Jones v Knobel & Davis Property Services P/L [2008] QCA 105

Judgment (95 paragraphs)

[1]

**[1] MUIR JA: The respondent, a licensed real estate agent carrying on business on the Gold Coast commenced proceedings in the District Court against the appellant seeking payment of a commission of $76,120 allegedly payable by the appellant to the respondent in respect of the sale of land owned by the appellant. The statement of claim alleged that by a contract of sale dated 2 June 2004, the appellant contracted to sell the land to a purchaser introduced to the appellant by the respondent in accordance with an agency agreement between the appellant and the respondent, also dated 2 June 2004.

[2]

[2] On 8 October 2007, judgment in the sum of $76,120 plus interest and costs was given in the District Court in favour of the respondent.

[3]

[3] The only point in issue on the appeal is whether the respondent, having performed work as a real estate agent for the appellant in respect of the sale before obtaining a written appointment as real estate agent in the approved statutory form, is prevented by Section 140 of the Property Agents and Motor Dealers Act 2000 (Qld) ("the Act") from recovering the commission.

[4]

[4] Mr McKay was a licensed real estate agent who, at relevant times, was acting as an agent of the respondent. He met the appellant on the land on 24 May 2004 and was told by her that she had received an offer to purchase the land. After some discussion, the appellant told Mr McKay that she would give him a week in which to see if he could obtain a better offer. Mr McKay approached a property developer, Mr Badalotti, and had some discussions with him. Those discussions led to Mr McKay's arranging a meeting between himself, the appellant and Mr Badalotti on 27 May 2004. At that meeting a proposal was discussed under which Mr Badalotti would purchase the land and the appellant would purchase a unit in a development known as "The Wings" being undertaken by Mr Badalotti or one of his companies.

[5]

[5] At another meeting the next day Mr Badalotti and the appellant reached a consensus which was recorded on a piece of paper by Mr McKay. It stated:**

[6]

______________________________

[7]

THIS CONTRACT IS SUBJECT TO AND CONDITIONAL UPON THE SELLER ENTERING INTO A CONTRACT AND PURCHASING LOT 54 IN WINGS RESIDENTIAL RESORT AT FERN ST GOLD COAST HIGHWAY FOR $640,000. AS PART SETTLEMENT OF THIS TRANSACTION.

[8]

SETTLEMENT TO BE ON OR BEFORE 1ST JUNE 2005 MUTUAL CONSENT SEVEN DAYS NOTICE FROM THE BUYER TO THE SELLER."

[9]

[6] The document was signed by Mr Badalotti and the appellant. The appellant did not contend that the document constituted a binding contract for the sale of land or otherwise rely on it.

[10]

The signing of the form of appointment of agent and the contracts.

[11]

**[7] Mr McKay then prepared the contract for the sale of the land and obtained from Mr Badalotti's site office on 2 June what he described as "the paperwork necessary for the purchase of Lot 54 in 'Wings'." Later that day he met with the appellant, who signed an appointment of real estate agent in the statutory form, form 22a (the "Appointment")

[12]

[8] In the Appointment: the client was identified as the appellant; the agent was identified as "Knobel and Davis Property Services Pty Ltd - Allan McKay;" the land was described in item 4 under the heading "Appointment of Agent" and it was also there stated:**

[13]

"The Client appoints the Agent to perform the following service/s:

[14]

Sale of: LAND AND BUILDINGS . . . . 4.2 Reserve or listing price: $2,750,000 . . . .

[15]

Sale by Private Treaty and negotiations with qualified buyers. Conjunction arrangements with other agents as necessary."

[16]

The table below shows when you will have to pay the Agent, if the property is sold during the term of the Agent's appointment."

[17]

**The item recorded that in the case of a sole agency the principal was required to pay the Agent if "Another agent sells" or if "Agent sells".

[18]

[10] The agency established between the appellant and the respondent was identified as a sole agency with a starting date of 2 June 2004 and a concluding date of 2 July 2004. Item 5 stipulated that an agreed commission was "payable for the service to be performed by the Agent" of 5% of the first $18,000 plus 2.5% of the balance of the sale price plus 10% GST. In item 7 the commission was stated to be payable "on settlement completion".

