CIVIL DISPUTE** - 'effectively introduced' the purchaser - original agent entitled to commission - assignment of a business brokering agreement - 'absolute assignment' of contractual right
Source
Original judgment source is linked above.
Catchwords
CIVIL DISPUTE** - 'effectively introduced' the purchaser - original agent entitled to commission - assignment of a business brokering agreement - 'absolute assignment' of contractual right
Judgment (28 paragraphs)
[1]
This matter is resumption of Newham Business Brokers Pty Ltd v Jodi Miller as trustee for the Miller Family Trust Pty Ltd & Anor[2019] ACAT 21 which in turn was a continuation of Newham Business Brokers Pty Ltd v Jodi Miller Pty Ltd as trustee for the Miller Family Trust & Anor[2018] ACAT 57. The present decision adopts but does not repeat all the evidence recited in those decisions.
The applicant is a business broker in the ACT and is the ACT franchisee of Finn Franchise Broker in Sydney (Finn). On 9 April 2015 Finn entered a business agency contract with the Miller Family Trust to find a purchaser for its masonry business. The agency agreement contained clause 27 which permitted Finn to assign the benefit of that contract. The validity of the contract between the respondent and Finn was the subject of Newham Business Brokers Pty Ltd v Jodi Miller as trustee for the Miller Family Trust Pty Ltd & Anor[2019] ACAT 21. The contract was found to be valid and the decision has not been the subject of an appeal.
In July 2015 Finn assigned the contract to the applicant in accordance with clause 27 and notified the respondent by mail and email of this fact without any objection being raised by the respondent, albeit the respondent denies this. The respondent thereafter dealt only with Mr Newham, the director of the applicant company, who communicated with the respondent by phone, mail and email (on the applicant's letterhead).
Finn is not a party to these proceedings and the applicant made a conscious decision not to join it as a party. The validity of the assignment from Finn to the applicant is challenged by the respondent and remains to be determined in these proceedings.
The core of the dispute concerns whether the applicant is entitled to a commission under the assigned contract of 9 April 2015. The applicant originally introduced Sophie Malone's company (the third party) to the respondent. Ms Malone's company eventually purchased the masonry business from the respondent. The applicant asserts that he is entitled to the commission from that sale.
The purchase involved a personal director guarantee by Ms Malone at paragraphs 8.1 and 8.2 of the Sale of Business Agreement. The respondent relies upon that personal guarantee to join Ms Malone, as opposed to her company, as the third party to the applicant's claim.
The initial introduction by the applicant occurred on 23 December 2015 with a follow up meeting between the parties on 25 February 2016 and various correspondence in between. No agreement for the sale was reached. Ms Malone's evidence was to the effect that she put the decision to purchase the business on hold whilst she considered other options. On 2 July 2016, the respondent terminated the broker contract with Finn and hence the contract with the applicant.
On the same day Mr Newham wrote to the respondent and provided a list of people he asserted he had introduced as potential purchasers of the business in relation to whom a commission would arise from any sale within the next 12 months. The list included the representatives of Ms Malone's company.
The respondent then retained the broking services of Mr Walmsley of Capital Commercial Business Brokers.
Subsequently Ms Malone's company had a change of mind and decided to revisit the purchase. She was directed by the respondent to do so through Mr Walmsley. Negotiations ensued in which Mr Walmsley played his part that led to completion of the sale on 12 December 2016 by providing updated financial information concerning the business.
The applicant only became aware of the sale in July 2017. The applicant then made a demand on the respondent for the commission.
[2]
The contract between Finn and the respondent (subsequently assigned to the applicant) relevantly provided:
[3]
8.2 The client authorises the Agent to perform the Agency Services and agrees to pay all fees as provided for in Part 6 including the Sales Commission where the Franchised Business is sold during the Term of this Agreement whether or not the Agent is the effective cause of the sale.
[4]
8.3 Furthermore the Client will also be liable to pay the Sales Commission where the Agent effectively introduced the buyer to the Client or the Franchised Business during the Term of this Agreement and a contract for sale is entered between the buyer and the Client within twelve (12) months of the end of the Term.
[5]
9.1 Where a liability to pay the Sales Commission arises under this Agreement then the liability is subject to the contract of sale of the Franchised Business proceeding to completion unless:
[6]
[there follows a list of circumstances not presently relevant]
[7]
Warning: A commission may be payable under this Agreement even if the sale of the property or business is not completed.
[8]
The sale to Ms Malone's company occurred within 12 months of the end of Mr Newham's agency agreement and so brings clause 8.3 into play. Mr Newham contends that he "effectively introduced the buyer to the client" within the meaning of clause 8.3 and was therefore entitled to a commission. The respondent denies this.
