Brenhaven Pty Ltd v Harbrae Pty Ltd [2008] QDC 259

DISTRICT COURT OF QUEENSLAND CITATION: Brenhaven v Harbrae [2008] QDC 259 PARTIES: BRENHAVEN PTY LTD (ACN 007 119 655) (Plaintiffs) AND HARBRAE PTY LTD (ACN 010 601 733) (Defendant) FILE NOS: 161/07 DIVISION: District Court of Queensland, Maroochydore PROCEEDING: Civil hearing ORIGINATING COURT: Maroochydore District Court DELIVERED ON: 6.11.2008 DELIVERED AT: Maroochydore HEARING DATE: 6.11.2008 JUDGE: Judge J.M. Robertson ORDER: The Plaintiffs claim is dismissed CATCHWORDS: PRINCIPAL AND AGENT: where defendant appointed as real estate agent on 1 July and contract of sale entered into the following day; whether defendants activities as a real estate agent prior to appointment were unlawful; CONTRACT: whether agent had to be the effective cause of sale to retain commission pursuant to the contractual arrangements between it and the Plaintiff; whether defendant was entitled to retain commission paid to it; whether Put and Call Agreement entered into prior to appointment as a real estate agent constituted a lawful appointment under Property -- 1 of 17 -- 2 Agents and Motor Dealers Act 2000. PROCEDURE: where dispute decided on basis not the subject of direct pleadings; where parties given further opportunity to make submissions; where no prejudice alleged by the plaintiff. Legislation: Property Agents and Motor Dealers Act 2000 Cases Considered: Asset Loan Co Pty Ltd v Mamap Pty Ltd [2005] QDC 295 David Deane & Associates P/L v Bonnyview P/L and Ors [2005] QCA 270 Knobel & Davis Property Services Pty Ltd v Jones [2007] QDC 241 Jones v Knobel & Davis Property Services P/L [2008] QCA 105 Moneywood Pty Ltd (2001) 202 CLR 351 COUNSEL: Ms. Muir for the Plaintiff Mr. Hackett for the Defendant SOLICITORS: Ellison Moschella & Co for the Plaintiff Shultz Toomey O’Brien Lawyers for the Defendant Introduction [1] On the 2 nd July 2004 the plaintiff (Brenhaven) entered into a contract to sell a commercial property at Sugar Road Maroochdyore to Mr. and Mrs. Silbery (as trustees for the Silbery Family Trust) for $2,350,000. Harbrae Pty Ltd (Ray White) then traded as Ray White Commercial Mooloolaba and was nominated as Brenhavens agent and stakeholder in the contract, and received a deposit of $115,00 on its behalf on 8 th July 2004. The contract completed on 20 August 2004, and, on or about the 24 th August Ray White paid to itself from the deposit monies the amount of $77,500 by way of commission. Brenhaven claims that Ray White was not entitled to be paid -- 2 of 17 -- 3 a commission as it was not, prior to 1 July 2004 appointed properly as its agent and was therefore not entitled to commission by virtue of s140 of the Property Agents and Motor Dealers Act 2000 (the Act). It further argues that Ray White was not the effective cause of the sale on 2 July by reason of anything done after its appointment as agent on 1 July 2004. [2] The case sensibly proceeded on the basis of agreed facts and an agreed bundle of documents. Brenhaven called only one witness, Mr. Lopes who was at the time a director and controlling shareholder of Brenhaven. He had limited direct dealings with Ray White and the Silberys in relation to the sale as this was left to the resident director Mr. Ryan. [3] Ray White called two witnesses, Mr. Silbery who was the decision maker behind the purchaser, and Mr. Tom McLean who was one of the licensed real estate agents involved with the property at the time along with Mr O’Brien. [4] There are no issues of credibility or reliability. Background Facts [5] Brenhaven first listed the property for sale in early 2004, and appointed another agent, FPD Savills (Sunshine Coast) as its agent. Mr. Silbery contacted Savills by telephone in early 2004 as a result of an advertisement, and Savills sent him a brochure. The agency agreement between Brenhaven and Savills is in evidence and was entered into in April -- 3 of 17 -- 4 2004 and gave Savills exclusive agency from 31.3.04 to 30.6.04. I was told by Ms. Muir in her opening that there was an agreement covering the earlier period but that is not in evidence. I infer that Savills introduced a buyer who entered into a contract which did not proceed. Mr. Lopes said he recalls meeting with Mr. O’Brien of Ray White in 2004 in a bar at Maroochydore and telling him, in effect, that the contract with Savills would not probably proceed and the property was for sale. [6] I infer that soon after (probably in June) Mr. O’Brien told Mr. McLean of the availability of the property and Mr. McLean contacted Mr. Silbery who he knew was interested in purchasing a commercial property. [7] On 17th June Mr. McLean and Mr. Silbery inspected the property from the outside. It is agreed that on that date, Mr O’Brien and Mr Mclean explained the property to Mr Silbery and discussed the following matters: (i) leases relating to the Property; (ii) a neighbouring service station; (iii) contamination issues; (iv) easements; (v) zoning issues; and -- 4 of 17 -- 5 (vi) the possible future redevelopment of the Property; Mr Silbery indicated that he was prepared to buy the property subject to certain investigations. Between 17 June 2004 and on or about 25 June 2004 Mr O’Brien and Mr McLean assisted in negotiations between Mr Silbery and the plaintiff in relation to the terms of a proposed put and call option agreement. [8] Mr. Lopes did not want to sell the property in that financial year. That may have been because he was conscious of the terms of the