Al Maha Pty Ltd v Liu

Applicable legislative provisions

1. Sections 55 and 55A, in the form those provisions took in June 2014, were as follows: "55 No entitlement to commission or expenses without agency agreement (1) A licensee is not entitled to any commission or expenses from a person for or in connection with services performed by the licensee in the capacity of licensee for or on behalf of the person unless: (a) the services were performed pursuant to an agreement in writing (an agency agreement) signed by or on behalf of: (i) the person, and (ii) the licensee, and (b) the agency agreement complies with any applicable requirements of the regulations, and (c) a copy of the agency agreement signed by or on behalf of the licensee was served by the licensee on that person within 48 hours after the agreement was signed by or on behalf of the person. Note. Section 55A allows a court or tribunal to order that commission and expenses are recoverable in certain circumstances despite subsection (1). (2) The regulations may make provision for or with respect to regulating the form of agency agreements and the terms, conditions and other provisions that an agency agreement must or must not contain. Without limiting this subsection, the regulations may prescribe one or more standard forms of agency agreement. (3) Without limiting the means by which a copy of the agency agreement may be served on a person, it may be served by means of facsimile transmission or by such other means as the regulations may allow. (4), (5) (Repealed) 55A Relief from disentitlement to commission and expenses (1) A court or tribunal before which relevant proceedings are taken may order that commission or expenses are wholly or partly recoverable by a licensee who would otherwise not be entitled to the commission or expenses (under section 55) because of: (a) a failure by the licensee to serve a copy of the relevant agency agreement on the person within 48 hours after it was signed by or on behalf of the person, or (b) a failure of the relevant agency agreement to comply with the requirements of the regulations. (2) A court or tribunal is not to make such an order in circumstances of a failure to serve a copy of the agency agreement within the required time unless satisfied that: (a) the failure was occasioned by inadvertence or other cause beyond the control of the licensee, and (b) the commission or expenses that will be recoverable if the order is made are in all the circumstances fair and reasonable, and (c) failure to make the order would be unjust. (3) A court or tribunal is not to make such an order in circumstances of a failure of the agency agreement to comply with the requirements of the regulations unless satisfied that: (a) the failure is a minor failure, and (b) no loss has been suffered as a result of the failure by the person for whom or on whose behalf the services concerned were performed, and (c) failure to make the order would be unjust. (4) Proceedings are relevant proceedings if they are proceedings taken by a licensee for the recovery of commission or expenses from a person or proceedings on a consumer claim relating to commission or expenses (as referred to in section 36) in relation to which a licensee is a respondent."
2. It will be seen that s 55(1) disentitles a licensee from recovering commission or expenses from its client, relevantly, in the circumstances that there are non-compliances with the requirements of the regulations (s 55(1)(b)) or if there is a failure to serve a copy of the agency agreement signed by or on behalf of the licensee within 48 hours (s 55(1)(c)). Section 55(3) identifies some means by which service may be effected, but does not limit the means by which that may be achieved.
3. The power in s 55A(1) to order that commission or expenses be wholly or partly recoverable, notwithstanding the prohibition in s 55(1), is available where either or both of s 55(1)(b) and (c) have not been satisfied. However, s 55A(2) and (3) make separate provision for the preconditions which must be complied with in each case. Non-compliance with the requirement of service requires the court to be satisfied that the failure was occasioned by "inadvertence or other cause beyond the control of the licensee", that the commission or expenses are fair and reasonable and that the failure to make an order would be unjust. Non-compliance with the regulations requires the court to be satisfied that the failure was a "minor failure", that no loss has been suffered by reason of the failure and that, once again, failure to make the order would be unjust. Even if the preconditions in s 55A(2) and (3) are satisfied, that merely enlivens the discretion to make an order pursuant to s 55A(1), thereby lifting the disentitlement effected by s 55(1).
4. The provisions in Schedules 7 and 8 of the Regulation upon which Al Maha relied at trial, as to most of which Ms Liu conceded there had not been compliance, are as follows: "Schedule 7 Terms applying to all agency agreements 6 Period of duration of the agreement The agreement must contain a term indicating the period for which the agreement remains in force or indicating that the agreement remains in force until terminated. 9 Remuneration (1) The agreement must include a term specifying: (a) the circumstances in which the licensee is entitled to remuneration (by way of commission or otherwise) for services performed under the agreement, and (b) the amount of the remuneration or the way in which it is to be calculated, and (c) when the remuneration is payable. (2) If the agreement relates to the sale or purchase of residential property and provides for payment of commission to the agent calculated as a percentage of the sale or purchase price, the term must also specify the amount of the remuneration to which the licensee will be entitled calculated on the basis of a specified estimated sale or purchase price for the property." "Schedule 8 Terms specific to agency agreement for sale of residential property 2 Warning about other agency agreements (1) The agency agreement must include the following statement:WARNING: Have you signed an agency agreement for the sale of this property with another agent? If you have you may have to pay 2 commissions (if this agreement or the other agreement you have signed is a sole or exclusive agency agreement). (2) A statement that an agency agreement is required to include by this clause must be included in the agreement immediately following the term required by clause 9 (Remuneration) of Schedule 7 or immediately following the statement required by clause 1 of this Schedule, and must be no less prominent than that term or statement. 3 Fixed term agency agreements (1) If the agreement is for a fixed term that exceeds 90 days, the agreement must include a term that entitles the principal to terminate the agreement (without penalty) by giving 30 days notice in writing to the agent at any time after the end of the first 90 days of the term. (2) This clause does not apply to an agency agreement in respect of the sale of residential property where the contract for sale provides for the construction by the seller of a dwelling on the land. 6 Cooling-off period (1) The agency agreement must include the following statement:COOLING-OFF PERIOD: You (the principal) have a cooling-off period for this agreement. If you do not wish to continue with this agreement you can cancel it until 5 pm on the next business day or Saturday. (2) A statement that this clause requires an agency agreement to include must be included in the agreement in close proximity to the place where the principal signs the agreement and must be no less prominent than any other term of the agreement. 7 A sales inspection report to form part of the agreement The agreement must include a copy of any sales inspection report prepared by the agent and given to the principal under clause 2 of Schedule 2."

