UPJAY PL v MJK PL T/AS KLOBAS PROP GROUP & KLOBAS No. SCCIV-00-568 [2001] SASC 62

Supreme Court of SA|2001-03-14|Before: Doyle CJ, Wicks JJ, Williams J

Judgment No. [2001] SASC 62

On Appeal from DISTRICT COURT (HIS HONOUR JUDGE DAVID)

UPJAY PTY LTD v MJK PTY LTD Trading As KLOBAS PROPERTY GROUP & KLOBAS

1 DOYLE CJ I agree with the orders proposed by Wicks J, and with the reasons that he has prepared. I have nothing to add to those reasons.

2 WILLIAMS J I agree with the orders proposed by Wicks J for the reasons given by him.

4 This is an appeal by the defendant Upjay Pty Ltd against a judgment of a Judge of the District Court wherein he ordered that the plaintiffs recover from the defendant the sum of $275,000 together with interest and costs. Both plaintiffs in this matter, MJK Pty Ltd ("MJK") and Michael John Klobas at all relevant times were registered as agents pursuant to s 6 of the Land Agents Act 1994. Mr Klobas was at all material times Managing Director of MJK. MJK was engaged in the business of property development under the style or business name "Klobas Property Group".

5 The defendant, Upjay Pty Ltd, was at all material times a builder and property developer. In relation to the transactions which are the basis of this litigation Mr Mario Minuzzo was an authorised officer of the defendant company.

6 The claim of the plaintiffs was that there was an oral agreement made between Mr Klobas acting on behalf of MJK and Mr Mario Minuzzo representing the defendant to the effect that the defendant would pay to MJK commission in the sum of $300,000 if a company called Harvey Norman Holdings Limited ("Harvey Norman") were to enter into a commitment with the defendant to take a lease of a property in the southern suburbs of Adelaide, with a site area of some 10,000 square metres and suitable for the erection of a retail showroom and warehouse for use by Harvey Norman in connection with its business. The plaintiffs allege that the agreement was constituted by a conversation in June of 1996 between Mr Klobas and Mr Mario Minuzzo, the effect of which was that if the commitment described was established, then a fee of $300,000 would be paid by the defendant to MJK. While the defendant admitted that an unwritten agreement had been made, it denied that the agreement concerned was made in terms alleged by the plaintiffs. The defendant contended that before the $300,000 was payable, a site had to be located and purchased, Harvey Norman had to enter into a commitment to lease the property, a showroom and warehouse had to be erected and the completed development sold to an investor and the sale completed. This appeal is concerned with a judgment of the District Court for the payment of the above fee of $300,000 less an amount of $25,000, which amount will be further explained later in these reasons.

7 Harvey Norman and companies associated with it were substantial retailers of electrical goods, carrying on business in a number of Australian States. The Company had not previously carried on its business of an electrical goods retailer in South Australia and desired to secure a suitable site upon which to erect a warehouse and showroom in the southern suburbs of Adelaide with the object of carrying on its business.

8 Mr Norman Field, a property manager for the Harvey Norman Group was acquainted with Mr Klobas. The question of obtaining suitable premises was discussed and Mr Klobas agreed to look out for an appropriate site for the Group to establish a business in South Australia.

9 Eventually Harvey Norman became interested in a site consisting of three properties at Marion known as the Omond property, the CSR property and the Bice property.

10 Negotiations took place in relation to each of these properties and these negotiations resulted in two properties, namely the CSR property and the Bice property being purchased, developed and leased to Harvey Norman. In the end, the Omond property did not become available for lease. This property was tenanted and it appeared that significant difficulty would be faced in obtaining possession from a large number of existing tenants.

11 A contract in relation to the CSR site was entered into on 25 October 1996 between the then owner of the property and the defendant as purchaser. This contract was duly completed.

12 An option to purchase the Bice property was entered into between Bice Melory & Co Pty Ltd as grantor and the defendant as grantee on 29 July 1997. The option was subsequently exercised. Prior to the execution of the option agreement in relation to the Bice property, Mr Klobas arranged a sales agency agreement between Bice Melory & Co Pty Ltd and MJK trading as Klobas Property Group whereby the latter company was to earn a commission of $25,000 payable by the vendor on the sale of the Bice property. This agency agreement was reduced to writing and executed on 29 July 1997. The sale of the Bice property was completed on or about 30 September 1997, following which MJK was paid a fee of $25,000.

13 At the time of MJK signing the sales agency agreement in relation to the Bice property, the defendant was looking for similar properties to lease to Harvey Norman. Also at that time, the defendant was unaware of the fact that MJK was acting for Bice Melory & Co Pty Ltd in connection with the transaction and that a secret commission of $25,000 payable to MJK had been agreed by that company to be paid by Bice Melory & Co Pty Ltd.

14 Originally the plan was that the defendant would purchase the CSR property and also the Bice property and then lease both properties to Harvey Norman. However, after some further negotiations Harvey Norman and the defendant agreed that a joint venture would be entered into to purchase and hold the land in question. Included in that venture would be the reversion of the lease to which I have referred. The joint venture was to be between the defendant or an associate of the defendant and Harvey Norman or an associate of that company. The joint venture was to acquire the CSR land and the Bice land and construct the showroom and warehouse.

15 The first question to consider therefore is whether there was an agreement for the payment of commission to the plaintiffs or one of them and if so, the terms and conditions of that agreement.

The agreement for the payment of $300,000 commission

16 The only witness called for the plaintiffs was Mr Klobas. He told the court of extensive activities in relation to commercial real estate in Adelaide mainly through the operation of the first plaintiff company, MJK. He gave evidence that he had known Mr Mario Minuzzo since the 1980s. In or about 1995 he mentioned the topic of Harvey Norman to Mr Minuzzo knowing that he was a planning and building developer.

17 Mr Klobas introduced Mr Field to Mr Minuzzo in or about June of 1995. At that time, Mr Field made it known in the course of the discussions what Harvey Norman was looking for. After that meeting Mr Klobas continued to look for sites for Harvey Norman and eventually became aware that a property on Marion Road in the southern suburbs had been identified as feasible. That was the property known as the CSR property. Negotiations then ensued in relation to the possible acquisition and development of the site for the purpose of leasing it to Harvey Norman.

