Sargent v ASL Developments Limited

12 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11974/99 TERRY PFEIFFER REAL ESTATE PTY LIMITED v PETER CONNORS AND VIVIEN ANN CONNORS

JUDGMENT Outline 1 This is an appeal from a decision of the Local Court given on 29 June 1999 by Senior Civil Magistrate Mr J.R. Dive. The defendants in this action had paid to the plaintiff the sum of $21,800.00 commission for acting as their agent on the sale of property 80 Kyle Parade, Kyle Bay. The defendants sued for recovery of that amount of commission paid claiming such entitlement pursuant to s42AA(4) of the Property Stock and Business Agents Act 1941 (the Act). So that the parties can be more readily identified I will refer to the plaintiff agent in the proceedings before this court as "the agent" and the defendants being the plaintiffs in the Local Court as "the vendors". Relevant legislation 2 Section 42AA of the Act is as follows: 42AA. Agency agreements to be in writing

(1) A licensee shall not be entitled to: (a) any remuneration by way of commission, fee, gain or reward for services performed by the licensee in his or her capacity as licensee, or (b) any sum or reimbursement for expenses or charges incurred in connection with services performed by the licensee in his or her capacity as licensee, from the person for whom or on whose behalf those services were performed unless: (c) the agreement pursuant to which those services were performed is in writing and signed by or on behalf of: (i) the licensee, and (ii) that person, (d) the agreement contains such terms (if any) as may be prescribed, and (e) a copy of the agreement was served by the licensee on that person within 48 hours of the agreement being signed by or on behalf of that person. (2) Subsection (1) does not apply to a prescribed agreement, transaction, circumstance or person or an agreement, transaction, circumstance or person of a prescribed class or description.

(3) Any provision in, or applying to, an agreement referred to in subsection (1) and purporting to exclude or restrict the operation of the terms (if any) required to be contained in that agreement has no force or effect.

(4) Where a licensee has recovered or retained from a person any remuneration or sum to which the licensee is not entitled by virtue of subsection (1), the person who would be entitled to the remuneration or sum so recovered or retained by the licensee had that remuneration or sum not been so recovered or retained may bring proceedings in any court of competent jurisdiction for the recovery of that remuneration or sum, or both, as a debt.

(5) A licensee who recovers or retains any remuneration or sum to which the licensee is not entitled by virtue of subsection (1) is guilty of an offence against this Act.

Facts 3 The agent had represented some people called Zdrilic on the sale of their property and knew that they were looking for another property. Mrs Connors had asked the agent for an indicative selling price for the Kyle Parade property although at that stage she and her husband had not necessarily decided to sell it. Mr Pfeiffer, who with his wife, Mrs Pfeiffer, are the directors of the agent company, suggested that Mr & Mrs Zdrilic might be interested in Connors property and showed it to them by arrangement. The agent prepared a sales inspection report and exclusive agency agreement which contained the required terms and which provided for a selling price of $1,035,000 at a commission of $25,875. He told Mr Connors an agreement was required so that he could be paid. However, this was not signed by the vendors, because they had been quoted a commission for a sale at that price of $21,800. In fact they were prepared to sell for $1 million clear of commission. There was no problem about the reduced commission because the agent immediately agreed to abide by the rate which had originally been quoted. By this time Mr and Mrs Zdrilic had agreed to purchase the property at $1,035,000. When the problem about the rate of commission came up, a new sales agreement (the second agreement) was prepared and this time was signed by both vendors and agent. It gave an exclusive selling agency for a period from 23 May 1995 to 23 June 1995, provided the property was to be offered for $1,035,000, for a commission of $21,000 from a sale at that price but otherwise of $3,100 on the first $100,000 of the sale and 2% thereafter. It was dated 23 May as was the first agreement, but it was not signed until 24 or 25 May. As I have said the sales agreements were prepared more or less at the same time that the offer of Mr & Mrs Zdrilic was being accepted. Confirmatory letters on the sale were sent to the vendors' solicitors and the vendors on 23 May 1995, which provided for a commission of $25,875. Subsequent letters were sent which stated the deposit was 2½% and the agreed commission $21,800. Those letters to the solicitors and to the vendors were dated 25 May 1995, but it is established, at least so far as the one to the solicitors is concerned, that it was sent by facsimile on 24 May 1995. 4 Mr Connors said that after signing the second sales agreement he remembered that he did not have a copy of it and telephoned the agent and asked that one be sent to him. He says that he did not receive this. On the file of the agent is an unsigned copy of a letter to the vendors dated 23 May 1995, the substance of which is as follows: We thank you once again for giving us exclusive selling rights of your property and as requested please find enclosed a copy of your new signed agreement with adjusted commission structure from 2½% to $3,100.00 for the 1st $100,000.00 then 2% thereafter. Looking forward to an exchange of contracts as soon as possible. Assuring you of our best attention at all times.

