Filippini v The Real Estate Institute of Queensland Ltd & Ors [2008] QSC 113

SUPREME COURT OF QUEENSLAND CITATION: Filippini v The Real Estate Institute of Queensland Ltd & Ors [2008] QSC 113 PARTIES: HEATHER FILIPPINI (applicant) v THE REAL ESTATE INSTITUTE OF QUEENSLAND LTD (first respondent) and PAUL VERTULLO REAL ESTATE PTY LTD ABN 15 297 040 954 (second respondent) FILE NO: BS 7398 of 2004 DIVISION: Trial Division PROCEEDING: Application for leave to appeal ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 4 June 2008 DELIVERED AT: Brisbane HEARING DATE: 26 May 2008 JUDGE: McMeekin J ORDER: Order that: [1] Leave to appeal is refused. [2] The applicant to pay the respondents’ costs of and incidental to the application on the standard basis. CATCHWORDS: ARBITRATION – AWARD – SETTING ASIDE – PROCEDURE - application for leave to appeal from award by arbitrator – real estate dispute where applicant alleged errors of law on the face of the arbitration award – whether there was a manifest error on the face of the award – whether there was strong evidence of an error of law Acts Interpretation Act, s38(1) Commercial Arbitration Act 1990, 38(4)(b), 38(2) Property Agents and Motor Dealers Act 2000, s137 -- 1 of 11 -- 2 Natoli v Walker (1994) 217 ALR 201 applied Promenade Investments Pty Ltd v State of New South Wales (1991) 26 NSWLR 203 applied COUNSEL: Mr Howe with Mr Dickey for the applicant Mr Brady for the first respondent Mr McLeod for the second respondent SOLICITORS: Michael Sing Lawyers for the applicant McCullough Robertson Lawyers for the first respondent Brian Bartley and Associates for the second respondent [1] McMEEKIN J: The applicant, Ms Heather Filippini, seeks judicial review of two decisions of The Real Estate Institute of Queensland Ltd, the first respondent, made on 24 June 2004 and 28 July 2004 (the latter being itself an appeal of the first decision). [2] Although not apparent from the originating application, the right to seek that review is limited. The first respondent was, at the material time, acting as an arbitrator pursuant to an arbitration agreement.1 The decisions of the first respondent are therefore “an award” within the meaning of the Commercial Arbitration Act 1990 (“the CAA”), and the court’s power to review such an award is governed by s 38 of the CAA. [3] That has two effects. Firstly, the applicant needs leave pursuant to subsection 38(4)(b) of the CAA and, secondly, the appeal lies only as to questions of law arising out of the award pursuant to subsection 38(2) of the CAA. Background facts [4] It is necessary to say something about the facts. The following recital reflects the facts either explicit or implicit in the first respondent’s decisions. [5] The second respondent is a real estate agent. It entered into an exclusive agency with the vendors of a certain property. A sales person employed by the second respondent introduced the buyers to the property. The introduction was made during the currency of the period of exclusive agency. [6] On the same day that the second respondent’s sales person introduced the property, and later in that day, the buyers were inspecting other properties with the applicant. During the course of those inspections the buyers mentioned to the applicant that they had seen the subject property with the second respondent’s sales person. The applicant informed the buyers that the applicant was authorised to sell the property and that they could buy the property through them. The applicant claims to have had an open listing on the property. They had the buyers execute a contract on the 1 See Exhibit RR1 pp 8 and 27, Affidavit of Rinaudo. -- 2 of 11 -- 3 property and indicated on that contract that they were acting in conjunction with the second respondent. No conjunction arrangement had been entered into. The applicant placed a “Sold” sign over the second respondent’s “For Sale” sign which was erected outside the property. [7] The buyers’ asserted that they had not seen the property or received any information about it prior to seeing an advertisement by the second respondent on the day before their inspection. [8] The applicant received from the vendors an amount of money which reflected the entire commission payable in respect of the sale, that is, the maximum permitted under the legislation.2 The second respondent received 50 per cent of the commission payable. [9] The second respondent complained to the first respondent that the applicant had breached a number of the articles of the Code of Ethics3 , that it was entitled to 100 per cent of the commission, and that the applicant ought to repay to the vendor the balance of the monies paid over and above the maximum permitted under the legislation (the vendors having paid 150 per cent of the