18 Mr Klobas then gave evidence that some time in June 1996 he had discussions with Mr Mario Minuzzo concerning remuneration which would be earned in connection with the establishment of a showroom and warehouse in the southern suburbs of Adelaide for Harvey Norman.

19 The conversation came about in the following manner. Mr Klobas was in the car with Mr Field visiting some properties. They arrived at Mr Minuzzo's office in the course of travel during the day. They met in the boardroom and Mr Minuzzo and Mr Klobas excused themselves for a short period of time. They had a meeting between themselves leaving Mr Field in the main boardroom. The topic of a fee payable to the plaintiffs or one of them in connection with work done on the Harvey Norman project in the southern suburbs was raised. Mr Klobas said that fee arrangements between the plaintiffs and the defendant relating to the establishment of the property to be occupied by Harvey Norman needed to be formalised. Mr Minuzzo said, "What do you consider is an appropriate fee?" to which Mr Klobas responded "$300,000 for a successful lease of Harvey Norman". If there were two transactions, Mr Klobas would be paid $300,000 for each. Mr Minuzzo responded by saying that he thought the figure was "a bit high", but given the circumstances, he said that he was happy with it. Mr Klobas then said that the agreement should be confirmed in writing.

20 According to Mr Klobas there was an agreement between the plaintiffs and the defendant to the effect that once Harvey Norman was committed to a lease of the CSR property, a fee of $300,000 was due and payable to the plaintiffs. Mr Klobas contended that this commitment occurred in April 1997 when there was a letter from Harvey Norman to Mr Mario Minuzzo agreeing to lease the CSR property. It is convenient to set out the letter in full as follows:

RE: LESANDU SA PTY LIMITED - PROPOSED LEASE OFPREMISES AT MARION ROAD, MARION

I refer to my recent telephone conversations with Steven Minuzzo.

I confirm that the Lessee agrees to enter an agreement to lease the Premises on the following terms and conditions:

1.1 The settlement of the 'Readymix Contract' (providing your Company is not in default under that Contract); and

1.2 The granting of relevant planning and development approvals.

The premises are to be of approximately 7,065 square metres in area, constructed for retail purposes substantially in accordance with a preliminary site plan annexed.

Should your company seek to purchase the 'Bice Melory' Land, it must first offer to lease to the Lessee warehouse premises to be constructed on the Land, which offer the Lessee may accept or refuse at its absolute discretion.

The Lease is to include approximately 200 car spaces for the use of the customers, staff and invitees of the Lessee.

The Agreement for Lease and Lease or otherwise to be on the terms agreed to date. In this regard it is noted that the agreement has yet to be reached as to the method of rent review and the matters raised in the letter from the Lessee's solicitors, Norman Waterhouse to Nigel Thomson of Minter Ellison dated 20 December 1996.

21 In his evidence, Mr Klobas said that sometime after August 1997 he learnt from Mr Steven Minuzzo about the prospect of a joint venture between the defendant and Harvey Norman in relation to the CSR property and the Bice property.

22 On 18 August 1997, the defendant wrote to Harvey Norman on various topics relating to the proposed joint venture. In that letter, the defendant raised the question of the fee payable to the plaintiffs. The letter in part read as follows:

"4. In our costing for the development we committed an amount of $400,000 payable to Michael Klobas which covered an introduction fee, leasing fee and fee for locating the sites and negotiating with owners and tenants. I believe this cost should be a Joint Venture cost."

23 It will be observed from this paragraph of the letter of 18 August 1997 that the fee payable to the plaintiffs or one of them had now grown to $400,000. When questioned, Mr Klobas denied any knowledge of that letter until it was discovered in these proceedings. There was a further letter from the defendant to Harvey Norman dated 22 August 1997 specifically dealing with the fee arrangements in relation to one or other of the plaintiffs, although it is not altogether clear to which plaintiff the fee was payable. I set out the text of this letter in full:

Further to my correspondence dated 18th August 1997 and a conversation today I write to elaborate on our agreement with Michael Klobas. I was not a party to the agreement and as Mario is unavailable Michael has provided the following information.

* CSR .................................................................................1,100,000

* Bice Melory .................................................................... 880,000

Total .............................................................................$1,980,000

Real Estate Institute of SA recommended fee structure is 3.2% of sale price.

* Net rental - 9,586 m2 @ $100/ m2 = $958,600 per annum.

The recommended leasing fee recommended by the Real Estate Institute of SA (refer to attached) is based on a percentage of average gross rent, being 10% for a tenancy of one to three years, plus 1% for each additional year in excess of three years to a maximum fee of 15%. If the tenancy is precommitted the fee is 200% of the above calculation based on the average gross annual rental for the term of the lease.

* $958,600 @ 30% = $287,580. Allowing for average gross rental over 12 years gives a fee of, say $325,000.

Michael has been involved extensively in all other negotiations relating to negotiations with existing lessee's and negotiations with Omond. This work was agreed to on the basis of a flat fee of $25,000 plus other out of pocket expenses (i.e., telephones, travel, facsimile costs, LTO search fees, etc.). The majority of this work is now completed.

This arrives at a fee of $413,360 which was rounded to $400,000.

24 Mr Klobas admitted that he contributed to that letter and that he had seen it in August 1997 before it was sent. He was involved in settling the letter in terms of final wording and presentation. He also admitted that neither Mr Mario Minuzzo nor Mr Steven Minuzzo had agreed with Mr Klobas that any fee would be due to him on the defendant acquiring a site. The letter from the defendant to Harvey Norman referred to a commission payable on site acquisition. In fact no such fee had ever been agreed.

25 Mr Klobas also participated in the inclusion in the letter of 22 August 1997 of a claim for $400,000. This figure was false in that there had been no agreement between the plaintiffs and the defendant in respect of such an amount.

26 Mr Klobas gave evidence to the effect that he was told by Mr Mario Minuzzo that the joint venture would pay a fee of $75,000 for work done by the plaintiffs. Mr Klobas was not prepared to accept that amount in full settlement but said that the plaintiffs would treat it as a part payment.

