Aux Venture Pty Ltd v Black [2018] QDC 211

DISTRICT COURT OF QUEENSLAND CITATION: Aux Venture Pty Ltd v Black & Anor [2018] QDC 211 PARTIES: AUX VENTURE PTY LTD ACN 135 481 140 (appellant) v DAVID PETER BARTON BLACK (first respondent) and JENNIFER ANNE BLACK (second respondent) FILE NO: D3/2018 DIVISION: District Court of Queensland PROCEEDING: Civil Appeal ORIGINATING COURT: Magistrates Court at Rockhampton DELIVERED ON: 19 October 2018 DELIVERED AT: Rockhampton HEARING DATE: 15 August 2018 JUDGE: Burnett AM DCJ ORDER: 1. Appeal allowed; 2. Liberty to apply; 3. All costs to be reserved. CATCHWORDS: CIVIL LAW – APPEAL AGAINST SUMMARY JUDGMENT BY DEFENDANT AGAINST PLAINTIFF – whether a serious issue to be tried – statutory interpretation – whether consultancy agreement provided for an unenforceable entitlement to remuneration pursuant to s 140 Property Agents and Motor Dealings Act 2000 (QLD) (PAMDA) – real estate agent’s commission – proper construction of agreement – terms of consultancy agreement – ambiguity – need for extrinsic evidence. COUNSEL: P D Hay for the Appellant T M Arnold for the Respondent SOLICITORS: ClarkeKann Lawyers for the Appellant Crosby Brosnan & Creen Lawyers for the Respondent -- 1 of 13 -- 2 Introduction [1] On 20 December 2017 the respondents/defendants made an application in the Magistrates Court for orders for summary judgment against the appellant/plaintiff pursuant to rule 293 of the Uniform Civil Procedure Rules1 (UCPR) or alternative orders together with a claim for costs on an indemnity basis. At the hearing the learned Magistrate acceded to the respondents/defendants primary application and ordered the application be allowed and that there be entry of judgment for the defendants. He also ordered the appellants pay the respondents’ costs of the proceeding and application to be assessed on the standard basis. By notice of appeal filed 16 January 2018 the appellant/plaintiff appeals the orders made. It seeks orders that the judgment be set aside together with orders for costs. Background [2] The respondents are and were engaged in the pastoral industry. They owned properties which included a cattle property in Western Queensland, Culloden from which they conducted part of their cattle grazing business. The appellant conducted business as a rural consultant and as part of its consultancy business offered to its clients, including the respondents, services including “financial services”. The appellant acted through its director, Jennifer Wainwright. [3] Prior to events relevant to these proceedings the respondents had determined to sell their property at Culloden. They had appointed a real estate agent, Geaney’s of Charters Towers. A formal appointment in the terms of a Property Agents and Motor Dealers Act2 (PAMDA) Form 21a was completed. Although the respondents had listed the property for sale they were open to the prospect of other arrangements which included some kind of joint venture or similar arrangement with a perspective investor. [4] At about the time of these events the appellant and respondents entered into a service agreement. That agreement dated 6 August 2012 was variously described as “Consultancy Agreement” or “Engagement Agreement”. It noted the duties of the 1 1999 (Qld). 2 2000 (Qld). -- 2 of 13 -- 3 engagement to include appointment of the appellant “as a consultant to facilitate the attainment of strategic accommodations that will provide further growth for the families in the business…”. It provided for a basis for remuneration at a set hourly rate. The arrangement was to assist the respondents in pursuit of arrangements other than by disposition of the property by sale. [5] It appears that the prospect of a sale to an entity in circumstances where the nature of the transaction contemplated a transition from a simple real estate transaction to one involving funding and a prospective joint venture precipitated a review by the appellant of the original Consultancy Agreement. A revised Consultancy Agreement was submitted by the appellant to the respondents dated 4 April 2013 which instrument was executed by both parties. It is that Consultancy Agreement which is contended to support the appellant’s principle claim in the proceeding. [6] That later agreement introduced a significant variation to the original Consultancy Agreement. The provisions of the original agreement were extended and adopting the numbering of the new Consultancy Agreement cl 7 added additional terms as follows: “7. The client will incur the fee stated in Item 3 of the schedule (Fee) to Aux Venture once an investor introduced by Aux Venture enters into an agreement, JV or an arrangement to provide funds to the Client substantially in the terms set out in Item 4 of the Schedule. The Fee is payable at settlement at which the funds are introduced. The schedule provided in Item 3 for the fee to be “2.2% of the value of the funds (including GST)”. Additionally Item 4 provided the terms to be “Investment Capital to be provided as a sale of assets and or JV or Equity partner that reasonably satisfies the strategic plan to undertake leverage and or herd growth strategy”. The “Minimum introduction