The reasons of the primary judge

1. The primary judge heard the proceedings over two days in November 2018, with a further hearing on 28 March 2019. Her Honour delivered reasons, promptly, on 5 April 2019: Wei Liu v Al Maha Pty Ltd [2019] NSWDC 106. Ms Liu was cross-examined extensively throughout that hearing, but was accepted by the primary judge as a witness of truth. Although Mr Antoine Bechara, a director of Al Maha at the relevant time, had sworn an affidavit, he did not give evidence and the affidavit was not read. There were a number of issues which need not be mentioned which were abandoned at the conclusion of Al Maha's submissions.
2. The reserved decision of the primary judge is relatively brief, some 48 short paragraphs occupying 9 pages. The first 46 paragraphs summarise the factual background, the course of the trial, the legislation and the parties' submissions. None contains any reasoning resolving the issues. Paragraph 47 is by far the longest paragraph in the judgment. In its entirety, it is as follows: "Findings Based on all the evidence before me, and having regard to the submissions made by both parties, I make the following findings: 1) The plaintiff came to an agreement with the defendant to sell units off the plan in the development situated at 32-72 Alice Street, Newtown NSW. 2) The agreement was in the form of the document as evidenced at page 114 of the affidavit of the plaintiff affirmed 26 June 2017. 3) The agency agreement was prepared by the defendant. 4) The agency agreement was on the defendant's letterhead. 5) The defendant and the plaintiff both signed the Agency Agreement. 6) Subsequent to the signing of the agreement, the plaintiff sold units for the defendant and the defendant paid her some commissions in accordance with the agreement. 7) Not all of the commission entitlements accruing pursuant to the agency agreement have been paid. $126,170.00 of the commissions provided for under the agency agreement have been paid. The outstanding amount of unclaimed commission is $226,840.00. 8) The agreement was not in Standard Form. 9) The agreement breaches s 55 of the Act, in that a copy of it was not provided to the defendant within 48 hours of the signing of the agreement. (s 55(1)(c)) 10) The defendant is a corporation that has been involved in property development for some 30 years, and as such is a sophisticated defendant. 11) The plaintiff had been in the real estate industry for 5 odd years, and had only been a licenced real estate agent for a period of months before the Agency Agreement was entered into. English is not the plaintiff's first language. 12) There is a significant power imbalance between the plaintiff and the defendant. 13) Such power imbalance, in my view enlivens the protection provided under s 55A of the Act, and I am satisfied that were I to fail to make an order so as to afford the plaintiff the protection of the Act, that order would be unjust."
3. The final paragraph of the judgment records a "verdict and judgment" for the plaintiff in the sum of $226,840. Although a claim for interest had been made, no such amount was ordered and this was not raised on appeal.

