Alanbert Pty Ltd v Bulevi Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4528/97 ALANBERT PTY LTD v BULEVI PTY LTD & ORS JUDGMENT 1 HIS HONOUR: Before me today for decision are eight contested items relating to what have been known in this case as the commissions and incentives payable by the defendants to the plaintiffs in respect of the sale of lots in the subject subdivision. The issues in contest I defined in a judgment delivered on 30 August 2001: Alanbert Pty Ltd v Bulevi Pty Ltd [2001] NSWSC 785 ("my judgment"). I summarised them in a consolidated schedule to my judgment. 2 Item [1] relates to the sale of lot 2 in the subdivision to Arnold by contract exchanged on 1 December 1996. The question here is whether the $8,200 in the "Paid" column of the schedule was ever received by the plaintiffs, or whether it was not. The only evidence concerning that is evidence which has been brought forward by Mr Lawrence, a director of the defendants, who appears by leave for those companies. He has tendered, as part of Exhibit 15, a letter dated 21 September 2001 to him from Mr Arvo Pikkat, and also a statutory declaration of Mr Pikkat of 22 November 2001. Mr Pikkat deposes in his statutory declaration that he is a director of Bernoth Realty Pty Ltd and also that he is the executor of the late Cecil Alan Bernoth, who has unfortunately died during the course of the proceedings. Mr Pikkat stated in his letter and then repeated in his statutory declaration that Bernoth Realty Pty Ltd received the sum of $5,240 in relation to lot 2 which was the sum of $8,200 less $2,960. The $2,960 was retained by Mr Pikkat who, the parties agree, was an estate agent who acted in conjunction with the Bernoth interests in relation to the sale of this particular lot. As I have said, this is really the only evidence one way or the other concerning it. Mr Fairbairn, of counsel for the plaintiffs, has objected in final address to the form of this documentary evidence and to the fact that Mr Pikkat was not available for cross examination. However, the documents were admitted into evidence without objection on the plaintiffs' part and, although there has been a break in the hearing of this part of this case, no request was made for Mr Pikkat to be produced for cross examination. The only matter that Mr Fairbairn was able to rely on was Annexure AP to Mr Bernoth's affidavit of 9 October 1998. That has a "payments" column in it, and the $8,200 is not included in the payments column. What is said concerning Annexure AP in the body of Mr Bernoth's affidavit is that it is a "Statement of Commissions and Incentive Monies Paid and Payable by Bulevi and Davhand to Bernoth Realty (BR) as at 7 November 1997" in relation to the subdivision land. He further states that the document was prepared by his legal advisers on his instructions. There is no specific statement in his affidavit that the statements in Annexure AP are true, or that the instructions that he gave to his legal advisers were true. 3 In any event, in the circumstances on the balance of probabilities I prefer the word of Mr Pikkat, who there is no reason to think did not at the relevant time have access to the records of Mr Bernoth and of Bernoth Realty Pty Ltd. I bear in mind Mr Pikkat's position as a director of Bernoth Realty Pty Ltd and as executor of Cecil Alan Bernoth. I contrast his positive assertion with the convoluted and imprecise statement in Mr Bernoth's affidavit. I see no reason why I should not accept Mr Pikkat's evidence. On that basis there will be a finding that that sum of $8,200 was in fact paid to the plaintiffs. 4 Item [2] refers to lot 3 in the subdivision and its sale to Salvador. The dispute is as to the amount of commission payable to the plaintiffs, which the defendants contend was $3,350 and the plaintiffs contend was $4,750. There is no dispute that originally the agreement as to commission ("the old regime") was that commission was payable at the rate of 3 per cent up to $830,000 and 5 per cent over $80,000. Equally there is no dispute that subsequently the agreement was varied and the new rate of commission ("the new regime") was 5 per cent on the whole of the sale price. The dispute is as to whether or not the commission in relation to this lot should be calculated according to the old regime or the new regime. This dispute, which also applies to other items, I shall call "the rates dispute." 