KIS REALTY PTY LTD -v- YEO & RIMBALDI [2016] WASC 149 (19 May 2016)

2 These principles emerge from a number of decisions in particular Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332, 338 339, 354 and Westpac Banking Corporation v Totterdell (1998) 20 WAR 150, 154.

3 Turning then to the facts. Westpoint Finance Pty Ltd (Westpoint) was incorporated on 9 February 1996. On 28 February 2006 the defendants were appointed as administrators of Westpoint and on 27 March 2006 they were appointed liquidators pursuant to a resolution of creditors. By letter dated 21 June 2011 the defendants sent to the plaintiff a proof of debt form for completion. The plaintiff submitted a proof of debt dated 30 June 2012. By a document dated 4 June 2015 the defendants gave notice that the proof of debt was rejected. The basis for the rejection was that the plaintiff had released the debt claimed against the company by terms of a settlement made on 24 May 2011 in proceedings in the County Court of Victoria.

4 The plaintiff and Westpoint were both part of the Westpoint Group. The plaintiff was a licenced real estate agent. Westpoint's business included introducing clients to property investment and assisting them by arranging finance as a broker for property purchases. The plaintiff acted as the real estate agent in the property sales and thereby became entitled to receive commissions under a 'Services Agreement' made between the plaintiff and Westpoint. The Services Agreement provided for the payment of 'Service Fees'. The claim by the plaintiff is for unpaid Service Fees under the Services Agreement.

5 By the time the matter reached this court there were three grounds upon which the defendants said the plaintiff's claim failed. First, it was said the debt does not correspond with the proof of debt. Second, it was said the Services Agreement was illegal, void and unenforceable. Third, it was said the debt was compromised by a Settlement Agreement on 24 May 2011. (There was a fourth issue which was raised in the originating process. The plaintiff alleged its debt was secured by a charge. That argument was not pursued at the hearing.)

6 Dealing with each of these matters in turn the first issue can be disposed of quickly. It was not really pursued in either written or oral submissions. Really the defendants were cavilling with how the debt was described in the proof of debt. But whichever way the description is read the claim is for money not paid under the Services Agreement. In my view the debt is clearly adequately described and there is no substance to the defendants' claims on this question.

7 The second matter raised by the defendants requires some consideration of the Services Agreement. Recital A of the Services Agreement says:

WPF conducts the business of selling residential/commercial real estate to investors.

8 Recital C of the Services Agreement reads as follows:

KIS has granted a licence to WPF to act as its authorised agent and to conduct the WPF Business [defined as the business of selling residential/commercial real estate to investors] under the KIS licence.

In consideration for providing the Administrative Services, WPF agrees to pay the Service Fees [defined in Item 2 of the Schedule].

Subject to the provisions of clause 5 and payment of the Service Fees pursuant to clause 3.2, KIS grants WPF a right, title and licence to use the KIS Licence to conduct the KIS Business.

KIS grants to WPF a right, title and licence to use the Trademark and the Name during the Term in the Territory.

KIS warrants to WPF that KIS is the owner of, or has the sole unencumbered rights to the KIS Licence and all Intellectual Property rights in relation to the Trade mark and Name and is authorised and will remain authorised throughout the currency of this Agreement to licence their use to WPF in the Territory.

13 Based upon the Services Agreement the defendants say a number of points. First, the plaintiff was the owner of a real estate agent's licence in Queensland, New South Wales and Victoria. Second, the plaintiff purported to assign the licences to the company to carry out the company's business; namely, to sell residential/commercial real estate to investors. Third, in consideration for the assignment of the plaintiff's licences the company agreed to pay the licence fee. Fourth, in consideration for the plaintiff carrying out the duties set out in item 2 of the schedule in the Services Agreement the company agreed to pay the plaintiff the Service Fees.

14 The defendants say there is no evidence the plaintiff possessed the licences in New South Wales, Queensland and Victoria (in other words all three licences) and therefore granted the right, title and use of the licences to the company.

