Active Property Marketing Services v Joelco P/L [2007] QSC 167

SUPREME COURT OF QUEENSLAND CITATION: Active Property Marketing Services v Joelco P/L [2007] QSC 167 PARTIES: ACTIVE PROPERTY MARKETING SERVICES (AUST) PTY LTD ACN 112 177 741 TRADING AS ALPHA REALTY (applicant/plaintiff) v JOELCO PTY LTD ACN 056 036 054 (respondent/defendant) and IANNOE PTY LTD ACN 122 043 681 (applicant/intervener) FILE NO: BS5259 of 2007 DIVISION: Trial Division PROCEEDING: Applications DELIVERED ON: 13 July 2007 DELIVERED AT: Supreme Court, Brisbane HEARING DATE: 6 July 2007 JUDGE: Wilson J ORDER: (1) that the plaintiff's application filed on 19 June 2007 be dismissed; (2) on the intervener's application filed on 5 July 2007 – (i) that the intervener be joined as second defendant in the proceeding and that it be heard as a respondent to the plaintiff's application filed on 19 June 2007; (ii) that the plaintiff pay the sum of $110,000 held in its trust account in relation to the sale contract dated 2 February 2007 between the plaintiff and the intervener to the intervener; (iii) that the plaintiff pay the intervener interest on the said sum of $110,000 pursuant to s 47 of the Supreme Court Act 1995 from 31 May 2007 at the rate of 10% per annum. CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – PARTIES – OTHER MATTERS – the real estate agent in a property transaction held the deposit as deposit holder – after the contract was signed the vendor and -- 1 of 12 -- 2 purchaser decided between themselves that no binding contract had arisen – the agent brought an action against the vendor for its commission – the agent claimed a right to the deposit as part payment of the commission – the vendor and purchaser agree that the deposit ought to be returned to the purchaser – whether the purchaser ought to be joined as a party to the proceeding CONTRACTS – PARTICULAR PARTIES – PRINCIPAL AND AGENT – RIGHTS OF AGENT AGAINST PRINCIPAL – LIEN – the real estate agent claimed a lien over the deposit for payment of its commission – whether the agent held such a lien – whether the deposit should be returned to the buyer STATUTES – ACTS OF PARLIAMENT – STATUTORY POWERS AND DUTIES – EXERCISE – GENERAL MATTERS – the agent sought an order under s 389(b) of the Property Agents and Motors Dealers Act 2000 (Qld) for payment of the deposit into Court – alternatively the agent relied on s 12(4)(b) of the Trust Accounts Act 1973 (Qld) – whether either Act applies Property Agents and Motor Dealers Act 2000 (Qld) s 133, s 134, s 140, s 384, s 385, s 389 Trusts Accounts Act 1973 (Qld) s 12 Uniform Civil Procedure Rules 1999 (Qld) r 69, r 70 De Wolf v Demage (1922) 65 DLR 42, cited Nickelby Pty Ltd v Holden Unreported, Supreme Court of NSW (Eq), Young J, 31 March 1994, cited Tibmor Pty Ltd v Nashlyn Pty Ltd [1989] 1 QdR 610, cited COUNSEL: G O Wildie for the applicant plaintiff M J Byrne for the respondent defendant L M King (solicitor) for the applicant intervener SOLICITORS: Greenhalgh Pickard Solicitors for the applicant plaintiff Lawrence & Associates for the respondent defendant Hemming+Hart Lawyers for the intervener [1] WILSON J: In this proceeding commenced on 19 June 2007 the plaintiff, a real estate agent, claims commission of $287,870 and a declaration that money currently held in its trust account be applied towards the payment of outstanding commission as claimed. [2] There are two interlocutory applications before the Court: (i) by the plaintiff for an order that it pay the deposit moneys in its trust account ($110,000) into Court pursuant to s 389(b) of the Property Agents and Motor Dealers Act 2000 (“PAMDA”) or alternatively s 12(b) [sic] of the Trust Accounts Act 1973 (Qld); (ii) by the intervener Iannoe Pty Ltd for orders – -- 2 of 12 -- 3 (a) that it be included as a party to the proceeding; and (b) that the plaintiff pay the $110,000 plus interest to it. The facts [3] On 14 December 2006 the defendant appointed the plaintiff as its agent for the sale of the “Maleny Glen” estate consisting of approximately 78 lots. [4] A real estate agent must not act for a client unless the client first appoints the agent in writing.1 The appointment must be in the approved form; otherwise it is ineffective.2 Section 133(3) provides – “133 Appointment of real estate agent — general … (3) The appointment must, for each service — (a) state the service to be performed by the real estate agent and how it is to be performed; and (b) state, in the way prescribed under a regulation, that fees, charges and commission payable for the service are negotiable up to any amount that may be prescribed under a regulation; and (c) state — (i) the fees, charges and any commission payable for the service; and (ii) the expenses, including advertising and marketing expenses, the agent is authorised to incur in connection with the performance of each service or category of service; and (iii) the source and the estimated amount or value of any rebate, discount, commission or benefit that the agent may receive in relation to any expenses that the agent may incur in connection with the performance of the service; and (iv) any condition, limitation or restriction on the performance of the service; and (d) state when the fees, charges and any commission for the service become payable; and (e) if the service to be performed is the sale or letting of property or the collecting of rents and commission is payable in relation to the service and expressed as a 1 PAMDA s 133(1). 