5 I shall have to go into the date of commencement of the new regime in some detail in relation to some of the other items in dispute. However, as will appear from that discussion, it seems clear that the agreement for the new regime was entered into long after this sale was effected. The exchange of contracts took place on 13 April 1995. It was not till November/December 1996 that negotiations took place and the new regime as to rates was struck. Nor is there any evidence that the new regime was backdated in relation to lot 3 (there is some such contention as to lot 4). 6 The only argument that can be put on behalf of the plaintiffs in relation to lot 3 arises from a "letter" dated 29 November 1996 from Bernoth Realty Pty Ltd to Mr Lawrence, the principal of the defendants. That does refer to "Commission as agreed $4,750", which is calculated at the higher rate. However, I have described the document as being a "letter" because it is not complete on the face of it, having no conclusion and bearing no signature. I am far from convinced that that letter was ever sent. This case is full of draft and incomplete documents and it is often very hard to tell the finals from the drafts and to tell whether draft letters were ever sent. On the evidence, although this "letter" was during the litigation at one stage brought forward by Mr Lawrence, I am not prepared to find that it was sent or received at the time and, in any event, as I say, the agreement for the new regime came into effect long after the contract for this sale indicated by the date it bears and without there being any suggestion in the evidence that it was specifically discussed at the time of the negotiations for that agreement. 7 Furthermore, in paragraphs 80 and 81 of his affidavit of 9 October 1998 Mr Bernoth specifically stated that in respect of lots exchanged before 16 December 1996 it was his understanding that the old regime applied and that the lots regulated by the old regime included lot 3. In these circumstances I find that commission in respect of lot 3 was payable at the lower rate of $3,350. 8 The next three items, item [3], item [4] and item [5], all relate to the sale of lot 4, a sale to Baardwyk, the contracts for which were exchanged on 27 September 1996. 9 Item [3] relates to the amount paid to the plaintiffs, which is claimed by the plaintiffs to be $9,000 and by the defendants to be $5,100 only, leaving a difference of $3,900 in dispute. The defendants rely for proof of the payment of this sum of $3,900 on documents taken from the file of the solicitors who acted for the vendor on the sale, namely, Messrs Elliot Tuthill. It should be said at once that there is no dispute that the $5,100 has been paid. 10 The documents preparatory to the settlement leave no doubt that the vendor's solicitors required as one of the cheques to be handed over on settlement in payment of the balance of purchase moneys, a cheque, no doubt a bank cheque, in favour of Bernoth Realty Pty Ltd for $3,900. Furthermore, the documents on the solicitors' file seem to make it quite plain that the cheque for $3,900 was handed over - there is a tick on the copy of the settlement instructions which was apparently present when the settlement was effected that indicates that that was so. Thereafter, the presumption that all things have been done in due course might usually lead to the conclusion that that cheque was in fact forwarded or handed to Bernoth Realty Pty Ltd or otherwise to the plaintiffs. However, in a letter written by Elliot Tuthill to the defendants on 10 December 1996, among the deductions from the balance purchase monies accounted for to the defendants is the following item: "Bernoth Realty - balance due but held by us 3,900.00."

