George Ghossayn v Darcsol Pty Ltd t/as Jondarc Realty

Facts

1. The written agency agreement was dated 5 March 2012. The parties to it were Mr Ghossayn, the appellant, and Darcsol Pty Ltd, trading as Joandarc Realty (Joandarc), the respondent on this appeal. The address of the "Property for Sale" was given as 36, 38, 40, 42 Levey Street, Arncliffe. The price at which "the Property" was to be offered was $7 million.
2. The parties agreed that the agency was not to be an exclusive agency. Accordingly, the word "exclusive" in the heading to the document was crossed out. That change was initialled by the parties. Despite this, the typewritten word "exclusive" was retained in the sections of the written agreement dealing with agency period and agent's remuneration.
3. The agreement provided that in consideration of the agent promising to use best endeavours to sell, the agent was granted exclusive selling rights "of the Property" for the period from 5 March 2012 to 5 October 2012. The agent's fee was stated to be 2.2% if during the agency period "the Property" was sold either by the agent, any other agent, or by the principal.
4. Accordingly, the agency appointment was to sell the identified properties as a whole. Also, he agent was only entitled to commission upon their sale as a whole.
5. Mr Ghossayn was the sole director and secretary of the three companies which owned the properties at 36, 38 and 40 Levey Street. The property at 42 Levey Street was owned by Mr and Mrs Georgallis. According to Mr Ghossayn's evidence, Mr and Mrs Georgallis had given him authority in relation to the sale of 42 Levey Street, so that the properties could be sold together. Mr Ghossayn envisaged that the purchase of the four properties would enable them to be developed as a block of some 70 residential units, subject to relevant approvals.
6. There was a single residential home on each of the four properties and each was being used for residential purposes.
7. The respondent found a purchaser to buy the four properties. That purchaser was Kai-Tian Group Pty Ltd. Separate contracts for the sale of each of the four properties were entered into in late September 2012. These contracts identified Joandarc as the vendor's agent. Settlement occurred on 13 November 2012. On that date, the solicitors for Mr Ghossayn sent an email to Ms Khouzame of Joandarc confirming completion and stating that they were instructed that the commission was $68,250, being 1% of the purchase price.
8. By email of 20 November 2012, following a meeting earlier that day with Ms Khouzame, the solicitors for Mr Ghossayn stated that they were instructed that, after signing the agency agreement dated 5 March 2012, an agreement had been made between Ms Khouzame and Mr Ghossayn that the commission would be reduced to 1% on the basis that their client would accept a reduced price of $6,825,000. Later on 20 November 2012, Ms Khouzame sent an email to Mr Ghossayn's solicitors, in effect, denying that there was any such agreement for the payment of a reduced commission.
9. In December 2013 Mr Ghossayn commenced proceedings in the predecessor tribunal of Tribunal below seeking an order for the refund to him of the amount of $151,000, being the balance of the sale proceeds held by Joandarc.
10. It has always been common ground between the parties that if Schedule 8 of the Property, Stock and Business Agents Regulation 2003 (the Regulation) was applicable to the agency agreement, because the agency agreement was one for the sale of residential property, then the agency agreement did not comply with the requirements of Schedule 8. It did not comply because it did not contain a number of matters, including a warning about exclusive agencies, a term entitling the principal to terminate by giving 30 days notice at the end of the first 90 days of the term and a statement about a cooling-off period.

Legislative provisions

1. The relevant part of s55 of the Act provides: "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: (b) the agency agreement complies with any applicable requirements of the regulations, ……"
2. Schedule 7 of the Regulation contained requirements that all agency agreements had to comply with. It was common ground that the written agency agreement complied with those requirements.
3. Schedule 8 contained requirements for agency agreements concerning the sale of residential property. By cl 13 of the Regulation, Schedule 8 was stated to apply to an agency agreement under which the agent will act for the seller "on the sale of residential property".
4. The Regulation contained no definition of "residential property". However, the Act defines "residential property" to have the same meaning as in Division 8 of Part 4 of the Conveyancing Act 1919. That definition is contained in s 66Q of the Conveyancing Act 1919 which provides: 66Q Meaning of "residential property" (1) For the purposes of this Division, residential property is: (a) land on which are situated (or in the course of construction) not more than two places of residence, and no other improvements, or (b) vacant land on which the construction of a single place of residence alone is not prohibited by law, or (c) a lot or lots (including a proposed lot or lots) under the Strata Schemes (Freehold Development) Act 1973 or the Strata Schemes (Leasehold Development) Act 1986, comprising not more than one place of residence alone, whether constructed or in the course of construction, and including any place used or designed for use for a purpose ancillary to the place of residence. (2) Residential property does not however include: (a) land or a lot that is used wholly for non-residential purposes, or (b) land that is more than 2.5 hectares in area (or such other area as may be prescribed). (3) For the purposes of this section, place of residence means a building or part thereof used, or currently designed for use, as a single dwelling only, and includes outbuildings or other appurtenances incidental to any such use.