commission allowed). [10] Both the applicant and the second respondent are members of the first respondent. Under the By Laws of the first respondent, a complaint of the type made by the second respondent must be referred to the first respondent and dealt with under its regulations.4 The complaint is required to be heard by the Arbitration and Professional Standards Tribunal (“the Tribunal”) constituted under the By Laws. That procedure was followed here. The first decision complained of is the decision of the Tribunal. There is a right of appeal to an appeal tribunal. That right was exercised by the applicant. The second decision complained of is the decision of the appeal tribunal. Leave to appeal [11] I have mentioned that leave is required under subsection 38(4)(b) of the CAA. Subsection 38(5) of the CAA then provides: “The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that – (a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and (b) there is – (i) a manifest error of law on the face of the award; or (ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or maybe likely to add, substantially to the certainty of commercial law.” 2 See s 6 Property Agents and Motor Dealers Regulation 2001 cl. 1 Schedule 1A of the Regulations. 3 Ex C affidavit of Whitford filed 2 September 2004 4 See cl 41 of the By Laws – Ex B affidavit of Whitford filed 2 September 2004 -- 3 of 11 -- 4 Errors of Law Alleged [12] Mr Howe, counsel for the applicant, submitted that there were three errors of law that were manifest on the face of the award: (a) Fundamental to the arbitrator’s decision was a finding that the second respondent had a valid exclusive agency. The Tribunal made an express finding that the exclusive agency claimed by the second respondent was for a period of 61 days. Section 137 of the Property Agents and Motor Dealers Act 2000 relevantly provides in subsection (1) that such an agency “is ineffective from the time it is made if the term of the appointment is more than 60 days”. It followed that there was no effective exclusive agency in place. (b) The arbitrator ordered the applicant to repay to the vendor of the property the sum of $59,028.75. That sum was properly characterised as an ex gratia payment, a gift or a bonus not a commission. The Tribunal’s powers were limited so that such an order was beyond power. As well payment of that sum by the vendor to the applicant was not the subject of the dispute brought before the arbitrator. (c) There was no evidence to support a finding that his client knew or believed that the second respondent had an exclusive agency, that such a finding was essential at least in respect of the fines that were imposed on the applicant, and that the absence of such evidence was itself a sufficient error of law on the face of the award. Satisfaction of subsection 38(5)(a) [13] There is no doubt that if the applicant can demonstrate that the award was infected by a manifest error of law or that there is strong evidence that the arbitrator made an error of law then she will show that that has substantially affected her rights and so satisfy subsection 38(5)(a). [14] The arbitrator’s award meant that the applicant was required to pay out a sum of $118,057.50, was found to be in substantial breach of the ethics of her profession and was subjected to fines totalling $6,500. [15] The first alleged error identified by the applicant underpins the entire award. In my view the amount involved is sufficient to substantially affect her rights. 5 As well findings that she has breached the code of ethics and should be subjected to substantial fines, if wrongly made, in my view substantially affect her rights. Manifest error [16] The applicant has significant hurdles to over come to demonstrate “a manifest error of law on the face of the award”. The policy behind the Act is to limit the extent to which the court interferes with arbitral awards. The leading decision in Australian on the interpretation of s 38 is the decision of the Court of Appeal in New South 5 As to the significance of the amount in issue see Carpaolo Nominees Pty Ltd v Marrosan Nominees Pty Ltd (1997) 112 NTR 1 at 12; White Constructions (NT) Pty Ltd v Mutton (1988) 57 NTR 8 at 22- 23. -- 4 of 11 -- 5 Wales in Promenade Investments Pty Ltd v State of New South Wales.6 The statutory provisions there under consideration were identical in form to subsection 38(5). Sheller JA, with whom Mahoney and Meagher JJA agreed, explained the meaning and effect of the New South Wales provision as follows (at 225): “The expression ‘error of law on the face of the award’ is one of a type well known to courts. The award having been examined the question is whether there is apparent (and such is the denotation of the word ‘manifest’) an error of