The letter records that the sale proceeds paid to the defendants were $3563.87 after all deductions. Other than that, all is silence. There is no indication in the evidence as to what happened to the bank cheque for $3,900 which Elliot Tuthill apparently held as of 10 December 1996. 11 Mr Lawrence says that, although essentially Elliot Tuthill were the defendant's solicitors, Mr Bernoth had a great deal of contact with them and submits that it must have been by arrangement between Mr Bernoth and Elliot Tuthill that the cheque was held by that firm. However, the simple fact of the matter is that they were the defendants' solicitors and there is no evidence of that sum ever reaching the plaintiffs. In those circumstances I find that it is not established that the sum of $3,900 in respect of this lot was paid to the plaintiffs. 12 The next item is item [4]. This relates to the amount of commission. Whether the proper amount of commission was $3,400 or $5,000 turns on the rates dispute. There is no dispute between the parties that the new regime did come into force at some stage but there is dispute as to when this was and whether it applied to lot 4. The resolution of this dispute turns on a number of equivocal documents and, in relation to lot 4, also involves some conversations. There were negotiations, oral and written, as to the new regime generally. It is suggested on behalf of the plaintiffs that there was an oral rider to that agreement, or special oral provision, relating to lot 4. I do not propose to set all the documents out in full. Both sides have put forward various versions of the documents. Neither of their primary versions adds up at all satisfactorily. Both have attempted to put forward multi page documents by placing together various individual pages, but in both cases the pages fit ill together and often contain conflicting provisions from page to page. All documents put forward as possibly being incorporated in this agreement, as they are in evidence, are photostats only. 13 One of the vital documents is put forward in two versions. That is a document headed "Sole Selling Agency." The version put forward on the defendants' behalf is dated 11 December 1996, states that the sole selling agency which it agrees to shall terminate on 28 April 1997 and is signed only by Mr Lawrence. The version put forward by the plaintiffs of that document is dated 16 December 1996, is signed both by Mr Lawrence and by Mr Bernoth and provides that the sole selling agency shall terminate at midnight on 7 April 1997. The signature of Mr Lawrence appearing on each of the two versions is different. That is, clearly Mr Lawrence did sign twice. It is not a matter of a document originally signed by him having its blanks filled in differently and being subsequently signed by Mr Bernoth. The version signed by both has been referred to in argument as page 61. The other document which is of particular importance is one that has been referred to as page 62. That is also signed by both Mr Lawrence and Mr Bernoth, bears a date 17 December 1996, and by its terms extends the "sole selling agency agreement dated 16 December 1996" to include lot 13. 14 What is clear to me is that there were many communications taking place from late November through to 17 December 1996 between Mr Lawrence and Mr Bernoth. Some occurred on the telephone, some took the form of documents that were sent between them. Mr Lawrence suggests that on 17 December they met together, either at the Pitt Street Club in Sydney, where they usually met, or that perhaps he travelled to Mittagong. It is his belief that signatures got on to the same documents at this time by the mechanism of them both being in the same place at the same time, although it is fair to say that his recollection concerning these events is vague. 15 There are two important pieces of background. One is that Mr Lawrence suggests that he was bombarded with correspondence and requests by Mr Bernoth at times that Mr Bernoth was seeking to persuade Mr Lawrence to some course of action. This was clearly such a time. It is clear, whatever else is not, that Mr Bernoth was attempting to persuade Mr Lawrence to increase the rate of commission on sales and to provide incentives for sales. In general terms I accept Mr Lawrence's word concerning Mr Bernoth's persistence in communications at times such as this. It is consistent with other evidence in the case and with the impression of Mr Bernoth that I formed when he gave evidence in the witness box before me during the trial. 16 The other piece of background that I find important in this regard was an answer given by Mr Lawrence in cross examination to a suggestion put to him by the plaintiffs' counsel, Mr Fairbairn, as follows: "FAIRBAIRN: Q. What I'm suggesting to you is the practice between you and Mr Bernoth was to let things go until they were otherwise varied in writing, as a general practice. That you operated in a way that if you wanted to change the status quo you would enter into a new written agreement?