AUD 5 Million” was stated to be a base threshold for those fees. [7] One prospective arrangement put to the respondents concerned a proposal by an entity, Agricultural Investment Development Corporation (AIDC). AIDC was an entity that brokered rural investments marrying marketable rural investment opportunities with capital investors. One of its clients was a Grazing Australia, an entity associated with Daniel Koffel. -- 3 of 13 -- 4 [8] In summary the appellant was consulting/facilitating for the respondents who had appointed real estate agents for sale of Culloden. At the same time Koffel through his entity was interested in purchasing a stake in Culloden on terms and employing a structure that hadn’t been finalised and had engaged AIDC as its consulting entity. [9] It is also noteworthy that about this time AIDC and the appellant entered into an arrangement to “share commissions” they expected to achieve from this transaction. [10] There was one real estate agent and each entity, vendor and purchaser, had their own respective advisers in respect of a prospective joint venture arrangement for the operation of Culloden. [11] After the Koffel entity was introduced by AIDC in October 2012 extensive negotiations progressed from about March 2013 from which a final sale was concluded. The transaction ultimately negotiated was one whereby the respondents sold Culloden as a going concern to the Koffel entity. The contract was for the sale of the real estate and stock. That contract was formalised by an agreement dated 24 May 2013. [12] Geaney’s Pty Ltd as the real estate agents charged the respondents commission upon the terms agreed. The appellant also rendered an account to the respondents on account of services rendered. That account was for a sum of $140,475.55 based upon the later Consultancy Agreement entered into between the appellant and the respondent. Given the manner of its calculation it looks suspiciously like a real estate agent commission. That is the principle issue in dispute. [13] The appellant contended that the amended Consultancy Agreement rendered the respondents liable for a commission based fee of 2.2% for the “investor introduced via (the appellant) [which] enters into an agreement, JV or an arrangement to provide funds to the (respondents) substantially in the terms set out in item 4 of the schedule”. [14] Ms Wainwright, the director of the appellant, swore in her affidavit that the variation to the remuneration arrangements provided for in the original Consultancy Arrangement from an hourly rate to one based upon both hourly and commission rates occurred because she foresaw the nature of her consultancy extending to include services such as “funds introduction” rather than “simple advisory”. Accordingly, if the appellant introduced an “investor” she proposed a remuneration for such an -- 4 of 13 -- 5 introduction “would be by way of a percentage of the benefit (the respondents) receive”. She explained: “Introduction fees are usually calculated upon the amount introduced and/or transacted by the investor and paid to (the appellant) as a success fee at settlement”. [15] In due course the appellant issued invoices calculated at both the hourly rate for consulting services rendered and an invoice for a sum of $140,475.55 being “payment of service fee for the introduction of capital for the sale of Culloden…”. [16] The respondent paid the invoice for consulting services rendered on the hourly basis but refused to pay the sum of $140,475.55. [17] The appellant in turn initiated proceedings seeking to recover that sum or in the alternative for a sum based upon a quantum meruit. The respondent defended the claim alleging, in summary: (a) The terms of the Consultancy Agreement were never fulfilled as no investor was introduced and accordingly no commission was due; (b) The appellant’s claim for remuneration was one for services rendered as a real estate agent which was unlawful or unenforceable by operation of s140 PAMDA; and (c) In the circumstances of any quantum meruit claim would also fail by operation of s140 PAMDA. [18] The respondents also claimed in restitution for the recovery of the relatively lesser sums paid on the other invoices by reason of the principal matters raised in their defence. [19] In reply and answer the appellant responded in summary: (a) The term “funds”, not being expressly defined or discussed in the Consultancy Agreement was understood to include money contributed “by acquisition”; (b) The sale of Culloden to the investor amounted to the provision of investment capital within the meaning of the Consultancy Agreement and/or permitted the respondents to undertake leverage within the meaning of the Consultancy Agreement as the respondents were able to and did consequently discharge their debt to the ANZ bank and/or -- 5 of 13 -- 6 presented to the respondents the opportunity to pursue a herd growth strategy; and (c) It denied acting as a real estate agent and/or that any entitlement to remuneration was in respect of duties as a real estate agent. [20] On the hearing of the application for summary judgment those arguments were essentially pursued. In determining the