Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd

Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd - [2016] NSWSC 1535 - NSWSC 2016 case summary — Zoe

Background

In the proceedings, Ryde Developments relevantly seeks declarations that PIA is not entitled to claim commission payable under two agreements by which it is said Ryde Developments appointed PIA its agent to sell units in a mixed commercial and residential development in Ryde owned by Ryde Developments. The commission is said not to be payable by reason of the operation of s 55 of the Property, Stock and Business Agents Act 2002 (NSW) (the Act). Under that section, a licensee under the Act is not entitled to claim any commission or expenses for services provided by the licensee in the capacity of licensee unless relevantly the services were provided pursuant to an agreement in writing and the agreement complies with any applicable requirements of the regulations. Ryde Developments contends that PIA is a licensee who in connection with the sale of the units performed services for or on behalf of Ryde Developments in the capacity of licensee and that the agreements by which it was engaged to perform those services did not comply with the regulations in certain respects.
On 3 June 2016, the court gave the defendants leave to file a Further Amended Commercial List Response permitting them to withdraw admissions concerning the capacity in which PIA acted for Ryde Developments and to raise as a defence to Ryde Developments' claim the contention that, at the time the relevant agreements were entered into, the parties also entered into agreements by which PIA granted an option to Ryde Developments to require PIA to purchase each relevant unit at a price specified in the applicable agreement. Under the proposed amendments, the defendants contend that, when the relationship between the parties as recorded in the agreements is viewed as a whole, it must be understood as one in which PIA was acting as principal in selling the units with the result that the Act does not apply. It is this Amended Commercial List Response that was the subject of the defendants' motion filed on 18 August 2016.
On 3 June 2016, the court also ordered that PIA give discovery of documents in relation to the marketing, promotion, introduction of buyers or prospective buyers, selling and compliance with the Act in relation to the sale of the units together with documents in relation to the commission and profits earned by PIA in connection with those sales. Those orders were made in a context where Ryde Developments maintained that, having regard to the proposed amendments, it was entitled to investigate the precise activities undertaken by PIA in selling the units as part of the characterisation of the relationship between the parties.
At the time, the defendants resisted orders for additional discovery on the basis that the characterisation of the relationship would be determined principally by the terms of the agreements and that, to the extent that the actual activities engaged in by PIA were relevant, they could be the subject of admissions. However, no specific admissions were offered at that stage and the defendants were ordered to give discovery of documents falling within a number of categories of documents sought by Ryde Developments.
The defendants gave discovery on 4 July 2016, which was verified by Mr Wang.
Ryde Developments took the view that the discovery given by the defendants was inadequate. There was correspondence between the parties' solicitors in relation to that issue. The details are not important for present purposes. However, it is relevant to observe that Ryde Developments took the position that it would not consent to the filing of the Further Amended Commercial List Response until the question of discovery had been resolved.
In support of its motion, Ryde Developments filed an affidavit sworn on 19 August 2016 by Ms Peterson, a solicitor employed by Ryde Developments' solicitors, setting out in considerable detail gaps that were said to exist in the discovery given by the defendants.
In response, the defendants filed an affidavit affirmed on 12 September 2016 from their solicitor, Mr Cheung. Mr Cheung pointed out that the affidavit of discovery had stated that PIA had moved offices and that, following the move, it was unable to locate some documents. He also gave evidence that a Sabre order may have the result of damaging the relationship between PIA and the consultants. In addition, he said that he had been instructed that his clients were prepared to make a number of admissions, making any further discovery unnecessary. Those admissions were: a. PIA, through its independent sales consultants, promoted the units in the development to potential buyers; b. PIA, through its website and other websites such as realestate.com.au, and its independent sales consultants, marketed the development; c. PIA issued the advertisement at Tabs 17 and 18 of Exhibit "SAP-1" [affidavit of Samantha Anne Peterson sworn 19 August 2016]; d. PIA, through its independent sales consultants, introduced buyers for the units in the development; e. PIA, through its independent sales consultants, managed the sale process of the units, including in relation to coordinating inspections, liaising with the vendor's solicitors and so on; f. PIA accepted money on trust from buyers of some of the units on account of deposits for the units; g. PIA paid for all the advertising and marketing of the units, paid the purchase and installation costs of clothes dryers for the units, offered investor purchasers the PIA Assurance Package and incentive bonus for purchasers; and g. The tasks carried out by PIA as set out in subparagraphs (a) to (f) above are tasks of the kind which are normally undertaken by licensed real estate agents, acting in that capacity. In addition, PIA offered an undertaking that it "will not dispute or deny in any way that it performed services … in connection with the contractual arrangements between it and [Ryde Developments]".
Finally, the defendants submitted that Ryde Developments' application was a misconceived attempt to go behind the affidavit of discovery contrary to the principles stated in Mulley v Manifold (1959) 103 CLR 341; [1959] HCA 23 and recently reaffirmed by the Court of Appeal in Dai v Zhu [2013] NSWCA 412.
The matter came before me on 23 September 2016. At that time, I indicated that having regard to the admissions the defendants were prepared to make further discovery appeared to be unnecessary. However, I stood the matter over for three weeks to give the plaintiff an opportunity to consider whether it sought any other admissions as a substitute for discovery. At that time, I also granted leave to the defendants to file their Further Amended Commercial List Response, which disposed of their motion filed on 18 August 2016.
Following that hearing on 23 September 2016, there was correspondence between the parties in relation to the admissions sought by the plaintiff. It is plain that the plaintiff began by seeking admissions that went beyond the factual matters that it might be able to prove through discovery. However, it is fair to say that both parties showed a reasonable degree of cooperation in reaching an agreement on the final form of admissions that the defendants were willing to make and that, subject to one qualification, were acceptable to Ryde Developments as a substitute for any further discovery.
The final form of admissions to be made by the defendants was agreed at the adjourned hearing on 14 October 2016. The one qualification related to trust account records. Ryde Developments maintained that those records were relevant because they may show on whose behalf deposits and other amounts were held on trust, which may shed light on whether PIA was acting as principal or agent. The defendants, on the other hand, denied that the trust account records would shed any light on that issue. They were also not in a position to indicate at the time of the hearing what would be involved in producing the trust account records. In any event, I was not prepared to order discovery of all the trust account records. However, I left it open to Ryde Developments to issue a notice to produce calling for those records and I indicated that if such a notice to produce were issued as a first step it may be appropriate to order production of a sample.
The defendants claim the costs of the motion in relation to discovery. They submit that no additional discovery was ordered. They also submit that Ryde Developments' motion was both unnecessary and bound to fail. It was unnecessary because as early as May 2016 they had offered to make admissions in relation to what PIA did in connection with the sale of the units. It was bound to fail because it was apparent that the motion was nothing more than an attempt to go behind Mr Wang's affidavit verifying discovery.
The defendants also claim their costs of the motion seeking leave to file a Further Amended Commercial List Response on an indemnity basis. That leave had been given by the court in principle following the hearing on 3 June 2016. In those circumstances, there was no legitimate basis for Ryde Developments refusing its consent.