15 It was the defendants' position the contract was illegal because it anticipated a relationship between the plaintiff and Westpoint that was at odds with statute law. The point made by the defendants can be illustrated by reference to the statutory regime in New South Wales. Section 9(1) of the Property Stock and Business Agents Act 2002 (NSW) states:

A corporation must not act as or carry on the business of (or advertise, notify or state that the corporation acts as or carries on the business of or is willing to act as or carry on the business of) an [real estate] agent unless the corporation holds a corporation licence.

The holder of a licence or certificate of registration must not transfer, let out, hire or lend the licence or certificate of registration to any other person or permit any other person to use the licence or certificate of registration.

17 It is the defendants' position the arrangement between Westpoint and the plaintiff offended those sections and similar sections in both Queensland and Victoria. Accordingly the defendants say it is not open to the plaintiff to claim it was entitled to recover Service Fees.

18 The plaintiff answered the defendants' claims in this way. By cl 8.2 of the Services Agreement Westpoint warranted that it had obtained and would maintain any 'licence, certificate or registration or other government approval necessary to conduct the WPF Business'. The 'WPF Business' was the business of selling residential/commercial real estate to investors. The plaintiff was the owner of the licence to sell residential/commercial real estate. There therefore arose an estoppel by deed as against the defendants. Accordingly there was no illegality in the agreement because it was premised on cl 8.2.

19 As to estoppel by deed the plaintiff relied upon the decision of Owen J in Mark Anthony Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299. His Honour said [306]:

The first question is whether the doctrine of estoppel by deed would be a bar to relief. In Greer v Kettle [1938] AC 156 Lord Maugham described the doctrine in this way:

'Estoppel by deed is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken to be binding between parties and privies and therefore as not admitting of contradictory proof. It is important to observe that this is a rule of common law, ... . The position at equity is and was always different in this respect, that where a proper ground for rectifying a deed, eg because it was based on a common mistake as to fact, then to the extent of the rectification there can plainly be no estoppel based on the original form of the instrument.'

20 It is important to note that estoppel by deed is a rule of evidence. Really the plaintiff was submitting the evidence - that is to say the Services Agreement and in particular cl 8.2 of that agreement - is evidence Westpoint warranted it had all necessary licences. It can now not seek to avoid that position; it is estopped from doing so.

21 In my view that argument should be accepted for the reasons given by the plaintiff. I am not satisfied that the Services Agreement is illegal and unenforceable. Accordingly that limb of the defendants' argument fails.

22 What remains is the defendants' argument that settlement of County Court proceedings in Victoria precludes the plaintiff from lodging the proof of debt. The proceedings in question were issued in May 2006 and were brought by Westpoint (then in liquidation) against the present plaintiff. Interestingly enough Westpoint pleaded the Services Agreement and claimed pursuant to that agreement the present plaintiff remitted to Westpoint an amount of $188,864.77. Westpoint claimed it was entitled to repayment of that sum. The parties entered into negotiations and settled their differences. The Settlement Agreement was embodied in a deed which is found at attachment AY5 to an affidavit of Andrew Reginald Yeo sworn 15 January 2016. Clause 3 of that Settlement Agreement is relied upon by the defendants. It is in the following terms:

Subject to obtaining the Approval and save for as provided by these Terms of Settlement, Westpoint, Yeo and Rambaldi and KIS and Carey hereby mutually release and forever discharge each other, Madgwicks, their servants and agents from all claims, actions, suits, demands, causes of action and costs of whatsoever kind which either party now has, or at any time had, or may have or but for these Terms of Settlement could or might have had against the other party arising out of or in any way relating to the subject matter of the Proceedings, the Claims and the Third Party Action.

23 It is the defendants' position the all pervasive nature of that release and discharge is sufficient to prevent the plaintiff lodging its proof of debt. The plaintiff points out the subject matter of the agreement was the claims and counterclaims in the 'Proceedings' - that is, the County Court proceedings - relating to cheques totalling $188,864.77 claimed by Westpoint and KIS. The plaintiff points out the present debt said by KIS to be due to it by Westpoint was not an issue in the proceedings. Furthermore, the plaintiff says because Westpoint was in liquidation no claim could have been made against it except with leave. As no leave was sought it cannot reasonably be argued the plaintiff compromised its claim against Westpoint.