application in favour of dismissal of the appellant’s claim the learned Magistrate identified the principle issue as a claim on the part of the appellant seeking remuneration or reward for acting as a real estate agent noting that if that was indeed the positon then in the absence of an appropriate licence the claim was unenforceable. On that point he concluded: “On the plaintiff’s own evidence it performed activities as an agent. The aforesaid activity clearly falls within the ambit of negotiating for the selling of land as does introducing the buyer. The colour of those activities is not changed simply by changing the nomenclature. The reward in schedule 3 is a commission based on the value of funds. Here, the funds - the value of the fund is the purchase price arising from a sale. The activity does not change by altering the word buyer to the word investor. The true nature of the activity for which the success fee is sought is also revealed in its calculation, that is, a percentage of the funds from the sale of the asset. The plaintiff here falls foul of the said provisions of the said Act.” [21] His Honour continued to dismiss the appellant’s claims in respect of its claims for monies due on a quantum meruit basis concluding, “If the plaintiff could claim on a quantum meruit base, (sic) it would simply allow persons to avoid the operation of the Act by claiming on that restitutional basis. See FJ Richard Pty Ltd v Mills Pty Ltd [1995] 1 Qd R 001. The wording of section 140 is clear and, frankly, definitive. The words “not entitled to sue or recover” are sufficiently wide to preclude any claim and restitution, including on quantum meruit.” [22] His Honour thereby concluded the plaintiff had no real prospect of success in its claim and allowed the application for summary judgment by the defendant. -- 6 of 13 -- 7 Appeal [23] In its notice of appeal the appellant principally contends the learned Magistrate erred in: 1. Concluding that the appellant’s claim was precluded by s 140 of PAMDA; 2. Concluding that the fee payable pursuant to cl 7 and the schedule items 3 and 4 of the Consultancy Agreement was a reward or expense for the performance of an activity as a real estate agent within the meaning of s 140 of PAMDA; 3. Concluding that the appellant engaged in activity as a real estate agent within the meaning of PAMDA and more particularly the activity of selling or negotiating for the selling of land within s 128 of PAMDA; 4. Concluding that the debt the subject of the proceedings was a reward or expense for the performance of an activity as a real estate agent within the meaning of PAMDA and more particularly the activity of selling or negotiating for the sale of land within s 128 of PAMDA; 5. Concluding that the appellant was involved in negotiations between the respondents and Grazing Australia Pty Ltd in conjunction with AIDC for the sale of property known as Culloden; 6. Failing to give proper consideration to the evidence of the appellant’s witnesses that the appellant played no part in the negotiation for the sale of Culloden; 7. Finding on the evidence an independent real estate agent was engaged in the sale; 8. Finding that Ms Wainwright on behalf of the appellant had discussions regarding the sale of Culloden; and 9. Classifying the appellant’s claim as a claim for commission on the sale of property known as Culloden. Submissions [24] Despite the detailed grounds identified by the appellant in its notice of appeal, the appellant by its counsel in the Introduction to his Outline of Argument identified the central issue, that is, that there was no evidence to support a conclusion that the appellant’s conduct was “within the ambit of negotiating the selling of land”. Accordingly its activity did not fall foul of s140 PAMDA. [25] This central issue in turn identified two sub issues: -- 7 of 13 -- 8 (a) the proper characterisation of the Consultancy Agreement; was it an agreement to pay a commission for the introduction of a purchaser such as to bring it within the ambit of the PAMDA (the contract issue); and (b) if the Consultancy Agreement cannot be characterised as one bringing its terms within PAMDA, did the appellant do anything which gave it that effect (the performance issue). [26] These two issues are in broad terms the issues alive both at large and on the appeal. Other issues such as an entitlement to claim upon a quantum meruit basis will follow the determination of those principal issues. The contract issue [27] If the Consultancy Agreement was expressed in terms of the kind to be found in PAMDA Form 21a, it would be beyond doubt that on its face the appellant was seeking to recover remuneration in circumstances where its claim would be unenforceable. The Form 21a, appointment of real estate agent, notes the use of the form for “sale or purchase of property, land and businesses”. 