27 Mr Mario Minuzzo and his son were both called to give evidence. At all material times both were principals of the defendant. Mr Mario Minuzzo gave evidence of his version of the conversation with Mr Klobas at the meeting in June 1996 to which I have referred earlier, in which the fee payable to the plaintiffs was discussed. Mr Steven Minuzzo was not present on that occasion.

28 The learned trial judge found that it was common ground between the parties that discussions between Harvey Norman and the defendant, involving Harvey Norman in acquiring a site in the southern suburbs of Adelaide referred to earlier in these reasons, were initiated by Mr Klobas. According to Mr Mario Minuzzo, the CSR site was identified by him in May of 1996. At about that time he and Mr Klobas made an inspection of the site. Mr Mario Minuzzo was aware of Harvey Norman's requirements. After that visit to the CSR site he gave evidence of a meeting with Mr Klobas at Mr Minuzzo's office. Mr Field attended that meeting. On that day, following the meeting with Mr Field, Mr Klobas and Mr Minuzzo went into an adjoining room in order to discuss Mr Klobas' fee in the absence of Mr Field. At this meeting Mr Klobas put a proposal that he wanted a fee of $300,000. Mr Mario Minuzzo's evidence on the topic was as follows:

"Q Can you remember what words he used or are you only able to recall the substance of the conversation.

A I can recall that he put a fee proposal of 300,000 and I said 'That's a lot of money, what do I get for that'.

Q Do you recall what his response was to that question.

A I went on and said 'Do I get a lease, a 12 year lease at $105 a square metre signed off. Do you find the sites'.

A I'm saying this. 'We build the building', and I said 'Have you got an investor for the on-sale'.

A I also said that that proposal would have to be put before Steven for his approval.

A On the issue of investors he said that he had a few in Adelaide and a couple in Sydney.

Q Just concentrate on the meeting for the moment. At the time of the meeting he didn't mention any names.

Q Did he respond other than as you have described relating to investors.

Q What was the purpose of talking about a cap rate.

A The cap rate is related to the margin and profit, and obviously the higher the rent, and the lower the cap rate, the higher the profit margin.

Q Can we perhaps just go back to the meeting. You have told his Honour what you said and you have told his Honour that Mr Klobas responded by saying what you said he said about investors. Did Mr Klobas make any other response to what you had said.

A Yes. I said 'Can you deliver' and he said 'Yes, I can deliver'.

Q Was there anything else said about what individuals might do or might be required to do.

A Yes. He talked about the $300,000 fee covering the introduction to Harvey Norman.

Q Can you remember the words that Mr Klobas used or are you only able to now´ generalise.

Q Was anything more said in that meeting in relation to his fee proposal.

29 In or about August 1997, the original plan to lease the CSR site and the Bice site to Harvey Norman was replaced with a joint venture in which each of the defendant and Harvey Norman (or a related company in each case) would have a 50% interest. As a result, Harvey Norman as a participant in the joint venture did not want to pay any money at all for previous work done by the plaintiffs as agents. On the other hand, as I have indicated earlier in these reasons, the plaintiffs were taking the view that the conditions to be fulfilled before the fee could be earned by them (or one of them) had already been fulfilled. In that regard, it must be borne in mind that the plaintiffs relied upon the letter from Harvey Norman to Mr Mario Minuzzo dated 28 April 1997 the text of which is set out earlier in these reasons.

30 Despite the fact that Harvey Norman took the view that it had no obligation to pay any fee to the plaintiffs, the representatives of Harvey Norman were nevertheless persuaded by Mr Mario Minuzzo to pay an amount of $75,000 out of the funds of the joint venture towards the plaintiff's fees. This amount was put forward as fair recompense for the work done by Mr Klobas up to 28 April 1997.

31 Mr Mario Minuzzo approached this matter on the basis that there was a moral obligation to pay a reasonable fee to Mr Klobas. It is, however, clear that on the defendant's case he need not have done so because there was no obligation to pay the plaintiffs anything at all because there had been no on-selling. The letter dated 18 August 1997 from Mr Steven Minuzzo to Harvey Norman was put to Mr Mario Minuzzo who admitted that he had seen the letter sometime in August of 1997.

32 Mr Mario Minuzzo admitted that when he first saw the letter of 18 August 1997, he was aware that the claim for $400,000 referred to in that letter was false. He admitted that on the defendant's version of the facts, nothing at all was due to Mr Klobas until the project was sold. It follows that Mr Mario Minuzzo would have known that there was no agreement for the payment to Mr Klobas of commission or the acquisition of any site referred to in the letter of 22 August 1997.

33 Mr Steven Minuzzo gave evidence. He was asked about his understanding of what Mr Klobas was to do to get the $300,000 fee. He replied that it was payable out of the proceeds of the sale of the development. In order for the plaintiffs to earn the fee he would lease the property to Harvey Norman and would sell the development with his fee being payable out of the proceeds. In relation to the total amount of $400,000 referred to in the letter of 22 August 1997 from the defendant to Harvey Norman, the letter set out how the fee of $400,000 was arrived at. In particular, he must have known that the amount of $400,000 included commission on site acquisition. In fact, there had been no agreement between the defendant and the plaintiffs or either of them on this topic. Mr Steven Minuzzo signed the letter of 22 August 1997 before it was sent. He had some involvement in writing or settling part of the letter before it was sent off to Harvey Norman. However, whether or not that is so, he must be taken to have prime responsibility for the letter. Prior to 22 August 1997 Mr Steven Minuzzo was of the belief that there was no money on account of the $300,000 to be paid at that time.

34 The only letters dealing with the question of commission payable to the plaintiffs are those dated 18 August 1997 and 22 August 1997. According to Mr Steven Minuzzo, there were many discussions with representatives of Harvey Norman in relation to the fee payable to the plaintiffs after the letter of 22 August 1997 had been sent to Harvey Norman. Although there is no written evidence of these discussions, it does seem clear that Harvey Norman was prepared to have $75,000 paid to Mr Klobas out of the funds of the joint venture.