The applicant's entitlement to a commission depends on:
(a) whether the assignment of the broker contract from Finn was valid; and
(b) whether Mr Newham 'effectively introduced' the third party to the respondent.
[9]
The respondent argued that the agency agreement had not been validly assigned to the applicant from Finn and so the applicant was not privy to the agreement. The respondent relies upon section 12 of the Conveyancing Act 1919 (NSW):
[10]
Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor...
[11]
The respondent argues that:
(a) the assignment of the contract from Finn and the applicant was not 'an absolute assignment'; and
(b) the respondent was never given written notice of the assignment from Finn to the applicant. The respondent noted in its submissions filed on 21 June 2019 that the express notice to the respondent could be given by either Finn or the applicant, but denies that either occurred.
The concept of an 'absolute assignment' has been discussed in various cases. Most recently McMurdo J in Mio Art Pty Ltd as T'ee of Spencer Family Trust v Mango Boulevard Pty Ltd & Ors (No 6)[2015] QSC 116 wrote:
[12]
[12] The meaning of "absolute assignment" in this context was discussed by Barrett JA (with whom Beazley P and Meagher JA agreed) in Austino Wentworthville Pty Ltd v Metroland Australia Ltd. Barrett JA there discussed several judgments, including the observation of Mason J in Clyne v Deputy Commissioner of Taxation (Cth) that an "absolute assignment" in this context "signifies one which is unconditional" embracing "an assignment notwithstanding that the document effecting the assignment provides or implies the need for re-assignment or re-conveyance on the happening of a future event, e.g. the repayment of a loan for which the assignment is being held as a security". Mason J there noted that in Durham Bros v Robertson, Chitty LJ had said that an unconditional assignment of a debt by way of mortgage to secure repayment of a loan would be an absolute assignment, although it was subject to an equity of redemption.
[13]
[13] Barrett JA summarised the relevant principles emerging from the cases as follows:
[14]
(1) An 'absolute' assignment is one that is unconditional and does not attempt to affect part only of the chose in action.
[15]
(2) The fact that an assignment otherwise absolute is accompanied by an express proviso for redemption, an implied right of redemption or the creation of a trust in respect of future proceeds does not deprive it of its absolute character.
[16]
(3) An assignment by way of charge is one the effect of which is to give a right of payment out of the subject matter assigned without outright transfer of that subject matter. Such an assignment occurs when, for example, there is a transfer of a right to be paid out of a particular fund or of so much of a debt as is sufficient to satisfy a future indebtedness.
[17]
(4) The character of the assignment must be ascertained from the terms and effect of the instrument, according to the construction of it as a whole.
[18]
[14] In several cases it has been said that an assignment of part of a debt cannot be an absolute assignment within the meaning of this provision or its equivalents in other jurisdictions. I will return to the arguments for the plaintiff that only part (if at all) of a chose in action was assigned under this document.
[19]
[15] The defendants argue that this was an absolute assignment although by way of mortgage to secure repayment of a loan, as described by Chitty LJ in Durham. The assignment was according to cl 2.1 and the equity of redemption was provided by cl 2.2. The assignment was unconditional and therefore, they argue, absolute.
[20]
[16] The plaintiff argues that the document as a whole did not provide for an absolute assignment but instead provided for a mere charge over the subject chose in action. To the extent that it provided for an assignment, that was conditional upon the happening of a future event, namely some default by the plaintiff.
[21]
The assignment occurred in the context of a franchise agreement between Finn and the applicant that operated on a referral basis. The applicant traded under its own name. Finn referred all ACT and surrounding NSW business to the applicant who paid Finn a general franchise fee and paid Finn for any administrative work it did in any assigned matter. Beyond this, the applicant was solely entitled to its commission on any sale it effected.
Mr Ferguson and Mr Walmsley of Finn gave evidence of the assignment to the applicant, albeit no formal assignment was tendered in evidence. There was no suggestion that the assignment was by way of charge only, or Finn had any right of redemption in relation to work performed by the applicant under the franchise agreement. The fact that the applicant paid Finn for some administrative services and paid a franchise fee for the franchise generally, does not mean that the applicant was not absolutely entitled to the commission for any sale it effected.
The Tribunal finds that the assignment from Finn to the applicant in relation to the right to commission on the respondent's sale was an absolute one.
Mr Wilcox from Finn gave evidence that he notified the respondent by mail and email of the assignment. The Tribunal accepts this evidence. Mr Newham gave evidence that he also notified the respondent of the assignment as part of his introduction. Ms Miller on behalf of the respondent concedes that after the date of the assignment she dealt only with Mr Newham, and that he communicated with her on his email and letterhead showing the applicant company and not Finn. At no stage did the respondent question why this was. There is no substance in the respondent's assertion that she was never notified of the assignment.
The assignment was valid.
