Grounds 1 and 1A
96 These grounds are as follows:
1. The primary judge erred in rejecting [APD's] claim against [Maximo Developments] for equitable damages for breach of fiduciary duty by disregarding the following facts:
(a) that when [Maximo Developments] procured [APD] to enter into the agency contract of 5 November 2016 with it, the relationship of principal and agent between [APD] and [Maximo Developments] was in existence by reason of their entry into an agency contract dated 12 October 2016 which remained current and in force on 5 November 2016; and
(b) that the commission payable by [APD] to [Maximo Developments] under the agency contract of 5 November 2016 upon the latter's procurement of a sale of [APD's] property (which occurred on 31 March 2017 when the appellant agreed to sell that property for $24 million to [Bondbao] Pty Ltd, a party introduced by [Maximo Developments] to [APD]) was $11,906,840, which exceeded the commission which [would] have been payable under the agency contract of 12 October 2016 by $4,118,840.
1A. The primary judge erred in failing to find that [APD] suffered loss in the sum of $5,412,000 or alternatively, $4,188,840 in consequence of [Maximo Developments'] breach of fiduciary duty.
97 APD's submissions in support of these grounds commence with the proposition that, from the time when APD and Maximo Developments entered into the 12 October 2016 Agency Contract, Maximo Developments was subject to a fiduciary duty to act in APD's interests and not to profit improperly by reason of the agency: Scott v Davis (2000) 204 CLR 333 at [229] per Gummow J; Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies (5th ed, LexisNexis Butterworths, 2015), [5-215].
98 APD submits that, when it entered into the 5 November 2016 Agency Agreement, Mr Doan was labouring under the misapprehension that the Property was worth no more than $12 million and any excess of the purchase price above $12 million was to find its way back to the buyer via the commission clause.
99 APD submits that Maximo Developments' conduct in "prevailing upon" APD to enter into the 5 November 2016 Agency Contract while the 12 October 2016 Agency Contract was still on foot amounted to a breach of its fiduciary duty to APD.
100 APD submits that Maximo Developments requested APD to enter into the 5 November 2016 Agency Contract for the "singular purpose" of obtaining a substantially greater commission in the event that the Property sold for any amount in excess of $12,245,000 (compared with the commission that would have been payable by APD under the 12 October 2016 Agency Contract).
101 APD submits that, on the sale price of $24 million, the commission payable under the 5 November 2016 Agency Contract was $11,906,840 (including GST) which exceeded the amount which would have been payable under the 12 October 2016 Agency Contract ($7,788,000 including GST) by $4,118,840. (As we have noted, while $24 million was the price specified in the Contract of Sale, the amount actually paid at settlement was $24 million plus GST, that is, $26.4 million.)
102 APD submits that the compelling inference to be drawn from the statements made by Mr Rahmani in paragraph 46 of his affidavit of 2 October 2019, and from his preparation of the brochure to which he referred in his second affidavit of 7 May 2020, is that between 12 October 2016 and 5 November 2016 he formed the view (doubtless, at least in part, as a result of his discussions with the conjunction agent) that there was a strong likelihood that the prospective purchaser would be persuaded to pay a price for the Property far greater than the $12 million which Mr Doan considered it to be worth (as indeed proved to be so). APD submits that it is clear from Mr Rahmani's evidence that he did not tell Mr Doan that he had formed that view before he requested APD to commit itself to the 5 November 2016 Agency Contract; nor did he tell him that his purpose in so doing was to ensure that the commission payable by APD to Maximo Developments under that contract would be substantially greater than the commission that would have been payable under the 12 October 2016 Agency Contract.
103 In the course of oral submissions, senior counsel for APD identified the following three matters, in particular, as matters that were not disclosed by Mr Rahmani to Mr Doan before the execution of the 5 November 2016 Agency Contract:
(a) that he (Mr Rahmani) had formed the view that it was at least possible, if not probable, that the ultimate buyer, Bondbao, would agree to pay a price far greater than $12 million for the Property;
(b) that the sole purpose for Maximo Developments' request that APD enter the contract (that is, the 5 November 2016 Agency Contract) was that, if the Property did sell for an amount between $12,245,000 and $16,500,000, the commission would be increased by 99% of the difference; and
(c) that Maximo Developments had an arrangement in principle with Mint Property that the commission would be split between them - 60% to Maximo Developments and 40% to Mint Property.
104 Senior counsel for APD also submitted that if any of those disclosures had been made, Mr Doan's misapprehension (namely, that if the purchase price exceeded $12 million, the excess would be refunded to the buyer via the commission clause) would have been "immediately exploded".
105 APD submits that it may fairly be inferred that Mr Rahmani "deliberately refrained" from telling Mr Doan about these matters to enable Maximo Developments to "exploit" Mr Doan's conviction that the Property was worth no more than $12 million.
106 APD submits that Maximo Developments did not provide APD with full information about its rights and all of the material facts and circumstances of the case (relying on Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 at 393, cited in Mualim v Dzelme (2021) 157 ACSR 367 at [113]) before or at the time of APD's entry into the 5 November 2016 Agency Contract.
