Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd

Background

1. Ryde Developments was the developer of a mixed commercial and residential development in Ryde (the Development). On 15 May 2012, it entered into an agreement described as "Deed of Exclusive Agency Agreement" with PIA (the First Agreement) by which it granted PIA "an exclusive agency agreement" on the sale of 16 one bedroom units in the Development. On the same date, Ryde Developments, PIA and Mr Wang, as guarantor, entered into a Deed of Option Agreement by which PIA granted an option to Ryde Developments to sell each of the units to PIA for a price specified in the agreement.
2. On 22 November 2013, Ryde Developments entered into a second Deed of Exclusive Agency Agreement with PIA (the Second Agreement) substantially in the same terms as the first by which it granted PIA an exclusive agency agreement on the sale of a further 51 units in the Development. On the same date, the parties entered into a Put Option Agreement in respect of those units.
3. Most of the units the subject of the agreements have been sold and PIA claims amounts said to be due to it under the First Agreement and Second Agreement totalling in excess of $5,000,000.
4. Ryde Developments commenced these proceedings on 25 March 2015. It originally sought declarations to the effect that PIA was not entitled to any commission under s 55 of the Act under the two agreements together with relief under s 236 of the Australian Consumer Law restraining PIA from recovering commission. Section 55(1) of the Act relevantly provides: 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: (a) the services were performed pursuant to an agreement in writing (an agency agreement) signed by or on behalf of: (i) the person, and (ii) the licensee, and (b) the agency agreement complies with any applicable requirements of the regulations, and …
5. "Licensee" is defined in s 3 of the Act to mean "the holder of a licence under this Act". Other definitions are relevant to the resolution of the issues in this case, but it is not necessary to refer to them for present purposes.
6. Ryde Developments contends in the proceedings that the First Agreement and the Second Agreement do not comply with the requirements of the regulations. As part of that contention, it pleads in its List Statement, among other things, that: 1. PIA was a licensed real estate agent. 2. by each of the First Agreement and the Second Agreement Ryde Developments appointed PIA its exclusive real estate agent to market and sell the units the subject of those agreements; 3. pursuant to cl 9.1 of the two agreements, commission was expressed to be payable by Ryde Developments to PIA in accordance with the formula: Contract Price - MUP = Commission, where "MUP" is a reference to the Minimum Unit Price set out in the schedule to each of the agreements.
7. By their List Response filed on 22 April 2015, the defendants admitted the allegations in (a) and (b). In relation to the allegation in (c), the List Response pleaded: Admitted, and says that commission was payable in accordance with the formula set forth in paragraph 12 of the Plaintiff's Contentions on the basis that: i. the risk in relation to sales of the said units was entirely transferred from Ryde Developments to PIA pursuant to the terms of the First and Second Put Options; ii. PIA paid to Ryde Developments a 1% deposit in respect of its obligations under the First and Second Put Options, which sum was later refunded upon the expiry of the First and Second Agency Agreements; and iii. marketing and promotion fees and other usual selling expenses in respect of the sale of the said units were to be, and were in fact, borne entirely by PIA.
