White Pointer Investments Pty Ltd v Creative Academy Group Pty Ltd

[2023] NSWSC 817

Supreme Court

New South Wales

Medium Neutral Citation:

White Pointer Investments Pty Ltd v Creative Academy Group Pty Ltd [2023] NSWSC 817

Hearing dates:

20, 22 March 2023, further submissions 2, 5, 11 and 30 May 2023

Date of orders:

25 July 2023

Decision date:

25 July 2023

Jurisdiction:

Equity - Commercial List

Before:

Rees J

Decision:

Judgment against first defendant with costs.

Catchwords:

CONTRACTS — plaintiff offers to source childcare sites for the defendants at a “boozy” lunch — eight sites sourced in NSW and ACT — whether there was an oral contract – principles at [204]-[206] — whether to disregard evidence given consumption of alcohol, at [207] — post-contractual conduct corroborates oral contract — whether oral contract varied – plaintiff agreed to a series of indulgences, which were not variations for want of consideration, at [232].

CONTRACTS — sufficiency of consideration — defendants made settlement offer that was accepted — offered to pay an amount early instead of a larger amount already due — whether offer supported by sufficient consideration — principles at [235]-[237] — no tangible benefit — whether consideration in recording the agreement in writing — parties had already recently recorded their agreement — whether consideration by release of plaintiff from claims under Property and Stock Agents Act 2002 (NSW) and Agents Act 2003 (ACT) — parties then unaware of any issue with plaintiff’s real estate licence – no consideration where licensing issue not in parties’ contemplation at the time of formation – principles at [246]-[247].

REAL ESTATE AGENT – whether plaintiff precluded for recovering fees as no real estate agent licence – Property and Stock Agents Act 2002 (NSW) s9(2) – Agents Act 2003 (ACT) s 23 – whether should take into account other services for which no fee charged, at [33]-[35] – whether plaintiff “acting as agent” – principles at [260]-[266] – acted as agent for NSW site – whether “negotiating with”, at [278] – meaning of “inducing or attempting to induce” under Agents Act 2003, s8(2)(b) at [279]-[287] – inducement is of the counterparty, not the principal – plaintiff did not induce counterparty – plaintiff entitled to recover fees for ACT sites.

RESTITUTION – money had and received – whether defendants entitled to restitution of money paid under contract for NSW site due to plaintiff’s breach of Property and Stock Agents Act – principles at [314]-[319] – breach of Property and Stock Agents Act did not render contract unenforceable per se – legislation punished agents directly – no total failure of consideration – mistake – no entitlement to restitution for payments made under valid contract, at [321]-[322] – no evidence that defendants were mistaken or that mistake was causative of payments made, at [324].

CORPORATIONS — pre-incorporation contracts — s 131, Corporations Act 2001 (Cth) — special purpose vehicles later incorporated to enter into leases of childcare sites — plaintiff asked to invoice special purpose vehicles — principles at [221]-[224] — ratification — although common practice to set up companies for each site, no discussion of special purpose vehicles at time of oral contract — whether special purpose vehicles reasonably identifiable with company on whose behalf oral contract was entered into — requirements of s131 not established.

Legislation Cited:

Property and Stock Agents Act 2002 (NSW) ss 3(1), 3A, 8, 9

Corporations Act 2001 (NSW) s 131

Agents Act 2003 (ACT) ss 8, 18, 23

Cases Cited:

ACCC v Bluescope Steel Ltd (No 5) [2022] FCA 1475

Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; (1954) 92 CLR 424

Aztech Science v Atlanta Aerospace (Woy Woy)[2005] NSWCA 319

B J McAdam Pty Ltd v Jax Tyres Pty Ltd (No 3) [2012] FCA 1438

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153

Breusch v Watts Development Division Pty Ltd (1987) 10 NSWLR 311

Challenger Group Holdings Ltd v Concept Equity Pty Ltd [2008] NSWSC 801

Challenger Group Holdings Ltd v Concept Equity Pty Ltd [2019] NSWCA 120

Commissioner of State Revenue v Viewbank Properties Pty Ltd [2004] VSC 127

David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 353; (1992) 175 CLR 353

Director of Public Prosecutions for Victoria v Le [2007] HCA 52

Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498

Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 5

Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336

Gnych v Polish Club Ltd (2015) 255 CLR 144; [2015] HCA 23

Grant v John Grant and Sons [1954] HCA 23; (1954) 91 CLR 112

GuanvLui [2021] NSWCA 65

Haigh v Brooks (1839) 10 Ad & El 309; (1839) 113 ER 119

Hawk Australia Pty Ltd v George Ambrose Commercial Pty Ltd [2007] NSWSC 1150

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110

International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644

Jenkins v Kedcorp Pty Ltd [1999] QCA 452; [2002] 1 Qd R 49

John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451

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

JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625

Kennedy v De Trafford [1897] AC 180

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

LarkinvGirvan (1940) 40 SR (NSW) 365

Lendlease Real Estate Investments Ltd v Charter Hall Retail Management Ltd [2011] NSWSC 1624

Lym International Pty Limited v Marcolongo (2011) 15 BPR 29,465; [2011] NSWCA 303

Mathews Capital Partners Pty Ltd v Coal of Queensland Holdings Ltd [2012] NSWSC 462

Newitt v Leitch (1997) 6 Tas R 396

Payne v Parker [1976] 1 NSWLR 191

Persad v Singh [2017] UKPC 32

Peterson v Moloney (1957) 84 CLR 91

Queensland Phosphate Pty Limited v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269

R v Thiyagarajah [2019] SASC 84

RHG Mortgage Ltd v Rosario Ianni [2015] NSWCA 56

RogersvKabriel [1999] NSWSC 3

Ryde Developments v The Property Investors Alliance [2017] NSWSC 436

SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56

Schwartz v Hadid [2013] NSWCA 89

Scott v Davis (2002) 204 CLR 333

SearlevCommonwealthofAustralia (2019) 100 NSWLR 55; [2019] NSWCA 127

Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 1) [2008] QCA 357; [2009] 1 Qd R 589

Sunlink Group Pty Ltd v Lui [2019] NSWSC 803

The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd (in liq) [2022] NSWSC 1081

Watson v Foxman (1995) 49 NSWLR 315

WiganvEdwards (1973) 1 ALR 497

Williams v ATM & CPA Pty Limited [2015] NSWSC 703

Texts Cited:

Ian Jackman, Varieties of Restitution (Federation Press, 2nd Edition)

J W Carter, Contract Law in Australia (LexisNexis Butterworths, 7th Edition)

K Mason, J W Carter and G J Tolhurst, Restitution Law in Australia (LexisNexis Butterworths, 4th Edition)

N C Seddon and R A Bigwood, Cheshire & Fifoot Law of Contract, (LexisNexis Butterworths, 11th Australian Edition)

Category:

Principal judgment

Parties:

White Pointer Investments Pty Ltd (Plaintiff)
Creative Academy Group Pty Ltd (First Defendant)
Wonderschool (Conder) Pty Ltd (Second Defendant)
Wonderschool (Dickson) Pty Ltd (Third Defendant)
Wonderschool (Taylor) Pty Ltd (Fourth Defendant)
Wonderschool (Throsby) Pty Ltd (Fifth Defendant)
Wonderschool (Woden) Pty Ltd (Sixth Defendant)
Simon Larcombe (Seventh Defendant)

Representation:

Counsel:
Mr I Pike SC / Mr CE Bannan (Plaintiff)
Mr R Newlinds SC / Mr PD Reynolds (First to Seventh Defendants)

Solicitors:
Keypoint Law (Plaintiff)
Shanahan Tudehope Lawyers (First to Seventh Defendants)

File Number(s):

2021/161182

Judgment

1. HER HONOUR: The plaintiff, White Pointer Investments Pty Ltd, sues for some $800,000 under an oral contract to “source” childcare centres for the defendants, for a fee of $2,000 per approved child place. The seventh defendant, Simon Larcombe, is the person with whom the conversations said to form the basis of the contract were had. He is a director and shareholder in the first defendant, Creative Academy Group Pty Ltd, which is the parent company of special purpose vehicles subsequently established to enter into leases for each childcare centre, being the second to sixth defendants. (In what follows, I have simply referred to the defendants, unless it is necessary to be more specific).

2. The defendants accept that the plaintiff “sourced” eight childcare centres, being Hurstville in New South Wales and Conder, Dickson, Macgregor, Red Hill, Taylor, Throsby and Woden in the Australian Capital Territory. Four issues arise:

1. was there an oral contract in the terms alleged;

2. did the parties enter into a binding settlement agreement in March 2020, such that the defendants are now obliged to pay far less than the amount due under the alleged oral contract;

3. is the plaintiff precluded from recovering its fees by the Property and Stock Agents Act 2002 (NSW) or the Agents Act 2003 (ACT), for want of a real estate agent licence; and

4. is the plaintiff obliged to refund fees already paid given the illegality of the oral contract or as payments made under a mistake, being that the plaintiff had the necessary licences to provide its services.

3. The parties agreed that the plaintiff’s entitlement to fees for childcare centres due to open in the near future will abide this judgment.

4. Whilst I have been greatly assisted by the parties’ submissions, I have, by and large, not repeated those submissions here.

Evidentiary matters

5. The plaintiff relied on the evidence of its director, Hilton Hedley, who was cross-examined. Mr Hedley appeared an intelligent and straightforward person. He did make some unsolicited negative comments about his former friend, Mr Larcombe, and was clearly annoyed about the events which had unfolded. Mr Hedley was entitled to feel badly treated by his “mate,” who later boasted that he had “smashed” Mr Hedley on fees: see [195].

6. Mr Hedley’s evidence contained some inconsistencies which were not of great moment: see [27]. Of more moment, Mr Hedley down-played the extent of the tasks which he performed for the defendants, presumably in light of the allegation that the plaintiff should have had a real estate agent licence. Mr Hedley was reluctant to accept that he had provided the defendants with advice in respect of whether a particular site was suitable, agreeing that he provided “vague advice on whether the opportunity was a good or a bad one.” Likewise, “to the extent that it was a ‘cracker’ or a ‘f’ing cracker’ … it’d be limited to that.” It is clear from his emails and text messages that Mr Hedley did provide advice from time to time, albeit in loose colloquial terms. The plaintiff’s counsel accepted that Mr Hedley’s evidence that he did not give advice was wrong. Otherwise, Mr Hedley was generally open and accurate about his role. I consider Mr Hedley to be a generally reliable witness, albeit I have deferred to contemporaneous documents.

7. In this regard, the parties tendered a very substantial amount of documentary material. Any discrepancies between Mr Hedley’s first and second affidavits, or his oral evidence, as to the services the plaintiff provided are resolved by this material. Similarly, whatever concessions were said to have been extracted in cross examination do not override the import of this material. I have in mind Mr Hedley’s agreement in cross-examination that he would not introduce a tenant to the landlord’s agent if he did not think they would be a good operator; by implication, he was recommending that person as a tenant. At least for the ACT sites, the contemporaneous records indicate that the landlord’s agent, Guy Randell, recommended the tenant and not the plaintiff: see for example, at [71].

8. The defendants called no witnesses. An affidavit had been served by Mr Larcombe, who was not ultimately called to give evidence. The plaintiff submitted that the Court should draw an adverse inference from his failure to give evidence: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 at 320-321 (per Windeyer J). The defendants submitted that the Court should simply infer that Mr Larcombe could not offer any cogent evidence as to what was said in conversations six years ago at a “boozy” lunch, and infer that he could not remember with certainty the words that were said. In any event, the plaintiff had also proposed to call Glenn Dumbrell, who was not called, and so a Jones v Dunkel inference would cut both ways.

9. I readily draw a Jones v Dunkel in respect of the failure to call Mr Larcombe. As explained in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361; at [63]: (emphasis added)

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. That is particularly so where it is the party which is the uncalled witness. 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. …

See likewise RHG Mortgage Ltd v Rosario Ianni [2015] NSWCA 56 at [78] (per McColl JA, Emmett JA and Sackville AJA agreeing, citing Payne v Parker [1976] 1 NSWLR 191 at 201-202 (per Glass JA)).

10. Mr Larcombe’s evidence was relevant not only to the conversations forming the oral agreement but also on the extent of Mr Hedley’s role in performing that agreement in the ensuing two years, circumstances surrounding the settlement agreement and whether Mr Larcombe was mistaken when making payments to the plaintiff. I infer that his evidence would not have assisted the defendants’ case.

11. As to Mr Dumbrell, at the time of these events, Mr Dumbrell worked for the defendants. Mr Dumbrell was the executive general manager of Creative Academy, overseeing property acquisition and senior management. An initial question is whether Mr Dumbrell may be regarded as “in the camp” of the plaintiff or “a witness likely to be friendly to the interests of the other party”: Payne v Parker [1976] 1 NSWLR 191 at 201-202 (per Glass JA); Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343 (per Kirby P, Mahoney and Clarke JJA agreeing). The fact that Mr Dumbrell swore two affidavits which were served in support of the plaintiff’s case suggests that, by the time of the hearing at least, his allegiance had shifted to Mr Hedley. As no explanation was given for Mr Dumbrell’s failure to give evidence, I draw the same inference. To some extent, this does have a neutralising effect in respect of the absence of Mr Larcombe, at least in respect of the oral agreement. However, Mr Larcombe is a party to these proceedings. He is a director and, through other corporate entities, a shareholder of the corporate defendants. Mr Larcombe was the decisionmaker in respect of each transaction. His absence from the witness box is significant.

