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  • Unreported Judgment

Equity 2 Pty Ltd v Best Price Real Estate Pty Ltd

 

[2020] QDC 180

DISTRICT COURT OF QUEENSLAND

CITATION:

Equity 2 Pty Ltd v Best Price Real Estate Pty Ltd [2020] QDC 180

PARTIES:

EQUITY 2 PTY LTD ACN 138 153 367

(plaintiff)

v

BEST PRICE REAL ESTATE PTY LTD ACN 136 134 025

(defendant)

FILE NO/S:

D73/20

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court, Southport

DELIVERED ON:

3 August 2020

DELIVERED AT:

Southport

HEARING DATE:

17 July 2020

JUDGES:

Kent QC, DCJ

ORDER:

  1. (a)
    The defence is struck out pursuant to r 171 of the UCPR as not disclosing a reasonable defence, without leave to re-plead;
  2. (b)
    Summary judgment is given in favour of the plaintiff against the defendant pursuant to r 293 of the UCPR;
  3. (c)
    The defendant pay the plaintiff’s costs, unless a party contends for a different order as to costs, in which case the contending party should file a further written submission on that issue within seven days, with the opposing party to have seven days to respond, upon which the issue shall be determined on the papers.

CATCHWORDS:

CONVEYANCING – THE CONTRACT AND CONDITIONS OF SALE – AGENT’S COMMISSION – where the applicant was appointed as the exclusive agent to market and sell property – where the respondent introduced a buyer to the applicant – where a conjunction agreement was entered into entitling the respondent to a share of the commission contingent upon the sale to the nominated buyer – where the property was sold to a different buyer – where a portion of the commission was distributed to the respondent – whether the respondent was the effective cause of sale of the property – whether the respondent is entitled to a share of the commission pursuant to the conjunction agreement.

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – whether there is an implied term in the conjunction agreement that the respondent is entitled to a share of the commission notwithstanding the property was sold to a different buyer and the respondent was not the effective cause of sale of the property – whether the applicant acted in breach of an implied duty to cooperate – whether the applicant acted in breach of an implied duty to act in good faith in the performance of the contract.

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OF DEFENCE – where the plaintiff seeks orders that the defendant’s defence be struck out – whether the defendant discloses a reasonable defence – whether leave should be granted to re-plead.

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR PLAINTIFF OR APPLICANT – where the plaintiff seeks summary judgment against the defendant – whether the defendant has any real prospect of defending the claim – whether there is a need for a trial.

COUNSEL:

J. Faulkner for the Plaintiff/Applicant

N. M. Cooke for the Defendant/Respondent

SOLICITORS:

Woods Hatcher Solicitors for the Plaintiff/Applicant

Redmond + Redmond for the Defendant/Respondent

Nature of application

  1. [1]
    The plaintiff is applying for a number of orders:
    1. (a)
      Firstly, that the defence be struck out in whole or in part pursuant to r 171 of the Uniform Civil Procedure Rules 1999 (Qld) (the ‘UCPR’);
    2. (b)
      Secondly, or in the alternative, that the plaintiff be given summary judgment on its claim pursuant to r 292 of the UCPR; and,
    3. (c)
      Finally, consequential orders such as costs.
  1. [2]
    The applicant was engaged as an agent to sell premises situated at 24 Frank Street and 4 Brett Avenue Labrador on the Gold Coast (the ‘development sites’; premises occupied, or formerly so, by a business known as “Cav’s Steakhouse”) by the vendor, Toompani Enterprises Pty Ltd (‘Toompani’). The respondent introduced a proposed purchaser, Trevato Pty Ltd (‘Trevato’), and a written conjunction agreement was entered into thereafter, which purports to entitle the respondent to a proportion of the commission upon the sale of the property pursuant to its terms. The property was ultimately sold to a different purchaser.
  2. [3]
    The central issue arising from the statement of claim is whether the respondent is entitled to a proportion of the applicant’s commission for the sale of the land, notwithstanding that it was sold to a different entity than that introduced by the respondent.
  3. [4]
    The matter came on for hearing in the applications list on the 17th July. Notwithstanding the estimate of 60 minutes, it occupied about 4.5 hours of court hearing time on that day; judgement was reserved, and short further written submissions were requested as to a particular possibly relevant authority. Matters of this level of complexity and importance (e.g. where in effect final relief is sought) can consume a significant amount of court time on busy applications days.
  4. [5]
    Obviously it is best for the efficient conduct of the court’s business if such estimates can be made more accurately; sometimes such matters, when it becomes clear they will exceed two hours, may go off to the civil list. Further, the fact that written outlines are only exchanged on the day of hearing can sometimes cause a difficulty; the opponents may have different perceptions of the case and may present, or emphasise, different aspects of the potential arguments and issues. Sometimes the outlines are like “ships that pass in the night” (and in some respects this was such a matter). Nevertheless the arguments were fully ventilated in this case.