[19]

[11] After the completion and signing of the Appointment, Mr McKay and the appellant read through and checked the form of contract in respect of the land. The purchaser was shown on it as Grandsure Holdings Pty Ltd, presumably a company under the control of Mr Badalotti. The name of the vendor's solicitor was inserted in the front page and the document and a copy of it were signed by the appellant. The appellant then executed a form of contract and related documents in respect of the sale and purchase of "The Wings".

[20]

[12] At the conclusion of his meeting with the appellant, Mr McKay took a copy of each of the documents signed by the appellant to Mr Badalotti who had previously paid the one dollar deposit provided for in the contract of the sale of the land.**

[21]

"133 Appointment of real estate agent - general

[22]

(1) A real estate agent who is asked by a person ("client") to perform an activity ("service") for the client must not act for the client unless the client first appoints the agent in writing under this section.

[23]

(2) The appointment may be for the performance of -

[24]

(a) a particular service ("single appointment"); or

[25]

(b) a number of services over a period ("continuing appointment").

[26]

(a) state the service to be performed by the real estate agent and how it is to be performed; and

[27]

(b) state, in the way prescribed under a regulation, that fees, charges and commission payable for the service are negotiable up to any amount that may be prescribed under a regulation; and

[28]

(i) the fees, charges and any commission payable for the service; and

[29]

(ii) the expenses, including advertising and marketing expenses, the agent is authorised to incur in connection with the performance of each service or category of service; and

[30]

(iii) the source and the estimated amount or value of any rebate, discount, commission or benefit that the agent may receive in relation to any expenses that the agent may incur in connection with the performance of the services; and

[31]

(iv) any condition, limitation or restriction on the performance of the service; and

[32]

(d) state when the fees, charges and any commission for the service become payable; and

[33]

(e) if the service to be performed is the sale or letting of property or the collecting of rents and commission is payable in relation to the service and expressed as a percentage of an estimated sale price or amount to be collected, state that the commission is worked out only on the actual sale price or the amount actually collected; and . . . ." [1]

[34]

(2) The approved form must include a prominent statement that

[35]

the client should seek independent legal advice before signing the appointment.

[36]

(3) An appointment that does not comply with subsection (1) is

[37]

"140 Restriction on recovery of reward or expense - no proper

[38]

(1) A person is not entitled to sue for, or recover or retain, a

[39]

reward or expense for the performance of an activity as a real estate agent unless, at the time the activity was performed, the person -

[40]

(b) was authorised under the person's licence to perform the activity; and

[41]

[42]

person to be charged with the reward or expense."[2]

[43]

**[14] The primary judge held that the activities of Mr McKay from 24 May 2004 until the signing of the form of appointment of agent were activities as an agent connected or concerned with the selling of the land.

[44]

[15] His Honour concluded that the "activity which would generate the right or entitlement to commission" was the entering into of a valid contract of sale. "That happened once the appellant signed [the contract of sale of the land] and that fact was communicated to the purchaser." "By this time the respondent had been duly appointed the appellant's agent.

[45]

[16] In relation to the appellant's contention that s 140 applied, his Honour concluded that "the activity or service . . . . was the sale of the land."**

[46]

**[17] On the facts found by the primary judge, which are unchallenged on appeal, the respondent acted as a real estate agent prior to its appointment in writing. That was contrary to s 133 of the Act which prohibits a real estate agent acting for a client unless first appointed in writing under the section. Section 4 of the Form 22a[3] describes the services to be performed by the respondent as including "the sale of land and buildings" and specifies the performance of the service to be conducted as "sale by private treaty and negotiations with qualified buyers. Conjunction arrangements with other agents as necessary."

[47]

[18] Having regard to the form of appointment it is clear that the "service" includes the matters carried out prior to the signing of the appointment. "Activity" which is defined as "service" in s 133(1), covers the negotiations leading up to the contract of sale. The definition of "sell" in Schedule 2 of the Act includes "attempt to sell, have for sale, negotiate for sale, and in any way be concerned in selling."

