World Square Realty Pty Ltd v Matthew Camilleri; Mathew Camilleri v Feng Chen and Rong Gu

Local Court of NSW|2013-12-03

Background 1These are proceedings in which the Plaintiff, World Square Realty Pty Ltd, seeks to recover the sum of $53,900 in real estate agent's commission under an agency agreement dated 31 August 2013 following the sale of a property in Concord. 2The Defendant, Mathew Camilleri was the developer and vendor of the property. 3The Defendant has Cross-Claimed on an indemnity basis against the Cross-Defendants, Feng Chen and Rong Gu, who were the purchasers of the property. Default judgment has already been entered in favour of the Defendant against the Cross-Defendants on an indemnity basis.

Issues 4The Defendant does not dispute that he entered into an agreement with the Plaintiff. However, the Defendant contends that the Plaintiff is not entitled to recover commission because the agreement is invalid, defective and unenforceable as it does not comply with the requirements of the Property, Stock and Business Agents Act 2002 (the Act) and the Property, Stock and Business Agents Regulation 2003 (the Regulation). The Plaintiff accepts that if the agreement does not comply with the statutory requirements then his action must fail. 5Alternatively, the Defendant contends that the Plaintiff's introduction of the Cross-Defendants was not the effective cause of the sale and therefore the Plaintiff is not entitled to commission under Clause 7(i)(a) of the agreement.