appointment agreement with Savills but that was not explored or established on the evidence. [9] It is further agreed that: “On or about 25 June 2004, the plaintiff entered into a put and call option agreement (“Put and Call Agreement”) with Mr Silbery and Isabel Janice Silbery (“the Silberys”) On 28 June 2004 the plaintiff & Mr and Mrs Silbery agreed to vary special condition 3.1 to the contract annexed to the Put and Call Agreement from 3 years to 2 years.” -- 5 of 17 -- 6 [10] On 1 July 2004, it is admitted that two appointment agreements were signed between Brenhaven and Ray White. It is accepted that the relevant appointment is the second appointment on that day because it relates to the sale of the property whereas the first appointment related to tenancy agreements. At the time of sale, the property was occupied by three commercial tenants all of whom had current enforceable lease agreements. [11] The second appointment provides (relevantly) inter alia: (a) the reserve or listing price of the Property was $240,000.00 (clause 6 of Form 21a); (b) the appointment was for an Exclusive Agency, starting 1 July 2004 and ending 30 September 2004 (clause 8 of Form 21a); (c) the appointment was to continue as an Open Listing until 31 December 2005 (clause 9 of Form 21a); (d) the commission payable was 3% of the actual sale price plus 10% GST (clause 10 of Form 21a); (e) standard terms and conditions approved by the Real Estate Institute of Queensland, which included the following: “2. ENTITLEMENT TO COMMISSION 2.1 The Client agrees to pay the Agent commission as specified in the Appointment if a Contract of Sale of the Property is entered into with a buyer, whether within the Term or after the Term, where the -- 6 of 17 -- 7 Relevant Person is the effective cause of the sale within the Term, provided that (1) the Contract of Sale of the Property is completed; or (2) … 2.2 For the purposes of Clause 2.1 a Relevant Person is, where the Appointment is for: (1) an Exclusive Agency, any person (including the Client); or (2) a Sole Agency, any person other than the Client; or (3) an Open Listing, the Agent only.” Discussion of the Issues [12] The fundamental submission of Brenhaven is to the effect that on the evidence, anything done by Ray White prior to the 1st July cannot, as a matter of law, be the basis for a claim for commission because prior to that date Ray White had not properly been appointed by Brenhaven as its agent. [13] Ms Muir relied on ss 133 and 140 of the Act. s. 133 (1) provides (relevantly) : “(1) A real estate agent must not act as a real estate agent for a person (client) to perform an activity (service) for the client unless— (a) the client first appoints the real estate agent in writing; -- 7 of 17 -- 8 ………………………………… Maximum penalty—200 penalty units.” [14] s.140 of the Act provides (relevantly): “(1) A person is not entitled to sue for, or recover or retain, a reward or expense for the performance of an activity as a real estate agent unless, at the time the activity was performed, the person— ……… (c) had been properly appointed under division 2 by the person to be charged with the reward or expense.” “(2) A person who sues for, or recovers or retains, a reward or expense for the performance of an activity as a real estate agent other than as provided by subsection (1) commits an offence.” [15] Brenhavens submission is that the actions of Mr. McLean and Mr. O’Brien on the 17 th June, their actions in assisting Mr. Silbery up until 25 June 2004 leading up to the Put and Call agreement on 25 June 2004 (and amended on 28 June 2004) were the effective cause of the sale, not anything done by Ray White between its appointment on the 1 st July and the execution of the contract on 2nd July. [16] Ray Whites response is multi-faceted. Ray White initially defended essentially on the basis that it was the effective cause of the sale within the terms of the second appointment on the 1 st July 2004 . In its first amended -- 8 of 17 -- 9 defence it raised what is now referred to as the “first appointment” on the 1st July (dealing with tenancies) and asserted that it was entitled to commission as the effective cause of sale within the terms of either appointment. On the day of the hearing, a further amended defence was filed without objection which raised an additional matter, namely a contention that, in addition to the 1st July appointments, the Put and Call Agreement on the 25 th July 2004, by virtue of paragraph 30 in the standard REIQ terms attached to it, contained a valid appointment of the defendant as Agent on that date. Mrs. Muir indicated her intention to file an amended reply which would plead that the appointment alleged in paragraphs 9(aa) of the Further Amended Defence was not a valid appointment as a matter of law. [17] As I have noted the parties agree that the first appointment is not relevant to the issues in the case. Is Ray White entitled to commission as a result of the second appointment on the 1st July 2004? [18] The plaintiff concedes (as it must) that this was a valid appointment and that the contract was settled. The issue raised at trial was whether Ray White was “the effective cause of the sale within the term”. After the 1st July, Mr. McLean engaged in some activity, namely the taking of the contract to the solicitors, receiving the deposit, and engaging in -- 9 of 17 -- 10 correspondence with the solicitors about the progress of the contract and its completion. [19] I am comfortably