3 PAMDA s128 relevantly provides: “128 What a real estate agent’s licence authorises (1) A real estate agent’s licence authorises the holder of the licence (real estate agent) to perform the following activities as an agent for others for reward— (a) to buy, sell, exchange, or let places of residence or land or interests in places of residence or land; (b) to buy, sell, exchange, or let businesses or interests in businesses; (c) …; (d) to buy, sell or exchange livestock or an interest in livestock; (e) to negotiate for the buying, selling, exchanging, or letting of something mentioned in paragraph (a) or (b); (f) to negotiate for the buying, selling or exchanging of something mentioned in paragraph (d).” [28] The Consultancy Agreement states it provided for payment of a fee “once an investor introduced by [the appellant] entered into an agreement, joint venture or an arrangement to provide funds… substantially in terms set out in Item 4.” Item 4 3 See affidavit of James Charles Gearney, Annexure JCG-1. -- 8 of 13 -- 9 provides, “investment capital to be provided as a sale of assets and/or joint venture or equity partner that reasonably satisfies the strategic plan to undertake leverage relief or herd growth strategy”. [29] Those terms were introduced into the second Consultancy Agreement dated 4 April 2013. Plainly the property Culloden had been formally listed for sale by the appointment of Geaney’s on 1 April 2011. The appellant’s knowledge of that appointment is a factual mater in dispute on the pleadings. In her affidavit, Ms Wainwright did not address the issue. However the respondents plead she was aware of the appointment of agents. This matter has some significance as is explained below. [30] The evidence indicates the nature of transaction initially contemplated by the respondents changed from a plain sale (a vendor/purchaser) transaction to something more sophisticated. As Jennifer Black deposed in her affidavit: “Apart from an interest in an intent to sell Culloden we were also interested in forming a joint venture with some other party to enable us to continue our work on Culloden.” [31] She continued: “For that purpose we appointed (the appellant) as a financial advisor.” [32] Plainly, after the Koffel entity expressed interest in the property, but not as a vanilla sale, the appellant reflected upon the terms of its consultancy. This occurred about late March 2013 and was reflected in an email of 28 March 2013 at 5.58pm from the appellant to Rod Krvavac of AIDC who represented the investor. [33] It is not for me to determine on this appeal whether the primary action should fail because on a proper construction of the Consultancy Agreement the appellant can show no entitlement to commission. However the underlying issue concerning the proper construction of clause 7 and Items 3 and 4 of the Consultancy Agreement and the fee entitlement, if any, under that agreement are central to the issue between the parties. Before any conclusion can be reached as to whether the Consultancy Agreement is one which seeks to reward the appellants for ‘the performance of an activity as a real estate agent’ clause 7 and Items 3 and 4 must be considered to determine if upon its proper construction that is indeed what the agreement provided. -- 9 of 13 -- 10 [34] Likewise it is not for me to determine on this appeal whether the appellant has any, or no, entitlement to reward under the agreement because the property was sold by the respondents and accordingly failed to ‘introduce an investor who entered into an agreement, JV or an arrangement to provide funds … substantially in terms set out in Item 4’. [35] Both these matters are informed by evidence and for reasons that follow there is insufficient certainty in the evidence to proceed to summary relief. [36] As a matter of general principle of documentary construction, a court should afford the words of a contract the plain, natural or common meaning in cases where the language is unambiguous in the sense of not being susceptible to more than one meaning. However where the words are ambiguous then courts may have regard to surrounding circumstances to aid in construction, in particular concerning the factual matrix preceding the agreement.4 Plainly, the courts do not adopt this approach where there is a clear non-ambiguous expression unless a parol evidence rule exception can be established. [37] Of particular significance in the current context is that the parties are presumed not to intend their contracts to achieve unreasonable results and accordingly, except in the clearest of cases, a construction which avoids an unreasonable result and sees a commercially sensible result as to be preferred.5 [38] Adopting that approach, arguably neither the appellant nor respondents anticipated the appellant would be remunerated in respect of the same activities to be undertaken by the real estate agent. That would be so even if the appellant was formally unaware of the appointment of Geaney’s as real estate agent, but even more so if it were aware of Geaney’s appointment (a matter which is in contest on the pleadings). [39] I have earlier recited the terms of Clause 7. The language of Clause 7 and Item 4 is torturous. It is open to more than one construction and accordingly, on its face, ambiguous. It follows that the true intent of the parties expressed in their agreement must be informed by the circumstances surrounding the conclusion of that agreement 4 See generally, Pacific Carriers Limited v PNB Paribas (2004) 218 CLR 451 at 462; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 350. 