2 s 134. -- 3 of 12 -- 4 percentage of an estimated sale price or amount to be collected, state that the commission is worked out only on the actual sale price or the amount actually collected; and (f) if the appointment is for a sole or exclusive agency, state the date the appointment ends.” The agent’s right to recover commission is restricted by s 140 which provides – “140 Restriction on recovery of reward or expense—no proper authorisation etc. (1) A person is not entitled to sue for, or recover or retain, a reward or expense for the performance of an activity as a real estate agent unless, at the time the activity was performed, the person— (a) held a real estate agent’s licence; and (b) was authorised under the person’s licence to perform the activity; and (c) had been properly appointed under division 2 by the person to be charged with the reward or expense. (2) A person who sues for, or recovers or retains, a reward or expense for the performance of an activity as a real estate agent other than as provided by subsection (1) commits an offence. Maximum penalty for subsection (2)—200 penalty units.”3 [5] The plaintiff’s appointment was in writing on a form headed “PAMD Form 22a Appointment of Real Estate Agent (Sales and Purchases)”. That was the approved form. [6] Part 4.1 of the printed form allowed space for the insertion of how the service was to be performed (information required by s 133(3)(a)). It was left blank. [7] Part 6 of the printed form related to commission, and in particular part 6.2, which dealt with when the commission was payable (information required by s 133(3)(d)) was completed as follows – “Refer Clause 7 of Terms of Appointment”. [8] Clause 7 of the Terms of Appointment was in these terms – “7. Commission 7.1 The Client agrees Commission as detailed in the Appointment will be due if the Client enters into an enforceable contract of 3 Cross-reference removed. -- 4 of 12 -- 5 sale when such contract becomes unconditional and payable on settlement of the sale. 7.2 Should an enforceable contract be entered into but not completed due to: (a) any act or omission of the Client; or (b) the Client, as Seller, releasing the Purchaser from the Purchaser’s contractual obligations; or (c) the deposit forfeited; in terms of the Sales Contract to the Seller the Client agrees the Commission is payable to the Agent forthwith. 7.3 The Agent will be entitled to the Agreed Commission if the property is sold to a person introduced to the Property; (a) during the period of an Exclusive Appointment; or (b) during the period of a Sole Appointment except where the introduction is made by the Client; or (c) after the conclusion of the Agency, the Property is sold to a purchaser effectively introduced to the Property by the Agent during the Agency. 7.4 The Client authorises and directs the Agreed Commission to be paid to the Agent by the person holding the deposit monies or other monies due under the contract for the sale of the Property, be that the stakeholder or other person as provided herein. This appointment shall be sufficient authority and discharge for such payment.” [9] By contract dated 2 February 2007 the defendant (“the Seller”) agreed to sell the “Maleny Glen” Estate (76 lots) to the intervener (“the Buyer”) for $10,450,000. By special condition 1 - “1. This Contract is subject to and conditional upon completion by the buyer of a due diligence investigate [sic] the results of which are completely satisfactory to the Buyer within 14 working days of the date of this Contract …” The plaintiff was nominated as the Deposit Holder, a total deposit of $110,000 being payable as follows – $10,000 when the seller signed the contract $100,000 3 days after the satisfaction of special condition 1. The contract contained standard conditions in relation to the deposit including – “2.2 Deposit (1) The Buyer must pay the Deposit to the Deposit Holder at the times shown in the Reference Schedule. The -- 5 of 12 -- 6 Deposit Holder will hold the Deposit until a party becomes entitled to it. (2) The Buyer will be in default if it: (a) does not pay the Deposit when required; (b) pays the Deposit by post-dated cheque; or (c) pays the Deposit by cheque which is dishonoured on presentation. … 2.4 Entitlement to Deposit and Interest (1) The party entitled to receive the Deposit is: (a) if this contract settles, the Seller; (b) if this contract is terminated without default by the Buyer, the Buyer; and (c) if this contract is terminated owing to the Buyer’s default, the Seller. (2) The interest on the Deposit must be paid to the person who is entitled to the Deposit. (3) lf