[22]
The respondent contends that the new broker was the 'effective cause of the sale' and the efforts of the applicant were spent when Ms Malone decided not to proceed with the purchase.
The Tribunal notes that clause 8.3 does not speak of the 'effective cause of the sale' but rather whether the applicant 'effectively introduced' Ms Malone to the respondent.
The respondent cited Emmons Mount Gambier Pty Ltd v Specialist Solicitors Network Pty Ltd[2005] NSWCA 117 where the issue was the 'effective cause of the sale'. The Court said at [39]:
[23]
What the respondent [the agent claiming commission] has to show is that his efforts continued to influence the purchaser in its eventual decision to buy. In effect, the agent has to prove that his initial efforts flowed through to [the buyer] thus causing the ultimate sale.
[24]
In the present case the test is whether the applicant 'effectively introduced' the ultimate buyer. It is not disputed that the applicant 'introduced' the buyer. The dispute appears to hang off the word 'effectively' and what it means in this context. The respondent's argument appears to take 'effectively' to be synonymous with 'the effective cause of the sale.'
The respondent argued that there can only be one effective cause of the sale at law and that was Mr Walmsley. This submission does not appear consistent with the obiter from the High Court in Moneywood Pty Limited v Salamon Nominees Pty Limited[2001] HCA 2 at [86] or in LJ Hooker Ltd v WJ Adams Estate Pty Ltd[1977] HCA 13. There can be more than one effective cause of a sale. There can be more than one commission payable.
There have been a number of cases in the superior courts considering the contract term 'the effective cause of the sale'. In those instances, the question is whether the sale or purchase would have occurred but for the involvement of the agent. In this case, the second agent, Mr Walmsley, did no more than provide updated financial information to an already interested and willing purchaser. Had the purchaser been directed back to the applicant then the same result would likely have followed.
It is for the respondent to ensure that it manages its commercial relationship with its brokers to ensure that it is not exposed to a double commission. It was open to the respondent to have directed the third party/purchaser back to the applicant. The respondent was on written notice at the time from the applicant that it asserted its right to commission if a sale to the third party went ahead.
Ms Miller gave evidence that she was unimpressed with Mr Newham's work and this was the reason for terminating his agency. Be that as it may, these motivations do not obviate the fact that Mr Newham introduced the third party purchaser. The emotions are irrelevant.
The Tribunal finds that the applicant effectively introduced the third party purchaser and is entitled to its commission.
Nothing said above is intended to imply that Mr Walmsley was not also entitled to his commission.
[25]
The respondent set out its submissions on the third party issue in its submissions of 21 June 2019. It argued why clause 8.1 of the Sale of Business Agreement gave rise to liability of the third party for any commission payable to the applicant:
[26]
8.1 The buyer indemnifies and holds harmless the Seller against all Liabilities and the cost of all demands, actions and other proceedings against the Seller (including legal costs on a solicitor and own client basis) arising from Completion in relation to the business or arising directly or indirectly as a result of or in connection with, any breach or non-performance by the Buyer of the obligations of the Buyer...
[27]
The third party filed her submissions on 9 July 2019, arguing the contrary. The arguments were not materially different to those put to Senior Member Robinson in Newham Business Brokers Pty Ltd v Jodi Miller Pty Ltd as trustee for the Miller Family Trust[2018] ACAT 57. The Tribunal accepts the arguments of the applicant and the principles set out in paragraphs [13]-[14] of the Senior Member's decision.
The indemnity of clause 8.1 only applies to liabilities that arise from completion of the sale from the respondent to the third party. The respondent's liability under the agency agreement with Finn and the applicant pre-dated completion. It existed from the inception of that contract; at the time when the respondent terminated that contract; when the respondent retained the new broker; and when the respondent exchanged contract for the sale to the third party. The respondent's liability may have been a 'contingent' one at those times, but it still existed. The completion of the sale to the third party was only the act that made the contingent liability actionable.
The Tribunal agrees with the third party's submission that no reasonable and commercial construction of clause 8.1 could give rise to the purported liability of the third party; by no stretch of the Codelfa principles[1] could it be found that the third party had impliedly agreed to such a liability; and by no stretch of the principles in Hadley v Baxendale[1854] EngR 296; (1854) 9 Ex 341 was the loss arising from the respondent's actions a foreseeable one on the part of the third party when the contract for the sale of the business was entered.
In addition to the above, the Tribunal finds the respondent's argument to be coloured with unconscionability. The actions that caused the present dispute were those of the respondent. There is no suggestion of any wrongdoing on the part of the third party. The respondent now seeks to rely upon a contractual right, based on its own wrongdoing, to pass its liability to the innocent third party.
The third party claim is dismissed.
The respondent is to pay the applicant the commission.
The matter is to be relisted to determine the quantum of the commission payable and any costs application by the third party.