I find that it was the practice, in the quite complicated and long running dealings between them, that changes to contractual arrangements were documented in writing and were taken not to be in effect until they were, as specifically put in the question above by the plaintiffs' counsel and agreed to by Mr Lawrence on behalf of the defendants. 17 I find that what occurred during late November and early December 1996 was a process of negotiation between the two men. Various documents bear the signature of one or the other, but I am not prepared to find that there was an agreement between them on the subject matter until there was a document signed by both of them. That document is the document page 61 dated 16 December 1996 which undoubtedly bears both their signatures, as modified by the document dated 17 December 1996, which is likewise signed by both. A difficulty with the document of 16 December 1996 is that it does not spell out which lots were referred to or what the new rates of commission were to be, or the new incentive rates. In my view the document that sets those out and which is to be taken to be incorporated in the agreement of 12 December 1996, is the document headed "Annexure A", that is, the first document under Tab 2 in Exhibit 15. That document appears to date from around 3 December 1996. It is not dated but contains a reference to that day in its third line, referring to an exclusive selling agency, not a sole selling agency. A sole selling agency and an exclusive selling agency appear to be, on the evidence, agreements different in their terms. Furthermore, the agreement in this document, Annexure A, was to be for a period different from and longer than the period ultimately specified in the document of 16 December 1996. So far as Annexure A is inconsistent with that subsequent document, it must be taken to be superseded by it, but the terms as to commission and the regime as to incentive are not otherwise stated and there is no dispute between the parties as to what those terms were in either case. The undisputed terms are the terms stated in the document Annexure A. Furthermore that document defines the lots that it is to apply to as lots 1, 2, 6, 8 and 9, which were the lots in relation to which there had been no contract of sale exchanged as at this time, apart from lot 13. Then, by the amending document of 17 December 1996, lot 13 is added to the regime. 18 It has been suggested that other documents were incorporated in the contract, or that the contract should be read by reference to them. But in at least one case the document propounded contains a reference to lot 13, which would make no sense at all as part of a document from which lot 13 was excluded. I do not find that any document was incorporated in the 16 December agreement other than Annexure A to the extent mentioned in [17]. 19 By reason of the manner in which business between the men proceeded, as I have found, I find that the agreement did not come into operation until 16 December 1996, which is the date of the page 61 document on which both signatures appear. The agreement that then came into effect incorporated the provisions of Annexure A as to rates of commission and basis of incentives and as to the lots to which applied. On that basis lot 4 was excluded from the new regime as to commission and entitlement to incentives, no doubt by reason of the fact that contracts in relation to it had been exchanged long before. 20 However, there is another leg to the plaintiffs' case in relation to lot 4. The plaintiffs claim that there was incorporated in the agreement of 16 December 1996, or coexisting with it, an oral term or agreement, that the new regime should apply to lot 4. Lot 4 was in discussion between the parties at that stage because its sale was settled at about that time, late November 1996, in fact, on 29 November. 21 Mr Bernoth, in an affidavit, deposed that he had a telephone conversation with Mr Lawrence on 28 November 1996. He asserted that in that conversation Mr Lawrence said to him that he was going to increase the commission and incentive arrangements and give Mr Bernoth a sole agency agreement. Mr Bernoth claims that he asked what commission and incentive arrangement were to apply in respect of the settlement of lot 4 to Baardwyk and Lawrence replied, "I will give you 5 per cent on the first $100,000, and the incentive payments are to start at $92,000." On 2 December 1996 Mr Bernoth wrote to Mr Lawrence a letter which claimed commission at the higher rate of $5,000, stated to be "as agreed", and also claimed "incentive as discussed & agreed upon 28/11/96". That letter I find was sent by Mr Bernoth to Mr Lawrence. Furthermore, on Mr Bernoth's copy there is a note at the foot in his hand, dated 4 December 1996, "Wayne agreed but would not pay until the deed is completed." 22 Furthermore, Mr Fairbairn points to cross examination of Mr Lawrence on 4 December 1998 in the original trial which he says demonstrates that Mr Lawrence agreed that the relevant amounts were owing and that the rates of commission payable in respect of lot 4 were "varied by agreement 28 November 1996". However, Mr Lawrence submits that all he was doing in that cross examination was agreeing with Mr Fairbairn that those were various figures and words that appear in Annexure AP to an affidavit of Mr Bernoth that was before Mr Lawrence in the witness box at the time the questions were asked. The questions are rather equivocal in form and the answers are therefore equivocal. I am not convinced that Mr Lawrence was intending to make or making the admissions which it is said by Mr Fairbairn that his answers represent. Mr Fairbairn announced at that time an intention to return to that subject matter at a later time in his cross examination but, perhaps by reason of focus passing off Annexure AP as a central document in the case, this did not occur and the answers were left equivocal, as I have said. 23 The subject matter is not an entirely easy one because there is some possible support for Mr Bernoth's claimed version of the conversation in the note at the foot of the letter of 2 December 1996. However, Mr Bernoth did appear to me to be a perpetual optimist who was always hopeful that his proposals would be accepted. When one comes to the documentation which constituted the agreement of 16 December 1996 (including the relevant portions of annexure A), there is no mention of lot 4. In all the circumstances I am not prepared to find that there was an agreement to pay commission according to the new regime in respect of lot 4. The correct amount of the commission is therefore $3,400. 