Mr Hedley and the plaintiff

12. Mr Hedley described himself as a commercial real estate consultant with some 27 years’ experience in the commercial property industry. Over those years, Mr Hedley worked with Australian Property Group, Colliers International, Jones Lang Lasalle, Colorado Group Ltd, Stockland Corporation Ltd, Ticor, Macquarie Group and MCD Australia.

13. Mr Hedley was a licenced commercial real estate agent, but his licence expired on 1 May 2014. Mr Hedley did not renew the licence as he understood that he did not need a licence for the work he was doing at the time. Mr Hedley was then sourcing childcare sites for Guardian Early Learning Group, Little Learning School Pty Ltd and Kids Club Childcare.

14. In 2015, the plaintiff was incorporated. The plaintiff is the corporate vehicle through which Mr Hedley provided commercial real estate consultancy services. Mr Hedley used the business name “Allied Property Group.” The plaintiff sourced childcare centre opportunities for its clients using the relationships which Mr Hedley had developed with owners and real estate agents.

15. In particular, Mr Hedley had a professional relationship with Mr Randell, a commercial real estate agent representing owners in Canberra. As will be seen, Mr Randell’s clients were owner developers at various stages of obtaining development consent, constructing or leasing sites which included childcare centres. Since 2018, Mr Hedley had been contacted by Mr Randell, seeking suitable tenants for childcare space in such properties.

Mr Hedley and Mr Larcombe meet again

16. From 2003 until 2006, Mr Hedley worked with Mr Dumbrell at Stockland. Afterwards, they maintained a professional working relationship. Mr Dumbrell generally worked for owners. Mr Hedley predominantly worked for tenants.

17. Mr Dumbrell and his domestic partner became involved in childcare centres, incorporating Play Academy Australia Pty Ltd in 2016. Play Academy began with one childcare centre in Five Dock (“Happy Little Campers”) and, in September 2017, was working towards opening another childcare centre in Croydon Park (“Woodstock”). Whilst Play Academy was owned by Mr Dumbrell and his partner, Mr Dumbrell then wrote that the company had “major financial backing to grow the group to 30 centres over the next five years.” This appears to have been a reference to Mr Larcombe and his colleague, Anthony Brooks, who were providing financial support to acquire the Croydon childcare centre.

18. Likely at this time, Mr Hedley and Mr Dumbrell met at the Woollahra Hotel one evening. Mr Dumbrell said that he and his domestic partner had started up a business managing childcare centres and were looking for investors. Mr Hedley said, “I have so many sites on the go with Kids Club. I am happy to steer them your way as long as you pay me the same fee as Kids Club.” Mr Hedley had already mentioned to Mr Dumbrell on a few occasions that he was getting $2,000 per place (plus GST) from Kids Club.

19. Mr Hedley was then doing some work for the developer of a site in Hurstville. Mr Hedley and Mr Dumbrell discussed the opportunity for a long day care centre in the Hurstville development. On 19 September 2017, Mr Dumbrell sent Mr Hedley an offer, addressed to the developer and Mr Hedley, for Play Academy to lease the childcare premises at Hurstville. Mr Dumbrell also asked to meet to discuss purchase of the site.

20. Later that evening, Mr Dumbrell reported to Mr Larcombe by text message, describing the Hurstville deal as “golden”, where the owner was said to be one of Mr Hedley’s “best mates.” Mr Dumbrell texted “One of [the] best deals [we have] come across for childcare. And we have [the] inside position.” That is, Mr Dumbrell perceived that the relationship with Mr Hedley gave Play Academy an advantage in accessing this childcare site.

21. The next morning, on 20 September 2017, Mr Larcombe responded, “Brilliant let’s do it!!” The same day, the first defendant was incorporated, initially as Croydon Childcare Pty Ltd. (Presumably, the company was then intended to be the special purpose vehicle for Play Academy’s upcoming Croydon childcare centre). Mr Larcombe and Giancarlo (Jim) Mascitelli were appointed as directors. Mr Mascitelli is Mr Larcombe’s accountant.

22. On 25 September 2017, Mr Dumbrell sent Mr Hedley a further offer from Play Academy to lease the Hurstville site and asked to meet again and “discuss option as well.” On 27 September 2017, Mr Dumbrell provided Mr Hedley with a letter from Mr Mascitelli, confirming the financial capacity of Mr Larcombe and Mr Brooks. Mr Dumbrell emailed “This should [do]. [Is] your client happy.” Further, Mr Dumbrell advised “We want to meet and put in an offer for $6.3 million. Subject to [due diligence] and have an option period for six months. Let’s discuss with formal offer today [a]t 4.00.” Shortly after 4.00 pm, Mr Dumbrell sent Mr Hedley an adjusted offer to lease and purchase the Hurstville site “as we discussed.” The offer now noted that, from initial investigations and their meeting, “we would put forward an offer of $6.3 million subject to a due diligence of 4 weeks.” The email was copied to Mr Larcombe.

16. Mr Larcombe emailed Mr Dumbrell, asking for a rough summary of how the deal would work. Mr Dumbrell advised that he would send through a breakdown and simple feasibility. Mr Hedley was copied on these emails. Mr Larcombe added, “And hope your well Hilton mu[st] catch up for lunch when your free.” Mr Hedley replied, “G‘day Simon … yes long overdue …” Mr Larcombe had gone to school with Mr Hedley’s brother. Mr Hedley and Mr Larcombe had known each other for a long time but had not seen each recently. It would appear that, by these email exchanges, Mr Hedley renewed contact with Mr Larcombe.

17. On 28 September 2017, Mr Hedley emailed Mr Dumbrell and Mr Larcombe, asking whether they were available to meet with the Hurstville owner’s builder/architect on the afternoon of 3 October 2017, to go through design and construction costs, gain an understanding of the development application and ask any questions they may have regarding the overall development.

18. Likely at about this time, Mr Hedley met with Mr Larcombe and Mr Dumbrell at the Woollahra Hotel. Mr Hedley said “it was quick. It was a bit of chit chat.” Mr Hedley struggled to recall precise details of the conversation, “I mean, we’re going back six years.” As described in his affidavit, Mr Hedley told Mr Larcombe, “I have heaps of sites that I am working on for Kids Club. I am more than happy to steer them your way so long as you pay me the same fee as what Kids Club are paying me.” Mr Larcombe was keen and asked what Mr Hedley was being paid by Kids Club. Mr Hedley said “$2,000 per place structured over two payments, lease signed and DA approved and the final figure on opening. For example, a 100 place centre equalled a $200,000 fee plus GST.”

A ”boozy” lunch

26. The subject was discussed again when the gentlemen had a “boozy lunch” over a few hours at “Bistro Moncur” in Woollahra. Over lunch, Mr Larcombe said he was part of a group of investors looking at investing in childcare centres and asked what Mr Hedley would charge them to source sites for childcare centres. Mr Hedley said he would charge $2,000 plus GST per placement, with 50% of the fee payable when the lease was signed and development application approved, with the remainder when the childcare centre opened. Mr Larcombe said, “If you source childcare centres for us, we will pay you those fees.”

27. After the lunch, Mr Hedley did not immediately follow up the defendants with an email or letter confirming that he understood that they had an agreement, nor was it Mr Hedley’s usual practice to do so, “I’ve learnt over the years that if someone doesn’t want to pay, they won’t pay, irrespective of how bulletproof your agreement is, and a lot of it was me going on the trust that [Mr Larcombe had] known me for 30 odd years, that he wouldn’t dud me. … He was still good friends with my brother.  He was business partners with someone I considered a friend, being Glenn Dumbrell, and in terms of the level of risk …”

28. Against this, Mr Hedley later said in cross-examination that he did ask Mr Larcombe for an agreement in writing shortly after the lunch at Bistro Moncur, “Yes, absolutely. And it was only because he paid me the full entitled fee for the first deal and the second deal, and I think the third and the fourth. … To me that constitutes an agreement, especially if he pays it. … When someone pays you on the first couple of deals, it doesn’t become … as much of an urgency.” Mr Larcombe’s congratulatory comments and appreciative remarks on the conclusion of each deal “alluded me into thinking that there was no reason to be concerned about ever being not paid.” Mr Hedley’s answer aggregates events which occurred over a year; he may have been referring to his request for a written agreement in June 2019: see [141]. There is some contemporaneous evidence that Mr Hedley “always wanted an agreement in writing”: see [176]. Little turns on this.

29. Mr Hedley said the fee discussed was the same fee he was being paid by Kids Club Childcare and Little Learning School. Mr Hedley said he would not have done any work for the defendants had he not had an agreement, be it verbal or otherwise. It was Mr Hedley’s understanding that the defendants were then unknown in the childcare sector. Given his experience, Mr Hedley understood that the defendants were going to have difficulties securing sites to operate childcare centres. Such sites are usually taken up by established operators with a proven track record. Mr Hedley understood that childcare was a competitive market with many operators. Landlords could be selective about which operator entered into a lease for a site. If Mr Larcombe had not agreed to pay the fee, Mr Hedley would have continued to put other clients forward for childcare sites rather than the defendants. I will return to whether an oral agreement was concluded at [203].

“Sourcing” sites

30. Mr Hedley said that leasing and establishing a childcare centre involved a series of chronological steps. First, the plaintiff communicated with the client to see whether they had an interest in a site. If so, a site inspection took place, either with or without the developer. The client carried out due diligence and, if interested, prepared an offer which it forwarded to the developer. The developer and client may comment on offers and exchange correspondence regarding an appropriate offer. When an offer was deemed acceptable, a final letter of offer was signed by the client and forwarded to the developer for execution. The signed letter of offer (or ‘heads of agreement’) was provided to the parties’ respective solicitors, who prepared a disclosure statement and negotiated the terms of an agreement for lease. The agreement for lease was executed, annexing the proposed lease. Progressively, the development application would be approved, the childcare centre marketed and built. Staff for the childcare centre were recruited and the childcare centre opened, with the lease coming into effect.

31. Mr Hedley said the work he undertook for the defendants was largely limited to early steps in this sequence. That does, broadly, appear to be the case. However, given the defendants’ reliance on the Property and Stock Agents Act and the Agents Act, it is necessary to consider precisely what the plaintiff did for the defendants in respect of each of the eight childcare sites. (To assist the reader, I have initially set out the plaintiff’s work in chronological order, to the extent that it sheds light on the existence of the oral contract, before drawing together the work done on each site).

32. The parties also referred to a number of other childcare sites which the plaintiff and defendants sought to progress but which came to nought. As I understood it, these other sites were relied by the plaintiff as post-contractual conduct evidencing the oral contract, while the defendants relied on the plaintiff’s work in respect of these sites as evidence that the plaintiff was carrying on business as a real estate agent.

33. I am reluctant to consider the plaintiff’s actions in respect of these other sites for two reasons. First, in support of the contention that the plaintiff was carrying on the business of a real estate agent, the defendants’ pleadings did not refer to, or particularise, these other sites but simply relied on the services which the parties alleged had been provided in respect of the eight sites the subject of this judgment.

34. Second, the allegation that the plaintiff was carrying on the business of a real estate agent without a licence was largely concerned with whether the plaintiff was prohibited from bringing these proceedings to recover its fee. Section 9(2) of the Property and Stock Agents Act provides that a corporation is not entitled to bring proceedings to recover a fee “for any service performed by the corporation as an agent unless the corporation was the holder of a corporation licence at the time of performing the service.” Section 23 of the Agents Act is in like terms, disentitling a person from bringing proceedings to recover a fee “for a service provided by the person as an agent if the person was not licensed to provide the service when the service was provided.”

35. Both forms of the legislation require the Court to focus on the service for which a fee is sought to be recovered and whether the plaintiff should have held a real estate agent licence when the service was provided. I consider that whatever services the plaintiff provided for other sites – for which it charged no fee and brings no proceedings – should not be taken into account when determining that question. For example, I think it would be wrong to conclude that, by reason of the plaintiff’s efforts to source sites for the defendants in North Sydney or Gungahlin in the ACT (assuming for the moment that those services required a real estate licence) that the plaintiff is precluded from recovering its fee in respect of Hurstville or Red Hill in the ACT (assuming for the moment that the services provided in respect of Hurstville and Red Hill did not require a real estate licence). Where the legislation in question is penal, “one has to be fairly conservative and literal in the way that one approaches the section”: Challenger Group Holdings Ltd v Concept Equity Pty Ltd [2008] NSWSC 801 at [65] (per Young CJ in Eq) (reversed on appeal but not on this issue). For this reason, I have put the evidence in respect of other sites to one side, beyond brief mention to the extent that it may indicate whether the oral contract existed.