[48]

[19] Having regard to these matters, the primary judge erred in holding that the lack of proper appointment under s 133 did not invoke the operation of s 140. His Honour erred also in holding that the only activity that gave rise to the right of commission was the final entry into a contract of sale which His Honour concluded "occurred after the exercise of the authority" and therefore did not present any bar to recovery under s 140.

[49]

[20] The concept of "activity" includes negotiations and other activities carried out by the appellant. Support for that proposition may be obtained from authorities, including Moneywood Pty Ltd v Salamon Nominees Pty Ltd[4], Freehold Land Investments Ltd v Queensland Estates Pty Ltd[5] and Greg Roughsedge Realty Pty Ltd v Whitecross & Anor[6].

[50]

[21] The term "activity" should be construed more broadly than the mere signing of the contract of sale because:**

[51]

(a) By virtue of s 14A of the Acts Interpretation Act (1954) (Qld) the purpose of the Act is primarily consumer protection;[7]

[52]

(b) To construe the term "activity", in the context of the range of an agent's activities that constitutes an agent's service in selling property, as only referring to the entry into of the sale contract is too narrow and inconsistent with the Act's purposes; and

[53]

(c) Similarly, a narrow construction would permit unscrupulous agents to market a landowner's property for sale, without the Owner's consent or knowledge, then present a contract for sale, together with a Form 22a. That mischief is one which is precisely what the Act is designed to restrict.

[54]

[22] There is no definition of "activity" in s 140. The word is a general one which, in normal parlance, would apply to virtually any acts engaged in by a person or corporation. There are indications though that "activity" has more limited meaning in Chapter 5 of the Act. In Section 133(1) "activity" is defined as "service". Section 133(2), which provides that the appointment of a real estate agent may be for the performance of a particular service or a number of services over a period, suggests that the word "service" refers to the overall task for which the agent is engaged or retained, and not to individual items of work done in the fulfilment of the engagement or retainer. So too does subsection (3), which requires an appointment for each service to state various matters including:

[55]

(a) The service to be performed and how it is to be performed;

[56]

(b) The fees, charges and any commission payable for the service;

[57]

(c) Expenses, including advertising and marketing expenses, the Agent is authorised to incur in connection with the performance of each service or category of service.

[58]

**[23] Subsection (3)(b) assumes that there will be fees, charges or commission in respect of a service prescribed under a regulation. That is an indication that "service" is not a reference to each item of work performed under an engagement or retainer. Section 133(3)(e) identifies "the sale or letting of property or the collecting of rents and commission" as services.

[59]

[24] Section 133(1) commences with the words, "A real estate agent must not act as a real estate agent for a person (client) to perform an activity (service) for the client." The requirement for an appointment prior to the performance of an activity also suggests that what the section has in mind by the words "activity" and "service" is one or more of the functions or roles specified in s 128. That section provides:**

[60]

"128(1) A real estate agent's licence authorises the holder of the

[61]

licence (real estate agent) to perform the following activities as an agent for others for reward -

[62]

(a) to buy, sell, exchange, or let places of residence or land or interests in places of residence or land;

[63]

(b) to buy, sell, exchange, or let businesses or interests in businesses;

[64]

(d) to buy, sell or exchange livestock or an interest in livestock;

[65]

(e) to negotiate for the buying, selling, exchanging, or letting of something mentioned in paragraph (a) or (b);

[66]

(f) to negotiate for the buying, selling or exchanging of something mentioned in paragraph (d).

[67]

(2) A real estate agent may perform the activities in the carrying on of a business, either alone or with others, or as an employee of someone else."

[68]

[25] It is unlikely that the word "activity" in s 40 has a meaning different from the meaning of the word used elsewhere in Chapter 5.

