HEADNOTE
[This headnote is not to be read as part of the judgment]
Pursuant to a Sole Agency Agreement ("SAA") executed on 20 April 2018, the appellant, The Property Investors Alliance Pty Ltd ("PIA"), undertook to market and promote the sale of specified units - designated as "Agency Lots" - in a residential development being constructed by the respondent, C88 Project Pty Ltd ("C88"). Under the SAA, it was agreed that where PIA, as selling agent, was the effective cause of sale of an Agency Lot, it would be entitled to "Commission" from C88, calculated at 5.5% of an Agency Lot's "Contract Price". So as to protect its right to payment of "Commission" or its "commission entitlement", cll 12.9, 12.10, and 12.11 of the SAA cumulatively conferred a right upon PIA to lodge a caveat or caveats over units in the development where C88 defaulted in punctual payment of its Commission. Similarly, cll 12.15 and 12.16 conferred a right upon PIA, in the same circumstances, to direct C88 to sell an Agency Lot to it or to its nominee or to a third party at a fixed price, which was to be capable of being offset against any accrued commission entitlement.
Prior to execution of the SAA, PIA and C88 had, with respect to the same development, entered into two Exclusive Agency Agreements, under which PIA came to be owed a significant amount of outstanding commission payments. As at the date upon which the SAA was executed, PIA had come to be owed even more, on a contingent basis, insofar as it had caused sales of units in the development not being Agency Lots. Notwithstanding the amounts owing to PIA for its prior work, however, cl 1.1(g) of the SAA limited the terms "Commission", "commission entitlement", and "agent commission" only to the sums payable to PIA for its sale of Agency Lots. One consequence of that limitation was that any amounts owing to PIA prior to the execution of the SAA fell beyond the ambit of the protections accorded to PIA by cll 12.9-12.11 and 12.15-12.16 thereof.
At trial, the sole director of PIA, Mr Justin Wang, gave evidence of conversations with a director of C88 which, PIA contended, showed that it had been the parties' common intention that the SAA should secure all amounts then and thereafter owing by C88 to PIA. Mr Wang's evidence was uncontradicted by evidence from those involved in the management of C88 prior to its entry into liquidation, and was accepted by the primary judge as credible. Notwithstanding the primary judge's acceptance of Mr Wang's evidence, relief in the nature of rectification was denied on the basis that the appellant had not proffered clear and convincing proof that Mr Wang's understanding of the purview of cl 1.1(g) was common to that of the managers of C88.
The primary judge also rejected the claim that the appellant had been expressly granted an equitable charge by cll 12.15 and 12.16 or impliedly granted an equitable charge by cll 12.9, 12.10 and 12.11. A submission proffered by C88 that, even if the SAA did expressly or impliedly confer an equitable charge on PIA, any such charge would be excised from the agreement as being repugnant or contrary to s 49(1) of the Property and Stock Agents Act 2002 (NSW) was rejected.
On appeal, the issues before the Court were:
(i) Whether the primary judge had erred in refusing to order rectification of cl 1.1(g) of the SAA, in circumstances where Mr Wang's evidence was unopposed by countervailing evidence adduced by C88 and where the liquidators of C88 had not called the company's former managers to give evidence as to their intentions regarding the scope of cl 1.1(g);
(ii) Whether the primary judge had erred in holding that cll 12.15 and 12.16 of the SAA did not expressly grant an equitable charge to PIA;
(iii) Whether the primary judge had erred in holding that, as a matter of construction, cll 12.9, 12.10, and 12.11 did not evince an intention to confer a proprietary interest in the units of the development on PIA as security for payment of its Commission, so as impliedly to grant a charge to it; and
(iv) Whether the primary judge had erred in holding that, in the event that the SAA did grant an equitable charge to PIA, a contravention by PIA of s 49(1) of the Property and Stock Agents Act was not such as to excise the clauses granting the charge from the SAA, as contemplated by cl 1.2(h) thereof.
The Court (per Kirk JA and Griffiths AJA, White JA dissenting in part), allowing the appeal in part and remitting the proceedings to the Equity Division, held:
As to issue (i) per Kirk JA:
(1) Rectification based upon mutual mistake requires clear and convincing proof of the parties' common intention. While the fact that a defendant to a suit seeking rectification has not gone into evidence does not necessarily foreclose the availability of rectification, the onus remains with the claimant to make the claim good. In the circumstances of this case, none of the conversations that Mr Wang deposed to having with the managers of C88 indicated agreement to the position, and an intention, that the SAA should safeguard all outstanding payments then and thereafter owing to PIA: [131]-[143].
(2) Inferential reasoning by recourse to Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 does not permit the bridging of gaps in evidence. In circumstances where there was no evidence that the managers of C88 had the same subjective intention and understanding as that of Mr Wang, there was no basis either to infer that their evidence would not have assisted the respondent's case or to draw an inference adverse to C88 with greater confidence: [144]-[149].
Kuhl v Zurich Financial Services Ltd (2011) 243 CLR 361; [2011] HCA 11, applied.
Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53; RHG Mortgage Corporation Ltd v Ianni [2016] NSWCA 270; CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121; Ling v Pang [2023] NSWCA 112, followed.
As to issue (i) per Griffiths AJA:
(3) A party seeking rectification of a written document carries the onus of establishing both the substance and detail of a common intention between the parties and the document's departure therefrom in the clearest and most satisfactory manner, by reference not only to objective material but also to evidence of the parties' subjective states of mind: [157]-[165].