law. “Manifest error’ is an expression sometimes used in reference to reasons given by judges or the approach taken by juries …. It is used to indicate something evident or obvious rather than arguable: see generally per McHugh JA in Larkin v Parole Board (1987) 10 NSWLR 57 at 70-71. … However as McHugh JA pointed out ‘manifest’, in the context of the subsection, which contemplates the grant of leave before an appeal can be pursued, notes an error of law that is more than arguable. There should, in my opinion, before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law.” [17] In the later decision of Natoli v Walker7 Kirby P explained that the policy behind these provisions “was to promote the finality of arbitral awards even at the price of denying the party its usual entitlement to the determination of the dispute by a court of law, that is the precise assignment of the parties’ legal rights after a detailed scrutiny of the relevant facts and application of the relevant law.” 8 [18] In that same decision Kirby P briefly reviewed decisions in the United States concerning “manifest error” tests. He concluded: “What is in issue is a preliminary impression. It should not require a great deal of argument. The precondition to curial intervention is the easy demonstration that the primary decision maker was ‘clearly wrong’ …”9 [19] There have been a series of decisions in this State in which the courts have considered what amounts to a manifest error of law. They include Re Tiki Village International Limited10 , Kleerstyle Homes v Dickson11 and Crewford Pty Ltd v Transit Australia Pty Ltd12 . The first two decisions stand for the proposition that if the view taken by the arbitrator was “fairly arguable” then there can be no manifest error of law. In Crewford the Court of Appeal held that the word “manifest” means “evident or obvious”.13 6 (1991) 26 NSWLR 203. 7 (1994) 217 ALR 201; BC 9402554. 8 At p 202 (ALR). 9 At p 214 (ALR). 10 [1994] 2 Qd R 674. 11 SC No. 8037 of 1997, 16 September 1997. 12 [1998] QCA 81 (23 March 1999) 13 At [7]. -- 5 of 11 -- 6 Applicability of the s 38(5)(b)(ii) – Substantial Certainty Test [20] Assuming no manifest error, Mr Howe submitted that his client also satisfied subsection 38(5)(b)(ii) of the Commercial Arbitration Act 1990 in that there was strong evidence of an error of law and “that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.” [21] In relation to the first alleged error the Tribunal indicated that the question of whether these exclusive agency appointments should include or exclude the last day of the nominated period was the subject of debate between responsible bodies in this State. It is evident that the determination of the question will satisfy the test referred in subsection 38(5)(b)(ii) of adding substantially to the certainty of commercial law in this State. [22] It is not immediately apparent to me what wider scope of materials I am entitled to look at in deciding whether there has been “strong evidence that the arbitrator … made an error of law”. In respect of the question in issue, the error, if there is one, is on the face of the record. [23] In my view in relation to the second and third alleged errors it cannot be said that the determination of the question would add or be likely to add substantially to the certainty of commercial law. The interpretation of the By Laws may be of interest to the respondent and its members but it could hardly be said to be of interest to those involved in commerce generally. The third issue merely involves questions of evidence peculiar to this case. Validity of Exclusive Agency [24] As to the first alleged error there is no doubt that Mr Howe’s characterisation of the point has that beguiling simplicity which could lead one to the view that the relevant tests had been satisfied. However that characterisation glosses over the difficulties apparent from the study of the record. [25] Firstly, the primary Tribunal plainly considered that the issue now raised – that is whether or not the exclusive agency was void because it was for too long a period – was not argued before it.14 All that the Tribunal did was point out that there are two schools of thought as to whether an authority for the period nominated in the subject document 15 extended beyond the 60 day period allowed by the legislation. Whilst there was reference to 61 days that was not, properly understood, intended as a finding that the period extended beyond that allowed under the statute. As the point was not raised before the Tribunal it did not enter into the debate. [26] Secondly, the point when raised by the applicant on her appeal was rejected on grounds that form the true area of debate and in respect of which the “manifest error” test must be applied. The appeal tribunal applied s 38(1) of the Acts Interpretation Act to s 137 of the Property Agents and Motor Dealers Act (“PAMDA”), held that in calculating the period one should exclude the day in which 14 See paragraph 25 of the decision which is Exhibit “A” to Affidavit of Whitford filed 28 September 2004. 