[69]

**[26] Under the Appointment the appellant appointed the respondent on 2 June 2004 to sell the land and improvements. The terms of the Appointment required the appellant to pay commission to the respondent "if the property is sold during the term of the Agent's appointment." The term commenced on 2 June 2004 and concluded on 2 July 2004. Payment was due "on settlement completion." The Contract was entered into on 2 June 2004 after the signing of the form of appointment. It is not contended by the appellant that the sale of the land was not effected on 2 June 2004. It follows that, subject to the provisions of s 140, the service for which the respondent was appointed was performed and an entitlement to commission arose, conditional upon settlement being effected.

[70]

[27] Under item 6 of the Appointment, commission was "payable for the service to be performed by the Agent". The phrase describes a future service. The language of item 4 is prospective also; "The Client appoints the Agent to perform the following services...". The words "sale by Private Treaty and negotiations with qualified buyers. Conjunction arrangements with other agents as necessary" are plainly standard form terminology. The words are not apt to refer to the prior negotiations with the appellant and Mr Badalotti in which the respondent was engaged. The past tense is not used. If it had been intended otherwise it is reasonable to conclude that the form would have made reference to matters such as "the negotiations with Mr Badalotti" and employed the past tense. Plainly, the appellant and the respondent did not have in mind "conjunction arrangements."

[71]

[28] There was no agreement to pay commission for services rendered prior to the signing of the appointment of agent and the respondent was not suing "for a reward or expense" for the performance of those services. It had no need to claim in respect of services prior to 2 June 2004. It was sufficient for its purposes that it recover the commission due for the services rendered under the terms of the Appointment after it took effect.**

[72]

Despite the terms of the parties' bargain does s 140 prevent the appellant from recovering the agreed commission?

[73]

**[29] Section 133 prevents a real estate agent performing a "service" for a client unless duly appointed. It prescribes penalties for breaches of its provisions. Section 140 has a different role. It is concerned only with prescribing the circumstances in which a real estate agent's fees may be recovered.

[74]

[30] The appellant's strongest argument, in my view is as follows. The respondent sued to recover a reward in respect of the performance of an activity performed, in part, prior to its appointment as agent. The "activity" of selling the land, for the purposes of s 140, included the pre- appointment negotiations and other acts performed pursuant to the respondent's engagement as real estate agent to effect a sale of the land. The respondent's appointment as agent in the course of performing the "activity" cannot produce the result that the respondent had been duly appointed "at the time the activity was performed."

[75]

[31] Counsel for the appellant argues that the above approach to the construction of s 140 would be consistent with the prohibition in s 133 against real estate agents performing an "activity" unless first appointed in writing. It is doubtful however that s 133 operates to prevent an agent who does work, no matter how minor, as real estate agent for a client in the performance of an "activity", from thereafter accepting an appointment as agent in relation to the activity.

[76]

[32] The section imposes a penalty for breach of the obligation to be duly appointed before performing an activity as a real estate agent. If the legislative intention was to bar the agent from accepting an appointment once there had been a breach of s 133 it is surprising that this was not made apparent. There is a considerable difference between a prohibition against acting as a real estate agent for a client "unless the client first appoints the agent in writing" and a prohibition against acting for the client in relation to an "activity" if the agent has performed any work in furtherance of the relevant activity prior to the agent's appointment. In my view the legislature took the conventional approach of providing no disincentive for the curing of default. On this approach to the construction of s 133 the client would be free to continue to avail itself of the services of the agent of its choice. If this construction of s 133 is correct it would be surprising if the legislative intention was that s 140 operates to prevent an agent recovering remuneration for work done after having been duly appointed.

[77]

[33] In my view the appellant's argument pays insufficient regard to the wording of s 140 and to the application of the words of the section to the facts. Under the agreement constituted by the Authority, as explained earlier, the respondent became contractually entitled to the payment of the agreed commission. That entitlement arose from acts and circumstances after the execution of the Authority and it is the Authority and such acts and circumstances which establish the respondent's cause of action. If the "activity as a real estate agent" includes, for the purposes of s 140, the respondent's work prior to the signing of the Authority, the respondent was not suing for a reward for the performance of that "activity". The respondent sued only to recover monies to which it was contractually entitled under the Authority.