Hurstville site

36. On 19 October 2017, Mr Larcombe provided Mr Hedley with an offer to convey to the Hurstville developer, to enter into an exclusive due diligence period for the Hurstville site for two weeks. Mr Hedley suggested some edits to the offer – to add the price – and once edited, Mr Hedley provided the offer to the owner. Whether the offer was made on behalf of Play Academy or the first defendant is not known. The offer appears to have been to purchase, rather than to lease, the site.

37. On 23 October 2017, Mr Hedley asked the owner’s solicitor whether he had received instructions. The owner’s solicitor asked whether Mr Hedley had a sales advice. On 24 October 2017, Mr Hedley forwarded Mr Larcombe’s offer of 19 October 2017 to the owner’s solicitor, noting “all they require at this stage is a draft contract … they will be providing entity details etc in due course.” On 26 October 2017, the owner’s solicitor provided Mr Hedley with a draft contract of sale. Mr Hedley forwarded the draft contract to Mr Dumbrell and Mr Larcombe, asking what else was needed in order to complete their due diligence. Mr Hedley also provided Mr Dumbrell and Mr Larcombe with tenders to build the childcare centre, and an analysis of the tenders, indicating that the estimated cost of build. In addition, Mr Hedley provided preliminary drawings for the childcare centre, being for 100 children. On 29 October 2017, Mr Larcombe asked Mr Hedley a question about parking. On 1 November 2017, Mr Hedley enquired as to how due diligence was going, as he wanted to let the owners know where they were up to. Mr Hedley’s actions are consistent with acting in the capacity of the owner’s representative, soliciting an offer to purchase the site.

Creative Academy

38. In January 2018, the first defendant changed its name to Creative Academy Group Pty Ltd. A shareholders agreement was executed between companies associated with Mr Larcombe, his brother Sean Larcombe, Mr Mascitelli, Mr Dumbrell and his domestic partner. (Mr Dumbrell and his partner’s corporate entity executed the agreement as a prospective shareholder). Mr Dumbrell’s partner became a director of Creative Academy. Creative Academy later registered the business name “Wonderschool.” Play Academy was later deregistered. It would appear that, at this time, the defendants made a decision to invest in the childcare business more broadly.

39. In February 2018, text messages ensued between Mr Hedley, Mr Dumbrell and Mr Larcombe in respect of inspecting sites in Manuka and Tuggeranong. After the site inspection, Mr Larcombe said he would provide Mr Hedley with offers for both sites. Mr Larcombe was then interested in buying Manuka. Neither site went ahead.

40. On 14 March 2018, Mr Hedley provided Mr Dumbrell and Mr Larcombe with a competing offer to lease the Hurstville site. Mr Dumbrell replied that the offer was made by a company which was under some operational strain, “Please advise your client.” Mr Hedley replied, “You’re my client.” Mr Dumbrell replied, “You know what I mean.” As it would appear that Mr Hedley’s client was the Hurstville owner, he now appears to have been assisting both sides of this potential transaction. Mr Hedley’s reference to the defendants as “my client” also suggests that the plaintiff had been retained by the defendants, supporting the existence of an oral contract as described.

41. By now, it would appear that the defendants were no longer considering purchasing the Hurstville site, but were still interested in a lease. On 16 March 2018, Mr Dumbrell provided Mr Hedley with a further offer to lease the Hurstville site. Mr Hedley pointed out some errors in the offer which required correction. On 17 March 2018, Mr Hedley provided the Hurstville owner and its solicitor with details for the defendants’ solicitor. Mr Hedley advised that signed heads of agreement were expected shortly; the owner’s solicitor could then prepare a disclosure statement and lease.

42. On 19 March 2018, Mr Dumbrell provided Mr Hedley with a further offer to lease the Hurstville site. The proposed lessee was now “Wonderschool Hurstville Pty Ltd.” Mr Hedley was asked to “Confirm lessor works and handover date and we will come back to you.” In parallel, Mr Hedley was in contact with Mr Randell, “Let me know what days are good for you next week to meet and discuss … Hurstville … I am the introducing agent and will merely be referring the sale on to you.” Perhaps Mr Hedley needed another agent to represent the defendants on the transaction, where he was already retained by the Hurstville owner.

43. On 22 March 2018, the designer for the Hurstville site provided Mr Hedley with details of the landlord works, which Mr Hedley was asked to pass on to “your tenant” with a view to meeting to go through the plans; presumably the designer was referring to the tenant which Mr Hedley had found for property. Mr Hedley forwarded the material to Mr Dumbrell and Mr Larcombe, “We need to meet and go through this so we are all on the same page re: the works etc.” Mr Dumbrell advised that he would review and discuss the matter with Mr Larcombe and suggested that they then meet to go through it. Mr Hedley replied, “yep once this is sorted a formal acceptance will come out and leases issued. The deal has in princip[le] been approved. Can you push the needs analysis as urgent please for both you and the owner’s peace of mind.” (For each potential childcare site, the defendants retained a consultant to prepare a “Childcare Needs Assessment” report, indicating whether there was unmet need for childcare places in the area, such that the childcare centre was likely to be filled).

44. Mr Hedley, Mr Dumbrell and Mr Larcombe arranged to meet on 26 March 2018. On 28 March 2018, Mr Larcombe emailed Mr Dumbrell and Mr Hedley, noting that the offer did not mention the number of placements, “Needs to be in document so if they don’t get us 100 then rent is reduced.” Mr Hedley replied, “Yes its prorated on a per place basis.”

45. On 3 April 2018, the Hurstville owner’s designer provided an amended Landlord Works Schedule to Mr Hedley and arranged a meeting on 5 April 2018. Mr Hedley informed Mr Dumbrell and Mr Larcombe of the meeting details. On 9 April 2018, the owner’s solicitor provided a draft lease to the defendants’ solicitor for consideration. On 12 April 2018, Mr Larcombe circulated a revised offer for the Hurstville site for comment, although apparently not to Mr Hedley, “Lets get this deal over the line guys.”

46. On 17 April 2018, Mr Dumbrell provided Mr Hedley with financials and cashflow projections for the Hurstville childcare centre, as requested by the owner’s valuer. Further material was provided on 18 April 2018, including a business plan and needs analysis obtained for the site. The information appears to have been provided to Mr Hedley in his capacity as the owner’s representative, presumably to satisfy the owner that the defendants would be able to perform their obligations under the proposed lease.

47. The parties’ solicitors continued to communicate in respect of the transaction documents for the Hurstville lease. From time to time, Mr Larcombe instructed Mr Dumbrell to forward these email chains to Mr Hedley, in order to get Mr Hedley to encourage the owner’s solicitor to progress the matter. For example, on 4 May 2018, Mr Dumbrell asked Mr Hedley to call as the owner’s solicitors “are being not consistent and not commercial.” On 7 May 2018, Mr Hedley enquired of the owner’s solicitors, “How are you going with the Childcare lease for Hurstville the tenant is driving me nuts wanting to get it signed …”

48. Mr Dumbrell and Mr Larcombe also kept Mr Hedley informed as to progress. Mr Hedley appears to have liaised between the owner and the defendants. For example, on 7 May 2018, Mr Hedley checked with the owner’s solicitors whether they had heard from the defendants’ solicitors and, having been provided with an update, informed the owner’s solicitor, “I’ll go back to the tenant now.” Beyond this, there is no evidence that Mr Hedley was involved in negotiating the terms of the agreement for lease or the lease. The defendants’ solicitors had the conduct of the matter, with instructions obtained from time to time from Mr Dumbrell and Mr Larcombe.

49. On 7 May 2018, Mr Hedley passed onto Mr Dumbrell that the owner had been approached by a prospective tenant, being a large chemist who wanted to lease the site. Mr Dumbrell pressed Mr Larcombe and their solicitors to “Keep that to ourselves please” and move quickly to execute the lease. On 15 May 2018, the defendants’ architect provided Mr Dumbrell with plans for the Hurstville childcare centre, noting that there was “just enough to provide for 91 children.” Mr Dumbrell forwarded this email to Mr Hedley. Mr Hedley replied, “What are the outgoings there? It’s 4,400 per place yes + you pay all outgoings?” Negotiations of the terms of the lease continued. On 19 May 2018, Mr Dumbrell forwarded the latest solicitors’ email chain to Mr Hedley enquiring, “What’s the holdup?” A further email chain was forwarded by Mr Dumbrell on 28 May 2018, “Waiting waiting waiting.” Mr Hedley was asked to follow up the owner.

50. On 30 May 2018, Mr Larcombe forwarded Mr Hedley the latest schedule of landlord works, advising that there were a couple of things to tidy up and then the documents could be executed. Later that day, Mr Larcombe complained to Mr Hedley that the landlord’s lawyer “is being a bit difficult.” Mr Hedley spoke with the developer and advised Mr Dumbrell that the owner agreed in principle to a late delivery clause.

51. On 1 June 2018, the transaction documents were provided for execution. Problems emerged with timely execution. On 4 June 2018, Mr Hedley emailed the developer, “R u reading these emails??” Further problems emerged with the exchange of counterparts. On 6 June 2018, Mr Larcombe asked Mr Hedley to “call [the developer] and tell him to get [their solicitor] to deal with asap he’s so slow!” The agreement for lease for the Hurstville site was exchanged on 8 June 2018.

52. On 14 June 2018, Mr Larcombe and Mr Dumbrell exchanged the following text messages: (emphasis added)

LARCOMBE:      Hilton has agreed mate

DUMBRELL:      Great work so fee for the 5%? How much cash?

LARCOMBE:      Mate

It was always $2000 per kid.

So around $184k

Half at execution and DA

Other half once open

53. As I read these text messages, Mr Larcombe and Mr Hedley had spoken and agreed on the fee for sourcing the Hurstville site. The fact that “Hilton has agreed” suggests that there was not already an agreement in place. However, Mr Larcombe’s later text suggests that the plaintiff’s rate had already been agreed, “It was always $2000 per kid.” It may be that what was agreed at this time was the number of places on which the fee would be calculated, or to split the fee into two tranches. I will return to this at [208].

53. On 15 June 2018, Mr Dumbrell was having problems with the owner’s designer and complained to Mr Hedley. Mr Hedley replied, “I’m not sending that.” That is, Mr Hedley was not willing to forward Mr Dumbrell’s email expressing his concerns. Mr Dumbrell replied, “was not asking you to. Just ask [Mr Larcombe] and [the owner’s designer] for a meeting. Making it clear handover aint what she thinks and clearly she is not competent.” Mr Dumbrell appears to have been endeavouring to make use of Mr Hedley’s role as the owner’s consultant to bring its designer to the table.

54. On 12 July 2018, Mr Dumbrell emailed the defendants’ architect and Mr Hedley, noting that the owner was going to lodge a development application for more childcare places, “We agree that 93 is the max within the building envelope … and made clear at last meeting with owners.” Mr Hedley forwarded this email to the owner’s designer, “Are you aware that the max amount of spaces they will commit to is 93?” Mr Hedley suggested that the designer clarify this with Mr Dumbrell directly. Mr Hedley forwarded the designer’s response on to Mr Dumbrell. On 25 July 2018, Mr Dumbrell provided Mr Hedley with revised drawings and the advice from the defendants’ architect that 94 places was the maximum which could be achieved. Mr Dumbrell proposed to forward the material to the owner’s designer, “Just keeping you updated.”

55. In August 2018, delays were being experienced in the lodgement of the development application for the Hurstville site. On 27 August 2018, Mr Dumbrell advised Mr Larcombe, “Hilton confirmed [the owner] will agree on the rent clause due to delays from them.”

56. On 20 September 2018, Mr Hedley sent an email to Mr Larcombe in respect of an offer to acquire a boarding house, apparently following a discussions with other deal participants. Mr Hedley reported that there was a general consensus that there was a deal there, “We need to collectively discuss a few things and define who would do what etc … If you are open to signing an agreement for their valuation purposes … then assuming we can agree terms, I then suggest we collectively review the business after 12 months and 24 months and set a rent from year three onwards. … They are very mindful that it’s not worth your while based on your comments/numbers in your email …” As I read this and subsequent communications on this topic, Mr Hedley appears to have been trying to broker a deal between the Hurstville owners and Mr Larcombe, where Mr Larcombe would purport to buy the site in order to assist the owner to raise finance. The Hurstville owner was considering building a boarding house or apartments above the childcare centre.

57. On 12 October 2018, Mr Hedley sent a text message to Mr Dumbrell and Mr Larcombe, asking whether they were still interested in buying the Hurstville site. It appears that the owners were considering selling the site ‘as is’ with development approval.