Decision of the Tribunal below

1. The Tribunal below concluded that no decision was required on the claim based on s 55(1)(b) of the Act because the claim had been extinguished (to use the language of the Tribunal below): at [9] and [11]. It came to this conclusion after referring to some evidence given by Mr Ghossayn in cross-examination. The Tribunal below did not elaborate upon what it meant by the conclusion that the claim was extinguished or how such evidence resulted in the loss of the claim. Mr Ghossayn had not been given an opportunity to be heard on this point. It was not a matter raised by the agent or by the Tribunal itself during the hearing below.
2. The oral evidence that the Tribunal below relied upon arose from some questioning in cross-examination about Mr Ghossayn's decision to propound a case that the agent was not entitled to any commission. In that context, Mr Ghossayn's answers in this line of questioning, included: "She sold the property and she is entitled to half the commission and good luck to her but I need the other half. … This [that the agent should not have any commission at all] is what the solicitor said and the law said … I know in my heart and in my belief she entitled to half the commission … I didn't say [the agent should not get anything] … I said the solicitor and the law say, not me."
3. As to Mr Ghossayn's alternative claim that there was an oral variation of the agency agreement reducing the commission payable to 1.1% (including GST), the reasons of the Tribunal below included (at [39]): Therefore, the Tribunal is of the view that without evidence to demonstrate the oral agreement, the conclusion must be reached that the applicant has failed in the endeavour to demonstrate an agreement for [sic] the commission was to be halved.
4. The Tribunal below then decided that cl 7 of the written agency agreement "trumps" any oral variation, if it was wrong in its conclusion based on the state of the evidence. Cl 7 relevantly provided that any fees payable to the agent pursuant to the agent "cannot be varied except as agreed by the Principal in writing".

The claim for a full refund of commission - consideration

1. In rejecting the claim for a full refund of commission, in our opinion, the Tribunal erred, in at least, two respects, both relied upon by Mr Ghossayn in his grounds of appeal.
2. First, there was a denial of procedural fairness because Mr Ghossayn had no opportunity to address this ground for rejection of the claim. Secondly, in our opinion, Mr Ghossayn's evidence, was not capable of depriving him of his claim. In substance, Mr Ghossayn's evidence was as to his belief about entitlement. At no point was there an abandonment of the claim for a full refund and the parties proceeded to deal with it in their closing addresses.
3. On the appeal, no real attempt was made by the agent to justify the Tribunal's conclusion about the loss of Mr Ghossayn's claim for a full refund of the commission. Both parties invited us to determine the matter on the merits. We received written and oral submissions on the point. In the circumstances, we think it appropriate that we determine whether Schedule 8 of the Regulation does apply to the agency agreement in this case.
4. In our opinion, it does not. This is because the agency agreement was not one under which the agent acted for the seller on the sale of "residential property".
5. We were informed by Counsel that they had not been able to find any authorities directly on the point.
6. For present purposes, the relevant part of the definition was that in s66Q(1)(a).
7. As we have already identified, under the agency agreement the agent acted on the sale of the four properties together, not on the sale of the individual properties. The agent's mandate was not in respect of land on which there was situated not more than two places of residence. Its mandate was in respect of land on which there was situated four places of residence. There is no warrant in the language of the Regulation, as expanded by the definition in s 66Q, for dividing the land into the individual titles that comprise the land and then examining whether each of those titles contain no more than two places of residence.
8. The definition of "residential property" adopted by the Regulation is a restricted one. It is not determined solely by the current usage or intended usage of the land in question. Nor is it determined by zoning. Rather, in the first place, the scale of residential development defines the status.