107 APD submits, in its supplementary submissions in relation to ground 1A, that Maximo Developments acted in breach of the fiduciary duty to which it became subject upon the making of the 12 October 2016 Agency Contract:
(a) by prevailing upon APD to enter into the 5 November 2016 Agency Contract; and
(b) by obtaining payment of commission totalling $13.2 million following the completion of the sale of the Property, such commission exceeding that which would have been payable under the 12 October 2016 Agency Contract by $5,412,000.
108 APD submits that it is not in dispute that Maximo Developments acted as stated in paragraphs (a) and (b) above. APD therefore submits that Maximo Developments' breach of fiduciary duty caused APD to suffer loss (contrary to the proposition expressed in the Maximo Parties' notice of contention).
109 In our view, the fundamental difficulty with grounds 1 and 1A is that they represent a new case on appeal. The case presented by APD in these grounds is a very different case from the case presented by APD at trial. Further, the circumstances are not such that it should be permitted to run a new case on appeal.
110 The relevant principles are well established. In Coulton v Holcombe (1986) 162 CLR 1, Gibbs CJ, Wilson, Brennan and Dawson JJ stated at 7-8:
To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v Gundowda Pty Ltd; Bloemen v The Commonwealth.
(Footnotes omitted.)
111 The plurality in that case approved the following passage from the judgment of Mason J (with whom the other members of the Court agreed) in O'Brien v Komesaroff (1982) 150 CLR 310 at 319:
In some cases when a question of law is raised for the first time in an ultimate court of appeal, as for example upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is expedient in the interests of justice that the question should be argued and decided (Connecticut Fire Insurance Co v Kavanagh; Suttor v Gundowda Pty Ltd; Green v Sommerville). However, this is not such a case. The facts are not admitted nor are they beyond controversy.
The consequence is that the appellants' case fails at the threshold. They cannot argue this point on appeal; it was not pleaded by them nor was it made an issue by the conduct of the parties at the trial.
(Footnotes omitted.)
112 These principles have been applied in many cases. See, eg, Hsiao v Fazarri (2020) 270 CLR 588 at [53] per Kiefel CJ, Bell and Keane JJ.
113 The thrust of APD's case at trial was that Mr Rahmani represented to Mr Doan that the bulk of the "commission" that would be paid by APD to Maximo Developments would in fact go back to the buyer, as part of a mechanism to avoid Chinese foreign exchange controls, and that that representation was false. The representations were said to have been made in a conversation between Mr Rahmani and Mr Doan in the lead-up to the 5 November 2016 Agency Contract. It was in the context of those allegations that it was alleged that Maximo Developments breached fiduciary duties it owed to APD by procuring or requesting APD to enter into the 5 November 2016 Agency Contract and charging a commission that was more than a fair and reasonable commission.
114 APD's pleading at trial was its third amended statement of claim. This focusses on the 5 November 2016 Agency Contract; it does not even refer expressly to the 12 October 2016 Agency Contract, which is the source of the fiduciary duties now relied upon by APD. Paragraph 9 of the pleading alleges that, in early November 2016, prior to the making of the 5 November 2016 Agency Contract, Mr Rahmani on behalf of Maximo Developments, made certain oral representations (broadly, to the effect that the bulk of the "commission" that would be paid by APD to Maximo Developments would in fact go back to the buyer, as part of a mechanism to avoid Chinese foreign exchange controls). Paragraph 9A alleges that the representations were untrue for reasons there set out. Paragraph 10 alleges that, induced by, and acting in reliance on, the representations, APD entered into the 5 November 2016 Agency Contract. Paragraph 12 alleges that, "by virtue of its execution of the agency contracts", Maximo Developments was constituted the agent of APD for the purpose of procuring a sale of the Property and as such assumed a fiduciary duty throughout its dealings with APD to act in good faith and in its interests, at all times preferring APD's interests over its own interests. This allegation refers to "agency contracts" in the plural, and thus may contain an implicit reference to the 12 October 2016 Agency Contract, even though it is not referred to expressly. Paragraph 14 alleges that none of the Maximo Parties, at any time prior to the making of the agency contract (a clear reference to the 5 November 2016 Agency Contract) informed APD that the representations stated in paragraph 9 were untrue. Paragraphs 15 to 18 contain allegations based on the Australian Consumer Law. Paragraphs 19-25, 27-30 and 34 relate to Mr Arcuri. Paragraphs 33, 35-36 are as follows:
33. On 29 June 2017, [Maximo Developments] rendered an invoice to [APD] claiming payment of $13,200,000 being commission of $12,000,000 plus GST of $1,200,000, which claim exceeded the commission supposedly payable under the agency contract by $1,293,160.
…
35. A fair and reasonable commission payable to an agent effecting a sale of the property for $24,000,000 is not more than $528,000, being 2.2% of the sale price inclusive of GST.