[78]

[34] It is important to recognise that the prohibition in s 140 is against recovering or retaining an expense or reward "for" the performance of "an activity". It is not a prohibition against recovering or retaining an expense or reward "in respect of" or "in relation to" an "activity". It may be the case also that where an appointment to act as real estate agent in a transaction is made after the agent has acted in the transaction, the relevant "activity" for the purposes of s 140, where the appointment is for future services, is constituted by that which is done after the appointment. The appointment to act as agent can be expected to define the "activity" to be performed by the agent in the way the Appointment defined the service to be provided by the respondent to the appellant.

[79]

[35] The approach to the construction of s 140 which I favour, in my view, does not render s 140 ineffectual. Costs and expenses incurred by a real estate agent prior to a valid appointment are irrecoverable. If there is a breach of s 133 the agent will have committed an offence, be liable to pay a penalty and may be subjected to disciplinary proceedings. If the real estate agent has introduced a buyer to the agent's principal before obtaining an authority to act, the agent will be at risk of not being able to persuade the principal to provide an authority. Once an authority to act is signed by the agent's principal, it would not seem unreasonable that the agent be remunerated for the work done after signing.**

[80]

**[36] For the above reasons I would order that the appeal be dismissed with costs.

[81]

[37] WHITE J: I have read the reasons for judgment of Muir JA and agree with his Honour's reasons that this appeal should be dismissed.

[82]

[38] The appellant's approach to the construction of s 140 of the Property Agents and Motor Dealers Act 2000 (PAMDA) which Muir JA has described is essentially a purposive one[8], that is, consumer protection. But to give effect to that approach in the manner advocated by the appellant which would deny recovery of commission does involve interpreting the language of Parliament in a manner not readily supported by the words themselves.

[83]

[39] The relevant provisions, ss 133 and 140, have been set out by Muir JA. Section 133(1) prohibits a real estate agent from performing a service for a client unless first being appointed by the client in writing. Mr McKay, the real estate agent, performed certain services for the appellant as described by Muir JA without such an authorisation. He, and/or the respondent, as noted by his Honour, are thereby exposed to disciplinary action.

[84]

[40] Section 140 is concerned with something different, namely, to prevent a real estate agent who has not been appointed in accordance with s 133 from benefiting from the relationship with the client in such a circumstance. It is plain from an analysis of the Form 22a signed by the appellant on 2 June 2004 that the engagement for which a commission might be earned related to future conduct, that is, the sale of the appellant's land and buildings.

[85]

[41] The appellant argued that the extended meaning of "sell" including, as it does, "attempt to sell...and in any way be concerned in selling" related back to the pre-appointment activities of Mr McKay. Even if that be so, it does not affect the futurity of the activity which sources the entitlement to commission.

[86]

[42] Such a conclusion is not offensive to the legislative purpose of consumer protection. Unless the seller appoints a real estate agent adhering to the detailed provisions in s 133 and s 134 the real estate agent can recover nothing be it for expenses prior to or commission on sale.

[87]

[43] I agree with Muir JA that there is nothing in the legislation to compel the conclusion that a real estate agent can never be redeemed by the agent's appointment to sell a property subsequent to other activity in respect of that property for which there was no appointment. The purpose of the legislation to protect the seller of property from predatory conduct is still maintained.

[88]

[44] LYONS J: I have had the advantage of reading the reasons of Muir JA. I agree with the reasons of his Honour and with the orders proposed.**

[89]

[1] Property Agents and Motor Dealers' Act (2000) s 133 extracted from Reprint No.2D as in force at the relevant times

[90]

[2] Property Agents and Motor Dealers' Act (2000) s 140 extracted from Reprint No.2D as in force at the relevant times

[91]

[3] The prescribed form of appointment of Real Estate Agent (sales and purchase)

[92]

[4] [2001] HCA 2; (2001) 202 CLR 351

[93]

[5] [1970] HCA 31; (1970) 123 CLR 418

[94]

[7] Explanatory notes at pp 1950-3 and 1995-6

[95]

[8] Section 14A Acts Interpretation Act 1954 (Qld)

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Judgment (95 paragraphs)

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