8. On 16 October 2015, Ryde Developments was granted leave to file an Amended Summons and an Amended Commercial List Statement. Consequential orders were made for the filing of documents in response to the amended claim. The Amended Summons and Amended Commercial List Statement raised a number of additional claims including allegations of breach of fiduciary duty, misrepresentation and breach of statutory duties. The Amended Summons also sought a declaration that each of the First Agreement and the Second Agreement was void and unenforceable, damages, equitable compensation and equitable damages.
9. On 4 November 2015, the defendants filed a Commercial List Response to the Amended Commercial List Statement. That document continued to admit the allegation referred to in para 8(a) above. However, instead of admitting the allegation referred to in para 8(b) above, it pleaded that: … the Defendants: a. deny that the effect of the First Agency Agreement (in the wider context of the transaction) was to appoint PIA as agent to market and sell units for Ryde Developments. b. deny that PIA entered into the First Agency Agreement in its capacity as a licensee for the purposes of the Act. c. say that the true construction and effect of the transaction and relationship between the parties: i. was not that of principal and agent but that of principal and principal as joint venturers, or, in the alternative, that of owner and prospective purchaser; ii. was such that PIA did not sell the units as an "agent", but, rather, as principal … iii. resulted in PIA becoming the beneficiary of an implied trust for PIA's Profit or, in the alternative, resulted in the creation of a charge or lien over PIA's Profit, …
10. In response to the allegation referred to in para 8(c) above, the List Response pleaded: … the Defendants: a. say that PIA's Profit earned by PIA under the First Agency Agreement and the Second Agency Agreement is not properly characterised as commission for the purposes of the Act or otherwise; b. otherwise admit the allegations; and c. say further that …
11. On 4 December 2015, the defendants, with leave, filed an Amended List Response correcting a number of typographical errors.
12. On 11 April 2016, Ryde Developments filed a Reply to the Amended Second List Response. In paragraphs 1 to 9 of that Reply, Ryde Developments make complaints about the defendants unilaterally withdrawing admissions without the leave of the court.
13. By a Notice of Motion filed on 14 April 2016, the defendants sought to strike out the paragraphs of Ryde Developments' Reply to Commercial List Response which raise the issue of withdrawal of admissions without the leave of the court. They also sought to strike out the paragraphs of the Commercial List Cross Claim Response which sought to raise the same issues. In the alternative, the defendants sought leave to withdraw the admissions they are said to have made.
14. On 16 May 2016, the Ryde Developments filed a Notice of Motion seeking orders that the defendants acted in breach of Uniform Civil Procedure Rule 2005 (NSW) (UCPR) r 12.6(2) in withdrawing admissions without leave of the court by filing the Defence to Amended Commercial List Statement and the Amended Cross Claim Statement and orders striking out the relevant paragraphs of those documents.
15. It is those two motions that gave rise to the issues with which this judgment is concerned.