58. On 27 October 2018, Mr Larcombe emailed Mr Hedley, seeking confirmation that he could place signage on the Hurstville site. Mr Larcombe also asked whether Mr Hedley had received any feedback in respect of the boarding house, “And any deals worth looking at? Markets in trouble hey.” Mr Hedley replied, “I’m expecting a shit load of sites to hit the market.” Further, Mr Hedley said that if Mr Larcombe offered $6 million for the Hurstville property “you might be lucky.” On 30 October 2018, Mr Hedley advised Mr Larcombe that a heads of agreement was being prepared in respect of the boarding house, “They are keen to finalise this asap and build … boarding house and childcare at the same time … the DA for the childcare is already approved … They reckon … it will be a quick process with council.”

Hurstville fee

60. On 8 November 2018, Mr Hedley informed Mr Dumbrell and Mr Larcombe that the development application for the Hurstville site had been approved, with 72 places. Building was to commence in February 2019. As “the deal was done on a pro rata basis anyway at $4,400 per licensed place … so no need to enter into a new lease.”

61. On 9 November 2018, the plaintiff rendered an invoice to Mr Larcombe and Wonderschool (Hurstville) Pty Ltd for $72,000 plus GST, with the following description:

Re: Consultancy services for Wonderschool Hurstville based on 72 places x $2,000 per place = $144,000 x 50 percent upon lease signed and DA approval = $72,000

The invoice conformed with Mr Larcombe’s text message of 14 June 2018, extracted at [52], albeit the total fee was lower as the places approved were less than had been sought in the development application.

62. On 12 November 2018, Mr Hedley contacted the Hurstville owner and its solicitor, pressing for amendments to the Hurstville lease to be sent to the tenant’s solicitors urgently, “I ask because there is now a brand new childcare centre available for lease in Hurstville which is in direct competition … it’s urgent and critical that the amendment is issued and signed asap …” Emails ensued between parties’ solicitors and their clients in respect of the amended documents. Mr Dumbrell instructed their solicitor that Mr Hedley had advised that the sunset date in the new lease was a mistake. Mr Dumbrell forwarded emails to Mr Hedley from time to time, “Keeping you in loop.” On 21 November 2018, the Hurstville owner forwarded Mr Hedley the solicitors’ emails regarding the last ‘sticking point’ in negotiations, which Mr Hedley forwarded to Mr Dumbrell. On 22 November 2018, Mr Dumbrell replied to Mr Hedley, setting out the defendants’ position, “It seems [the owner’s] lawyer does not understand this.”

63. On 23 November 2018, Mr Dumbrell asked Mr Hedley to forward an email from the defendants’ solicitor to the Hurstville owner as “We are getting nowhere.” Mr Hedley advised that he had spoken to the owner, “This is being sorted now.” Mr Hedley also emailed the owner and its solicitor, asking whether this had been resolved as the tenant wanted to sign the lease that day. Mr Hedley forwarded the response from the owner’s solicitor to Mr Dumbrell.

64. On 26 November 2018, Mr Hedley requested an update from Mr Dumbrell as to whether the Hurstville lease had been signed. The owner then wanted the right to terminate the lease if less than 60 places were approved. In response to Mr Dumbrell’s protest, Mr Hedley explained that this was because, if the Department of Education reduced the number of places to 60, “it makes the deal unviable based on the rent being reduced as well. … it’s non-negotiable. Given its DA approved for 72 places the risk is almost negligible.” Mr Hedley pressed Mr Dumbrell for a resolution. Assuming that the lease was signed on 27 November 2018, Mr Hedley asked “Can u push my payment for this week. Once signed there is no reason not to pay.” That is, consistently with Mr Larcombe’s text extracted at [52], half of the plaintiff’s fee was to be paid once the lease had been executed and the development approval obtained.

65. Mr Dumbrell replied “Yes you should once executed.” However, Mr Dumbrell suggested that the changes sought by the owner meant that the deal remained conditional, where it was possible that the site may not be approved for 60 children and the owner could terminate the lease. Mr Hedley replied that that was beyond everyone’s control and highly unlikely, “If he doesn’t pay because of that I will lease it to someone else.” That is, Mr Hedley did not accept that payment of the first tranche of the fee should be deferred beyond development approval and execution of the lease; if Mr Larcombe sought to defer payment until approval had been obtained from the Department of Education for at least 60 places, then the deal was off.

66. On 27 November 2018, Mr Hedley pressed Mr Dumbrell for an update, “What did Simon say? This needs to be signed today.” Mr Larcombe asked the defendants’ solicitor to “Get it done ASAP” and asked Mr Hedley to “please assist thanks mate”. Mr Dumbrell asked Mr Hedley whether the owner would consider a break lease cost and Mr Hedley replied, “No mate.” Mr Dumbrell instructed the defendants’ solicitor to prepare the documents for execution. On 29 November 2018, Mr Hedley pressed the owner’s solicitor to have the documents ready for execution that day, “I spoke with [the owner] … and he confirmed that he was happy with the latest clause proposed by the tenant’s solicitor.” Separately, Mr Hedley pressed Mr Dumbrell and Mr Larcombe to execute the documents.

67. On 30 November 2018, a deed of variation was executed in respect of the Hurstville lease. Mr Hedley sent a revised invoice to Mr Dumbrell with a $5,000 discount “subject to the invoice being paid in full today upon executing the lease.” Further emails between Mr Hedley, Mr Dumbrell and Mr Larcombe that day evidenced no disquiet as to the invoice.

68. On 2 December 2018, Mr Mascitelli sought instructions from Mr Larcombe “Are you OK for me to pay the commission to Hilton. I did not realise it was that amount, but still value for money …” Mr Larcombe replied, “Yes sorry if hadn’t explained that fee. Hold off for the moment thanks.” The reason to “hold off” is not evident.

69. On 3 December 2018, Mr Mascitelli sought further instructions as to whether he could pay the plaintiff, “I am getting phone from Hilton to get his payment”. Mr Dumbrell advised Mr Mascitelli, “The figure was the agreed amount for Hurstville even though its sometime away now. I confirm.” On 4 December 2018, Mr Larcombe instructed Mr Mascitelli to pay the invoice. On 6 December 2018, the plaintiff’s invoice was paid.

70. The defendants later terminated the agreement for lease for the Hurstville site, in July 2022. The childcare centre never opened. The plaintiff does not claim to be entitled to the second half of its fee for the Hurstville site. The defendants, however, seek to recover the Hurstville fee, either under the settlement agreement or as moneys had and received paid under a mistake, to which I will return in due course.

ACT sites

71. In April 2018, Mr Randell had contacted Mr Hedley seeking expressions of interest for a new childcare centre at Dickson in the ACT. The centre would be built for 90 places. The owner/developer was DOMA. Mr Hedley inquired as to how the childcare operator would be selected, whether DOMA was “just chasing the highest possible rent” or whether a boutique operator may be chosen. Mr Randell advised:

My expert opinion will shortlist my preferred’s based on business plans, previous operations, rating, price (not the determining factor at all) experience, incentives, fitout etc.

It could be a boutique or big guy.

… They … will go with my recommendations

… Also got a few more coming up namely red hill just finalised plans in.

Mr Randell also provided Mr Hedley with architectural drawings in respect of a development in Red Hill, “Just make sure not made public.” Mr Hedley did not then pass these details on to the defendants.

72. On 18 September 2018, Mr Randell emailed Mr Hedley again in respect of various childcare opportunities in Canberra coming on to market in the next few weeks, including Red Hill (120 places), Macgregor (150 places but “can be scaled”) and Throsby (110 places). Mr Randell was looking for the sites to be packaged together, as all sites were with the same developer (the ACT developer). Mr Hedley was asked to advise if he had any clients with interest.

73. Mr Hedley forwarded the details to Mr Larcombe, “Can secure all of these for you if you want. All in Canberra. Red Hill is the standout. Let me know ASAP”. By securing a site, Mr Hedley said he was referring to using the relationships he had, particularly with Mr Randell, so that the defendants could become the preferred tenants to enter into leases for childcare centres at those sites. Mr Larcombe requested information on all of the sites.

74. On 22 September 2018, Mr Randell informed Mr Hedley that he had just received another childcare site in Taylor which he would work up over the next month for market. On 8 January 2019, emails ensued between Mr Hedley and Mr Dumbrell in respect of preparing an offer to lease a childcare site at Gungahlin in the ACT. This site did not proceed.

Red Hill offer

75. On 1 February 2019, Mr Randell provided Mr Hedley with a Dropbox link to documents regarding the Red Hill site. Mr Hedley provided the link to Mr Dumbrell, suggesting “$4,250 per place will put you ahead. Kids Club are at $4,200 per place at the moment … u need to circa $6k more a year but I would allow for more as it’s only round 1 of the [expression of interest].” Mr Dumbrell was to complete the expression of interest.

76. On 4 February 2019, Mr Dumbrell provided Mr Hedley with an offer for Red Hill, “Thanks again mate”. Mr Hedley provided the offer to Mr Randell. Mr Hedley advised Mr Dumbrell that the offer had been submitted to the owners and suggested, “I would allow a day next week to go to Canberra to meet with them to go through the deal. Critical to them given the quality and location of the development will be design and review of your proposed business plan. They are after a boutique operator.” Mr Dumbrell advised that he would be putting a nice looking business plan together and would discuss Mr Larcombe getting a design outline down once their offer was accepted. Mr Hedley forwarded Mr Dumbrell’s email to Mr Randell. Mr Larcombe replied, “Can get design done now if that helps us secure it.” Mr Hedley replied, “Let’s get the commercial terms agreed and then come up with a bells & whistles design.”

Macgregor site

77. On 5 February 2019, Mr Randell provided Mr Hedley with information on a proposed childcare site in Macgregor, which had development approval for 150 places. The ACT developer preferred to have the same tenant for both Red Hill and Macgregor and was in due diligence with another operator. Mr Randell also provided feedback on the defendants’ Red Hill offer, “and I will send Taylor later today.”

78. Later on 5 February 2019, Mr Randell provided Mr Hedley with an information memorandum in respect of a childcare centre in Taylor, to go to market in mid-March 2019, “Have a look and see if [y]our group is interested in this option … for 92 places, however you could also do up to 110 …” Mr Hedley provided these details to Mr Dumbrell and Mr Larcombe.

79. On 11 February 2019, Mr Dumbrell advised Mr Hedley that they were considering buying the Red Hill site and responded to Mr Randell’s feedback on the offer. Mr Hedley asked Mr Dumbrell to provide “something a bit more formal and less arrogant.” Mr Larcombe advised that he would prefer to lease Red Hill. Mr Dumbrell provided Mr Hedley with a revised email on the Red Hill offer. Mr Hedley replied, “Mate. Can u send me exactly that in a new email without all the history. So don’t hit reply. Start a new one please. Fark me.”

80. Mr Larcombe asked Mr Hedley, “What’s the construction costs to fully complete for Red Hill roughly?” Mr Hedley replied that Red Hill was a “turnkey” provided by the landlord and not for sale. Macgregor was for sale but “at 150 places is too many, however if you lease it, it can be done in stages … Or purchase it based on the number of places you are comfortable with.”

Taylor site

81. On 11 February 2019, Mr Hedley provided Mr Dumbrell, Mr Larcombe and Mr Mascitelli with the information memorandum on the Taylor site and also set out where each proposed site was up to “just to be clear and to avoid confusion.” The sites then under consideration were Gungahlin, Red Hill, Macgregor and Taylor. Of Taylor, Mr Hedley advised that “Like Red Hill, Macgregor and Gungahlin, this is another one that Kids Club have submitted an [expression of interest] on that we can secure.” Mr Hedley suggested that Mr Dumbrell accompany him to Canberra to meet Mr Randell, who was the agent on Red Hill, Macgregor and Taylor, “He has kindly come to me and I think if we get traction on Red Hill this week you should definitely meet.” Mr Hedley indicated that further sites were coming up in the Sydney metro area “that I have control of.” Mr Hedley suggested that they meet to go through these sites.

82. Mr Hedley also forwarded Mr Dumbrell’s response to feedback on the Red Hill offer to Mr Randell, advising that an offer was coming for MacGregor, “They also want Taylor.” Mr Randell pressed Mr Hedley as to when he could expect the offer for Macgregor and Taylor. Mr Hedley advised, “Naturally the issue is the amount of places. I’m working through it all with them but yes the idea is that they secure all 3. … Quick question, if they build a smaller [Macgregor] centre (say 90 places) will this require a whole new DA?” Mr Randell thought that the DA would need to be amended. Mr Hedley forwarded these exchanges to Mr Dumbrell, Mr Larcombe and Mr Mascitelli.

Meeting Mr Randell

83. On 12 February 2019, Mr Hedley arranged a meeting with Mr Randell in Canberra, where his clients were planning to head down and look at Red Hill, Macgregor and Taylor “and would like to meet with you. I will be with them, the idea being that we finalise the deals on all 3 shortly thereafter.” The purpose of the trip was to inspect the sites, “put names to faces and talk through growth strategy, their business, financials, partners etc etc so you have a solid understanding of their business for both these sites and others in the future.” The meeting with Mr Randell was arranged for 19 February 2019.