35 The learned trial judge said that he observed Mr Klobas carefully both in evidence-in-chief and in his extensive cross-examination. He said there were areas of credibility which concerned him. He had similar concern in relation to the credibility of both Mr Mario Minuzzo and Mr Steven Minuzzo. He said that what concerned him most so far as all the parties in this case were concerned were the letters of 18 August 1997 and 22 August 1997 from the defendant to Harvey Norman. He said that even if Mr Klobas had no involvement with the letter of 18 August 1997 he was heavily involved in the formulation of the letter of 22 August 1997, a letter which contained what the learned trial judge described as a series of admitted, clear cut lies. Such criticism however related to all the parties and all of their explanations, the learned judge found, were unsatisfactory. He found Mr Mario Minuzzo's evidence to be very vague on the topic of the conversation about Mr Klobas' commission.

36 The learned trial judge said that on the topic of where the truth lies concerning the conversations of both Mr Mario Minuzzo and Mr Klobas in June 1996 about the fee, he preferred the evidence of Mr Klobas. The principal reason for so preferring his evidence was not so much that he himself impressed the learned judge as a witness of truth, but the surrounding circumstances and behaviour of the parties led him to the inexorable conclusion that Mr Klobas' version was the correct one.

37 I think the findings made by the learned trial judge on the evidence before him as to the credibility of the witnesses in this case were findings which he was entitled to make in the circumstances. I see no occasion for this Court to disturb those findings. Indeed it has not been asked to do so.

The findings of the trial Judge in relation to the agreement for the payment of commission

38 Based on the evidence to which I have referred earlier in this judgment, the learned trial judge made and correctly made in my opinion with one exception, the following findings of fact in relation to the conversation of June 1996 between Mr Mario Minuzzo and Mr Klobas:

(1) Sometime in June 1996 there was a discussion between Mr Mario Minuzzo and Mr Klobas concerning a fee payable to Mr Klobas in connection with the transaction between Harvey Norman and the defendant.

(2) That the terms of the conversation were consistent with the evidence of Mr Klobas that he would receive $300,000 for every successful lease that he concluded between Harvey Norman and the defendant.

(3) There was no pre-condition that the freehold of the CSR property was to be sold and the proceeds were to be received on sale.

(4) There was an agreement for lease entered into between the defendant and Harvey Norman on 28 April 1987.

I have come to the conclusion that the fee was payable to MJK trading as Klobas Property Group and not to Mr Klobas personally. This is the exception to which I have just referred. Later in this judgment I will set out my reasons for coming to this conclusion.

39 The defendant then submitted to the learned trial judge that even if he should find in favour of the plaintiffs on the terms of the contract, it was nevertheless unenforceable because it breached the provisions of the Land Agents Act 1994. The material provisions of that Act are as follows:

4.(1) A person is an agent for the purposes of this Act if the person carries on a business that consists of or involves -

(a) selling or purchasing or otherwise dealing with land or businesses on behalf of others, or conducting negotiations for that purpose; or

(b) selling land or businesses on his or her own behalf, or conducting negotiations for that purpose.

(2) However, a person does not act as an agent in so far as -

(a) the person sells or purchases or otherwise deals with land or businesses on behalf of others, or conducts negotiations for that purpose, in the course of practice as a legal practitioner; or

(b) the person sells land or businesses, or conducts negotiations for that purpose, through the instrumentality of an agent; or

6.(1) A person must not carry on business, or hold himself or herself out, as an agent unless registered under this Act.

(2) A person required by this Act to be registered as an agent is not entitled to commission or other consideration for services as an agent unless the person

(a) is, at the time of rendering the services, registered as an agent; and

(b) is authorised, in writing, to act as an agent by the person for whom the services are rendered or a person authorised to act on behalf of that person.

(3) Any commission or other consideration paid or given to a person who is, under subsection (2), not entitled to it may be recovered from the person as a debt."

40 It is true that in this case there was no instrument in writing in the normally accepted sense duly executed by the defendant authorising the plaintiffs or one of them to act on behalf of the defendant to find a suitable site in the Marion area to be leased by Harvey Norman for the purpose of establishing a warehouse and showroom. However, it is enough to satisfy the Act that the "writing" required by par 6(2)(b) of the Land Agents Act comes into existence at any time before the institution of an action to recover commission or other consideration payable. In this regard the structure of par 6(2)(b) differs from par 6(2)(a). In the case of the latter the agent must be registered as an agent at the time of rendering the services.

41 The agreement providing for the payment of the $300,000 in commission was oral and therefore contravened par 6(2)(b) of the Land Agents Act. Neither of the plaintiffs was authorised by the defendant in writing to act for the defendant in connection with the services for which the commission was payable. Under the Act, any commission or other consideration paid or given to a person who is not entitled to it by virtue of the Act may be recovered as a debt.

42 In Anderson v Densley [1953] HCA 47; (1953) 90 CLR 460, in a unanimous judgment, the High Court had to consider a section which was similar to s 6(2) of the Land Agents Act appearing in the Auctioneers and Commission Agents Acts (1922-1951) of Queensland. Par 23(1)(b) of those Acts provided:

"A commission agent shall not be entitled to sue for or recover ... commission, reward, or other remuneration for or in respect of any transaction unless his engagement or appointment to act as a commission agent in respect of such transaction is in writing, signed by the person to be charged with such ... commission, reward, or remuneration, or his agent or representative."

43 In that case, the Court held; "A long line of cases in Queensland has decided that the paragraph does not require the contract engagement or appointment of the agent to be in writing. It is sufficient if some writing or connected writings exist evidencing the creation of the relationship of principal and agent in respect of the transaction pursuant to an oral contract." The leading case is Canniffe v Howie (1925) QSR 121 at 127. The principle of construction ... is that stated by Lukin J in Canniffe v Howie: "Any document signed by the principal at any time before action brought which evidences the essential fact, the existence of the relationship in respect of the transaction in question, is sufficient to comply with the statute." Anderson v Densley, being a decision of the High Court, is binding on this Court.

44 In the present case, the plaintiffs argued that the following exhibits were sufficient to satisfy the requirements of par 6(2)(b) as to authorisation of the plaintiffs to act as agents:

45 It is understood that this document was prepared by Mr Steven Minuzzo. It sets out a long list of topics which the writer intended to raise and have considered either at a meeting or on some other suitable occasion. The only reference to the plaintiff appears in Item 20 which reads, "How do we treat the Klobas fees?" There is nothing in this document which purports to be or to recognise an authorisation in writing of a person to act as agent.