Is the agreement enforceable? 6The Defendant contends that the "SALES INSPECTION REPORT & AGENCY AGREEMENT" (Exhibit 5) is unenforceable because it fails to comply with the following mandatory requirements of the Act and Regulations: (a)The agreement did not specify the commission to be paid in dollar terms (Clause 7(ii) of the Agreement "Commission in dollars will be $..."; Regulation Schedule 7 clause 9); (b)The Sales Inspection Report was not signed by the agent (provision "(Signature of Agent)" just above Clause 1 of the Agreement; Regulation Schedule 2 Part 1 clause 2); (c)Whether the property was "Offered with vacant possession/existing tenancies" was not indicated (Regulation Schedule 2 Part 1 clause 2(f)); and (d)The "Agent's estimate of the selling price, or price range for the property" was not completed (Sales Inspection Report top third of the agreement; Regulation Schedule 2 Part 1 clause 2(h); Schedule 8 clause 7 "The agreement must include a copy of any sales inspection report prepared by the agent and given to the principal under clause 2 of Schedule 2"). 7The Act and Regulations (including the Schedules) provided (emphasis added) at the time of the agreement: Property, Stock and Business Agents Act 2002: Division 1 Requirements for agency agreements 55 No entitlement to commission or expenses without agency agreement (1) A licensee is not entitled to any commission or expenses from a person for or in connection with services performed by the licensee in the capacity of licensee for or on behalf of the person unless: (a) the services were performed pursuant to an agreement in writing (an agency agreement) signed by or on behalf of: (i) the person, and (ii) the licensee, and the agency agreement complies with any applicable requirements of the regulations, and ... (2) The regulations may make provision for or with respect to regulating the form of agency agreements and the terms, conditions and other provisions that an agency agreement must or must not contain. Without limiting this subsection, the regulations may prescribe one or more standard forms of agency agreement. Property, Stock and Business Agents Regulation 2003: 13 Contents of agency agreements (1) For the purposes of section 55 of the Act, an agency agreement must comply with the requirements of Schedules 7-14 as to the terms, conditions and other provisions that an agency agreement must or must not contain, with the application of those Schedules to be as follows: (a) Schedule 7 applies to all agency agreements (in addition to any other Schedule that may be applicable to the agency agreement), (b) Schedule 8 applies to an agency agreement under which the agent will act for the seller on the sale of residential property, (3) An agency agreement must not contain any term, condition or other provision that is inconsistent with a term, condition or other provision that the agency agreement is required to contain by this clause, but otherwise the terms, conditions and other provisions that an agency agreement can contain is not limited by this clause. ... Schedule 2 Rules specific to real estate agents, real estate salespersons and on-site residential property managers Part 1 Sales ... 2 Sales inspection report required for property On completion of the inspection required by clause 1, an agent must prepare and give to the principal a sales inspection report for the property. The report must specify the following and be signed by the agent: ... (f) any terms and conditions of sale known to the agent (for example, whether or not vacant possession is to be given), ... (h) the agent's estimate of the selling price (or price range) for the property, ... Schedule 7 Terms applying to all agency agreements ... 9 Remuneration (1) The agreement must include a term specifying: (a) the circumstances in which the licensee is entitled to remuneration (by way of commission or otherwise) for services performed under the agreement, and (b) the amount of the remuneration or the way in which it is to be calculated, and (c) when the remuneration is payable. (2) If the agreement relates to the sale or purchase of residential property and provides for payment of commission to the agent calculated as a percentage of the sale or purchase price, the term must also specify the amount of the remuneration to which the licensee will be entitled calculated on the basis of a specified estimated sale or purchase price for the property. Schedule 8 Terms specific to agency agreement for sale of residential property ... 7 A sales inspection report to form part of the agreement The agreement must include a copy of any sales inspection report prepared by the agent and given to the principal under clause 2 of Schedule 2. 8The Act and Regulations in question (and similar if not identical earlier provisions) have been the subject of review in the Supreme Court which has adopted a restrictive and stringent compliance approach necessary before an agent can recover commission: Terry Pfeiffer Real Estate Pty Ltd v Connors [2000] NSWSC 452; Investmentsource Corp Pty Ltd v Knox [2002] NSWSC 710; Overmeyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305; Kukolovski v Georges [2011] NSWSC 359. This approach has been consistent notwithstanding sound criticism by Judges that it may operate in a harsh and unfair way: Terry Pfeiffer v Connors at [18]; Overmeyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd at [16]. 9In Kukolovski v Georges Justice Barrett said that the legislation "operates in an absolute and unforgiving way" (at [34], relying upon the other authorities). In that case the agent had incorrectly inserted the business name of the agent as required by clause 2 of Schedule 7 of the Regulation, and did not insert the agent's licence number as required by clause 3 of Schedule 7. Justice Barrett held that "The second of these deficiencies (and probably also the first) is sufficient to attract the disentitlement created by s 55(1)" (at [34]). 10It is not in dispute that the relevant details referred to above were not included in the agency agreement or Sales Inspection Report. 11The Plaintiff submits that Schedule 7 clause 9(2) does not require that the agreement itself (as compared to the Sales Inspection Report) specify an estimate sale price. If there is no estimate sale price (as there was here) in the agreement then clause 9(2) has no application. The Plaintiff then submits that while that is a requirement under Schedule 8 clause 7 that does not mean that the Sales Inspection Report forms part of the agreement as the Defendant contends. 12To the extent that the agreement did include the Sales Inspection Report then Schedule 8 clause 7 has been complied with. The Plaintiff further submits that the Sales Inspection Report is a separate and distinct document from an agency agreement and only a copy of it need be included in the agency agreement. Even if there is non-compliance with the requirements for a Sales Inspection Report then that will not disentitle the Plaintiff as that is not part of the agency agreement referred to in s 55. In any event the plaintiff submits that Schedule 2 clause 2 does not expect that all details are to be included in a Sales Inspection Report and it is even optional as to whether to provide an estimate or a price range. As Schedule 9 clause 2(h) allows either an estimate or a price range then it is optional for the agent to choose one or the other and if the agent chooses a price range then how could the agent provide the amount of remuneration under Schedule 7 clause (9)(2) as there is no estimate. In that situation Schedule 7 clause (9)(2) would still be inapplicable. Further, the Plaintiff submits that as the Defendant was a developer and stipulated the price he wanted ($2,700,000) in the agreement and was not interested in any one else's estimate. 13Finally, the Plaintiff submits that as the agent signed the Sales Inspection Report and Agency Agreement in two places (the agency part just below clauses 7 and 11; and at the bottom concerning the agent providing a copy of the Agency Agreement for the Sale of Residential Property) then clause 2 of Part 1 of Schedule 2 of the Regulation has been complied with. 14The Plaintiff has made no explicit submission concerning the omission to include whether the property is "Offered with vacant possession/existing tenancies" (Regulation, Schedule 2, Part 1, clause 2(f)). The Court assumes that as this requirement forms part of the Sales Inspection Report then similarly the Plaintiff relies upon the argument referred to earlier.