this contract is terminated, the Buyer has no further claim once it receives the Deposit and interest, unless the termination is due to the Seller’s default or breach of warranty. (4) The Deposit is invested at the risk of the party who is ultimately entitled to it.” [10] On the same day (2 February 2007) the seller and the buyer entered into a Deed of Agreement. They recited having entered into the contract and their desire to vary its terms by the provisions of the deed. Clause 2.1 was as follows – “2. Variation to Contract 2.1 The Buyer hereby authorises Active Property Marketing Services (Aust) Pty Ltd t/a Alpha Realty (the real estate agent specified in the Contract) to release the deposit of One Hundred and Ten Thousand Dollars (AUD$110,000.00) to the Seller upon satisfaction or waiver by the Buyer of special condition 1 of Annexure ‘B’ of the contract.” [11] By 22 February 2007, the Buyer was satisfied with the results of its due diligence inquiries and informed the Seller (the defendant) accordingly, and the next day it paid the balance of the deposit into the plaintiff’s trust account. On 26 February 2007 the defendant instructed the plaintiff to release the full amount of the deposit to it. The plaintiff has steadfastly refused to do so. [12] Several facsimiles passed between the various parties on 27 February 2007. The defendant’s solicitors wrote to the plaintiff giving their client’s undertaking to pay any commission to which the plaintiff was entitled from the proceeds of sale at settlement. The Buyer’s solicitors wrote to the plaintiff enclosing a copy of the deed, drawing attention to clause 2.1 and advising that the Buyer had informed the Seller (the defendant) that special condition 1 had been satisfied. In a facsimile -- 6 of 12 -- 7 dated 19 February 2007 and received by the defendant's solicitors at 6.10 pm on 27 February 2007, the plaintiff’s solicitors said – “We act for Active Property Marketing Pty Ltd trading as Alpha Realty. We note your correspondence requesting our client to release the deposit, which we understand is $110,000.00. We refer to the Form 22a under the Property Agents and Motor Dealers Act 2000 between our respective clients and dated 14 December 2006. We draw your attention to clause 7.4 of the Terms of Appointment set out on page 7 of the Form 22a. Our client holds the deposit as stakeholder under the contract. It is our understanding of this clause that: 1. Your client authorises and directs the stakeholder to pay the agent the commission pursuant to the agreement; and 2. The clause contemplates that the stakeholder may be the agent and authorises payment. Clauses 7.1 and 7.2 set out the basis on which the client is bound to pay commission to the agent. We are instructed that the event entitling commission to be paid has occurred. That is, the contact has become unconditional. The time for the payment is when the sale is settled. Your client has authorised and directed the stakeholder to pay the commission from the deposit. The commission is payable but not presently due. Therefore our client as stakeholder is obliged by the agreement to perform clause 7.4 at the due time. If the deposit were released our client could not perform this obligation. We note that your latest correspondence advises that your client will be collecting the cheque for the deposit tomorrow. Our client will not be doing so until such time as your client can provide a lawful reason why our client should not be entitled to rely on the provisions of the agency agreement embodied in the Form 22a signed by the parties.” [13] The defendant’s solicitors replied – “To remove any doubt, we are instructed that the authority and direction given by our client pursuant to clause 7.4 of the Form 22a dated 14 December 2006 is hereby revoked. We are further instructed to authorise and direct your client to pay the sum of $110,000 held in your client’s trust account to our client. As the authority and direction given by our client under clause 7.4 has now been revoked, your client is no longer obliged to perform its’ [sic] obligations under clause 7.4 and can now comply with the subsequent authority and direction to pay the funds held in its trust account to our client without fear of breach of agreement. -- 7 of 12 -- 8 The authority and direction contained in clause 7.4 is clearly revokable. In our opinion, the contents of our correspondence to your client of 27 February 2007 effectively revoked that authority and direction. On this basis, any argument that your client would have been in breach of its obligations under clause 7.4 for releasing the deposit to our client is illusory.” The plaintiff disputed the purported revocation of authority. [14] Meanwhile an issue had emerged between the Seller (the defendant) and the Buyer (the intervener) as to whether “Maleny Glen” was being sold as a “going concern”. It seemed to be accepted that the website and domain name, etc were to be transferred to the Buyer – but there were potential implications for the GST payable by the buyer. This