Fowler v Fowler (1859) 4 De G & J 250; Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54; [1930] HCA 38; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65; Newey v Westpac Banking Corporation [2014] NSWCA 319; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47, cited.
(4) The primary judge did not err in holding that the appellant had not established a common intention departed from in the SAA to the standard required in a suit for rectification. Although Mr Wang's evidence was accepted by the primary judge, his recall of the discussions said to evidence the parties' common intention was admittedly imperfect notwithstanding their reduction to direct speech. Mr Wang's evidence, moreover, relayed equivocations as to whether the relevant representatives of C88 actually concurred in his proposal to encapsulate all moneys owing to PIA in the SAA, such equivocations occurring in ongoing and earnest commercial negotiations: [179]-[205].
Concept Television Productions Pty Ltd v Australian Broadcasting Corporation (1988) 12 IPR 129; Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17; Watson v Foxman (1995) 49 NSWLR 315; Kane's Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381, approved.
Gan v Xie [2023] NSWCA 163, cited.
(5) While the principle in Jones v Dunkel can apply in a rectification suit, and such a suit should not be successfully defended simply by the defendant not going into evidence, no such inference could be drawn in the circumstances of this case. The appellant's failure to discharge its onus of establishing the claimed common intention foreclosed any inference that the evidence capable of being given by C88's former managers would not have assisted C88: [207]-[215].
Ling v Pang [2023] NSWCA 112, followed.
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, cited.
As to issue (i) per White JA dissenting:
(6) Where a party intends to give effect to a document as worded, but also intends to enter into a transaction which has a different effect from that for which the document provides, then the availability of rectification depends upon the intention to achieve a legal effect being clearly predominant over the intention to give effect to the document as it is worded. In the circumstances of the present case, a fair inference was that the former managers of C88 shared an intention with Mr Wang that cl 1.1(g) would include, and thus the caveat provisions would protect, all moneys owing by C88 to PIA. In light of the long business relationship between the parties, it should not be lightly inferred that C88's former managers knew of Mr Wang's intention and kept silent knowing that he might be labouring under a mistake: [58]-[62].
Bush v National Australia Bank Ltd (1992) 35 NSWLR 390, cited.
(7) The inference that the parties shared a common intention of the kind asserted by PIA was strengthened by the fact that C88 had not called witnesses that it might otherwise be expected to have called. Accordingly, an inference adverse to C88 available from evidence led by PIA could more readily be drawn: [63]-[70].
RPS v The Queen (2000) 199 CLR 620; [2000] HCA 3; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, applied.
As to issue (ii):
(8) The primary judge was correct to hold that cll 12.15 and 12.16 of the SAA did not amount to the express grant of an equitable charge to PIA. Although those clauses did confer a proprietary interest upon PIA as security for payment of accrued commission, that proprietary interest was in the nature of a call option rather than an equitable charge. The inability of PIA, under those clauses, to enforce its security by appointment of a receiver or by judicial sale was inconsistent with the supposed grant of a charge thereby to it: [71]-[77] (White JA); [126] (Kirk JA); [153] (Griffiths AJA).
Swiss Bank Corporation v Lloyd's Bank Ltd [1982] AC 584, followed.
Broken Hill Proprietary Co Ltd v Commissioner of Stamp Duties [1998] 1 Qd R 452; King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; (2005) 13 BPR 25,077; Morris Finance Ltd v Brown (2017) 252 FCR 557; [2017] FCAFC 97; Johnson v Synnex Australia Pty Ltd [2017] SASCFC 165, cited.
As to issue (iii):
(9) The contractual grant of authority to lodge a caveat in respect of the grantor's land does not necessarily imply the grant of a caveatable interest in the grantor's land, whether in the form of an equitable charge or otherwise. In each case, the question is one that calls for construction of the terms of the contract as a whole: [85]-[108] (White JA); [128] (Kirk JA); [153] (Griffiths AJA).
Murphy v Wright (1992) 5 BPR 11,734; Coleman v Bone (1996) 9 BPR 16,235; Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489; [2011] NSWSC 1562; Aged Care Services Pty Ltd v Kanning Services Pty Ltd (2013) 86 NSWLR 174; [2013] NSWCA 393, considered.
Troncone v Aliperti (1994) 6 BPR 13,291, explained.
Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314; Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2004] NSWSC 880; (2004) 12 BPR 22,319; Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24; (2019) 19 BPR 39,153, cited.
(10) The primary judge erred in holding that cll 12.9, 12.10, and 12.11 did not impliedly grant an equitable charge to PIA to protect its entitlement to Commission from C88. In circumstances where C88 was a special purpose vehicle whose ability to satisfy PIA's Commission depended upon the sale of units in the development, the parties must have intended that PIA was to have more than a mere right to restrain completion of contracted sales of unit by caveat: [110]-[112] (White JA); [128] (Kirk JA); [153] (Griffiths AJA).
As to issue (iv):
(11) Even assuming that the implied conferral of an equitable charge upon PIA contravened s 49(1) of the Property and Stock Agents Act, that would not of itself necessitate the severance of cll 12.9, 12.10, or 12.11 from the SAA. The primary judge was correct to conclude that any such contravention would not void the SAA and that, accordingly, the excisive effect of cl 1.2(h) of the SAA was not enlivened: [114]-[122] (White JA); [125] (Kirk JA); [153] (Griffiths AJA).