Determination 15In so far as the Plaintiff relies upon the fact that the Defendant was a developer and knew and wanted his own price, the Court concludes that this submission is irrelevant. The Act and Regulations do not discriminate between the business acumen of vendors and contain no "unfairness" provisions often found in consumer protection laws. 16The Plaintiff's submissions cannot stand in the face of the statutory requirements as to what the agency agreement must contain. Section 55(1)(b) strictly requires that "the agency agreement complies with any applicable requirements of the regulations". 17Section 55(2) provides that "The regulations may make provision for or with respect to regulating the form of agency agreements and the terms, conditions and other provisions that an agency agreement must or must not contain. Without limiting this subsection, the regulations may prescribe one or more standard forms of agency agreement." (Court's emphasis) 18Clause 13(1) of the Regulations then similarly follows and instructively provides, "For the purposes of section 55 of the Act, an agency agreement must comply with the requirements of Schedules 7-14 as to the terms, conditions and other provisions that an agency agreement must or must not contain". 19The combined effect of s 55(2) and cl 13(1) is that the Regulations must be read as a whole and for present purposes the agency agreement must comply with the mandated requirements of Schedules 7 and 8, including a Sales Inspection Report that complies with clause 2 of Schedule 2. The Plaintiff's submission that the Sales Inspection Report does not form part of the agency agreement is untenable. The words in Schedule 8 clause 7, "The agreement must include a copy of any sales inspection", are clear and unambiguous and the clear legislative intention is that the Sales Inspection Report forms part of the agency agreement. To construe otherwise would be to ignore the words "must include", as why else would those words appear given that Schedule 2 clause 2 already and separately requires that the agent prepare and give to the principal Sales Inspection Report. The Plaintiff's further submission that Schedule 2 clause 2 does not require all the details to be included in the Sales Inspection Report and that it is optional to include "the agent's estimate of the selling price (or price range)" ignores the words "The report must specify the following and be signed by the agent". In any event the Sales Inspection Report does not contain either an estimate or a price range so on that account alone the submission must be rejected. Further, as the Sales Inspection Report was also not signed it failed to comply with Schedule 2, notwithstanding that the agency agreement was signed in two places but below the Sales Inspection part. Clearly, Schedule 2 requires separate compliance before a valid Sales Inspection Report can be included into the agency agreement. 20As the Sales Inspection Report was not signed, and there was neither an estimate or price range or details of whether the property was being sold by vacant possession or existing tenancies included as required by Schedule 2 clause 2(f) and (h), the agency agreement fails to comply with Schedule 8 clause 7. These omissions relate to material requirements and alone are sufficient to disentitle the Plaintiff the right to his commission under s 55(1). 21The Plaintiff's submission that Schedule 7 clause 9(2) does not require that the agreement itself (as compared to the Sales Inspection Report) specify an estimate sale price is also untenable. The words of the clause indicate "the term must also specify the amount of the remuneration to which the licensee will be entitled calculated on the basis of a specified estimated sale or purchase price for the property" (Court's emphasis). Clearly an amount must be included rather than simply the formula of its calculation. The evident legislative purpose is so that it is clear to the principal what the agent's remuneration will be in dollar terms rather than leaving the principal to do the calculation. Again, this omission relates to a material requirement and alone is sufficient to disentitle the Plaintiff the right to his commission under s 55(1).