Exhibit P38 - Letter dated 18.8.97 from the defendant to Harvey Norman.

46 This letter relates to an amount of $400,000 which was never the subject of an agreement between the plaintiffs or either of them and the defendant.

"In our costing of the development we committed an amount of $400,000 payable to Michael Klobas which covered an introduction fee, leasing fee and fee for locating the sites and negotiating with owners and tenants. I believe this cost should be a Joint Venture cost."

48 The fee sought to be recovered in this case is $275,000 (being $300,000 less $25,000 which the plaintiffs are obliged to account to the defendant). This letter is a communication between the defendant and Harvey Norman. The plaintiffs are not in any way involved. The letter does not purport to authorise any person to act as agent, nor does it purport to recognise any such appointment.

49 This letter relates to an amount of $400,000 which was never the subject of any agreement between the plaintiffs or either of them and the defendant. While there may have been an oral agreement relating to $300,000 payable to Mr Klobas, this letter does not refer to that amount as the commission which the defendant has agreed to pay.

50 This note refers in general terms to commission without specifying any further particulars. According to Mr Klobas it is in Mr Steven Minuzzo's handwriting and appears to be at a meeting with representatives of Harvey Norman. It is not a communication to the plaintiffs or either of them; nor does it purport to authorise any person to act as agent, or recognise any such appointment.

51 This note does not mention any commission or the authorisation of any person to act as agent.

52 No commission is mentioned. There is no reference to the authorisation of any person to act as agent. The notice contains a sentence in the following terms:

"Jerry [referring to Mr Gerry Norman] not going to pay any agent."

- which is not consistent with the appointment of any agent.

Exhibit P45 - Letter dated 4.9.97 from the defendant to Harvey Norman.

53 This letter refers to commission of $75,000 payable to Mr Klobas as a cost in respect of the joint venture then being negotiated between the defendant and Harvey Norman. This document relates to an amount of commission which Mr Klobas has indicated would not be acceptable in the circumstances. It does not evidence the existence of the relationship in respect of any sum of money which has been agreed to by the plaintiffs or either of them and the defendant.

Exhibit P51 - Letter dated 12.12.97 from Minter Ellison acting on behalf of the defendant to Johnson Winter and Slattery acting on behalf of the plaintiffs.

54 Although there is a reference in this letter to a commission of $300,000, liability to pay this amount to the plaintiffs is denied by the defendant. In the second paragraph, the letter provides:

"We are instructed to deny any liability to your client for the amount claimed or any amount at all."

55 A denial of this kind cannot be treated as anything but a denial. It disputes the relationship in question; it does not recognise it.

Exhibit P65 - Joint venture agreement between Calardu Marion Pty Ltd, the defendant, Mr Mario Minuzzo and Harvey Norman

56 The only reference to the plaintiffs in this document appears in cl 9.1(c) which provides that for the purposes of the Joint Venture Agreement certain costs are development costs. These include:

There is no reference to an authorisation of any person to act as agent.

57 I do not see anything in the exhibits or in any other matters to which I have referred which would enable the plaintiffs to satisfy the requirements of s 6(2)(b) of the Land Agents Act or to satisfy the principle of law stated by Lurkin J in Canniffe v Howie.

58 The plaintiffs contended that it was the defendant who was conducting the negotiations and carrying out the work as an agent within the meaning of s 4(1) of the Land Agents Act. The plaintiffs were not agents as such within the meaning of the Act.

59 According to a certificate from the Office of Consumer and Business Affairs in evidence the plaintiff MJK Pty Ltd was registered as a land agent pursuant to the Land Agents Brokers and Valuers Act 1973 on 19 September 1994 until 31 May 1996 and held and continues to hold a registration as a land agent pursuant to the Land Agents Act 1994 since 1 June 1996. The certificate was given on 16 March 2000.

60 According to a further certificate from the Office of Consumer and Business Affairs in evidence the plaintiff, Michael John Klobas, was registered as a manager pursuant to the provisions of the Land and Business Agents Act 1973 on 17 October 1984 and held that registration until 31 May 1996. On 1 June 1996, he became registered as land agent and held, and continues to hold, a registration as a land agent pursuant to the Land Agents Act 1994. The certificate was given on 16 March 2000. At the time, the terms of the oral agreement as to the payment of commission of $300,000 was being negotiated in June of 1996, both plaintiffs were the holders of registrations under the Land Agents Act. They were both subject to that Act as registered agents.

61 Mr Klobas was acquainted with Mr Field, a property manager of Harvey Norman. As a result of that acquaintance, Mr Klobas was instructed to look out for a suitable property for Harvey Norman to establish a showroom and warehouse in the southern suburbs of Adelaide. Mr Klobas undertook the task of endeavouring to locate a suitable site in which to house the Harvey Norman showroom and warehouse.

62 The work of a land agent includes the work of being an intermediary in every respect in relation to dealings in land and buildings (including buying selling and leasing). In the first place the work may involve the search for a property at a suitable location. It may involve negotiations with the present owner to enable it to be put on the market. Once a property has been located it is necessary to negotiate the terms and conditions of the sale or lease with the owner or prospective purchaser or prospective lessee. The agent would not undertake the detailed task of preparing an agreement for sale and purchase or lease. His role would be to undertake the task of giving general instructions to a solicitor or conveyancer leaving the latter to act as draftsman in carrying them out.

63 Guidelines for services published by The Real Estate Institute of South Australia Incorporated were made an exhibit in these proceedings. These guidelines set out details of the work an agent must perform in the buying, selling and leasing of property.

64 In order to be an agent within the meaning of the Land Agents Act, a person must carry on a business that consists of or involves selling or purchasing or otherwise dealing with land on behalf of others or conducting negotiations for that purpose.

65 The oral agreement made between the plaintiffs and the defendant in June 1996 was an agreement made in the course of a business of an agent namely a business that consisted of or involved the carrying out for a fee of a dealing with the land on behalf of others or conducting negotiations for that purpose.