84. Mr Hedley advised Mr Dumbrell and Mr Larcombe that the aim of the meeting was to secure the three new sites. Mr Hedley asked Mr Dumbrell and Mr Larcombe to review the information memorandum on Macgregor with a view to making an offer, “Whilst the DA is for 150 places you need to assess what is the more realistic number and base your offer on that number (I believe Kids Club have made an offer based on 90 places). Same owner as Red Hill and this one is the key to securing both.” Mr Hedley suggested that Mr Dumbrell prepare a business plan for the Canberra sites, with cashflow forecasts on differing scenarios. Whilst offers and leases were being prepared, “I’ll keep going with the deals to keep them alive but do that in the background. … I’m happy to assist in any way so let me know what you need.” Further, before the meeting with Mr Randell, terms needed to be agreed on Red Hill and offers prepared for Macgregor and Taylor, “We are coming in from behind on all 3 of these as they are way down the path with Kids Club but they are there for the taking.”

85. While preparing an offer for Taylor, Mr Dumbrell asked Mr Hedley what an appropriate market rate per child was in this area, “You done any deals in this market at all?” Mr Hedley replied, “Unfortunately I have not completed any deals in this catchment. I know there is an offer at present at $3k a place but can’t comment on where that sits re: market etc … I suggest it’s a good starting point.” Mr Hedley enquired of Mr Randell, who advised that $3,500 to $3,600 per child would secure the site. Mr Hedley passed this information on to Mr Dumbrell.

86. On 13 February 2019, Mr Dumbrell provided Mr Hedley with an offer for Macgregor, which Mr Hedley forwarded to Mr Randell. Mr Hedley pressed Mr Larcombe to provide financials and updated Mr Randell on his progress. Mr Hedley also advised Mr Dumbrell to check to make sure there were no other obligations regarding 150 places. While the rent may be based on the 120 places in their offer, the developer would be building for 150 places “so check to see if you as the tenant are required to meet any other obligations based on there being 150 places … even if you cap it at 120.”

87. Later on 13 February 2019, Mr Randell asked Mr Hedley to prepare an updated offer on Red Hill “so I can meet with [the developer] and compare … both sites as a package in our discussions tomorrow.” Mr Hedley replied that the Red Hill offer was being updated and sought further information in respect of outgoings. Mr Dumbrell provided an updated offer for Red Hill, which Mr Hedley forwarded to Mr Randell, asking Mr Randell to call after meeting with his client the next day.

83. On 14 February 2019, Mr Randell provided Mr Hedley with the developer’s response to the Red Hill and Macgregor offers, which were generally favourable. Mr Hedley forwarded the details to Mr Dumbrell and Mr Larcombe, “Good news guys.” Mr Hedley advised Mr Randell that he would have revised offers for him later that day. Mr Dumbrell described this as “fantastic news. … Great effort gents.” A revised offer for Red Hill was provided by Mr Dumbrell to Mr Hedley, and forwarded to Mr Randell.

84. On 15 February 2019, Mr Randell provided Mr Hedley with a marked-up copy of the defendants’ Macgregor and Red Hill offers and asked that he review and amend the offer “for final acceptance of offers … I can then get a draft AFL over asap.” Mr Hedley liaised between Mr Randell and the defendants in respect of the amendments. Mr Dumbrell and Mr Larcombe provided the amended offers to Mr Hedley, who provided them to Mr Randell.

85. Later that day, Mr Randell provided Mr Hedley with updated plans for the Taylor childcare centre, “Just needed to get a draft so we can get some renders done for the market.” Mr Hedley provided the plans to Mr Dumbrell and Mr Larcombe. Further, Mr Hedley asked Mr Randell, “Don’t go to Market just yet … They will take this one too I’m sure.”

86. On 18 February 2019, Mr Hedley sent a text message to Mr Randell in advance of their meeting the next day, asking whether Mr Randell would be joining them for the site inspections of Red Hill, Macgregor and Taylor, following which they would “finalise the deals and discuss next steps.”

87. On 19 February 2019, Mr Hedley, Mr Larcombe, Mr Dumbrell and Mr Randell inspected childcare sites in Canberra, including Red Hill, Macgregor and Taylor and met the developer. Following the site inspections, Mr Randell provided Mr Hedley with architectural drawings for the Red Hill site, which Mr Hedley provided to Mr Dumbrell. Mr Larcombe also emailed Mr Randell directly, copied to Mr Hedley and Mr Dumbrell, advising that an offer would be made on the Taylor site, requesting bank account details “for the deposit on all 3 sites,” and the finishing schedules for Red Hill and Macgregor for review by the defendants’ architect. Mr Randell obliged.

88. On 20 February 2019, Mr Dumbrell provided Mr Hedley with an offer for the Taylor site. Mr Hedley provided the offer to Mr Randell, together with receipts for deposits paid on the three sites. Mr Randell advised Mr Hedley that the Taylor offer needed to be at the level discussed, which was $3,500 per place net, “to not go to market.” Mr Hedley passed this information on to Mr Dumbrell and Mr Larcombe. Mr Larcombe agreed to amend the offer. Mr Larcombe emailed Mr Randell directly, advising that the defendants’ architect was happy with the finishing schedule, which should be attached to the agreements for lease. In addition, the Taylor offer was being amended, “sorry that was our typo mistake.” Mr Dumbrell provided Mr Hedley with an amended offer for the Taylor site. Mr Hedley provided the amended offer to Mr Randell.

89. Mr Randell replied to Mr Larcombe, advising that agreements for lease would be provided that afternoon and he would take the Taylor offer to the developers that day, “It will take slightly longer for the AFL to be done but we will put a hold on the property and get signed heads [of agreement] returned.” To this, Mr Larcombe asked Mr Hedley, “Is he taking Taylor to developers or was that a typo? Get it off the market thanks Hilton.” Later that evening, Mr Larcombe asked Mr Hedley to chase up the agreements for lease on Red Hill and MacGregor. Mr Hedley replied, “Will do mate we are all over it.”

90. Later that evening, Mr Hedley also asked Mr Dumbrell to “start doing some numbers” on a childcare centre approved for 100 places in Lane Cove, “This is a belter. … I’ve got first dibs on it … Will be the perfect compliment to Crows Nest …” Mr Larcombe replied that the defendants “definitely will be all over those centres thanks.” This site did not eventuate.

Direct approach by developer

96. Later still, the ACT developer emailed Mr Larcombe directly, attaching plans for a second childcare centre on the Throsby site, asking “What are your thoughts on a bit of healthy (unhealthy) competition?” The developer advised that it had already leased a childcare centre, which was under construction, but owned a nearby site which also permitted childcare as a use “and therefore we ‘could’ develop a childcare centre in that location if, you though it was viable etc.” The next morning, Mr Larcombe forwarded the developer’s email to Mr Hedley for his thoughts. Mr Hedley advised, “Guy mentioned that the existing Throsby site filled within 1 month. This is reasonably close to Taylor.”

97. Mr Hedley forwarded a text message from Mr Larcombe – advising that the developer “also put his other site to me” – to Mr Randell. Mr Hedley asked Mr Randell to request the developer to send any information on other sites “through you to me and not directly to Simon please … They are talking about a new site together.” Mr Randell was unhappy that the developer had approached the defendants directly. Mr Randell replied, “They better not be. … I will find out.” Mr Hedley also asked Mr Larcombe to ensure that communications about new sites went through Mr Randell and himself:

Hey if [the developer] is talking to you directly about new sites that will cause serious angst for both Guy and myself as its morally the wrong thing to do, and most importantly Guy is absolutely critical to you[r] future success. He is the number 1 agent in childcare and his clients should know better than to call tenants directly

… Next time you speak to [the developer] please ask him to send any information he has on new sites through Guy. Guy will then send it through me.

It keeps everyone happy, honest and motivated and ensures you will be favourably considered for all future sites (not just [this developer’s]). I know you know and completely understand where im coming from

98. Mr Hedley added “this isn’t about you jipping me … I know you would never do the wrong thing by me.” Mr Larcombe replied “Agree totally … will make it clear to send things via Guy and then Guy to you etc., we wouldn’t think about going around [Mr Randell] or yourself for a second it’s not cool and it would be completely stupid!” The same morning, Mr Randell provided Mr Hedley with information in respect of outgoings on the Macgregor site, which Mr Hedley provided to Mr Dumbrell and Mr Larcombe.

99. On 25 February 2019, Mr Hedley followed up Mr Larcombe regarding the architect’s review of the Red Hill and Macgregor plans, as Mr Hedley and Mr Randell “spoke earlier and he is hoping to have these signed by the end of this week.”. Mr Larcombe advised that no changes were required to the plans; amendments to the agreements for lease and the leases had been provided “Nothing major should all be able to be sorted with a phone call between lawyers after they review amendments today.” Mr Hedley was asked to let Mr Randell know.

100. On 26 February 2019, Mr Randell provided Mr Hedley with amendments to the Taylor offer. Having met with the developer that morning, Mr Randell advised that the centre would have 120 places. Mr Hedley provided this information to Mr Dumbrell and Mr Larcombe for their immediate review and action. Mr Hedley also requested details for the developer’s designer from Mr Randell “so they could start talking” with the defendants’ architect. Mr Randell obliged, “We are happy for your designer to lead the design for a guaranteed 120 place centre …” Mr Hedley was asked to send a signed updated Heads of Agreement “and we will get over to the solicitors this afternoon to draft AFLs.”

101. On 27 February 2019, Mr Hedley provided Mr Randell with a revised offer for the Taylor site, as executed by Mr Larcombe and Mr Dumbrell. Mr Hedley forwarded the offer to Mr Randell. The fourth defendant, Wonderschool (Taylor) Pty Ltd was incorporated.

102. On 28 February 2019, Mr Larcombe obtained a needs report for Macgregor, identifying unmet needs. Mr Larcombe also instructed the consultant to prepare a report for Throsby and other sites which did not proceed, being Gordon and Bungendore.

103. On the evening of 28 February 2019, Mr Randell updated Mr Hedley, Mr Larcombe and Mr Dumbrell on progress in respect of agreements for lease for Red Hill and Macgregor. Documents were expected to be ready for signing on 4 March 2019. Mr Dumbrell expressed his gratitude to Mr Hedley, “Good year for [you]. Makes me happy for you and for me and my family mate. … That is the quickest turnaround ever mate.”

A new shareholders agreement?

104. In early March 2019, Mr Larcombe and Mr Dumbrell exchanged emails in respect of a proposal to alter the shareholder agreement for Creative Academy. Mr Larcombe sent Mr Dumbrell a draft document to be circulated to investors for comment. The document outlined the state of each childcare site. In respect of Red Hill, Macgregor and Taylor, Mr Larcombe observed “Hilton introduced us to the site and acting as our agent.” Mr Larcombe also stated, “Hilton who is good mates with Glenn is providing us some great opportunities. I’ve known Hilton 25 years as well and very good to reconnect with him as well.”

105. In commenting on the proposal, Mr Dumbrell considered that his contributions to finding sites should be acknowledged and his equity contribution reduced accordingly, “especially if no agent involved like Hilton. More motivation to cut them out and say that fee we would pay a Hilton or other agent goes towards my equity. Say for a Red Hill deal that’s a $240,000 fee. … Same would go for any shareholder if they can bring like that to the table and not pay agent.” Mr Larcombe and Mr Dumbrell’s comments record that they both perceived Mr Hedley to be acting as an agent. I note also that, where Red Hill had 120 places, Mr Dumbrell’s comment acknowledged that the plaintiff’s fee was $2,000 per place.

106. Mr Larcombe did not embrace Mr Dumbrell’s suggestion, replying on 3 March 2019: (emphasis added)

Put [Mr Hedley] to the side he is getting paid a fee of $2k per pax on all these deals we are doing and has no interest in the business think that’s he asked original for 5% with no fee so that what he thought was fair and now gone to straight fee which is simpler for all of us.

107. Mr Larcombe considered that what was offered to Mr Dumbrell under the proposed deal “fairly rewards for your HH connection … your connection to Hilton has been great (I also know Hilton) … Yes going forward if you bring a site to the table with no fees $2k with no agent involvement that’s only fair …” That is, Mr Larcombe clearly acknowledged that there was an agreement with Mr Hedley to pay a fee of $2,000 per placement “on all these deals.” It does appear that Mr Hedley may have initially proposed an alternate fee arrangement but had settled on a “straight fee” in this amount.

108. On 5 March 2019, the defendants’ consultant provided Mr Larcombe with a needs assessment for Throsby. On 11 March 2019, Mr Hedley encouraged Mr Larcombe and Mr Dumbrell to improve their corporate presentation with a website and appropriate email addresses, “My relationships will get you through the door and in prime position but all it will take – especially with these property trusts is some mid level asset manager to dig deeper and make life hard to secure the deal … Happy to work on this with you.” Mr Dumbrell endeavoured to source images of the proposed developments for a new website; Mr Hedley put him in touch with the architect for the Hurstville site.

109. On 15 March 2019, Mr Hedley provided Mr Dumbrell and Mr Larcombe with information in respect of a proposed childcare site in North Sydney. This site did not eventuate.