24 In my view the submissions of the plaintiff in this regard ought be accepted. The Settlement Agreement compromised the County Court proceedings. That is the clear effect of the wording of cl 3 and means the Settlement Agreement was of limited compass. It certainly was not sufficient to prevent the present claim being brought by the plaintiff.

25 For these reasons I am satisfied the plaintiff's appeal against the defendants' proof of debt ought be allowed. On publication of these reasons I will hear the parties as to the appropriate orders and as to costs.

CITATION : KIS REALTY PTY LTD -v- YEO & RIMBALDI [2016] WASC 149 (S)

ANDREW REGINALD YEO & GUISEPPE MICHELE RIMBALDI as Liquidators of WESTPOINT FINANCE PTY LTD

Corporations Act 2001 (Cth)

1 MASTER SANDERSON: On 19 May 2016 I delivered judgment in this matter: KIS Realty Pty Ltd v Yeo & Rimbaldi [2016] WASC 149. Subsequent to the delivery of my reasons the defendants raised two matters they said were relevant to the ultimate determination of the application. The first had to do with the amount of the debt. The defendants submitted although the issue had been raised in both oral and written submissions it was not specifically dealt with in my reasons. The second issue related to interest. It was said that pursuant to s 563B of the Corporations Act 2001 (Cth) interest could not be allowed on any debt. This was not a point which had been raised either in written or oral submissions by the defendant.

2 In supplementary submissions dated 27 July 2016 the defendants summarised their position as follows:

1. The plaintiff's claim was for payment of Service Fees under the Services Agreement.
2. The Services Agreement provided (at clause 3.2) that: 'in consideration for providing Administrative Services, WPF agrees to pay the Service Fees' (defined in item 2 of the schedule).
3. Clause 1.1 defined 'Administrative Services' as the services defined in item 2 of the schedule. Item 2 of the schedule sets out what the 'Administrative Services' include.
4. Unless the 'Administrative Services' were provided the plaintiff had no entitlement to payment of the Service Fees. But the plaintiff did not adduce any evidence that it had provided the 'Administrative Services' this crucial component of its claim was therefore lacking.

3 The way in which the claim was made up was set out by a director of the plaintiff in a proof of debt lodged with the defendants. A copy of that proof of debt appears as attachment NPC 2 to the affidavit of Mr Carey sworn 31 August 2015. Under the heading 'Remarks' there appears the following:

See attached ledger account of KIS Realty Pty Ltd in accounts of Westpoint Finance Pty Ltd and attached loan agreement. Ledger account of Westpoint Finance Pty Ltd in accounts of KIS Realty Pty Ltd. Services Agreement and charge.

4 There is attached to the proof of debt a copy of the Service Agreement and a copy of the fixed and floating charge. There then appears (on page 67 of the affidavit) a note of how the amount in the proof of debt is calculated. Consistent with what is contained in the remarks this document would appear to have been part of the books and records of Westpoint Finance Pty Ltd. At no stage was it suggested otherwise by the defendants.

5 Nor can it be suggested Administrative Services were not provided. Mr Carey says they were. There is an agreement between Westpoint Finance Pty Ltd and the plaintiff to that effect. Accordingly in my view there is no doubt that the licence fee in the amount claimed was payable and should be admitted as a proof of debt.

6 As to the second question the defendants are quite right that interest is not payable from the date the company went into administration. I provided the plaintiff with the opportunity to make submissions on that question and none were forthcoming. Despite the fact the point was not raised by the defendant in earlier submissions the statute is clear and effect must be given to it. Accordingly, the amount of the proof of debt will be the service charges as claimed with no allowance made for interest.

7 I will hear the parties as to the precise form of orders and as to costs.