66 In my opinion the learned Judge was right in holding that the plaintiffs were "agents" in their dealings with Harvey Norman and accordingly, that they were subject to the restraints imposed by s 6 of the Land Agents Act.

67 In the present case, the contract, to the extent that it is for the payment of commission, is unenforceable and the plaintiffs are therefore not entitled to recover the commission: s 6(2). Subsection 6(3) of the Land Agents Act applies to provide that in those circumstances any commission paid to a person who is, under s 6(2), not entitled to it may be recovered as a debt. In view of these provisions, there is no way, as a matter of contract, whereby the plaintiffs can recover commission. However, the plaintiffs may be entitled to recover something for their pains and trouble under a quantum meruit.

68 In Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, the High Court by a majority decided that an action could be brought on a quantum meruit to recover reasonable remuneration for work done under an unenforceable contract. The contract under consideration in that case was just such a contract. In Pavey & Matthews, Deane J held that an action on a quantum meruit, such as that brought by the appellant in that case, rests, not on an implied contract, but on a claim to restitution or a claim based on unjust enrichment, arising from the respondent's acceptance of the benefits accruing to the respondent from the appellant's performance of the unenforceable oral contract. In their judgment in the same case, Mason and Wilson JJ observed at p 227:

"Once the true basis of the action on a quantum meruit is established, namely execution of work for which the unenforceable contract provided, and its acceptance by the defendant, it is difficult to regard the action as one by which the plaintiff seeks to enforce the oral contract. True it is that proof that the oral contract may be an indispensable element in the plaintiff's success but that is in order to show that (a) the benefits were not intended as a gift, and (b) that the defendant has not rendered the promised exchange value ... The purpose of proving the contract is not to enforce it but to make out another cause of action having a different foundation in law."

"... if there was a valid and enforceable agreement governing the claimant's right to compensation, there would be neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration. The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement, or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution."

70 It would not be possible to imply a term into the contract between the plaintiffs and the defendant in relation to the entitlement of the former to commission or other remuneration utilising the principles set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20 at p 26. In these circumstances, s 6(3) would preclude the payment of a commission or other consideration and this would apply to an implied contract just as it would apply to an express contract.

71 In Angelopoulos v Sabatino [1995] SASC 5230; (1995) 65 SASR 1 at p 9, Doyle CJ observed:

"It seems to me that the decision of the majority in Pavey's case makes two important points which are relevant to the present case. First, that a claim in restitution is not founded upon an implied agreement and while facts which might support an implied agreement may be relevant to a claim in restitution, it is not necessary to search for something akin to an agreement or request from which a promise to pay might be implied. Secondly, there is a significant emphasis in the judgments of the majority upon the notion of acceptance of a benefit from the performance by the claimant of an action which confers a benefit or enrichment upon the other person. However, to my mind it is equally clear from the majority judgments that the existing case law in this area has not been overturned. As Deane J pointed out, unjust enrichment is a 'unifying legal concept' which explains the result reached in a variety of situations and not in itself a cause of action or a basis for recovery."

72 Where a contract is found to be unenforceable, it may nevertheless be referred to as evidence, on the question of whether what was done was done gratuitously: Pavey & Matthews v Paul (supra).

73 As the contractual obligation for the payment of commission is unenforceable there is no agreement or request from which a promise to pay might be expressed or implied. Without a contractual obligation, the way is clear for the proceedings on a quantum meruit to apply and for the Court to determine fair and just remuneration to be recoverable having regard to the nature, value and extent of the services provided.

74 Zullo Enterprises Pty Ltd v Sutton (1999) 15 BCLR 283 is distinguishable. It was a case of an unlicensed builder who carried out building work in contravention of s 42 of the Queensland Building Services Authority Act 1991. In that case, the Queensland Court of Appeal held that the principle from Pavey & Matthews Pty Ltd v Paul that a quantum meruit is permitted where a contract is unenforceable for want of formality should not be extended to include instances in which a statute prohibits both the contract and the doing of the work. The present case is not concerned with the doing of the work as the plaintiffs are both registered under the Land Agents Act. Paragraph 6(2)(b) is only concerned with a prohibition relating to commission or other consideration for services as an agent.

75 In his judgment, the learned trial Judge said at par 37:

"It is clear that the plaintiff has done an amount of work for the defendant in relation to the CSR site. The process of how to remunerate him for that work consistent with the principles of unjust enrichment in this case is very difficult. I have virtually no evidence before me in which the day to day work done by the plaintiffs for the defendant can be costed in anyway. The plaintiff through his counsel admitted that this is too difficult and vague a task. What the plaintiffs put to me however is that work that he has done in bringing about the agreement to lease the CSR property has been costed out pursuant to the appropriate charges as set out by the Real Estate Institute of South Australia for 1995. On that basis the appropriate fee would be $323,000.00 but that amount should be reduced to the agreed fee of $300,000.00 because, according to the plaintiff's argument, the fee claimed on quantum meruit cannot be more than the fee agreed on the unenforceable contract."

76 Later in his judgment the learned trial Judge continued (par 38):

"In the present case I have to decide what is a reasonable remuneration for compensation for the benefit given by the plaintiffs to the defendant. As I have said the only evidence that I have before me is exhibit P63 [Guide as to various rates of commission recommended by the Real Institute of SA Inc] ... and the evidence of the amount of the agreement itself indicates to me that the appropriate amount for reasonable remuneration is $300,000.00."

77 While the plaintiffs are precluded from enforcing the commission agreement, there is no reason in principle why they should be deprived of the ordinary common law right to bring proceedings on a common indebitatus count to recover fair and reasonable remuneration for work which they have actually done and which has been accepted by the defendant: Pavey & Matthews. The task of the Court is not to assess damages for breach of contract as the claim of the plaintiffs presupposes no enforceable contract exists: Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; (1993) 2 VR 221 at p 262. The measure of what is recoverable as fair and reasonable in relation to compensation is in respect of the benefits actually accepted or accepted constructively by the defendant.

78 Where there is an unenforceable contract in a case such as the present leading to a claim for reasonable remuneration, the unenforceable agreement may be referred to as evidence, but as evidence only, of the question of the appropriate amount of compensation. The defendant will also be entitled to rely on an unenforceable contract, if it has been executed but not rescinded, to limit the amount recoverable by the plaintiffs to the contractual amount in a case where that amount is less than what would constitute fair and reasonable remuneration: Pavey & Matthews per Deane J at p 257. See also Brenner v First Artists' Management Pty Ltd per Byrne J at p 263.