5 See Cohen and Co v Okerby and Co Limited (1917) 24 CLR 288 at 300; Kitchen v Stewarts (1942) 66 CLR 116 at 124-125; Upper Hunter County District Council v Australian Chilling and Freezing (1968) 118 CLR 429 at 437. -- 10 of 13 -- 11 which manner can only be achieved following trial. For instance, what was the state of the appellant’s knowledge concerning the appointment of a real estate agent, any agent, not necessarily Geaney’s? What other evidentiary factors concerning the change in formal structure of the transaction inform the proper construction of the term of Clause 7? What was meant by the phrases “enters into an agreement, JV or an arrangement to provide funds”; and, the terms set out in item 4, which referred to “Investment capital” and such being “provided on a sale of assets and or JV or Equity Partner” that “reasonably satisfies the strategic plan to undertake leverage relief”? Given both parties signed this instrument they must have reached some consensus as to the meaning of those words. Unfortunately that consensus cannot be discerned from a plain reading of them and thus will require extrinsic evidence. [40] It follows that what was agreed can only be subject to proper construction to determine what the terms mean after consideration of the evidence related to the underlying transaction from which this agreement was spawned. [41] Once construed the true character of the Consultancy Agreement will be revealed. Three outcomes are immediately apparent. That is, whether the agreement was one that sought to reward the appellant in circumstances where it has no entitlement to be rewarded by operation of PAMDA; or, whether it has no entitlement to reward under the agreement simpliciter; or if in fact under the agreement there is an entitlement to reward on a quantum meruit basis. [42] With respect to the learned Magistrate, I do not agree that the Consultancy Agreement can be readily characterised as an agreement that offends s128 PAMDA. I agree that the mere changing of the nomenclature would not affect any change to its legal substance, but in this case, it is that legal substance which is in issue. The evidence is not sufficient to permit this matter to be resolved in a summary manner and the legal issues too complex for summary disposition. [43] The significance of the determination of this issue is that it impacts the alternative claim by the appellants for quantum merit. I accept the respondents’ submission that no claim for quantum merit can be maintained if the agreement was one that contravened s 140 PAMDA. But, given the terms of the Consultancy Agreement, a claim for reasonable remuneration might be open, although I too share the learned -- 11 of 13 -- 12 Magistrate’s cynicism concerning the applicant’s claim for quantum merit as set out for the amount claimed. [44] It follows in my view, that there is serious issue to be tried in respect of a matter of fact concerning the contract claim and on that basis alone the appellants have established there is some real prospect of succeeding at trial and accordingly the matter must go to trial.6 The performance issue [45] In addition to the contract issue there is also the performance issue. That is, accepting that as a matter of law the appellant’s Consultancy Agreement did not provide for the provision of activities provided for in s128 PAMDA, then a factual contest arises as to whether in fact it did so. [46] There is a contest on the evidence between that sworn to by Ms Wainwright and the deposition of Ms Black concerning the appellant’s involvement in negotiations leading to the concluded transaction between the respondents and the Koffel entity. Present issues of fact include conflict in the opposing testimony concerning:  the nature of the appointment;  The activity undertaken by the appellant;  The characterisation of the activity undertaken by the appellant – for instance was it in the nature of activity that would be expected to fall within the ambit of activity usually undertaken by a real estate agent? [47] Although the appellant may succeed in the contract issue it may still fail in the performance issue. However, whether it does or not cannot be resolved in the absence of a testing of the evidence. Summary [48] In my view the issues in this case are far from straight forward. Whilst I agree that at its heart the legal issues concerning the construction of the consultancy agreement may be determinative of all rights; the fact remains that the wording of the consultancy agreement is not unambiguous. Evidence will be required to assist in the 6 Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 at pp 236-7. -- 12 of 13 -- 13 proper construction of the agreement. If the agreement is not one which purports to provide an unenforceable entitlement to remuneration by operation of s140 PAMDA, then the contested factual issue concerns whether the appellant is in fact entitled to remuneration, and that matter can only be resolved at trial. Orders 1. Appeal allowed; 2. Liberty to Apply; 3. All costs to be reserved. -- 13 of 13 --