Invoices for Red Hill and Macgregor

110. On 19 March 2019, Mr Larcombe asked Mr Hedley and Mr Randell to “get cracking on Taylor.” Further, Mr Larcombe texted Mr Hedley “I’ll send your details for invoices for entities today.” On 21 March 2019, the plaintiff rendered an invoice in respect of the Red Hill site for $120,000 plus GST. The invoice described the fee as follows:

Re: Consultancy services for Wonderschool Red Hill based on 120 places x $2,000 per place = $240,000 x 50 percent upon lease signed and DA approval = $120,000

111. A further invoice was rendered in respect of the Macgregor site for $150,000 plus GST, with the services described in like terms:

Re: Consultancy services for Wonderschool McGregor based on 150 places x $2,000 per place = $300,000 x 50 percent upon lease signed and DA approval = $150,000

112. Mr Mascitelli asked that the invoices be addressed to Creative Academy. Mr Hedley replied, “Is that the only change you require …?” No response is in evidence. Mr Hedley rendered an amended invoice addressed to Creative Academy.

113. On 25 March 2019, the Commonwealth Bank issued bank guarantees in respect of the Red Hill and MacGregor leases; arrangements were being made for the documents to be executed and delivered to the owner’s solicitors. Mr Dumbrell emailed Mr Hedley, “I confirm that you will receive payment of your invoices for the Canberra transactions once the bank guarantee is received. … We would expect anytime between today and [27 March 2019] at the latest.”

114. Following receipt of Mr Dumbrell’s email, Mr Hedley sent an email to Mr Larcombe, “Just confirming our discussion of Friday [22 March 2019] that once the bank guarantee is received you will proceed with payment of the invoices for [Red Hill and MacGregor].” Mr Larcombe promptly replied:

Yes as discussed

$2k per place

25% on [bank guarantee] and notification that they are acceptable most likely Friday and payment Monday so will be in your account Tuesday most likely

25% on [agreement for lease] conditions being met being finance and them get all the[ir] approvals likely within next 6 weeks so payment in that week

50% of us commencing trading

All good ?

115. That is, neither Mr Larcombe or Mr Dumbrell raised any issue with respect to the amount of the fees or the basis on which the fees had been calculated, as described in the invoices. What had been discussed, however, was an alteration to when the fees would be paid, with the initial 50% of the fee now split into two payments of 25% each, payable on different events. The remaining 50% of the plaintiff’s fee remained payable when the childcare centres commenced trading.

116. On 26 March 2019, Mr Larcombe asked Mr Hedley to send through revised invoices to reflect the terms of his email and addressed to Creative Academy. Mr Hedley replied:

I acknowledge that the payment schedule is 50 percent o[f] the current invoice of $270k paid now and a further 50 percent once the developer receives his final approvals (albeit this being a formality) and then a further invoice will be sent once you open for a further $270k.

So $135k + GST now

$135k + GST in circa 4-6 weeks (estimate timeframe only)

And then final $270k will be invoiced when you open.

117. That is, Mr Hedley agreed to the first tranche being paid in two instalments. Mr Larcombe requested that the revised invoices be re-sent and, once exchange was confirmed, “we will pay you 25% fee.” Mr Hedley re-sent Mr Larcombe the invoices for Red Hill and Macgregor, which Mr Larcombe forwarded to Mr Mascitelli with the instruction “please pay 25% of total fee.” Mr Mascitelli processed the payments on 29 March 2019 and informed Mr Hedley, “Thanks for your great work Hilton.” The plaintiff received $82,500 in respect of the Macgregor invoice and $66,000 for Red Hill.

118. On 28 March 2019, Mr Hedley sent a text message to Mr Dumbrell and Mr Larcombe, advising “I’ve got a cracker … in North Narrabeen … need to move like lightning to get control of it. … my window for stitching it up is limited. … it’s rare these ones come along.” (This site did not eventuate). Further, Mr Hedley advised that he had a buyer for the Red Hill, Macgregor and Taylor leases for $4 million, “I know it’s not the game plan but at least u know u could walk away tomorrow and pocket that.”

119. On 28 March 2019, agreements for lease were exchanged for the Red Hill and Macgregor sites. At the time, the Macgregor development was approved for 150 places. Red Hill was approved for 120 places. Mr Larcombe reported to investors, including in respect of the offer to acquire the Red Hill, Macgregor and Taylor leases:

Decided it’s best we keep going … add 4 times earnings they are worth $10m … Paying Hilton his first 25% fee $140k tomorrow … when start building he gets 25% then last 50% fee when we commence trade.

120. Again, Mr Larcombe acknowledged the defendants’ obligation to pay the plaintiff, albeit with the first tranche now split into two portions. Mr Larcombe’s description of when the second 25% payment was due differed from his earlier email to Mr Hedley, extracted at [114]. Mr Larcombe now described the event on which payment was due as when construction commenced. I expect this was likely a short-form description by Mr Larcombe to investors rather than reference to a different agreement than earlier described. In any event, the investors were happy, Sean Larcombe noting, “Hilton has certainly shown u some gems.”

121. On 2 April 2019, Mr Hedley communicated further with Mr Larcombe and Mr Dumbrell in respect of the $4 million offer to purchase the Red Hill, Macgregor and Taylor leases. Mr Hedley also informed the defendants of a further childcare site at The Gap and Kambah in the ACT, “I’ve got sites coming out of my ears hope u can keep up.” Later that day, Mr Hedley provided Mr Larcombe and Mr Dumbrell with details for eight childcare sites in Victoria and the ACT, “All off market we have first crack … Can u keep up … Come on …” Mr Dumbrell suggested a meeting, “Just saying we need to be measured and calculated as a new business.” (These sites did not eventuate). On 9 April 2019, Mr Dumbrell updated Mr Hedley on his progress with a Wonderschool website.

122. It appears that the ACT developer had again contacted Mr Larcombe directly. Mr Randell sent an email to Mr Larcombe and Mr Hedley, confirming he had just spoken to the developer about sending sites directly, “he assured me no one was getting cut out and ‘just likes talking to Simon’. … Just needed to set the record straight but he was assuring all is kosher and he wasn’t trying to cut anyone out. All sorted now and many more opportunities to come.” Mr Larcombe agreed.

123. The parties’ solicitors were in the process of negotiating an agreement for lease for the Taylor site. On 15 April 2019, Mr Larcombe emailed Mr Randell and Mr Hedley in respect of negotiating a side agreement, “Guy going to need your help likely on this one mate.” Mr Hedley replied that he would speak to Mr Randell and revert.

124. On 16 April 2019, Mr Larcombe sought Mr Hedley and Mr Randell’s comments on a proposed offer for a site at Coombes in the ACT, being (apparently) the site offered by the developer directly. This site did not eventuate.

Woden site

125. On 16 April 2019, Mr Hedley texted Mr Randell about a DOMA development in Woden. Mr Randell advised that the Woden site was already on hold for Kids Club, “I won’t compete on that one as a lot of work has been done already. … Did that some time ago and we are working on build concepts … If it gets a hint of going bad [Kids Club] is out.” Mr Randell advised that any offer would need to be “better than 4800.”

126. Mr Hedley sent Mr Dumbrell and Mr Larcombe a link in respect of the Woden site. Mr Hedley advised that, although an offer had already been accepted for the site, “Guy said he won’t screw [the existing offeree] over at this late stage but i have just called the developer who is an old friend … it’s a very long shot but it is … a fucking cracker.” Mr Hedley called Mr Larcombe and said there was a chance the defendants would be able to secure the Woden site, which had the same owner as the Dickson site. Although there was a deal in place with Kids Club, Mr Hedley might be able to steer it his way. Mr Larcombe said, “Put your foot on it.” Mr Hedley texted Mr Randell that he was sending through an offer, “All you u can do is give it to the vendors and let them decide to screw Kids Club.”

278. On appeal in Guan v Lui, Meagher JA focussed on whether Mr Lui’s actions were undertaken “as agent” for the vendor and, in this context, observed “although Mr Lui sought to induce the making of non-binding offers, he did not do so representing or acting as agent for the vendor or its selling agent. Although the services he performed were to the financial advantage of Ms Guan they did not involve or require his acting as her representative in inducing the making of bids or offers”: at [50]. As the plaintiff submitted, it is not clear to what extent (if any) this finding reversed the factual findings of the trial judge. As such, the example is equivocal.

279. Beyond this legislation, “induce or attempt to induce” has been considered in the context of the Consumer and Competition Act 2020 (Cth). Section 76(1)(d) empowers the Court to impose a pecuniary penalty where a person “has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene … a provision”. In Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 59 ALR 589, Fox J considered, “Inducing a person to contravene a provision envisages success, both because the inducement produces results and because there is the arrangement. Attempting to induce a person to contravene suggests to me conduct which does not amount to inducement because it does not produce results, notwithstanding an arrangement could readily be made. There is no attempt to induce if, despite invitation or exhortation, or threats or promises, there is no arrangement which is in place and can be effected, or can readily be effected. Invitations, however pressing, to start to see if an arrangement can be made, are not in my view within the paragraph”: at 594.

280. Section 96(3)(b) of the Consumer and Competition Act 2020 provides that resale price maintenance includes “the supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier”. In Heating Centre Pty Ltd v Trade Practices Commission (1986) 65 ALR 429, Pincus J (Lockhart and Wilcox JJ agreeing) considered that inducement “ordinarily refers to some proffered advantage or disadvantage, promised or threatened, to follow from following or failing to follow a stipulated course of action. There is no reason, however, to read into para (b) a necessity to find that anything is offered in exchange, so to speak, for not discounting; mere persuasion, with no promise or threat, may well be an attempt to induce”: at 439.

281. Section 126 of the Securities Industry (WA) Code makes it an offence to induce or attempt to induce another person to deal in securities by inter alia by dishonest concealment of material facts. In Bond v R (1992) 62 A Crim R 383, Nicholson J considered, “an attempt to induce a dealing in securities would occur where the accused, intending to induce or cause the dealing by a dishonest concealment of material facts, attempted to induce that dealing, or an act which would constitute a dealing in securities by doing something held to be more than merely preparatory to the commission of the completed offence, but did not actually fulfil the intention by inducing or causing a dealing in the securities.”

282. Obviously, cases considering different legislation are of limited assistance in construing section 8 of the Agents Act 2003, as is the extrinsic material. I do note, however, that section 8(1) of the Agents Act 2003 anticipates that the real estate agent is providing a real estate agent service “for a principal for reward.” Section 8(2)(a) describes actions which a real estate agent may undertake in effecting a real estate transaction, including buying, selling or leasing land. Section 8(2)(b) describes precursor activities to a real estate transaction, that is, “negotiating with, or inducing or attempting to induce, a person” to enter into such a transaction. Noteworthy, the negotiations are with
     “a person” rather than “a principal”. Likewise, the agent induces or attempts to induce “a person” rather than “a principal”. Whilst I accept that “a person” is a sufficiently broad term that it may include “a principal”, it makes sense that the “person” is not the principal, where the negotiations and inducement are real estate services provided “for a principal for reward”. It is difficult to see how negotiating with, or inducing, one’s own principal amounts to providing a service to the principal, being a service for which the agent will receive a reward, no less.

283. As the real estate agent service is provided “for the principal,” I consider that “negotiating with, or inducing or attempting to induce” a person refers to conduct with respect to the proposed counterparty to the real estate transaction. That is, the real estate agent is inducing or attempting to induce the counterparty, rather than their own principal, to enter into a real estate transaction. Thus, in Hawk, the purchaser’s agent, George Ambrose Commercial, wrote to the counterparty, being the vendor, seeking to induce the counterparty to sell the warehouse to Hawk. In Guan v Lui, Mr Lui’s actions – assuming for the moment that those actions were inducements – were directed to the potential purchasers of the land, where Mr Lui was retained by the director and shareholder of the vendor.

284. I do not consider that Freehold Land Investments is authority to the contrary. There, the agent accepted that it acted as a real estate agent but disputed that it did so in Queensland. The agent submitted that whenever it was engaged in actions, discussions, or communications with its own principal in Queensland, as opposed to potential overseas purchasers, it could not be carrying on the business of a real estate agent as it was not then doing anything “as an agent for others”, being the terms of the Queensland statute. Walsh J rejected this argument and considered that the agent’s interactions with its principal could not be excluded when considering whether a person was acting “as an agent for others”: at 443. That is, all of the real estate agent’s actions could be considered when determining whether it was acting as agent.

285. As a matter of the law of agency, this is obviously correct. Part of the agent’s function will involve reporting to, and seeking instructions from, one’s principal. Consistently with this, I note that the Agents Regulation 2003 contains a number of specific obligations, requiring an agent to inform their principal of various matters, such as offers received (regulation 8.22) or each stage of the negotiation of a purchase price when acting as a buyer’s agent (regulation 8.27). But Freehold Land Investments does not otherwise assist in construing subsections 8(1) and 8(2)(b), specifically, whether the plaintiff is providing a real estate agent service within the meaning of the ACT legislation.