79 In many cases the appropriate method of assessing the benefit of the work is by applying an hourly rate to the time involved in performing the services. The Court may have regard to the rate of remuneration commonly accepted in the industry concerned, but would need to have regard to the standing of the person performing the services, the difficulty of the task and the fact that the services required imagination and creativity which may be difficult to discern in the end product: Brenner v First Artists' Management Pty Ltd (supra). Where it is difficult or impossible to assess the number of hours involved or to itemise the precise services, the Court is entitled to make a global assessment or to reduce or increase the remuneration which can be proved with some certainty in order to reflect the reasonable value: Brenner v First Artists' Management (supra) per Byrne J at p 263.

80 In the present case, the plaintiffs claim they are entitled to be paid the sum of $300,000 in relation to the CSR site less $25,000 being the commission received by MJK on the sale of the Bice land leaving a net amount payable of $275,000. The plaintiffs contend that this amount is payable on a quantum meruit basis in the course of the plaintiffs' business as agents in selecting the CSR site at Marion and securing the commitment of Harvey Norman to a lease in respect of that property. Particulars of the work undertaken are set out in the first schedule to the Statement of Claim in this action. Those particulars itemise numerous meetings, telephone calls and letters. The schedule, however, does not detail the time occupied so that what is included is virtually useless in determining the time occupied by the plaintiffs in carrying out the services detailed.

81 The difficulty with this industry is that work is generally not done on a fee for service basis but rather on a commission basis. In Brenner v First Artists' Management Pty Ltd (supra), Byrne J said at p 264 that where it is customary in an industry for the services to be recompensed on a commission basis, the Court may have regard to what is a reasonable commission and to apply it where appropriate.

82 In Way v Latilla [1937] 3 All ER 759, Lord Atkin said at p 764:

"There are many employments the remuneration of which is, by trade usage, invariably fixed on a commission basis. In such cases, if the amount of the commission has not been finally agreed, the quantum meruit would be fixed after taking into account what would be a reasonable commission in the circumstances and fixing a sum accordingly. This has been an every day practice in the courts for years."

83 The authority to which I have referred requires me to have regard to the commission payable under the contract, namely $300,000. I am bound to have regard to this figure but I am not bound by it. In the circumstances of this case, I am entitled to have regard to other factors as well. The commission of $300,000 was agreed verbally by Mr Klobas and Mr Mario Minuzzo on behalf of their respective principals in June 1996, although at that time no attempt was made to justify the amount concerned or to show how it was made up.

84 Mr Klobas and Mr Steven Minuzzo met in August 1977 in order to prepare and send a letter to Harvey Norman seeking to justify a fee of $400,000 as commission payable to the plaintiffs or one of them in respect of the Marion Road properties. A pamphlet containing scales of commission published by the Real Estate Institute of South Australia Incorporated was obtained in August 1997 for use in calculating commission payable to the plaintiffs or one of them. The scale involved was headed "Leasing - Commercial" and is as follows:

1 to 3 year lease term - 10% of the average gross annual rental.

Over 3 years - 10% of the average gross annual rental with an additional 1% for each year in excess of 3 years up to a maximum of 15% plus any agreed advertising and out-of-pocket expenses.

Precommitments/Preleasings - Twice the normal recommended leasing fees."

The Real Estate Institute scale was the only one considered by the parties when determining what remuneration the plaintiffs should be entitled to in connection with the development on Marion Road, south of Adelaide. The leasing fee is based on rent payable. Rent is put at $100 per square metre. The total area is 9,586 square metres so that the total annual rent is $958,600. The rental fee is calculated at 10% for a period at one to three years. If the term is longer, the rate of rental per square metre escalates from 10% at the rate of 1% per annum to a maximum of 15% of the total annual rental. The total amount of commission payable is therefore $143,790.

85 As appears from the scale set out above, reference is made to "Precommitments/preleasings' being twice the normal leasing fees. No evidence was given as to what amounts to a "precommitment" or "preleasing". The scale itself is silent on why a doubling of the fee is justified. It may be that the item "Precommitments/preleasings" is applicable where there are numerous tenants and where substantial work is required in negotiating lease terms in respect of many leases. In the circumstances, I am unable to accept that a "precommitment" or "preleasing" has any relevance to this case. In this matter I am concerned, not with what the parties may have agreed, but rather with what is reasonable in the circumstances. In the absence of any proper explanation I would not be disposed to accept a doubling of the leasing fee in this case. There may be cases where such a doubling of the leasing fee is justified, but this case is not one of them. I am not persuaded to go beyond the rate of 15%.

86 In their statement of claim, the plaintiffs claim an additional amount arising from rent reviews contained in the draft lease referred to in the statement of claim. There is nothing in the applicable scale of commission which suggests that rent reviews are to be taken into account in calculating the commission payable under this item of the Real Estate Institute scale of recommended charges. In any event, a rent review operates in respect of future events such as future changes in the cost of living. To estimate such a change at this stage would be mere guess work. The parties have agreed that $25,000 should be subtracted from any amount otherwise payable to the plaintiffs because of the commission MJK received on the sale of the Bice property. That would leave $118,790 as the amount recoverable by the plaintiffs.

87 Counsel for the plaintiffs on the appeal said that a pre-commitment is a commitment to lease given by a tenant in relation to a building which is not fit to lease either because it has not been erected or because it has not been fitted out. Why, in those circumstances, there is a doubling of the fee is beyond me.

88 I consider the amount of $118,790 to be a fair and reasonable amount recoverable on a quantum meruit.

89 In my opinion the learned trial judge was in error in assessing the amount recoverable on a quantum meruit at $275,000.