I will call this "the disputed letter". 5 Contracts were exchanged on 2 June 1995. Settlement took place on 2 February 1996. The vendors' solicitors instructed the agent to account to the vendors for the deposit plus interest, less their commission. The agent did so on 9 February 1996. On 5 August 1998 the vendors commenced action in the Local Court at North Sydney to recover the amount of the commission. The claim pleaded and the claim pursued 6 The claim of the vendors as pleaded was that prior to 23 May 1995 the agent introduced the purchaser to them; that at that time there was no agreement in writing pursuant to which the introduction was performed, that commission of $21,800 was paid, that s42AA(1) precluded any entitlement to commission, so that pursuant to s42AA(4) of the Act the vendors could sue the agents for it and recover the amount of commission as a debt due to them by the agent. While that was the pleaded claim, the Local Court is not one of strict pleading and it is apparent from the transcript of proceedings in the Local Court in evidence and from the judgment and from the way in which the appeal was conducted before me, that the vendors also claimed that they were entitled to recover because the agent had not served on them a copy of the agency agreement as required bys42AA(1)(e) of the Act. Thus the claim for recovery was based on failure of the agent to comply with the requirements of both ss42AA(1)(c) and(e) of the Act. 7 By its defence the agent denied that the commission was paid for the introduction and said that the commission was payable as a result of the property being sold to a purchaser introduced by the agent during the exclusive agency period to a party who actually completed the sale. That contention is correct, although it is not necessarily an answer to the claim of non-compliance with sub-subs(c). The agent denied that s42AA(4) precluded their entitlement to commission. In addition the agent pleaded that if the vendors were entitled pursuant to s42AA(4) to recover the commission as a debt, then the vendors, with full knowledge of the relevant facts, waived that entitlement and elected to treat the agency agreement as binding on them. As a claim based on s42AA(1)(e) was not pleaded no paragraph of the defence went to it, but as I have said it was clearly seen as an issue and the defendant presented a body of evidence going to the question of service of a copy of the second agreement. What the claim means 8 The vendors obtained a price higher than the price for which they were willing to sell from a purchaser introduced by the agent. They paid to the agent a commission which they had negotiated and agreed to pay. Two years after settlement and payment of the commission by deduction as authorised by them, they brought proceedings to recover the commission from the agent, not because the commission had not been earned, but because they had somehow had their attention drawn to s42AA of the Act. Their claim is completely unmeritorious. Consumer protection legislation exists for those who need protection not for those who seek to take advantage of it with no justification whatsoever. There can be no doubt at all that if the vendors are entitled to a refund of the commission as the learned magistrate found, then they will have been unjustly enriched. The decision of the magistrate 9 The magistrate held that the second agreement was not served. Mr Connors, in a statement admitted into evidence, said he had a practice of maintaining a file on the properties he bought and sold, that he had examined his file, which contained no copy of the agreement "and to the best of my recollection I did not receive a copy of the second agreement prior to the commencement of these proceedings. My solicitor has provided me with a photocopy of the second agreement which was produced by the defendants (agent) pursuant to a notice to produce". In oral evidence he denied receiving a letter dated 23 May 1995 (the disputed letter) enclosing a copy of the agency agreement. In cross-examination, the following passage appears: Q: But as far as the new signed agreement with the adjusted commission structure goes, you simply can't recall either way? A: To my knowledge I have never received an agreement, as I put in my statement. To my best recollection I've never received an agreement. 10 Mr Connors was the only person who gave evidence for the vendors. Mrs Pfeiffer was the only person who gave evidence for the agent. Not unnaturally she could not say for certain that a copy of the second agreement had been sent to the vendors. All she could say was that such matters were treated in the office as urgent and important; that there was a particular tray for matters which required urgent attention; that the procedure for sales agreements was to photocopy the original signed authority because, although these were prepared in quadruplicate the copies were not easy to read and that a letter was sent to the vendor with such a photocopy. She said that everybody in the office was aware of this procedure and that regular meetings were held when such matters were discussed. Finally she pointed to the disputed letter. It was not explained why the disputed letter on the file was dated 23 May 1995, but it is likely this was because the second agreement was also dated that day, although it was accepted that it could not have been signed on that day; it was probably signed on 24 or 25 May. The magistrate discussed the absence of any definition of service or prescribed method of service and took into account s76 of the Interpretation Act 1987. From this he found that if the copy of the second agreement was posted it would have been served in time. Faced with the evidence of Mr Connors that he had not received a signed copy of the second agreement, and taking into account what he thought was considerable confusion and unreliability in the evidence of Mrs Pfeiffer and presumably the fact that no direct evidence of posting was given, the learned magistrate accepted the evidence of Mr Connors that he did not receive a copy and that a copy was not served as required by the Act. 11 The learned magistrate treated the defence of waiver and election as one, which was I think correct in the light of the pleading and the argument before me, the defence being one of waiver of the right to not pay commission by affirming the agency agreement. He accepted that Mr Connors knew a signed agency agreement was necessary to entitle the agent to claim commission, but found that he did not know of the obligation to serve a copy of it. He held that at the least knowledge of material facts is necessary to ground an election to affirm a contract, even if awareness of the right to recover the deposit was not a requirement. This was in accordance with Sargent v ASL Developments Limited (1974) 131 CLR 634, particularly Mason J at 656 to 658. The Magistrate held that knowledge of the right to a copy of the agency agreement was a material fact. Thus he held that the waiver defence failed. The learned magistrate did not deal with the plaintiff's claim based on non-compliance with s42AA(1)(c) and unless the appeal otherwise should be allowed it is not necessary for me to do so either, although this was raised by the vendors' notice of contention. Grounds of appeal 12 These can be summarised as follows:

A. That the magistrate reversed the onus of proof on the question of service of an agency agreement.

B. That the magistrate failed to give reasons for his decision to accept the evidence of Mr Connors this amounting to an error of law.

C. That in holding that he should accept the evidence of Mr Connors, the learned magistrate failed to take into account evidence indicating that this evidence of should not be accepted.

D. That the magistrate held without explanation that he did not accept the disputed letter was sent out at a date later than 23 May 1995 with the second agency agreement, and that failure to give an explanation amounted to an error in law.

E. That in making the finding in D the learned magistrate failed to take into account evidence indicating that the disputed letter was sent out on a date later than 23 May 1995 this failure amounting to an error of law.

F. That the magistrate erred in law in (i) failing to hold that the plaintiffs had waived their rights to receive a copy of the second agency agreement; (ii) by holding that the plaintiffs had not waived their rights despite their having been aware of all material facts at the time of their election to treat the agreement as binding on them; (iii) that the magistrate erred in law in treating ignorance of the requirements of s42AA(1)(e) as ignorance of a material fact. Decision 13 It is necessary to state as a preliminary matter that, when I raised the matter, it was accepted there was no argument before the learned magistrate that any inference should be drawn from the failure of Mrs Connors to give evidence, nor that the vendors' case could not be proved without that evidence. Not only was this not argued but it was not stated to be a ground of appeal and it was not sought to argue it before me, other than to state that the vendors' case depended upon the evidence of Mr Connors alone. Thus while this might have been a matter of considerable significance, it does not arise on this appeal and it is possible that some explanation for the absence of Mrs Connors might have been available. 14 There is no basis for suggesting that the learned magistrate reversed the onus of proof. What he did was to accept the evidence of Mr Connors that he had not received the disputed letter and that he had not received a copy of the second agency agreement. That evidence had to be contrasted with the evidence of Mrs Pfeiffer as to the practice in the agent's office. It was open to the magistrate to find as he did. He did not suggest that the agent had to prove that it served a copy of the second agreement. 15 So far as the claim based on failure to give reasons is concerned, this is, for the most part, grounded upon the fact that there was some evidence which indicated that Mr Connors was not an altogether reliable witness. There was no obligation on the learned magistrate to deal with each of these matters in his decision. No doubt they were pointed out to him in submissions and there is no reason to suggest that he did not take proper account of what might be described as lapses in evidence of Mr Connors. He was entitled to accept his evidence on the crucial point, and he was entitled to consider that there was at least some confusion in the evidence of Mrs Pfeiffer as to the dates on the important documents. There were lapses in her evidence as well. While the wording of the disputed letter, by referring to a request for a copy of the second agreement, clearly indicated that it was intended to send this with the letter if that letter were sent, the magistrate was entitled to find that it was not sent. In view of his doubts, which were quite strongly expressed, about the defects in the agent's case on this aspect, he was entitled to accept the evidence of Mr Connors that he did not receive the letter or the agreement, thereby establishing the agreement was not served, because he was satisfied that had the documents been posted they would have been received within the necessary period of forty-eight hours. It follows from this that the grounds of appeal based on errors of law as to onus of proof and evidentiary matters fail. I should add that as there is no appeal on questions of fact, the obligation to give reasons for coming to decisions on questions of fact is not great: See Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 273 and 280. 