24 So far as item [5] is concerned, that has been settled. The amount of the incentive in respect of lot 4 is agreed at $1,500. 25 Item [6] relates to the sale of lot 8 to Marsden. The dispute is in relation to the commission. The plaintiffs claim commission of $4,500, the defendants deny any entitlement to commission. The answer to this question depends not on the rates dispute but on whether or not this sale, which was not effected by the plaintiffs, but by another agent, fell within the period of the sole agency agreement so as to entitle the plaintiffs to commission, although they were not the selling agents. The selling agents involved were Nationwide. 26 The sale was effected by exchange of contracts on 8 September 1997. The sole agency agreement, which I have found to exist, was for a term which expired on 7 April 1997 and contained no option to renew. It is clear on this material that the sale was outside the terms of the sole agency agreement and the plaintiffs were not entitled to commission in the sum of $4,500, or at all. 27 There was an alternative argument put by Mr Fairbairn that the term of the selling agency was nine months after 3 December 1996, which is stated in Annexure A referred to above as being the commencing date of a selling agency for six months with an option for a further three months. However, I have found that there was not a selling agency for that period. Even if there were, there is no evidence of the exercise of any option in relation to any selling agency after December 1996, so that its maximum possible length would have been six months. Even if there had been an exercise of option, the date of contract of 8 September 1997 is outside even the nine month period argued for. 28 Item [7] relates to lot 9 sold to Bray. It relates to an incentive. The plaintiffs claim an incentive payment of $2,150 and the defendants deny any entitlement to incentive. They have now, however, withdrawn that denial and admit the plaintiffs' entitlement to $2,150 incentive in relation to this sale. 29 The last item is item [8] in relation to lot 10, sold to Cassar. It related to the amount of payment to the plaintiffs. The defendants say that $10,550 was due. There is no doubt that the plaintiffs received the sum of $10,550. However, they say that they paid $2,626 to the purchaser to assist the purchaser to pay stamp duty. They say that they ought be entitled to take that sum out of account as paid to them, treating the paid amount as $7,924 only. The defendants say that any loan to the purchaser was a private transaction between the plaintiffs and the purchaser after the purchaser had paid the money to the plaintiffs. The payment was not authorised by the defendants and the amount paid by the defendants ought not be treated as diminished by that amount. 30 With this last submission I agree. The evidence shows that an amount of $10,550 that was to stand towards the deposit was paid to the plaintiffs and put into a trust account before the exchange of contracts. The relevant trust account ledger shows the money being paid in on 4 September 1995. Contracts were exchanged on 28 September 1995 and the trust account ledger shows that the $2,626 went out in a cheque to the Office of State Revenue on 9 October 1995. In a letter from Mr Bernoth to the defendants dated 22 May 1996, there is the following narration concerning that payment: "As instructed by the purchaser, we withdrew and paid from this money to The Office of State Revenue Stamp Duty payable on the contract. This was paid on the 9/10/95 - soon after this the purchaser signed the contract and authorised us to effect an immediate exchange."

However, it appears that that statement was incorrect as to the sequence of events. It appears that the contract had already been exchanged on the 29 September and, indeed, that would appear to be likely as the stamp duty would only become payable to the Office of State Revenue after the contract had been exchanged. The "loan" was apparently never communicated to the purchaser's solicitors, or they forgot it, because no allowance was made for this refund out of the deposit monies when the settlement adjustment sheet was made up. Nor, on the evidence, were the monies ever otherwise recovered from the purchaser. There is not a scrap of evidence that the defendants were consulted about or approved this arrangement. It must therefore be taken to be a private arrangement between the plaintiffs and the purchaser and, if a loss has been sustained by this amount never having been recouped from the purchaser, it is the plaintiffs who must bear that loss or deficiency. In these circumstances, in respect of item [8], I find that the amount paid to the plaintiffs was $10,550. 31 The matter will be stood over till 10 o'clock tomorrow, 9 April 2002, for argument on what monetary judgment should be entered now that these disputed items have been determined and also as to what amount, if any, is secured under the mortgage to which the plaintiffs are entitled over lot 13.

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