15 Which can be found at Exhibit I – Affidavit of Whitford filed 2 September 2004. -- 6 of 11 -- 7 the period begins, and concluded therefore that the term of the appointment was for 60 days and within the Act. [27] The legal issue therefore raised is whether s 38 of the Acts Interpretation Act is in fact applicable to s 137 of the PAMDA. For the purposes of this application the question is: is it fairly arguable that s. 38 of the Acts Interpretation Act, which deals with the reckoning of time in statutes, applies to this provision? If the “fairly arguable” test is the applicable one when considering the interpretation of a statute, as opposed to the construction of an agreement between the parties, then I would not be satisfied that there was manifest error in this case and that is so whether one applies the preliminary impression that Kirby J spoke of, or whether one looks at what is “evident or obvious”. [28] Counsel informed me that they were unable to find any authority in which the “fairly arguable” test, as it has been applied to questions of construction of agreements, has been applied to the construction of a statute when considering this question of “manifest error”. [29] I cannot see that any different test should apply to statutes. Parliament was no doubt well aware in passing this legislation that arbitrators are often called on to apply the law, including statute law, in deciding disputes. While differing minds can and often do have differing views as to the meaning of a term in a private agreement, the same can be said of statutes. And while arbitrators can be expected to bring an informed view to the construction of private agreements – that is often enough why a particular arbitrator is chosen – and perhaps not claim any expertise in construing statutes, again that must have been evident to the legislature in passing this legislation. [30] The most that might be said is that where, as here, the statute in question concerns the holding of an important right that is the subject of contracts signed on a regular and recurring basis throughout the State of Queensland - a real estate agent’s right to secure payment of a commission even where the agent may not have been the effective cause of the sale16 - then that provides further grounds for the application of subsection 38(5)(b)(ii). [31] In deference to the arguments advanced by counsel I will explain why I consider there is no manifest error. That requires a close examination of the provisions of subsection 137(1) in the context of the provisions in the Property Agents and Motor Dealers Act as a whole and a close examination of the provisions in subsection 38(1) of the Acts Interpretation Act. Applicability of s 38(1) of the Acts Interpretation Act [32] Subsection 38(1) provides: “If a period beginning on a given day, act or event is provided or allowed for a purpose by an Act, the period is to be calculated by excluding the day, or the day of the act or event, and – 16 See subsection 19(2) of the Property Agents and Motor Dealers Act 2000. -- 7 of 11 -- 8 (a) If the period is expressed to be a specified number of clear days or at last a specified number of days – by excluding the day in which the purpose is to be fulfilled; and (b) In any other case – by including the day on which the purpose is to be fulfilled.” [33] Mr Howe submitted on behalf of the applicant that the provision in s 137 of the PAMDA did not satisfy the premise expressed in subsection 38(1)(a). That is, there is no period nominated “beginning on a given day, act or event”. [34] Subsection 137(1) of the PAMDA provides: “(1) The appointment of a real estate agent for the sale of residential property under a sole or exclusive agency is ineffective from the time it is made if the term of the appointment is more than 60 days.” [35] Mr Howe’s submission was that unless the period nominated in the Act in question was from a particular point in time (“a given day, act or event”) then the Acts Interpretation Act provision simply did not apply. As subsection 137(1) merely provided that an appointment was ineffective if for “more than 60 days” it was not from any particular point in time. [36] In order to determine the validity of that argument it is necessary firstly to identify the “purpose” that is the subject of subsection 38(1), in the context of the PAMDA, and secondly to put subsection 137(1) of that Act into its proper context. [37] For the purposes of this case the “purpose” referred