The errors in the reasons of the primary judge

1. The main issues arising for determination at trial were as follows. 1. First, in light of the admitted non-compliance with applicable requirements of the Regulation, had Ms Liu satisfied the preconditions in s 55A(3) that the failures were minor failures, that no loss had been suffered and that failure to make an order would be unjust? 2. Secondly, had Al Maha established the new point, arising from its further amended defence, that s 55(1)(c) had not been complied with, and, if so, could Ms Liu rely on an "inadvertent" failure under s 55A(2)? 3. Thirdly, if the preconditions in s 55A(2) and (3) were satisfied, should an order be made under s 55A(1) permitting Ms Liu to recover commission?
2. The primary judge made an express finding in [47(9)] that a copy of the agency agreement had not been provided to Al Maha within 48 hours of its signing. There is no reasoning explaining how that finding translated into non-compliance with s 55(1)(c). There is also nothing to indicate any attention at all was given to the factual matters raised by s 55A(2), including that "the failure was occasioned by inadvertence" or, in relation to the admitted non-compliance with the Regulation, the matters in s 55A(3), including that "the failure is a minor failure".
3. Further, no distinction was drawn between the preconditions in s 55A(2) and (3), and the discretionary exercise of the dispensing power in s 55A(1). The reference made by her Honour to a "significant power imbalance" between the parties, which "in my view enlivens the protection under s 55A of the Act" is insufficient to demonstrate that any separate regard was had to the exercise of discretion that was enlivened if the preconditions in s 55A(2) and (3) were satisfied.
4. It follows that error is established. The parties accepted that this Court could and should determine any unresolved issues and re-exercise the discretion in those circumstances.

The findings and re-exercise of discretion by this Court

Two preliminary points

1. Al Maha's first submission was that it was not open for this Court to make a finding of inadvertence, because of the absence of a pleading invoking s 55A(2), and that it followed therefore on the findings of the primary judge that the appeal must be allowed. I do not accept that submission.
2. Al Maha had been permitted to file a further amended defence raising, for the first time, the failure to serve. There was a deemed joinder of issue on that defence. The existing reply invoked s 55A, making it clear that Ms Liu sought to be excused from the (admitted) non-compliance with s 55(1)(b). There is no reason to infer, and every reason to proceed on the basis, that Ms Liu also sought to avail herself of the dispensing power in s 55A in relation to any non-compliance found by the primary judge of s 55(1)(c). That was how counsel who appeared for Al Maha at trial regarded the position. Early in his submissions he asked "was it occasioned by inadvertence?", advised that "There is law on inadvertence" and said "I'll hand up some submissions on that point in a minute". It seems, so far as the record in this Court discloses, that those submissions were not handed up. However, it is clear that s 55A(2) was regarded as being in issue, despite the absence of a reply to the further amended defence.
3. The question is whether Ms Liu, who expressly relied in her reply upon s 55A(1) and (3), may also be permitted to rely upon s 55A(2), in circumstances where Al Maha addressed on s 55A(2). I think she should be. To that relatively minor extent, this was a case where the litigation diverged from the pleadings; cf Banque Commerciale SA (en liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 287; [1990] HCA 11.
4. Ms Liu invited this Court to find that there had been service, and that what had occurred on 17 June 2014 was that a copy of the agency agreement was retained by Mr Bechara upon execution of the agreement. That submission was based upon a reading of some of Ms Liu's answers (as translated). They are not free from ambiguity. However, the conclusion of her cross-examination appears to make it plain that she accepted that there had been non-compliance and was positively saying that she had not provided a signed copy of Al Maha's letter to Mr Bechara because "Al Maha is the one who made the offer and that's why it's issued by the [written] agreement". But in any event there is a positive finding that a copy was not provided to Al Maha. I reject Ms Liu's submission that this Court should find to the contrary.

