per Mahoney JA. The circumstances in which such a fear may be inferred are various.

211. Having regard to the wording of ground 3 of the amended notice of appeal and the appellant’s outline of submissions at [64], it appears that the appellant relied upon the first type of inference described by Kirk JA in Ling. The appellant’s claim was that any evidence given by Mr Fayad and/or Mrs Khattar “would not have assisted the respondent in relation to the issue of whether the appellant and the respondent had the common intention in Ground 2”.

212. In circumstances where Mr Wang deposed at [17] of his affidavit that the conversation he had with Mrs Khattar was similar to that which he had with Mr Fayad, it is sufficient to focus upon this ground as it relates to Mr Fayad. Although the appellant pointed out that Mrs Khattar’s absence was entirely unexplained, I do not consider that this puts her in a different position from Mr Fayad. As I shall shortly explain, the Jones v Dunkel principle did not apply because of the plaintiff’s failure below to discharge its onus of establishing the claimed common intention. This failure applies equally to Mr Fayad and Mrs Khattar.

213. Although no affidavit was filed by Mr Fayad prior to 25 February 2022 as required by the orders dated 9 December 2021 (subsequent orders dated 31 January 2022 relate only to the filing of valuation evidence), no significance or adverse inference should attach to this omission. For the reasons given above, I agree with the primary judge’s assessment that, objectively assessed, Mr Wang’s oral and affidavit evidence (together with the matters of conduct relied upon by the plaintiff) did not provide a sufficient foundation for any inference to be drawn concerning the alleged common intention. Thus there was no requirement for the defendant to go into evidence on this point given that the plaintiff carried the burden. In these circumstances, there was no scope for an unfavourable inference to be drawn against the defendant because of Mr Fayad’s failure to provide an affidavit. To put the matter another way, given the equivocal nature of the plaintiff’s evidence on the issue of common intention, no natural inference should be drawn that the defendant feared that if Mr Fayad had provided evidence this would have exposed facts which were unfavourable to it.

214. In addition, insofar as Mr Fayad’s failure to give evidence at the hearing itself was concerned, an adequate and acceptable explanation was provided as summarised at [176] above.

215. For these reasons, I reject grounds 3 and 4.

216. Ground 5 relates to the primary judge’s observations at PJ[11] and [84] concerning the plaintiff’s failure to adduce any notes or drafts pertaining to the preparation and finalisation of the SAA. As noted at [178], the primary judge’s reasoning on this matter was criticised by White JA as “difficult to follow” and appears to form part of the basis for his Honour’s opinion that ground 5 should succeed. For the following reasons, I respectfully disagree.

217. First, even if it be assumed that the reasoning is difficult to follow, that of itself would not assure the appellant success. It is well settled that appeals lie from orders, not reasons (see, e.g., BP v State of New South Wales [2019] NSWCA 223 at [11]-[12]; McNab v Director of Publication Prosecutions (NSW) (2021) 106 NSWLR 430; [2021] NSWCA 298 at [25]; and Kramer v Stone [2023] NSWCA 270 at [259]).

218. Secondly, I do not have any difficulty with the primary judge’s reasoning at PJ[11] and [84]. The critical steps in that reasoning may be summarised as follows:

1. it was unclear whether the caveat clauses were taken straight from a template or whether the template was amended;

2. if there was an intention for caveats to be lodged in respect of arrears in commission, amendments were plainly required to the template;

3. if Mr Wang did not draft the SAA himself, given the importance to him of the caveats applying to past commission, one would think that he would have instructed his staff on this subject (or sought Mr Cheung’s assistance) in preparing the SAA;

4. in these circumstances, without the template or any notes or drafts, it was not possible to say precisely what occurred, save that no attempt appears to have been made to draft such a clause; and

5. thus an inference arose that any documents which may have been within the plaintiff’s possession in respect of drafting the SAA would not have supported “its claim”.

219. Fairly read, I understand her Honour’s reference at PJ[84] to “its claim” to be a reference to the plaintiff’s claim below that there was a common intention that the SAA would permit caveats to be lodged in respect of arrears in commission.

220. I do not read the primary judge’s reasoning as involving any inconsistency between her Honour’s acceptance of Mr Wang’s intention and the inference her Honour may have drawn from the plaintiff’s failure to adduce documents regarding the drafting of the SAA. I understand her Honour to be saying that if in fact there was a common intention which accorded with Mr Wang’s subjective intention, it would be reasonable to expect that this would be recorded in the notes or drafts of the SAA. But since no such documents had been adduced, an inference could be drawn that any documents which may have existed would not have supported the plaintiff’s case concerning the asserted common intention.

219. Thirdly, and in any event, as the appellant’s counsel explained in his reply submissions, it was common ground between the parties on the appeal that the primary judge’s observations at PJ[84] concerning the Jones v Dunkel principle applying to any notes or drafts, did not affect the outcome of the case. I see no reason why the Court should depart from the common position of the parties on this issue.

Conclusion

222. For these reasons, I propose that the appeal be allowed in part. As I have indicated above, I consider that the declaration regarding the equitable charge needs to be narrower so as to reflect the appellant’s failure to obtain rectification. The parties should have an opportunity to agree the terms of a declaratory order, as well as orders as to costs of both the proceeding and the appeal.

223. Accordingly, I propose the following orders:

1. The appeal be allowed in part.

2. Set aside the order dated 12 August 2022.

3. Subject to order (4), remit the proceedings to the primary judge for the purpose of considering making orders for judicial sale.

4. Within 14 days hereof, the parties are to seek to agree the form of a declaratory order which gives effect to these reasons, as well as seek to agree costs of the proceeding both below and on appeal. If they are unable to reach agreement, each should within that time provide a brief written outline of submissions, not exceeding four pages in length, in support of their respective positions. The remaining issues will then be finalised on the papers and without a further oral hearing.

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Endnote

Decision last updated: 06 December 2023