Conclusion

289. Unlike the Hurstville site, the seven ACT sites were brought to Mr Hedley’s attention by Mr Randell, who was retained as the owner’s agent in respect of each of those properties. Whatever services the plaintiff was providing to the defendants in respect of the ACT sites, the plaintiff always dealt with the owner’s agent. Whilst the ACT developer from time to time communicated directly with Mr Larcombe, Mr Randell – supported by Mr Hedley – insisted that communications between the owner and prospective lessee went through him as the owner’s agent, and Mr Larcombe largely obliged.

290. Again, whether the plaintiff was acting “as an agent” is, in part, informed by what the plaintiff agreed to do under the oral contract, and I repeat [267]. “Sourcing” sites sounds rather like an introducer, where the plaintiff introduced the defendants as prospective lessees of the ACT sites to the owner’s agent, Mr Randell. But introducers do not fall within “real estate agent services” under the Agents Act 2003; something more is required.

291. It may assist to summarise the plaintiff’s actions in respect of each of the ACT sites. As a general observation, Mr Hedley did far more for the earlier sites “sourced” for the defendants – where Mr Dumbrell and Mr Larcombe may have been unfamiliar with the process – and less for later sites, where the defendants now appeared to know what they were doing and were also increasingly dealing with Mr Randell directly.

292. In respect of Red Hill, Mr Hedley obtained information in respect of this site from Mr Randell, including architectural drawings, which were provided to the defendants, noting “Red Hill is the standout.” While the defendants were to complete the expression of interest, Mr Hedley suggested “$4,250 per place will put you ahead” of Kids Club: [75]. The defendants prepared an offer, which Mr Hedley forwarded to Mr Randell. Mr Hedley suggested that the defendants visit Canberra to meet with the owner, and gave the defendants some pointers as to what the owner was looking for and how the defendants could put their best foot forward: at [76]. When Mr Randell provide feedback on the offer for the Red Hill site, Mr Hedley made suggestions as to how a revised offer should be presented: at [79]. Mr Hedley provided the revised offer to Mr Randell. Mr Hedley also suggested that the defendants accompany him to Canberra and meet Mr Randell. Mr Hedley arranged this meeting. He liaised between Mr Randell and the defendants for further offers for the site. Mr Hedley inspected the Red Hill site with Mr Randell and the defendants. Documents provided by Mr Randell in respect of the site were forwarded by Mr Hedley to the defendants, while the defendants also requested some documents and information directly: at [92]. Mr Hedley followed up Mr Randell in respect of the agreement for lease and followed up the defendants in relation to their architect’s review of plans. The plaintiff then rendered an invoice for the first 50% of its fee. The plaintiff does not appear to have performed any further functions in respect of the Red Hill site, beyond passing on an offer to buy the defendants’ leasehold interest in four sites, including Red Hill.

293. In respect of Macgregor, Mr Hedley obtained information in respect of this site from Mr Randell and provided it to the defendants. Mr Hedley explained to Mr Larcombe that the site was for sale but, with 150 places, this was too many and the site should either be leased in stages or, if purchased, an offer made based on the number of places the defendants were comfortable with: at [80]. Again, Mr Hedley recommended that the defendants meet Mr Randell. Mr Hedley enquired of Mr Randell whether, if the defendants built a smaller centre with 90 places, a new development application would need to be lodged: see [82]. Mr Hedley provided the information thereby obtained to the defendants. Mr Hedley arranged a meeting between Mr Randell and the defendants and encouraged the defendants to make an offer based on a realistic number of places for the site: see [84]. Mr Hedley forwarded the defendants’ offer for the site to Mr Randell and suggested the defendants check whether there were other obligations which they would be required to meet in respect of 150 places, notwithstanding that their offer was based on 120 places: at [86]. Mr Hedley passed on the ACT developers’ response to the offer, and the defendants’ amended offer. He attended a site inspection with Mr Randell and the defendants. He chased up the agreement for lease and obtained information in respect of outgoings. He followed up the defendants in respect of their architect’s review of the plans. An invoice was then rendered by the plaintiff. Nothing further was done beyond passing on the offer to buy the defendants’ leasehold interest in four sites including Macgregor.

294. In respect of Throsby, Mr Hedley obtained information in respect of this site from Mr Randell and provided it to the defendants. The ACT developer also approached Mr Larcombe directly in respect of a second childcare centre on the site; both Mr Randell and Mr Hedley encouraged their respective clients to communicate through them rather than directly. The defendants inspected the site with Mr Hedley and Mr Randell. The defendants prepared an offer for Throsby and Mr Hedley provided his thoughts on whether to make an offer for the second Throsby site: at [132]. The defendants provided the offer directly to Mr Randell. Mr Hedley provided comments on the budget for fit-out works: at [138]. Mr Hedley received further revised offers for the Throsby site, often after the offer had been provided directly to Mr Randell. Mr Hedley suggested that the defendants “hold off” signing a deal for the Throsby site until the ACT developer had confirmed the status of the Red Hill and Macgregor sites: at [142]. Mr Larcombe consulted with Mr Hedley when the ACT developer exercised its option to “put” the second Throsby site to the defendants: at [154]. The invoice for the plaintiff’s first 50% of the Throsby fee was then rendered. Mr Hedley later communicated with the defendants as to how to progress the Red Hill, Macgregor and Throsby sites, when the ACT developer suggested it could not get finance without a contract for the Throsby site: at [167]-[168].

295. In respect of the Taylor site, Mr Hedley obtained an information memorandum from Mr Randell, which he provided to the defendants. Mr Hedley suggested that the defendants accompany him to Canberra to meet Mr Randell. When the defendants were preparing an offer for the site, Mr Hedley was asked what an appropriate market rate was per child in the area. Mr Hedley did not know but obtained information from Mr Randell in this regard, which he passed on to the defendants: at [85]. Mr Hedley obtained updated plans for the site from Mr Randell, which he provided to his clients, asking Mr Randell not to go to market as he was sure that his clients would take the site: at [90]. Mr Hedley inspected the site with Mr Randell and the defendants. Mr Hedley forwarded the defendants’ offer on to Mr Randell. He also passed on Mr Randell’s advice that the offer was insufficient and forwarded an amended offer. Mr Hedley received and forwarded the owner’s comments on the defendants’ offer, for review and action. He arranged for the owner’s designer to “start talking” with the defendants’ architect. Mr Hedley forwarded a revised offer for the Taylor site. An invoice was then rendered. Beyond this, Mr Hedley passed on an offer to buy the defendants’ leasehold interest in four sites, including Taylor. He also offered to speak to Mr Randell in respect of a side agreement to the agreement for lease.

296. In respect of the Conder site, Mr Hedley obtained details in respect of this site from Mr Randell, which he provided to the defendants. Mr Randell inspected the site with Mr Hedley, the defendants and the owners. When the defendants were not particularly interested in the site, Mr Hedley explored whether the owner would be open to a differently structured deal. He encouraged the defendants not to “give Conder a miss”, where this may harm their chances of obtaining further sites via Mr Randell: at [134]. The defendants agreed to give the site further consideration and inspected the site with Mr Hedley. Mr Larcombe provided an offer to Mr Randell. Mr Randell provided his comments on the offer. By now, communications were often directly between Mr Randell and Mr Larcombe. Mr Hedley suggested that lease documents for the Red Hill, Macgregor and Throsby sites be provided to the Conder owner to save time and legal fees. Mr Hedley commented on the needs report when it arrived, noting that Conder was not as strong as Dickson. The plaintiff then rendered its fee.

297. For the Dickson site, the plaintiff obtained information from Mr Randell in respect of the site, including how the childcare operator would be selected by the owner. The site was not available for some time, where agreements had already been signed with another lessee. Nonetheless, Mr Hedley and Mr Larcombe did a “drive-by” of the site, having obtained the address from Mr Randell. When Mr Hedley became aware that the proposed lessee was in financial trouble, he provided this information to Mr Larcombe and suggested that an offer be prepared ready to send to Mr Randell. Mr Hedley explored the possibility of leasing the site with Mr Randell, where Mr Larcombe was keen to pursue this opportunity: at [151]. Mr Larcombe executed heads of agreement, which he provided to Mr Randell and Mr Hedley. In turn, Mr Randell provided Mr Larcombe and Mr Hedley with plans for the site. Mr Larcombe provided Mr Hedley with draft lease documents for comments, which were apparently provided: see [156]. The plaintiff then rendered an invoice for the first 50% of its fee. The plaintiff appears to have played no further role in respect of the Dickson site until it was completed in February 2021.

298. Finally, in respect of the Woden site, Mr Hedley enquired about this site from Mr Randell. The site was then ‘on hold’ for Kids Club. Notwithstanding this, Mr Hedley suggested that the defendants make an offer, which they submitted to Mr Randell. Mr Randell was not interested, but when Kids Club withdrew from the site, Mr Hedley suggested that the defendants secure Woden as soon as possible. Mr Randell provided Mr Hedley with the latest plans and offer. Mr Hedley inspected the site with Mr Randell and the defendants. Mr Larcombe provided Mr Randell with an offer for the site. Relations between the parties dissolved before the plaintiff had issued an invoice.

299. Of the series of chronological steps involved in leasing and establishing a childcare, described at [30], Mr Hedley said the work undertaken for the defendants was largely limited to communicating to see whether the defendants were interested in the site and, if so, arranging a site inspection. In addition, the defendants used him as a conduit to pass information between the defendants and landlords. He was not involved in due diligence, determining budgets and cashflows, nor drafting, amending or signing offers. Sometimes Mr Randell provided him with the landlords’ requirements for amendments to offers for him to pass on to the defendants, which he did. Mr Hedley either forwarded such emails to the defendants’ representatives or, on occasion, provided limited commentary when forwarding this information. Mr Hedley did not provide instructions to the defendants’ solicitors or negotiate the terms of the agreement for lease. Mr Hedley had no involvement in the development application process, the design or building of the childcare centres, obtaining approvals from government, marketing, recruiting staff or opening the childcare centre. The plaintiff was not asked to provide opinions on the viability of the sites, although I note that Mr Hedley often commented on whether a site was worth pursuing. Although Mr Larcombe once described Mr Hedley as the defendants’ agent – presumably a reference to the document at [104] – Mr Hedley said he had never described himself that way. Mr Hedley’s evidence accords with the contemporaneous documents.

300. Mr Hedley considered that the plaintiff’s value to the defendants was that, because of the relationships Mr Hedley had and could establish given his experience, he was able to introduce and recommend the defendants as tenants to landlords or their agents so that they could lease sites on which to operate childcare centres and establish their brand. Without him, Mr Hedley considered that the defendants had little chance of securing sites, particularly those which the plaintiff proceeded to source in the ACT. Some of those sites had already been ‘earmarked’ for other operators, including Kids Club. Mr Hedley thought that it was only as a consequence of his recommendations that the defendants got the sites. Mr Hedley certainly held this view at the time, as recorded in contemporaneous documents, “My relationships will get you through the door and in prime position.”

289. However, Mr Hedley did not agree that he recommended his clients to the landlord as a preferred tenant; that was the role of the landlord’s agent. Mr Hedley said, “to be clear, the advice that I was providing to Wonderschool was what they needed to prepare, and the documents they needed to provide, in order to put them in the most positive light in competing with other operators. … I was putting the tenant's best foot forward to the agent, yes.” However, it was the agent acting for the landlord who provided advice to the landlord and recommended whether to proceed with the tenant. I agree; this is what the contemporaneous documents indicate.

290. I am not satisfied that the plaintiff’s services meet the description of “negotiating with … a person to … lease, … or enter into … or accept an offer to enter into, a contract to … lease.” At no time was Mr Hedley engaged in any ‘horse trading’ with Mr Randell – or anyone else – as to the terms and conditions of any lease. All such negotiations were undertaken by Mr Larcombe. On occasion, Mr Hedley passed on useful information to the defendants to inform those negotiations, such as the rent which had been offered by another childcare operator for the site, or the level of rent which was likely to be acceptable to the owner, but beyond forwarding offers prepared and signed by Mr Larcombe, Mr Hedley did not engage in any negotiation for any of the sites.

291. Turning then to whether the plaintiff “induced or attempted to induce” a person to lease, or enter into or accept an offer to enter into a contract to lease, for the reasons set out at [279]-[288], I consider that section 8(2)(b) is focussed on whether the plaintiff induced or attempted to induce the counterparty, being the owner of the ACT site as represented by Mr Randell. Whilst the defendants pointed to a number of communications between Mr Hedley and the defendants, encouraging them to taken an interest in a particular site, or to think again where the defendants had decided to give the site “a miss,” I do not think this is the relevant inducement.

292. As to whether the plaintiff induced or attempted to induce the owners of the ACT sites, Mr Hedley met some of the owners at site inspections, but there is no evidence that Mr Hedley engaged in such conduct vis a vis the owners. Indeed, Mr Randell was careful to make sure that communications with his clients went through him and Mr Hedley clearly respected that arrangement. Any inducement or attempt to induce could only have been directed at Mr Randell.