Inadvertence

1. It was not disputed that the concluding words in s 55A(2)(a), "beyond the control of the licensee", qualified only "or other cause". The parties were correct to proceed on that basis. True it is that, as a matter of grammar, "beyond the control of the licensee" is a phrase which is capable of applying to both of the nouns which precede it, namely, "inadvertence" and "other cause". However, as is commonly the case, the grammatical ambiguity is resolved by the meaning (see Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [100]). "Inadvertence" is inconsistent with something which is "beyond the control of the licensee", and so those words can only apply to "or other cause". The upshot is that it is sufficient, in order to remove the prohibition imposed s 55A(2), for Ms Liu to establish that her non-compliance was "occasioned by inadvertence" simpliciter.
2. Was the failure to effect service "occasioned by inadvertence"? The only testimonial evidence was given by Ms Liu who was regarded as a witness of truth. It is plain from her evidence that she did not appreciate there was a legal requirement to provide to Mr Bechara a signed copy of the letter on his company's letterhead which he had provided to her. Against this, Al Maha relied upon her acceptance in cross-examination that the failure reflected a positive choice on her part: "Q: You made a positive choice that there was no need to serve the document within 48 hours when you turned your mind to it. Is that right? A. Interpreter: Yes."
3. As a matter of ordinary English, "inadvertence" to comply with an obligation may come about from a person's deliberately chosen act, in circumstances where the agent is unaware of his or her legal obligation. A person may for example deliberately refrain from voting at a local council election, despite the candidates' exhortations, whilst being unaware of his or her legal obligation to do so.
4. The same is true in some legal contexts. For example, a line of decisions permitting an extension of time to register a charge out of time when the failure was due to inadvertence extends to cases of ignorance of the legal requirement to do so. Street J applied those decisions in Re Dudley Engineering Pty Ltd and Companies Act [1968] 1 NSWR 483 at 485, and more recently, Thomas JA (sitting at first instance) said that "The weight of authority suggests that omission to carry out such steps because of ignorance of the law may amount to inadvertence": Re Freightlines Northern Territory Pty Ltd (In Liq) [2000] 2 Qd R 384; [1999] QSC 209 at [11]. More recently still, for the purposes of s 588FM of the Corporations Act 2001 (Cth), Brereton J noted that "'inadvertence' includes failure to advert to or understand the requirement for registration within the specified period, and innocent error in the sense of failure to register through ignorance of the legal requirement to do so, or of the consequences of not doing so": Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782; (2014) 101 ACSR 629 at [10].
5. That said, there are also statutory contexts where inadvertence does not extend to an unawareness of the law. In many cases, a person - especially a licensed professional - will be expected to know the law; see for example Dumoine Holdings Pty Ltd v United & Commercial Holdings Ltd (1985) 13 ACLR 448 at 449, upon which Al Maha relied.
6. The obligation in s 55(1)(c) in its application to the facts of this case is highly artificial. The client Al Maha was a property developer with some thirty years' experience. The client drafted the agency agreement and provided it to the newly qualified real estate agent. The client at all times knew the terms of the document created on its letterhead and signed by its director, and a copy no doubt resided on one of its computers. It is easy to see how the agent might think that there was no legal requirement to provide a further copy of that document to the client. There is nothing in the evidence of Ms Liu which would sustain a finding that she believed that she was obliged to supply a copy of the signed document to Al Maha and consciously breached that obligation.
7. There may be a question whether there was in fact a contravention of s 55A(2)(a) on which Al Maha can rely, in the circumstances of the present case where it supplied the form of the agency agreement. The Property, Stock and Business Agents Amendment Bill 2012 was said by the Minister to aim "to remove red tape while ensuring at the same time that consumer protection is not compromised" (NSW Legislative Assembly, Parliamentary Debates (Hansard), 14 November 2012, p 16831). If as the primary judge found there was an obligation to provide a further copy of the document drafted and signed by Al Maha to it, it is difficult to see how that furthers the purpose.
8. But it is sufficient for present purposes to proceed on the basis, favourable to Al Maha, that there was non-compliance by Ms Liu. I would conclude that her non-compliance was inadvertent within the meaning of s 55A(2)(a). That conclusion turns on the fact that Al Maha was an experienced property developed, which drafted and supplied the written agency agreement to Ms Liu. It has no application to cases where a real estate agent enters into a contract for the purchase or sale of property on terms drafted by the agent.