seems to have been a live issue from as early as 8 February 2007. There were numerous communications and endeavours to resolve the issue, including preparation and lodgement of an application for a Private Tax Ruling. Ultimately, on 31 May 2007 the Seller and the Buyer agreed that there had never been a meeting of minds on the issue and that there had never been an enforceable contract. The defendant (the Seller) informed the plaintiff of this and instructed it immediately to return the deposit to the Buyer’s solicitors. It has not done so. The Buyer’s application to be joined as a party [15] Rules 69 and 70 of the Uniform Civil Procedure Rules provide – “69 Including, substituting or removing party (1) The court may at any stage of a proceeding order that – … (b) any of the following persons be included as a party — (i) a person whose presence before the court is necessary to enable the court to adjudicate effectually and completely on all matters in dispute in the proceeding; (ii) a person whose presence before the court would be desirable, just and convenient to enable the court to adjudicate effectually and completely on all matters in dispute connected with the proceeding. 70 Procedure for inclusion of party (1) Unless the court orders otherwise, an application by a person seeking to be included as a party must be supported by an affidavit showing the person’s interest in— (a) the matter in dispute in the proceeding; or (b) a matter in dispute to be decided between the person and a party to the proceeding. -- 8 of 12 -- 9 (2) Unless the court orders otherwise, an application to include a person as a defendant or respondent must be served on all existing parties and on the person.” [16] I am satisfied that the intervener (the Buyer)’s presence before the Court meets the criteria in both paragraphs (i) and (ii) of r 69(1)(b). Further the procedural requirements of r 70 have been met. There was no opposition to the joinder of the intervener as a party. [17] Accordingly there should be an order that Iannoe Pty Ltd ACN 122 043 681 be joined as second defendant in the proceeding, and that it be heard as a respondent to the plaintiff’s application filed on 19 June 2007. Validity of plaintiff’s appointment as agent of defendant [18] While I do not find it necessary to express a concluded view on the matter at this interlocutory stage, I think it is strongly arguable that the plaintiff was not properly appointed as the defendant’s agent under division 2 of part 2 of the PAMDA, in that its appointment was not in the approved form because it did not state how the service was to be performed.4 If that were correct, then it would be prevented from recovering commission by s 140. The basis on which the deposit moneys were paid to the plaintiff [19] The plaintiff received the deposit moneys as stakeholder pursuant to clause 2.2 of the contract of sale, as it acknowledged by signing the contract as “Deposit Holder”. It was obliged to hold the deposit until a party to the contract became entitled to it. [20] The plaintiff was obliged to pay the deposit moneys received into its trust account under s 379 of the PAMDA. By s 384(2) – “384 When payments may be made from trust accounts (1) An amount paid to a trust account must be kept in the account until it is paid out under this Act. Maximum penalty—200 penalty units or 3 years imprisonment. (2) An amount may be paid from a trust account only in a way permitted under this Act. Maximum penalty—200 penalty units or 3 years imprisonment.” Under s 385(2) and (4) of the PAMDA – “385 Permitted drawings from trust accounts … 4 PAMDA ss 134, 133(3)(a). -- 9 of 12 -- 10 (2) The licensee is authorised — (a) to draw an amount from the transaction fund to pay a transaction expense when the expense becomes payable; and (b) when the transaction is finalised, to draw an amount from the transaction fund that is equal to the difference between — (i) the balance of the transaction fund; and (ii) the total of the licensee’s transaction fee and any outstanding transaction expense; to pay the person entitled to the amount or in accordance with the person’s written direction; and … (c) to draw the licensee’s transaction fee from the transaction fund when the amount, if any, mentioned in paragraph (b) has been paid and when the transaction is finalised. … (4) The licensee must pay an amount mentioned in subsection (2)(b) to the person entitled to it or in accordance with the person’s written direction— (a) if the person asks, in writing, for the balance—within 14 days after receiving the request; or (b) if the person has not asked, in writing, for the balance — within 42 days after the person first had the right to the balance. Maximum penalty—200 penalty units or 3 years imprisonment.” Thus, the plaintiff was obliged by the legislation to retain the deposit moneys (less any transaction expenses properly payable) in its trust account until the transaction was “finalised”. [21] It is arguable that under clause 2.4 of the contract no one became entitled to the deposit