[3]

Resolution

In my opinion, Ryde Developments should pay the defendants' costs of their motion filed on 18 August 2016 on an indemnity basis. The court had, on 3 June 2016, given leave in principle to the defendants to file a Further Amended Commercial List Response which raised a defence based on s 55 of the Act. It was not suggested that the proposed Further Amended Commercial List Response went beyond that leave. No legitimate reason was advanced for withholding consent to the filing of the document. It appears that consent was withheld for the collateral purpose of persuading the defendants to give further discovery. That was not a legitimate basis for withholding consent. The defendants should never have been put to the unnecessary expense of filing the motion dated 18 August 2016. In those circumstances, they should have their costs on an indemnity basis.
I am not satisfied that Ryde Developments should pay the defendants costs of the motion concerned with discovery. There are a number of reasons.
First, the court did not examine in detail the question whether the defendants' discovery was inadequate, or whether Ryde Developments' complaints about the defendants' discovery were an illegitimate attempt to go behind the affidavit verifying the defendants' discovery. It was apparent that it was unnecessary for the court to do so having regard to the admissions that the defendants were prepared to make. The court should not embark on a process of determining the adequacy of the defendants' discovery now for the purposes of determining the question of costs. Contrary to the submissions of the defendants, in my opinion that conclusion is consistent with the principle stated by McHugh J in Re The Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 at 624 that generally a court should not make an order for costs in the absence of a hearing on the merits.
Second, although it is true that as early as 11 May 2016 the defendants proposed to deal with a number of factual issues in the case by admissions, making further discovery unnecessary, the fact is that the court made orders for additional discovery on 3 June 2016 and it was compliance with those orders that was in issue. Those orders were made in a context where the defendants had raised again the possibility of dealing with the issue by admissions but did not proffer any admissions at that time. The defendants did not indicate the admissions that they were prepared to make until they served Mr Cheung's affidavit affirmed on 12 September 2016. It was only in the light of those admissions that it became unnecessary to consider the adequacy of the defendants' discovery.
Third, although Ryde Developments persisted with its motion following the service of Mr Cheung's affidavit, the admissions that the defendants ultimately agreed to make went further and were more precise than those initially proposed in Mr Cheung's affidavit. Moreover, as I have said, although Ryde Developments originally sought admissions beyond those that could be regarded as a legitimate substitute for discovery, it did not act unreasonably in the process that produced the final set of admissions that the defendants were willing to make.
Fourth, and implicit in what I have already said, it may be that the costs of the discovery motion, and indeed the costs of additional discovery itself, could have been avoided if Ryde Developments had agreed earlier to deal with the relevant factual matters by admissions rather than through discovery. It could equally be said that those costs could have been avoided or reduced if the defendants had indicated earlier the precise form of the admissions that they were willing to make. Consequently, to the extent that Ryde Developments' motion for additional discovery became unnecessary, both parties must bear some responsibility for that.
Fifth, the value of the admissions that the defendants are willing to make goes beyond the resolution of a dispute concerning discovery. The admissions will simplify the preparation of the court book and the conduct of the trial. Where the parties have cooperated in bringing about benefits such as those, in the normal course of events, the costs of doing so should be costs in the cause.
Taking these matters into account, in my opinion each party should bear its own costs of Ryde Developments' motion filed on 19 August 2016 but any costs incurred by the parties in resolving the form of the admissions to be made by the defendants, including the costs of their attendances in court on 23 September 2016 and 14 October 2016, should be costs in the cause. The motion filed on 19 August should be dismissed.

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