Minor failures

1. For substantially the same reasons, I would conclude that the failures to comply with each of the regulations were "minor failures" within the meaning of s 55A(3).
2. As was said in Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd [2017] NSWCA 339 at [97]: "What constitutes a minor failure must be determined in all the relevant circumstances of the particular case."
3. In that decision, this Court had regard to the fact that the appellant was a sophisticated business entity that negotiated the agreement at arms' length with the respondent. The same is true here, save that rather than merely negotiating the terms of the agency agreement, Al Maha drafted those terms.
4. Al Maha's submissions gave prominence to the number of provisions which were not complied with. I agree with its submission insofar as s 55A(3) is to be assessed in light of the totality of failures to comply with the requirements in the regulations, rather than severally in relation to each particular failure. Nevertheless, the complaints when considered together are readily characterised as "minor". Clause 6 of Sch 7 imposed a requirement to contain a term indicating the period of the agency agreement. The sales were effected in a five month period, and thereafter nothing turned on the failure to indicate the period of the agency agreement. Substantially the same analysis applies to the admitted failures to comply with cll 2, 3, 6 and 7 of Sch 8. All are fairly described as "minor failures". I do not regard there to have been any non-compliance with cl 9 of Sch 7.
5. In this Court, Al Maha said also that findings should be made that there were failures to comply with cll 4 and 5 of Sch 7. Those clauses provide: "4 Principal's authority to enter into agreement The agreement must contain a statement to the effect that the principal warrants that the principal has authority to enter into the agreement. 5 Authorisation for licensee to act on behalf of principal The agreement must contain a term containing particulars of the extent of the authority of the licensee to act as agent on behalf of the principal in providing services under the agreement."
6. Al Maha's submissions on these additional non-compliances were brief, perhaps reflecting the fact that these non-compliances had not been raised below, in contradistinction with the other clauses which had, specifically, been pleaded. It is not necessary for me to reach a concluded view on whether Al Maha should be permitted to expand in this Court the contraventions on which it relies, or even whether they are made out. I incline to the view that there is a non-compliance with cl 4, notwithstanding the implicit statement of authority that comes from the signature above Mr Bechara's office as a director of Al Maha, while I am inclined to doubt that cl 5 was breached - the particulars of Ms Liu's authority were to sell units off the plan at the specified address.
7. Al Maha also sought to rely upon three further non-compliances within Sch 8. The first was with cl 1(2), which was the failure to include the following warning: "IMPORTANT: This is a sole agency agreement. This means you may have to pay the agent commission even if another agent sells the property or introduces a buyer who later buys the property."
8. The second and third were with cll 4 and 5 which require, respectively, that the agency agreement specifies the price at which property is to be offered (for sale of property by private treaty) and that it includes a provision stating whether or not the agent provided the principal with a copy of the "Agency Agreements for the Sale of Residential Property" guide. It seems clear that all three of these clauses were not complied with.
9. But I would once again readily conclude that all of the failures which Al Maha now invokes in this Court for the first time are "minor". Al Maha conceded, candidly and properly, that it could not point to any prejudice from any of the failures on which it relied. The failures came about because of Al Maha's drafting. It is to be doubted that any aspect of Al Maha's decision-making would have been altered had the written agency agreement contained those statements, and certainly, there was no evidence from Al Maha to that effect.
10. No separate submission was made as to whether the commission was, in all the circumstances, fair and reasonable, or contrary to the conclusion by the primary judge that failure to make the order would be unjust. At no stage could Al Maha ever have been under any misapprehension as to the terms of the written agreement between the parties, in circumstances where it prepared the document. It was not suggested that Al Maha had relevantly suffered any loss.
11. It follows that the gateways in s 55A(2) and (3) are satisfied.

Re-exercise of discretion

1. The remaining question is whether the discretion in s 55A(1) should be exercised in favour of the agent. In circumstances where the source of the failures was Al Maha, where it was not suggested that the commission was other than fair and reasonable, where the agent did the work, and where there was no prejudice to the client, that discretion should be exercised favourably to Ms Liu. The observations of Basten JA, with which I agree, are confirmatory of this.
2. It follows that the orders made by the primary judge may stand on that basis.

Orders

1. I propose that the appeal be dismissed with costs.

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