satisfied that there is no merit in Ray White’s argument raised for the first time in its further amended defence filed on the day of the hearing, that Clause 30 in the draft Contract annexed to the Put and Call Agreement constituted a valid appointment on that day. It is correct that in certain circumstances a Put and Call Agreement can amount to a contract of sale giving rise to a right to commission : David Deane & Associates P/L v Bonnyview P/L and Ors [2005] QCA 270, however the background facts in that case are quite different from the agreed facts here. In that case, the agent had been appointed as agent prior to the Put and Call agreement between the Vendor and a person introduced by the agent. In this case, there is no evidence that either party to the Put and Call agreement exercised any rights under it which resulted in the 2 nd July contract. Mr and Mrs Silbery were parties to the Put and Call agreement but the purchaser in the later contract was them as trustee for The Silbery Family Trust which was not actually created until the 30 th June. Also, the “appointment” in Clause 30 is not in the mandatory terms required by s. 133 (3) of the Act, and finally, Clause 30 in its terms namely “[i]n the absence of any specific appointment the Vendor by executing this Contract confirms the appointment of the Vendor’s agent (jointly with any other agent in conjunction with whom the Vendor’s Agent has sold) as the agent of the Vendor to introduce a buyer” -- 10 of 17 -- 11 has no application because of the specific appointment of Ray White as agent. [20] Both parties referred me (for different reasons) to the Court of Appeal’s decision in Jones v Knobel & Davis Property Services P/L [2008] QCA 105. It seems to me that a proper analysis of the judgment of Muir JA (with whom White and Lyons JJ agreed), and an application of the reasoning to the facts here, produces a resolution of the dispute between the parties to a significant extent, but not for the reasons advanced by the parties. [21] There is some similarity between the facts here and the facts in Jones v Knobel although the issue at the heart of that case was different. [22] The agent in that case entered into an agency agreement with a vendor on the same day that the vendor entered into a contract of sale of land to a purchaser introduced to her by the agent which subsequently settled. It was conceded that the agent had performed work as a real estate agent (discussions with the buyer, arranging and attending at a meeting between vendor and buyer) before obtaining a written appointment. The case turned on whether or not, by virtue of s.140 of the Act, the agent was prevented from recovering his commission, which in that case had not been paid, so the agent was the plaintiff who was successful at first instance (Knobel & Davis Property Services Pty Ltd v Jones [2007] QDC 241) and successful again on appeal. Although the appointment there was apparently in the -- 11 of 17 -- 12 approved form (presumably by Regulation to the Act); there is nothing in the judgment in the District Court or in the Court of Appeal to suggest that standard REIQ terms formed part of the appointment agreement, including Clause 2.1 which included the words “where the Relevant Person is the effective cause of sale within the term” as is the case here. [23] The statutory form there was said to be Form 22a which is the form for residential sales presumably, whereas the form here 21a is for sales of commercial property. [24] The activities of the agent (which were similar to the activities of the agent here), prior to the appointment agreement were held by the primary Judge to be activities as an agent connected or concerned with the selling of the land. He held that these activities did not constitute a breach of s.140; and held that the only activity that gave rise to the commission was the “final entry into a contract of sale.” Muir JA held that the primary Judge erred in both of these findings. By reference to cases such as Moneywood Pty Ltd (2001) 202 CLR 351, he held that the concept of “activity” should be construed more broadly than the mere signing of the contract because such a construction was inconsistent with the purposes of the Act which “is primarily consumer protection” [paragraph 21(e)]. [25] Despite holding that the primary Judge was wrong in two respects, his Honour nevertheless dismissed the appeal primarily on the basis of the parties contractual rights as reflected in the appointment agreement. The -- 12 of 17 -- 13 relevant term was to the effect that the vendor would pay commission to the agent “if the property is sold during the term of the Agent’s appointment”. [26] It can be assumed however that the Form in that case did not have attached to it the standard REIQ conditions which include Clause 2.1 so the Court did not deal with the construction of a Clause in the terms under consideration here. [27] Both parties proceeded at trial on the basis that Ray White’s entitlement to commission in this case was dependent upon : (1) a contract of sale being entered into within the term of its appointment and; (2) it was the effective cause of sale within the term and; (3) the contract completed [28] To that end both counsel referred me to the many cases on “effective cause”. The plaintiff submits that the effective cause of the sale was the actions of Mr McLean and Mr O’Brien prior to 1st July and as Ray White was not then appointed as agent, any activities carried