to subsection 38(1) of the Acts Interpretation Act in the phrase “a period … allowed for a purpose by an Act” is the period allowed for the holding of an exclusive agency. [38] Subsection 137(1) of the PAMDA appears in Chapter 5 Part 2 Division 2 of the Act. Division 2 deals with the appointment of real estate agents and includes sections 133 to 137. Subsection 133(1) of the Act provides that the appointment of the real estate agent must be in writing. Subsection 134(1) requires that the appointment be in the approved form. 17 Subsection 135(1)(a) provides that if the appointment is for a sole or exclusive agency the agent is required to bring to the client’s notice the information in the form of appointment about the proposed term of the appointment. It is in that context that subsection 137(1) provides that the appointment of a real estate agent under an exclusive agency is “ineffective from the time it is made if the term of the appointment is more than 60 days”. [39] The approved form18 provides in Section 5 of the form for the various types of agencies (open listing, sole agency or exclusive agency) and provides for a start date and an end date in respect of a sole agency and an exclusive agency. [40] In my view there is no doubt that Parliament intended that the appointment of an agent under an exclusive agency would date from a particular day. That day had to be nominated in the written appointment of agency form. The point of these 17 Form 22a and which was adopted by the parties here - Exhibit I to the Affidavit of Whitford filed 2 September 2004. 18 See Exhibit I to the Affidavit of Whitford filed 2 September 2004. -- 8 of 11 -- 9 provisions is to ensure that the client knows precisely when it is that the agent’s right to claim a commission both starts and ends. To permit a 60 day period to be nominated without requiring a starting point in time would defeat the whole purpose of the provision. It matters not that the starting point may be some time in the future, which was one matter that Mr Howe stressed. It makes no sense otherwise. [41] Once it is recognised that it is by force of the statute that a starting date for the 60 day period must be nominated then it is clear that the applicant’s submission that the provisions of subsection 38(1) of the Acts Interpretation Act cannot apply is flawed. [42] Subsection 38(1) requires that the calculation of the period of an exclusive agency is to exclude the both the day of commencement of the agency and the day of its conclusion (“the day the purpose is to be fulfilled”). [43] In my view, at the very least, the approach of the appeal body was fairly arguable. In my view therefore there is no manifest error on the face of the award or strong evidence of error. [44] I am not prepared to give leave on this ground. The Repayment Order of $59,028.75 [45] As to the complaint that the repayment of the amount to the vendor was not even before the tribunal the short answer is that Mr Vertullo for the second respondent asserts in his affidavit that it was.19 It is no part of my function to enter into disputed issues of fact. [46] As to the complaint that the Tribunal did not have the power under the relevant By Laws that depends upon the characterisation of the payment and whether it properly falls within the meaning of the word “commission” that appears in cl 51.1(2) of the By Laws. 20 [47] Clause 51.1(2) provides as follows: “Powers of Tribunal 51.1 The tribunal has the power to: … (2) Direct any member who is a party to a Dispute to pay commission to any person determined by the tribunal; …” [48] If the payment received from the vendor by the applicant was properly characterised as “commission” then it is beyond question that the tribunal had the power to direct the applicant to repay it to the vendor. 19 See paragraph 11. 20 See clause 51.1(2) of the bylaws being part of Exhibit B to the Affidavit of Whitford filed 2 September 2004. -- 9 of 11 -- 10 [49] The word “commission” is not defined in the By Laws or for that matter in the Constitution.21 The word is defined in the Macquarie Dictionary, so far as is relevant to this case, as: “12 A sum or percentage allowed to an agent, salesman, etc. for his services.” [50] There are several features of the payment which suggest that it is a “commission” as so defined. Firstly it was paid to an agent claiming to be authorised to act in the transaction and acting pursuant to that authority. Secondly it was paid to an agent who claims to have been the effective cause of the sale in question. Thirdly the amount was the maximum percentage of the commission allowed to be charged on the purchase or sale of residential property.22 [51] Without any doubt the amount that the vendor paid to the applicant here was intended as a reward