293. There is no evidence that the plaintiff induced the owners via Mr Randell to lease the ACT sites to the defendants. As far as the evidence reveals, Mr Randell discharged his obligations to his clients unaffected by any such inducement.

294. Did the plaintiff “attempt to induce” the owners via Mr Randell? Using the language in Hawk, did the plaintiff endeavour to persuade the ACT owners to enter into a lease on particular terms or, perhaps, at all? Where Mr Hedley abstained from involvement in the terms of the proposed lease, his actions fall short of any endeavour to persuade the ACT owners to enter into a lease on particular terms. Is the very fact that Mr Hedley put forward the defendants as a proposed tenant an attempt to induce entry into a lease? Whatever kudos the defendants may have enjoyed by having been introduced by Mr Hedley does not appear to meet this description, noting that introducers are excluded from the definition of “real estate agent service.” As mentioned, the Agents Act 2003 is penal legislation and, accordingly, “one has to be fairly conservative and literal in the way that one approaches the section”: Challenger Group at [65].

295. Looking then at what may qualify as an “attempt to induce”, Mr Hedley asked Mr Randell to delay in taking the Taylor site to market, where the defendants “will take this one too I’m sure”: see [90]. (It does not appear that Mr Randell acceded to this request: at [94]).

296. For the Woden site, Mr Randell was not interested in accepting an offer when it was already on hold for Kids Club. Notwithstanding this, Mr Hedley “called the developer who is an old friend” and encouraged Mr Larcombe to make an offer. Mr Hedley texted Mr Randell that he was sending through an offer, “All you u can do is give it to the vendors and let them decide to screw Kids Club”. Mr Larcombe provided an offer to Mr Hedley, who submitted it to Mr Randell. When Mr Hedley pressed Mr Randell for a response to the offer, Mr Randell advised that there was “nothing for Woden … there is a wait and see on this.” Mr Hedley persisted, suggesting that Kids Club was experiencing financial stress. This made no difference. Two months later, Mr Randell informed the defendants that the Woden site was available as Kids Club had withdrawn: see [140]. The defendants’ offer then submitted was duly accepted.

297. Mr Hedley also aggressively pursued the Dickson site, where another childcare operator had already taken the site. In July 2019, Mr Hedley provided Mr Randell with a newspaper article indicating that the lessee was in financial trouble. Mr Randell was not persuaded, replying “We do have issues there, but if [the owner] decided to not proceed with [the current lessee], then the terms are full guarantees for the entire length of the lease. It is a pretty tight lease … So if there was an opportunity there is zero room for negotiation. … I met with solicitors for two hours last night on the lease so will follow up today.” Mr Hedley asked Mr Randell whether it was “worth putting an offer under the owner’s nose as an alternative given all the bad press” about the current lessee. Two weeks later, Mr Larcombe provided Mr Randell with an offer for the Woden site.

298. Did the plaintiff thereby attempt to induce the owners to lease these sites to the defendants? All Mr Hedley sought to do was persuade the owner to entertain an offer from the defendants to lease the site, where the owner may have already agreed to lease the site to another. Mr Hedley was doing no more than introducing the defendants to the owner for consideration. The usual processes then followed, of submitting offers and revised offers, followed by negotiation of the terms of the transaction. Each of these matters were undertaken by the defendants themselves.

299. In conclusion, I am not satisfied that the plaintiff’s conduct in relation to the ACT sites fell within the description in section 8(2)(b) of the Agents Act 2003. It follows that the plaintiff is not precluded by section 23 from bringing proceedings to recover its fee.

300. If I am wrong as to the construction of section 8(2)(b) of the Agents Act 2003, then there is no evidence that the plaintiff induced the defendants to lease the childcare sites where Mr Larcombe give not give evidence and it is not otherwise apparent from the contemporaneous documents. As to whether the plaintiff “attempted to induce” the defendants, I have set out each and every step which may fall within that description, should another court take a different view of the meaning of section 8(2)(b).

ILLEGALITY AND MISTAKE

313. It remains to be considered whether the plaintiff is obliged to repay the Hurstville fee. The defendants contend that the oral contract was illegal, contrary to public policy, unenforceable and inherently ineffectual. When the Hurstville fee was paid, the defendants believed or assumed that the plaintiff held the necessary licences required to legally provide its services, was entitled to charge for its services, and that the oral contract was legal. These beliefs and assumptions were mistaken. The plaintiff is said to have been unjustly enriched at the defendants’ expense as a consequence of this mistaken belief and assumption. Further, the illegal, unenforceable or ineffectual nature of the oral contract resulted in a total failure of consideration.

314. Recovery under a claim for money had and received requires proof that the defendant was enriched by reason of some qualifying or vitiating factor, including mistake or illegality or total failure of consideration: David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 353; (1992) 175 CLR 353 at 479 (per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 at [30]. As French CJ, Crennan and Kiefel JJ observed in Equuscorp at [33]:

Failure of consideration as a basis for a claim for money had and received may arise from a number of causes. One cause is illegality. Where a payment is made under a contract which is unenforceable for illegality, the unenforceability of the agreement may constitute a failure of consideration which is capable of supporting a claim for recovery of the payment.

315. Dealing firstly with illegality, I considered this question in The Property Investors Alliance Pty Ltd v C88 Project Pty Ltd (in liq) [2022] NSWSC 1081 in relation to section 49(1) of the Property and Stock Agents Act, which prohibits an agent from obtaining a beneficial interest in the property they are retained to sell. As noted in that judgment, in Gnych v Polish Club [2015] HCA 23; (2015) 255 CLR 414 at [47], French CJ, Kiefel, Keane and Nettle JJ embraced Mason J’s observation in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 423:

There is much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished.

316. As Gageler J explained more fully in Gnych at [63]-[75], a strong presumption of unenforceability has given way to approaching the matter by proper construction of the statute. “An agreement which is not denied legal operation by statutory force may still be unenforceable … by operation of the common law by reference to considerations of public policy. The cases in which that might occur, however, must now be closely confined”: at [70]. Further, at [73]:

It is not the function of the common law to seek to improve on a regulatory scheme by supplementing the statutory sanctions for its breach. If a statute itself does not operate to deny legal operation to an agreement made in breach of one of its prohibitions, or to render that agreement unenforceable by reason of that breach, the coherence of the law is best served by a court respecting and enforcing that legislative choice.

317. Considerations of public policy may nonetheless dictate that the contract is unenforceable. Relevant considerations were expounded by Gageler J at [75]:

A court examining the application of that consideration of public policy to the enforcement of an agreement made in breach of a statutory prohibition will examine the intention of a person in entering into the agreement and in seeking to enforce the agreement. The court will recognise that, “whilst persons who deliberately set out to break the law cannot expect to be aided by a court, it is a different matter when the law is unwittingly broken”. The court will weigh the consequences of withholding a remedy to enforce the agreement in light of the objects or policies which the statute seeks to advance and the means which the statute has adopted to achieve that end [and whether] the consequence of withholding the remedy [are] proportionate to the seriousness of the illegality and not incongruous with the statutory scheme. The moulding of an equitable remedy, if sought, might involve other considerations and permit of greater flexibility.

318. I note also the observations of Professor Carter in Contract Law in Australia (LexisNexis Butterworths, 7^th Edition) at [25-13]: “it is important to consider whether the intention [of the statute] is to protect the public, or merely to exact a penalty for the benefit of the revenue. If the statute is designed to protect the public, a contract in contravention of it will generally be regarded as prohibited. … However, [this] is merely a factor to be considered, and is not conclusive”.

319. Certainly, the object of the statute is to protect consumers. That said, clients may range widely from ‘mums and dads’ to sophisticated clients such as, in this case, experienced businesspeople. The value of the property may also range widely from the family home to commercial property worth significantly more. Contracts which contravene the legislation may involve third parties. If such contracts were unenforceable by reason of a contravention of section 9, third parties may be affected. The client may also suffer harm if the contract was a good deal from their perspective. Perhaps for these reasons, the penalties for contravention of section 9 are specific and directed to punishing the agent rather than any broader consequences which may also impinge on the rights of others. I consider that contravention of section 9 does not render an agreement unenforceable per se. Of course, as Gageler J explained in Gnych, considerations of public policy may dictate that an agency agreement is unenforceable in a particular case.

320. Here, the agreement was with a sophisticated client, with ready access to solicitors. The defendants received a benefit, which they acknowledged at the time. Whilst the legislation prevents the agent from using the processes of the Court to obtain payment on the remaining monies owed under the agreement, I do not consider it to be incongruent with public policy and the purpose of the Act to permit the agent to retain the monies already paid. Where breach of the legislation does not render the oral contract unenforceable per se, it follows that there is no failure of consideration for payments already made, which would qualify as a vitiating factor justifying restitution.

321. Dealing then with mistake, a distinction may be drawn between mistaken payments made in fulfilment of a contractual obligation and a mere payment made by mistake: Mason, Restitution Law in Australia (4^th ed) at [404]. Generally, a payment made pursuant to a valid and enforceable contract cannot be recovered unless the contract is first set aside, on the ground of mistake or otherwise: Jackman, Varieties of Restitution (Federation Press, 2^nd Edition, 2017) at 43. Indeed, David Securities is a case where the contractual obligation had been rendered “absolutely void” by the Income Tax Assessment Act 1936 (Cth).

322. Both learned texts cite Newitt v Leitch (1997) 6 Tas R 396, where the appellant sought a refund of monies paid to an unlicenced real estate agent under a partnership agreement to operate a real estate business. Whilst it was arguable that the agent had committed an offence under the relevant legislation, Wright J observed that such an offence would not necessarily render the contract illegal or inoperative so far as their mutual rights and obligations under the partnership agreement were concerned, citing Yango Pastoral: at [17]. While the appellant had lost money in the venture, there was no total failure of consideration where he got what he bargained for, being the right to participate in the venture: at [22]-[23]. As to whether the appellant was entitled to recover the funds as paid by mistake, at [27]:

… David Securities … provides no authority for the proposition that persons who have entered into contracts whilst labouring under a misapprehension as to relevant facts, may go behind the contract and seek repayment or restitution of moneys or other consideration which they have provided. Before any such course may be undertaken, it is necessary that a determination should be made that the contract pursuant to which the moneys were paid or value provided is unenforceable, void or illegal for some reason. Whilst the contract subsists and until it has been set aside or declared unenforceable, the rights of the parties are derived from the contract. It is only if the contract goes and there is no longer any contractual obligation which can support the payment made, that the necessity may arise to consider whether a total or partial restitution of the consideration provided by the aggrieved party should be made. Whilst the contract subsisted the rights of the parties are governed by the contract …

323. Here, the defendants paid the Hurstville fee under a contractual obligation. The contract has not been set aside nor rendered void by statute. The defendants are not entitled to seek restitution of the Hurstville fee in these circumstances.

324. If I am wrong about this, then it would be necessary for the defendants to prove that they were mistaken as to whether the plaintiff needed to have, and had, a real estate agent licence and, further, that such a mistake was causative of the payment: David Securities at 378; Rogers v Kabriel [1999] NSWSC 368 at [165]-[166] (per Young J). Mr Larcombe did not give evidence in this matter. I infer that his evidence would not have assisted the defendants. Further, there is no hint in the extensive contemporaneous documents that the status of the plaintiff’s licence was ever mentioned or thought relevant. There is little to suppose that it was a matter of any concern to Creative Academy that the plaintiff was licensed. I am not satisfied that the defendants were mistaken or that any mistake was causative of the payment of the Hurstville fee. The defendants are not entitled to a refund of the Hurstville fee already paid as the settlement agreement is not binding and its action for monies had and received fails.

ORDERS

325. Following the hearing, the parties exchanged further submissions as to what moneys were payable in the event that the settlement agreement was, or was not, binding. Ultimately, the figures were largely agreed.

326. As to moneys payable now, the plaintiff is entitled to $59,400 in respect of the Dickson site. The plaintiff is entitled to $176,000 in respect of the Throsby site, less the part payment of $60,500, leaving $115,500. The plaintiff is entitled to $235,400 in respect of the Conder site, less the part payment of $47,750, leaving $187,750. The plaintiff is entitled to $264,000 in respect of the Woden site. The plaintiff is entitled to $121,000 for its initial fee in respect of the Taylor site. The total of the moneys payable now is $747,650.

327. As to moneys will become payable on the opening on childcare centres, on the opening of the Macgregor site, the plaintiff is entitled to $165,000. On the opening of the Red Hill site, the plaintiff is entitled to $132,000. On the opening of the Taylor site, the plaintiff is entitled to a further $121,000.

328. The defendants have wholly failed. The plaintiff is entitled to its costs.

329. For these reasons, I make the following orders:

1. Judgment against the first defendant in the amount of $747,650, together with interest under section 100 of the Civil Procedure Act 2005 (NSW).

2. Summons otherwise dismissed.

3. Cross-Summons dismissed.

4. First defendant to pay the plaintiff’s costs of the proceedings.

5. Parties to notify any errors or omissions within 7 days.

**********

Decision last updated: 25 July 2023