out as a real estate agent were unlawful and could not be the subject of a lawful retention of a commission. [29] Mr. Hackett’s submission on behalf of Ray White is multi-faceted. Firstly he argues that it does not matter that an appointment post dates the commencement of the real estate agents activities as an agent; provided -- 13 of 17 -- 14 that the activity which is agreed as the trigger for the payment of commission occurs after the appointment is signed. He relies on Jones v Knobel in support of that submission but, for the reasons stated above, I am of the opinion that involves an incorrect reading of Muir JA’s analysis. [30] He further submits that Ray White’s appointment on 1 July is sufficient for it to retain the commission and I agree there is some support in Jones v Knobel for that conclusion but not for the reasons advanced by Mr Hackett. Finally he refers to the “effective cause” cases, but I did have difficulty in understanding his argument on this point. I have already referred to activities carried out by Mr McLean after the appointment was signed but I do not think these activities constituted the effective cause of the sale which occurred the following day. [31] In my opinion, the correct construction of Clause 2.1 when read, as it must with 2.2, is that the agent becomes entitled to commission if : (a) a contract of sale is entered into with a buyer within the term which completes Or; (b) a contract of sale is entered into after the term where the Relevant Person is the effective cause of the sale within the term which completes. [32] Such a construction would not do any mischief to the purpose of the Act which is consumer protection. It would mean that Brenhaven got exactly -- 14 of 17 -- 15 what it bargained for in the appointment agreement, no less and no more, as did the vendor in Jones v Knobel. [33] It is common ground that this appointment, like the earlier Savills appointment, is an “exclusive agency”, so that the requirement that a relevant person (as defined in 2.2 as any person including the client) be the effective cause of sale does not arise when a contract of sale is entered into within the term which settles. This would only arise if any person including the client is the effective cause of sale within the term but a contract which completed is entered into after the term. [34] An application of this approach can be understood in light of the earlier appointment of Savills. This was also an “exclusive agency” which had expired by the time of the 2 nd July contract. However, as the effective cause of the sale was the activities of the two Ray White agents during the term of Savills appointment, Savills would be entitled to commission as a result of the contract of sale entered into after the term which settled. [35] Given that this construction had not been the subject of submissions at the trial and really not part of Ray White’s case, I caused my associate to inform the parties of my thinking and to invite submissions. Both have responded and I have considered those submissions. Although the approach I favour is not really part of the case as pleaded by Ray White, nevertheless in the absence of any suggestion from Mrs Muir in her latest -- 15 of 17 -- 16 submission that her client is taken by surprise or is prejudiced, I will proceed to decide the case accordingly. [36] Not surprisingly, Ms. Muir submits that the construction I favour is not correct and maintains her submission consistently with her submission at the hearing. Mr. Hackett adopts the construction I favour. He submits that such a construction “is consistent with the observations of Judge McGill in Asset Loan Co Pty Ltd v Mamap Pty Ltd [2005] QDC 295 at [6] and [7].” Clearly, the form of appointment in that case, albeit relating to the sale of residential property, had attached to it the standard REIQ terms including a clause similar to Clause 2.1. His Honour did not construe the clause in the manner I have favoured, nor did he say anything to detract from the correctness of my approach. All his Honour said was (relevantly to the facts in that case) was that there was nothing in the appointment document which dealt with the factual situation in that case. [37] Ms. Muir does not suggest that my approach is inconsistent with the pleaded defence. She does not address this at all, although at no stage do any of the various defences specifically plead a contractual right to commission consequent upon the second appointment and the contract of sale entered into on the 2nd July, which completed. [38] It follows that, consistently with Jones v Knobel: -- 16 of 17 -- 17 (1) Ray Whites activities prior to its appointment on 1st July were contrary to s.133(1) and technically an offence. Given that the purpose of the Act is consumer protection, it is not surprising that no action has been taken against Ray White pursuant to that section. (2) Ray White was not entitled to retain commission for acting as a real estate agent prior to its appointment on 1st July. (3) The activities of Mr. O’Brien and Mr. McLean set out in the admitted facts and documents were the effective cause of the sale entered into on 2.7.04. [39] However, upon the construction of the second appointment agreement that I favour, Brenhaven have got exactly what they bargained for in the 1st July appointment, and Ray White is entitled to retain the commission. [40] The Plaintiffs claim is dismissed and I will hear the parties as to costs. -- 17 of 17 --