91 The defendant alleged in its pleadings that in or about October or November 1997, the joint venture partners had agreed to pay Mr Klobas a fee of $75,000 and that on being told that by the defendant, Mr Klobas agreed to accept the fee. As a result it was argued that the plaintiffs were estopped from demanding any fee in excess of that sum. The learned trial Judge found on the evidence that the plaintiffs had never agreed to accept $75,000 in full satisfaction of the work done by Mr Klobas. He accepted the evidence of Mr Klobas on the matter despite other areas of his evidence which were a cause of concern. He found that Mr Klobas' behaviour was quite consistent with him being unwilling to accept $75,000 in full satisfaction of his claim for $300,000. He preferred Mr Klobas' evidence that he had never agreed to accept such an amount in settlement of this matter. He found that the defence of accord and satisfaction or estoppel as pleaded failed.

92 While this issue was raised in the Notice of Appeal, it was not addressed in argument or in written submissions before the Full Court. This issue has been decided by the learned trial Judge on a matter of credit. I therefore see no reason why this Court should intervene in the matter.

93 Counsel for the defendant argued that there was a fiduciary relationship between the plaintiffs on the one hand and the defendant on the other, the plaintiffs being the fiduciaries. It was further argued that while they were fiduciaries, MJK entered into a contract to act as agent for Bice Melory and Co. Pty Ltd in relation to the Bice contract and for so acting, MJK, unknown to the defendant, entered into an agency agreement with Bice Melory and Co. Pty Ltd under which it was paid a commission of $25,000 on completion of the sale of the Bice property. The sale took place and the commission was duly received. As a result of MJK receiving the commission of $25,000 the defendant claimed that there had been a breach of fiduciary duty which should be a bar from the claim for commission on the CSR property.

94 As to the nature of a fiduciary relationship, I refer to Hospital Products Limited v United States Surgical Corporation & Ors [1984] HCA 64; (1984) 156 CLR 41 per Mason J at p 96:

"The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v Boardman [1966] UKHL 2; [1967] 2 AC 46 at p 127), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal."

"In a commercial transaction of the kind here under consideration, where the parties are dealing at arms length and there is no credible suggestion of undue influence, I am reluctant to import a fiduciary obligation. The courts have often expressed a cautionary note against the extension of equitable principles into the domain of commercial relationships. So as 'not to strain [them] beyond [their] due and proper limits', to use the words of Lord Selbourne LC in Barnes v Addy (1874) 9 Ch App 244 at p 251."

"A fiduciary relationship exists where one party is in a position of reliance upon the other because of the nature of the relationship and not because of a wrong assessment of character or reliability."

97 In my opinion the relationship between the plaintiffs and the defendant was not a fiduciary one. The plaintiffs did not act in the interests of either the defendant or Harvey Norman in the exercise of a power or discretion which would have affected the interests of either the defendant or Harvey Norman in a legal or practical sense. This is not a case where the relationship is one which gives the plaintiffs a 'special opportunity to exercise the power or discretion to the detriment of' the defendant. The expression 'for', 'on behalf of' and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility. There is no suggestion that the defendant placed itself in the hands of the plaintiffs. All that happened here was that the defendant engaged the plaintiffs to find for it a suitable site to erect a showroom and warehouse in the southern suburbs and to assist in obtaining title to the site and to assist with the negotiations leading to the leasing of that land to Harvey Norman. None of that, it seems to me, imports a fiduciary relationship. There is a relationship of principal and agent but not all relationships of that kind are fiduciary in character.

98 Neither head of claim within the counterclaim was made out. At trial, counsel for the defendant conceded that the counterclaim should be dismissed.

99 The notice of appeal alleges that the learned trial Judge did not differentiate an entitlement to damages as between each of the plaintiffs. Strictly speaking, that is so. Although no damages as such were awarded in favour of the plaintiffs by the learned trial Judge, he did give judgment for the plaintiffs for an amount of compensation for unjust enrichment but in doing so did not differentiate the entitlement to compensation between each of the plaintiffs. In my opinion the plaintiff MJK Pty Ltd trading as Klobas Property Group is entitled to the benefit of the judgment in this matter. Most, if not all of the letters written by, or on behalf of, the plaintiffs in this matter are on a letterhead entitled "Klobas Property Group". Klobas Property Group is a business name under which the plaintiff MJK Pty Ltd trades. Many of the letters concerned are signed:

There are, however, a significant number of letters written on Klobas Property Group letterhead which are signed

100 I note that the sales agency agreement dated 29 July 1997 in relation to the option to sell the Bice property was made between Bice Melory & Co Pty Ltd as vendors and MJK Pty Ltd (ACN 008 052 748) trading as Klobas Property Group as agent. On 28 August 1997 Klobas Property Group rendered an invoice to Mr Norman Bice in relation to the sale of the Bice property. The invoice read as follows:

Professional fee associated with negotiating the sale of all strata units at 822-824 Marion Road, Marion to interests associated with Harvey Norman Holdings Pty Ltd as per the agency agreement executed on 29 July 1997.

101 In a letter from Johnson Winter and Slattery dated 18 November 1997 addressed to Upjay Pty Ltd, the letter is headed "Klobas Property Group" and the first two paragraphs of that letter reads as follows:

"Please note that we act for the Klobas Property Group and we are instructed that your company is indebted to our client in the sum of $300,000.00.

We are instructed by Mr Michael Klobas that in or about June 1996 our client entered into an agreement with your company to the effect that, in the event that your company entered into a development agreement with Harvey Norman Holdings Limited for the development of the site of 838 Marion Road, Marion, our client would be paid a commission agreed in the sum of $300,000 ..."

102 In the circumstances, I am of opinion that the agreement for the payment of the commission of $300,000 was made between MJK Pty Ltd trading as Klobas Property Group and Upjay Pty Ltd. The reference to "our client" in the second paragraph of the letter is clearly to "Klobas Property Group", a business named under which MJK traded. While Mr Klobas was intimately involved, nevertheless I consider that he was acting as agent for his company MJK Pty Ltd and that he was not acting in this matter on his own account.

(2) the judgment of the learned trial Judge should be set aside and in lieu thereof judgment should be entered for the respondent MJK Pty Ltd trading as Klobas Property Group in the sum of $118,790 together with interest; and

Land Agents Act 1994(SA)s 4, s

Land Agents Brokers and Valuers Act 1973(SA)

Land Agents Act 1994(SA)s 4, s

Land Agents Brokers and Valuers Act 1973(SA)

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