Effective introduction 22As the Plaintiff is not entitled to commission because of the failure to comply s 55(1) the Court will only briefly consider for completeness, given the Plaintiff's concession, the material evidence as to whether the Plaintiff had in fact effectively introduced the purchasers. 23The term "effective introduction" (here clause 7(i)(a) of the agency agreement, "effectively introduce to the Principal a purchaser who enters into a contract to buy the property") was considered by the High Court in Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] HCA 2. What is required in any case is a factual analysis of what work was done by the agent and whether that was the "effective cause" of the concluded transaction: Gleeson CJ at [15]; McHugh J at [27] adding at [30], "the law looks at the substance of the matter"; Gummow J at [86], "whether the agent brought about a state of affairs giving rise to the contractual right to the commission"; Kirby J at [135]; and Callinan J at [182], "However, the agent does not have to be the sole cause of the sale to qualify for commission." However, simply introducing a purchaser without more is not sufficient and the "but for" test has been rejected: McHugh J at [27]. 24Both parties have raised reliability issues concerning the evidence of the Plaintiff's employee agent Mr Pendino and the Defendant. The only other witness called in these proceedings was Yuansheng (Mike) Gu, who at all times was acting as the buyers' agent (of the Cross-Defendants). To the extent that he corroborates the evidence of Mr Pendino then his evidence is accepted (and consequently that of Mr Pendino), as it places the Cross-Defendants at prejudice because of the indemnity to the Defendant. 25There is no dispute that it was the Plaintiff through its employee Mr Pendino that first introduced the Cross-Defendants on 17 August 2011 when they attended the property with Mike Gu. 26On 17 August 2011 the Cross-Defendants signed two draft contracts (the price was left blank) for the purchase of the property and left them with Mike Gu. One of those signed contracts is the contract that eventually was entered into with the Defendant with the sale negotiated by LJ Hooker Concord. The Cross-Defendants then returned to China on 18 August 2011 and did not return to Australia until January 2012. 27On 29 August 2011 Mike Gu again inspected the property with Mr Pendino. Coincidentally that is the same day that Mr Pendino met with the Defendant and gave him the signed agency agreement, which the Defendant signed two days later on 31 August 2011. Both parties accept that the agency agreement was entered into on 31 August 2011. The agency agreement on its face is open ended as to the period of the agency but the Defendant maintains that it there was an oral term that it was only for a period of 14 days. Given the agreement is in writing and the Defendant had it for a period of two days before he signed it, the Court is not prepared to accept the Defendant's evidence. 28On 18 September 2011 Mike Gu met with Mr Pendino and gave him the signed contract for a $2.35 million offer together with a cheque for the deposit subject to Foreign Investment Review Board (FIRB) approval. Mr Pendino indicated that as a result of prior conversations with the Defendant that it was unlikely the offer would be accepted. Mr Pendino says that on the following day Mike Gu informed him of FIRB approval and then on 20 September 2011 he met with the Defendant bringing along with him the signed contract and deposit cheque for the $2.35 million offer but it was rejected. Mike Gu says that he was informed of the rejection and then on 20 September says he saw an internet advertisement for the property through LJ Hooker Concord. The Defendant says that offer was made on 2 September 2011 but given the evidence of Mike Gu of handing over the cheque and signed contract to Mr Pendino on 18 September 2011 and being informed of its rejection and then seeing the LJ Hooker advertisement the Court concludes that the offer by Mr Pendino was made on 20 September 2011. 29Thereafter Mike Gu says he made two more inspections of the property and made three to four more offers to purchase the property submitting offers of again $2.35 million, then $2.4 million, $2.41 million and $2.42 million which were rejected by the Defendant, as he wanted $2.5 million. On or about 18 October 2011 Mike Gu made an offer of $2.45 million, which was accepted.

Determination 30What is clear from the substance of the evidence is that as of 17 August 2011 the Cross-Defendants were not only intent on purchasing the property but had taken steps to be ready, willing and able (subject to FIRB approval which was in the hands of their solicitor and acceptance of their offer) to purchase the property by signing the draft contracts. While they themselves only inspected the property once Mike Gu did inspect the property one more time on their behalf. The next relevant and material steps were when Mike Gu contacted Mr Pendino on 29 August 2011 to again inspect the property and then on 18 September 2011 to hand over the signed contract for an offer of $2.35 million together with a deposit cheque. That offer was rejected and thereafter Mike Gu took up negotiations with LJ Hooker Concord when he saw the property advertised by that agency. It appears that it was the persistence of Mike Gu that finally led to a concluded sale with LJ Hooker over the next four weeks. 31However, the preponderance or substance of the evidence is that the sale of the property was brought about by the "effective cause" or "state of affairs" by the actions of the Plaintiff between 17 August and 20 September 2011. That it was not the sole cause of the sale (the actions of Mike Gu after 20 September were a contributing cause) is not to the point as Justice Callinan has said. The Plaintiff did more than simply introduce the Cross-Defendants on the one occasion. Mr Pendino took Mike Gu for a second inspection and then relayed the offer of the Cross-Defendants who had signed the contract and had ready a deposit cheque. Ultimately, the difference between the first and final accepted offer was $100,000, which while substantial is unremarkable compared to the price. By 20 September 2011 the Plaintiff had clearly effectively introduced the Cross-Defendants and it was only the continued negotiating by Mike Gu that contributed to the sale. 32While the Court concludes that the Plaintiff did "effectively introduce" (clause 7(i)(a)) the Defendant to the Cross-Defendant purchasers, the Court has already held that the Plaintiff is otherwise not entitled to its commission. 33A verdict is entered for the Defendant. 34The Court will hear the parties as to any special cost orders. Favretto LCM Downing Centre Local Court 3 December 2013

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. Decision last updated: 06 March 2014

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Judgment (7 paragraphs)

Cases Cited (5)