for the performance of an activity as a real estate agent. The applicant chose to characterise the payment as “bonus”. That of course is not determinative of the issue. But it was not denied that it was a reward for her activity as a real estate agent in bringing about the sale which she claims to have affected. [52] It would be a very odd thing if members of the first respondent could avoid the jurisdiction of the Tribunal by simply characterising payments that they received by way of reward for performance of their work as a real estate agent as a “bonus” and hence argue that they are not properly characterised as “commission”. [53] It is worth noting in this regard the provisions of s 141 of the Property Agents and Motor Dealers Act 2000. Subsection 141(1) and (2) provides effectively that a real estate agent “is not entitled to sue for, or recover or retain, a reward for the performance of an activity as a real estate agent” that is more than the amount allowed under the Regulations. The important point is that the restriction is not only on the real estate agent’s entitlement to sue for or recover such an amount but also to retain such an amount. [54] It will be recalled that the Tribunal is entitled the “Arbitration and Professional Standards Tribunal”. Its charter, plainly enough, includes ensuring that its members maintain standards commensurate with their adopted ethics and of course with the statute which governs its members.23 That Act forbids the retention of a sum of the type (in the sense of an award for her services) received by the applicant here. In construing the meaning that should be ascribed to the word “commission” no narrow definition that would subvert the intent and purpose of the first respondent’s charter should be adopted unless clearly required by the By Laws. There is no such requirement and indeed all indications seem to me to be to the contrary. [55] In my view the words “commission” used in the By Law was simply meant to reflect sums paid to an agent for their services. 21 See Schedule 1 to the Constitution which is Exhibit B to the Affidavit of Whitford filed 2 September 2004. 22 See s 6 Property Agents and Motor Dealers Regulation 2001 cl. 1 of Schedule 1A to the Regulations. 23 See cls. 1.1 and 40 of the By Laws – for the power to publish a code of ethics and to hear and determine breaches of that code -- 10 of 11 -- 11 [56] It is certainly not apparent on the face of the record that the tribunal were wrong in so characterising the payment. At the very least it was “fairly arguable” and therefore not a manifest error. [57] I am satisfied that the second of the alleged errors does not satisfy these tests. Knowledge of Exclusive Agency [58] The Tribunal takes evidence and submissions orally. No recording is made. There was some affidavit evidence before me as to what occurred. It does not purport to be a transcript. In those circumstances the applicant, on a judicial review such as this, has a difficult task in asserting that there was no factual basis for a finding. As well, silence on a crucial point, and in the context of what is discussed, can be eloquent testimony of a fact. [59] Counsel submitted in response to the third alleged error that there was evidence before the tribunal. Mr Brady, counsel for the first respondent, pointed out there was a photograph before the tribunal24 showing the second respondent’s “For Sale” signs erected in front of the subject dwelling showing its claim to an exclusive agency over which the applicant had placed her “Sold” signs.25 [60] Further it is plain that at no stage did the applicant assert that she did not know of the existence of the exclusive agency – a fact fundamental to the ethical complaints made. In her affidavit filed in these proceedings she did not assert any lack of knowledge, or that she had denied to the Tribunal having knowledge, but rather only that no member of the Tribunal asked her about it. That claim was rejected by a Tribunal member, Ms Dolan, who asserts that the applicant avoided answering the direct question as to whether she was aware of the exclusive agency.26 [61] Again it is far from apparent that there is any manifest error on the face of the record. Conclusion [62] In my view the preconditions to the grant of leave provided for by s 38 of the Commercial Arbitration Act 1990 have not been satisfied and leave to appeal is refused. [63] I order that the applicant pay the respondents’ costs of and incidental to the application. 24 Exhibit RR4 Affidavit of Rinaudo. 25 I reflect the claim made from the Bar table and not disputed by Mr Howe – the photograph before me was a photocopy and of poor quality such that I cannot discern the writing on the sign. 26 See paragraph 3(g) of Dolan’s affidavit. -- 11 of 11 --