Ryde Developments' contentions

1. Ryde Developments advanced two principal and overlapping contentions for the orders it sought. First, it contended that the defendants offered no explanation for how they came to make the admissions they now sought to withdraw and why they should be permitted to change their minds now. Second, Ryde Developments contended that it was not reasonably arguable that s 55 of the Act did not apply in this case. In its submission, it is clear on the face of the First Agreement and the Second Agreement that PIA was appointed the exclusive real estate agent to market and sell the units the subject of those agreements. It submitted that the defendants should not be permitted to withdraw an admission that was properly made and to put Ryde Developments to the expense of proving what is obvious.
2. Although on the documents filed by the parties the issue is framed in terms of whether PIA was appointed Ryde Developments exclusive real estate agent to market and sell the relevant units, the ultimate question to be determined by the court is whether PIA performed the services it did in the capacity of a "licensee" as defined in the Act and whether it was paid a "commission" for those services within the meaning of the Act.
3. It is true that on the documents as they originally stood, the defendants appeared to make admissions that were consistent with a contention that s 55 applied. However, the pleadings are not framed in terms that are necessarily decisive of that question. As I have said, the question for the court is whether the amounts sought to be recovered by PIA can be characterised as "commission or expenses … for or in connection with services performed by [PIA] in the capacity of licensee for or on behalf of [Ryde Developments]"; and there may be questions concerning the significance of allegations and admissions about exclusive agency generally to the answer to that question.
4. Moreover, the admissions made by the defendants were not complete even in their original form, since the defendants made allegations in relation to the features of the commission which they now seek to rely on for the allegation that the amounts earned by PIA under the First Agreement and the Second Agreement are not properly characterised as commission for the purposes of the Act.
5. In addition, the answer to the question whether s 55 applies turns on whether PIA did particular things as licensee; and that question in turn raises issues concerning the correct characterisation of the relationship between the parties and the correct interpretation of the Act. It involves a complicated mixed question of law and fact which is not so much something within the knowledge of PIA as a matter for submission and legal interpretation.
6. In those circumstances, in my opinion, it was not particularly helpful to characterise what the defendants sought to do as the withdrawal of an admission and to look for the rules applicable to the withdrawal of the admissions to determine whether they should be permitted to do so or not. Rather, in my view, it was preferable to view what the defendants sought to do as raising a defence which they had not raised or at least not raised properly before filing their Amended Commercial List Response. The question was whether they should be permitted to do so at this stage of the proceedings.
7. In any event, it was not disputed that the court had a discretion to permit a party to withdraw an admission made in a pleading. Nor was it disputed that that discretion had to be exercised in accordance with the principles stated in ss 56-60 of the Civil Procedure Act 2005 (NSW). To the extent that some early authorities may impose different or additional requirements on the exercise of the court's discretion, they need to be treated with some caution.
8. No explanation was given for why the defendants did not raise the defence earlier despite the fact that it must have been aware of the issue. But it may be inferred that they now believe that the defence has some merit whereas previously it did not; and it is doubtful that much would have been gained by an examination of the circumstances that caused them to change their mind. Consequently, the absence of an explanation was not critical in this case.
9. In my opinion, there were no case management principles that prevented the defendants from raising the defence now. Ryde Developments has been on notice of the fact that the defendants proposed to raise the defence since November last year. No hearing date has yet been fixed. Ryde Developments could not point to any relevant prejudice it would suffer if the amendments were allowed. It is true that the amendments would require PIA to give additional discovery. But additional discovery was also sought by the defendants from Ryde Developments which is unrelated to the amendments in question. Consequently, there was likely to be some additional delay in bringing the case to trial whether or not the amendments were allowed. It was not suggested that the amendments would add substantially to the length of the hearing.
10. In my opinion, it followed that the question whether the defendants should be permitted to raise the defence turned on the question whether the defence was reasonably arguable.
11. Ryde Developments submitted that it was not. It pointed to the terms of the Agency Agreements, which clearly provide for the appointment of PIA as Ryde Development's exclusive real estate agent.
12. In response to that contention, the defendants pointed out correctly that the language of the agreements cannot be definitive in relation to the character of the relationship between the parties for the purposes of the Act. Here, the defendants pointed to the fact that, as a result of the Put Options, and the way the commission was calculated, Ryde Developments bore no risk that the units would not be sold and bore no risk in relation to the purchase price. As a result, the defendants submitted that the relationship between the parties was not one properly characterised as that of a licensee acting as a licensee for the purpose of s 55 and the amount payable to PIA was not properly characterised as a commission for the purpose of s 55.
13. Ryde Developments submitted that those arguments had been considered and rejected by the court in Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd [2002] 56 NSWLR 27. In that case, Barrett J said at [22]: I should only add that I do not accept the submission made on behalf of Investmentsource that, in performing its selling role, Investmentsource was not acting for Knox and that, because it was Investmentsource which stood to gain profit over and above the stipulated base price for each unit, it was really selling for its own benefit and that of Milton (the benefit of Milton coming from the fact that a sale by Investmentsource caused the potential of an enforced purchase by Milton to be removed). The fact is that the seller under a sale arranged by Investmentsource was Knox; that so much of the proceeds of such a sale as did not exceed the base price went to Knox; and that, under cl 6.1 of the May 2001 agreement, it was the function of Investmentsource to "introduce Third Party Purchasers to the Vendor [Knox]". Knox was thus the client or principal of Investmentsource in the usual way and Knox was the seller of each unit sold to a buyer introduced by Investmentsource.
14. However, it is not clear from that decision whether the argument was raised in that case that the amount paid was not "commission" within the meaning of the Act having regard to its purpose. Moreover, the decision in Investmentsource was a decision of a first instance judge in different circumstances. In my opinion, the point raised by the defendants is at least arguable, and it was not appropriate to determine the matter on a summary basis relying on a first instance decision.
15. It was for those reasons that I made the orders I did.

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