Oral variation - consideration

1. As to the oral variation claim, Mr Ghossayn submitted that the reasons of the Tribunal below disclosed clear error in stating that "without evidence to demonstrate the oral agreement" it must fail: at [39]. If, in truth, the Tribunal rejected the claim on the ground that there was no evidence to support the oral agreement, there would have been clear error by the Tribunal below. This is because Mr Ghossayn had given evidence in an affidavit of a conversation with Mr Khouzame in support of the oral agreement, and he had been cross-examined about that conversation. Such an error would be an error of law in failing to take account of highly material evidence.
2. However, read in the context of all of the reasons on this point, we do not agree that the Tribunal below rejected this claim on a no evidence basis. On the contrary, it appears from the whole of the reasons (from paragraphs [12] -[43]) that the Tribunal below examined whether or not Mr Ghossayn's version of events was to be accepted. The Tribunal below referred to Mr Ghossayn's conversation about halving the commission at [17]. It referred to the lack of any written evidence to support his evidence at [27]. It referred to the lack of any evidence that Mr Ghossayn informed his partner of any agreed change in the commission in the context of their acceptance of a price of less than $7 million at [29] It also referred to the fact that no handwritten amendment to the fee of 2.2% was made to the written agency agreement (at [38]). Ultimately, it came to the conclusion that it was "not convinced" an oral variation had occurred.
3. Accordingly, in our opinion there was no error of law as contended for by the Tribunal below in rejecting the oral variation claim for evidentiary reasons. No leave to appeal was sought by Mr Ghossayn in relation to this finding, which was challenged solely on a question of law.
4. In the circumstances, the finding of the Tribunal below that no oral variation of the fee occurred remains undisturbed. It is, therefore, unnecessary to consider the challenge to the additional conclusion of the Tribunal below as to the ineffectiveness of any oral variation, on the basis of cl 7 of the written agency agreement.

Costs

1. The Tribunal below ordered that each party was to bear its own costs. In so ordering, the Tribunal relied on s60 of the CAT Act. Joandarc appeals against that order. It seeks an order that Mr Ghossayn pay its costs of the hearing below and of the appeal. To the extent necessary, it seeks leave to appeal on this issue.
2. Joandarc contends that the Tribunal below failed to have regard to the position of the parties that costs should follow the event. It also contended that the Tribunal below had failed to have regard to Rule 38 of the Civil and Administrative Tribunal Rules 2014 concerning costs in the Consumer and Commercial Division. That Rule confers power on the Tribunal to award costs, even in the absence of special circumstances, if the amount in dispute is more than $30,000.
3. In so contending, the agent contended that the exercise of the Tribunal's discretion concerning costs was flawed as a result of a failure to take account of these matters. Such grounds of appeal involve an appeal on a question of law.
4. The Tribunal below did refer to each party seeking costs on the basis that costs should follow the event at: at [39]. However, it made no reference to Rule 38 of the Civil and Administrative Tribunal Rules 2014.
5. From the transcript of the hearing below, it appears that no substantive submissions on costs were made (at pages 60-61). No reference was made by the parties to Rule 38. The transcript suggests that the position was left on the basis that the parties would be content if a provisional order concerning costs was made giving the parties the opportunity to address the matter further before the Tribunal below should either wish to do so (page 61).
6. In our opinion, the Tribunal below did err in law in its approach to the question of costs. It overlooked its power to award costs even in the absence of special circumstances.
7. We think it appropriate that we proceed to deal with this question of costs. In exercise of the power given to the Tribunal under Rule 38(2), we are of the view that Mr Ghossayn should pay the respondent's costs of the hearing below and of the appeal. This is because of the size of the amount of dispute between the parties, the appropriate involvement of lawyers for both sides and the respective positions taken by them concerning costs, namely that costs should be awarded in their favour in the event of success.

Orders

1. Accordingly, we order that Mr Ghossayn's appeal in AP 14/60145 be dismissed. We also order that the respondent's appeal concerning costs in AP 15/02393 be upheld. We also order that Mr Ghossayn pay the costs of Darcsol Pty Limited of the hearing below and its costs of the appeal.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 October 2015