36. By reason of the fact stated in the preceding paragraph, by its conduct in requesting [and] procuring [APD] to enter into the agency contracts, in rendering the invoice referred to in paragraph 33 above and in receiving payment of that invoice, [Maximo Developments] acted in breach of its fiduciary duty to [APD], being the fiduciary duty referred to in paragraph 12 above.
115 The reference in paragraph 33 to the "agency contract" is clearly a reference to the 5 November 2016 Agency Contract. Paragraph 36 refers to the "agency contracts". Again, this may contain an implicit reference to the 12 October 2016 Agency Contract. In any event, it is apparent from the pleading that the breach of fiduciary duty case against Maximo Developments focussed on Maximo Developments procuring or requesting APD to enter into the 5 November 2016 Agency Contract in the context of the pleaded representations, and Maximo Developments charging a commission that was more than a fair and reasonable commission.
116 The case pleaded in the third amended statement of claim did not include contentions along the lines now advanced by APD. In particular, the pleading did not include allegations to the effect that: (a) upon entering into the 12 October 2016 Agency Contract, Maximo Developments came under fiduciary duties to APD (or what those duties relevantly comprised); (b) in the lead-up to the 5 November 2016 Agency Contract, Mr Rahmani knew certain facts or believed certain matters (and what those facts and matters were); (c) in the lead-up to the 5 November 2016 Agency Agreement, Maximo Developments failed to disclose those matters to APD; and (d) in prevailing upon (or requesting) APD to enter into the 5 November 2016 Agency Contract, which provided for a substantially higher commission compared with the 12 October 2016 Agency Contract, without disclosing those matters, Maximo Developments breached its fiduciary duties under the 12 October 2016 Agency Contract.
117 The way in which APD's case was presented at trial can also be seen from the way in which the primary judge dealt with it in the Reasons. The primary judge dealt in detail with the issue of whether Mr Rahmani made the alleged representations to Mr Doan in the lead-up to the 5 November 2016 Agency Contract: see the Reasons at [66]-[120]. This issue was relevant for a number of claims brought by APD, including its fiduciary duty claim against Maximo Developments. The primary judge dealt specifically with APD's fiduciary duty case against Maximo Developments at [127]-[133] of the Reasons, which have been summarised above. The primary judge did not deal with a case along the lines of that now presented on appeal.
118 There is no suggestion that the primary judge failed to deal with the case that was presented to him. In the course of the hearing of the appeal, we were not taken to any submissions (oral or in writing) made by APD to the primary judge along the lines of the case now presented on appeal.
119 In response to a question from the Court as to whether this case had been run below, senior counsel for APD stated that "APD's contention that the parties' entry into the 5 November 2016 contract involved Maximo [Developments] in a breach of its fiduciary duty was very much central to the case as pleaded and prosecuted at first instance. That said, however, I must frankly acknowledge that the allegations of the breach being reflected by [Mr] Rahmani's failure to disclose his dealings with the conjunction agent in the latter half of October and the like were not expressly argued" (T19). Senior counsel for APD submitted that it was nonetheless open to APD to take that point on appeal, it being "essentially and ultimately a point of law arising from facts that are beyond dispute, and so within the qualification to the ruling in such cases as Coulton v Holcombe" (T20).
120 In our view, for the reasons given above, the case now presented by APD is very different from that presented below. While it may be accepted that APD's fiduciary case at first instance involved a contention that entry into the 5 November 2016 Agency Contract involved Maximo Developments in a breach of fiduciary duty, the case was presented in a fundamentally different way. The case presented at trial focussed on the representations allegedly made by Mr Rahmani to Mr Doan in the lead-up to the 5 November 2016 Agency Contract (to the effect that the bulk of the "commission" that would be paid by APD to Maximo Developments would in fact go back to the buyer, as part of a mechanism to avoid Chinese foreign exchange controls); it was not presented on the basis that Mr Rahmani knew certain facts and believed certain matters and failed to disclose these to Mr Doan. Indeed, the case now presented on appeal is inconsistent with the case presented at trial. The case presented at trial involved the proposition that the Property was not worth more than $12 million, and the bulk of the excess in the purchase price above $12 million would go back to the buyer via the commission. In contrast, the case now presented involves the proposition that the Property was in fact worth more than $12 million, and Mr Rahmani failed to disclose his belief to this effect to Mr Doan.
121 Further, we do not accept the submission that the case that APD now seeks to present is essentially a point of law based on facts that are not in dispute. In our view, had the case been presented in that way, the evidence may well have been (indeed, is likely to have been) different. Had the case been run in that way, the following factual issues are likely to have been explored in the evidence: whether Mr Rahmani knew or believed the facts and matters highlighted by APD in its appeal submissions in the lead-up to the 5 November 2016 Agency Contract; whether Mr Rahmani disclosed those matters to Mr Doan in the lead-up to that contract; and issues of causation of loss. In our view, in the circumstances, it would be fundamentally unfair to the Maximo Parties to permit APD to run the new case on appeal.
122 For these reasons, we reject grounds 1 and 1A.