16 I come to the defence of waiver. This defence was not raised on the basis, if it exists, of abandonment of a right. In any event it is difficult to understand how there can be an abandonment of a right which is unknown. The claim is that the vendors, at a time when they were aware of the material facts, waived the entitlement to recover the commission paid as a debt, by electing to treat the agreement as binding. This is a difficult argument. As put by counsel for the agent, it would mean that once an authority is given, by the vendor with knowledge a sales agreement was required, to an agent to deduct commission from the deposit held by way of payment of commission then the vendor so authorising elects to affirm the right to commission and waives any right under the statute for recovery of it. Assuming for the moment that the right to refuse to pay commission and the right to affirm the agreement to pay commission in accordance with the agency agreement are inconsistent rights or positions bringing the doctrine of waiver through election into play, it seems to me that knowledge of entitlement to be served with a signed copy of the agency agreement within 48 hours is a material fact, without knowledge of which there can be no waiver of the right to refuse to pay commission by election to pay or by paying commission. The magistrate accepted that Mr Connors had no knowledge of the existence of s42AA(1)(e) of the Act and if that is so, his conclusion that election could not be made out was correct. The position may be different in a case of waiver of contractual rights by election; in such a case a party to the contract has knowledge of the terms and thus knowledge of a breach. The position is quite different where the obligation arises under a statute and unknown breach of such statutory obligation is concerned. In such a case those obligations are material facts, although knowledge of loss of the right to commission might not be required for waiver: see Sargent v ASL Developments Limited per Stephen J at 645. In these circumstances it is not necessary to consider whether or not the statutory right of recovery is one which can be subject to waiver. 17 It follows from this that the appeal must be dismissed. Law Reform 18 The reasons for what would appear to be the harsh provisions of s42AA of the Act are of course perfectly clear. Parliament has decided that vendors should be protected from improper claims of unscrupulous agents and that there should be certainty of agency terms. Nevertheless, reasonable agents ought to be protected from what would be thought to be quite unconscionable claims by vendors, which can only result in unjust enrichment of vendors, who have, without that enrichment, obtained all the benefits which they contracted to get as a result of their agreement with the agent. It is extraordinary to think that a party who has suffered no loss can bring a claim such as the one brought here at any time up to the expiration of six years after the agency agreement was entered into. Urgent consideration should be given by the appropriate authorities to amending legislation to bring a reasonable balance between the rights of honest agents and the requirement to protect vendors from improper claims for commission by agents. At the very least there ought to be some limited time in which any claim for recovery can be made.

Last Modified: 09/25/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.