until the contract came to an end, either by settlement or by termination, since “the party entitled to the deposit” was defined in terms of whether the contract settled or if it were terminated, through whose fault it was terminated. But the parties to the contract varied their agreement by the Buyer, with the concurrence of the Seller, authorising the plaintiff to release the full deposit to the Seller upon satisfaction or waiver by the Buyer of special condition 1. It is arguable that in doing so they varied clause 2.4 of the standard conditions to provide that the Seller -- 10 of 12 -- 11 was entitled to receive the deposit upon satisfaction or waiver of special condition 1. Even if that were so, it would still be arguable that the plaintiff was precluded by ss 384 and 385 of the PAMDA from paying the moneys out of its trust account while the contract remained on foot. [22] These nice questions do not have to be decided on the plaintiff’s application now before the Court. An agent’s right to commission depends upon the terms of its appointment; it is an aspect of its relationship with the seller completely different from and entirely unaffected by its role as stakeholder.5 By clause 7.1 of the terms of the plaintiff’s appointment, commission was “due” when the contract became unconditional and “payable” on settlement of the sale. Here there never will be a settlement – either because, as the Seller and the Buyer contend, there never was a contract or because there has been a mutual release between the Seller and the Buyer. Clearly the plaintiff would not be entitled to commission if there never was a sale, and it may well be that in the event of a mutual release commission otherwise due ceased to be payable – but that is not a matter for determination at this stage.6 The Buyer and the Seller are agreed that the moneys in the plaintiff’s trust account should be paid out to the Buyer. [23] The plaintiff asserts a lien over the deposit moneys. Of course, an agent’s entitlement to a lien depends on its entitlement to commission.7 Even if there can be a lien over moneys in trust account (which was doubted in Nickelby Pty Ltd v Holden8 – but assumed to be possible in Tibmor Pty Ltd v Nashlyn Pty Ltd9), an agent can only hold a lien over property belonging to its principal.10 If the seller is not entitled to the deposit, the agent is not entitled to a lien. Here the seller disclaims any entitlement to the deposit. [24] The plaintiff seeks an order that the moneys in its trust account be paid into Court either pursuant to s 389(b) of the PAMDA or s 12(b) [sic] of the Trust Accounts Act. In argument the plaintiff’s counsel said it was s 12(4)(b) of the Trust Accounts Act on which his client relied. [25] Neither of these provisions is apposite. Section 389 of the PAMDA is concerned with circumstances where there is a dispute as to ownership of a fund between parties to a transaction (other than the agent). Here there is no dispute between the Seller and the Buyer. The Trust Accounts Act is concerned with trust accounts kept by solicitors, conveyancers and public accountants, not real estate agents. [26] In all the circumstances, the plaintiff’s application should be dismissed. [27] I am unpersuaded that the plaintiff (the agent) has a lien on the moneys in its trust account, which should be paid out to the Buyer (the intervener). The plaintiff will be at liberty to continue the prosecution of its claim against the Seller (the defendant). 5 W D Duncan, Real Estate Agency Law in Queensland (4 th ed, 2006) [8.15]. 6 See De Wolf v Demage (1922) 65 DLR 42. By the terms of his appointment, the agent was entitled to commission on finding a buyer and a further commission on completion of the sale. The seller and the buyer cancelled the contract. The agent was held entitled to retain the deposit as commission for finding a buyer, but not to the further commission. 7 W D Duncan, Real Estate Agency Law in Queensland (4 th ed, 2006) [12.15]. 8 Unreported, Supreme Court of NSW (Eq), Young J, 31 March 1994. 9 [1989] 1 Qd R 610. 10 See G E Dal Pont, Law of Agency (2001) [18.28]. -- 11 of 12 -- 12 [28] The intervener seeks interest on the sum of $110,000 from 31 May 2007 pursuant to s 47 of the Supreme Court Act 1995 (Qld). In the exercise of my discretion I allow interest as claimed at 10% per annum. Orders: (1) that the plaintiff’s application filed on 19 June 2007 be dismissed; (2) on the intervener’s application filed on 5 July 2007 – (i) that the intervener be joined as second defendant in the proceeding and that it be heard as a respondent to the plaintiff’s application filed on 19 June 2007; (ii) that the plaintiff pay the sum of $110,000 held in its trust account in relation to the sale contract dated 2 February 2007 between the plaintiff and the intervener to the intervener; (iii) that the plaintiff pay the intervener interest on the said sum of $110,000 pursuant to s 47 of the Supreme Court Act 1995 from 31 May 2007 at the rate of 10% per annum. [29] I will hear the parties on costs. -- 12 of 12 --