Summary judgment/strike out of the defendant’s defence

  1. [6]
    Rule 293 of the UCPR requires the applicant to satisfy the Court that: (a) the respondent/defendant has no real prospect of succeeding on some or all of the applicant/plaintiff’s claim; and (b) that there is no need for a trial of the claim or the part of the claim.
  2. [7]
    This is said to be clear and plain language.[1]
  3. [8]
    The rules should be applied using their clear and ambiguous language and keeping in mind the purpose of the UCPR to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense, pursuant to r 5.[2] The appropriate enquiry is in terms of the rule itself, that is, whether there exists a real, as opposed to fanciful, prospect of success.[3]
  4. [9]
    Rule 171 of the UCPR similarly requires the applicant/plaintiff to satisfy the court, inter alia, that the defence discloses no reasonable defence. Again, this discretion should only be exercised in clear cases, bearing in mind the evidence is at this stage untested; see Royalene Pty Ltd v Registrar of Titles.[4]

The facts

  1. [10]
    The action is suitable for summary determination, given the material facts are not generally contentious (subject to some qualifications identified below), rather, there is a disagreement as to the interpretation of the written conjunction agreement. The chronology of events appears to be as follows:
    1. (a)
      The parties are real estate agents. On or about July or August 2019, representatives of the respondent company advised the applicant that the respondent had developers interested in development sites (it seems the sites presently in question were not then openly on the market, but Mr Holmes of the applicant shortly thereafter advised the respondent of them).
    2. (b)
      On 24 September 2019, the respondent issued the applicant with a written offer from Trevato to purchase the development sites. Trevato has a sole director, Mr Turner.
    3. (c)
      On 9 October 2019, a representative of the applicant emailed a representative of the respondent advising of the circumstances upon which it would be paid a proportion of the commission under the sale. It relevantly provided that

the commission split available in the event the your (sic) prospective purchaser settles the contract… has been mutually agreed… is 33.3% plus GST for each party involved.’ (“each party involved” referred to the applicant, the respondent, and a Mr Schultz, a person associated with the respondent)

  1. (d)
    On 30 October 2019, the applicant was appointed by Toompani as the exclusive agent to market and sell the development sites. The appointment was for a single term commencing (perhaps curiously) on 1 October 2019 and expiring 30 May 2020. The commission payable to the applicant on sale was $440,000.
  2. (e)
    On or about 31 October 2019 (following discussions and negotiations), a formal contract between Trevato and the vendor was entered into for the purchase of the development sites (the ‘first contact’). It was for a purchase price of $8,350,000 and accompanied by a guarantee by Mr Turner.[5]
  3. (f)
    On 27 November 2019, Aelone Pty Ltd (‘Aelone’) was incorporated. Mr Lowe was the sole director and shareholder thereof.
  4. (g)
    On 28 November 2019, Frank Developments Pty Ltd (‘Frank Developments’) was incorporated. Mr Turner was the sole director.
  5. (h)
    On 3 December 2019, a representative for the respondent emailed to a representative for the applicant a draft conjunction agreement to be completed and signed; this occurred on 4 December[6]. It may be noteworthy that the draft originated from the respondent. Item 3 ‘Basis of Conjunction Agreement’ relevantly provides that ‘The Conjunction Agency introduces the Prospective Purchaser/s… to the Listing Agency for the sale of the Property...’. The conjunction agreement also provides that:
    1. The ‘Property’ is 30 Frank Street, Labrador 4215 QLD;
    2. The ‘Conjunction Agent’ is Best Price Real Estate Pty Ltd;
    3. The ‘Listing Agency’ is Equity 2 Pty Ltd;
    4. The ‘Prospective Purchaser’ is Trevato Pty Ltd
    5. The “Conjunction Agent” (the respondent) was to receive 66.6% of the commission and the “Listing Agency” (the applicant) 33.3%
  6. (i)
    It transpired that Trevato was ultimately unable to complete the purchase under the first contract; it could not obtain a suitable valuation to obtain finance.
  7. (j)
    On 9 December 2019, Frank Developments and Aelone entered into a joint venture agreement to acquire and develop the development sites. Frank Developments is defined as the ‘Company’ and Aelone is defined as the ‘Owner’.
  8. (k)
    In early December 2019, Mr Turner introduced the plaintiff to an alternative purchaser, being Aelone.
  9. (l)
    Following negotiations between Toompani and Aelone, a Deed of Recession was entered into whereby the first contract between Trevato and the vendor was formally terminated. The Deed is undated but is pleaded to have been signed at or about the time of execution of the second contract[7] (as to which see below). The parties, Toompani, Trevato and Turner released each other from all contractual obligations and the parties were returned to their pre-contractual status.
  10. (m)
    On 31 December 2019, a written contract to purchase the land between Aelone and the vendor was entered into (the ‘second contract’). The purchase price was reduced and there was now a guarantee by Mr Lowe; i.e. the contract had changed significantly.
  11. (n)
    On 12 January 2020, the defendant’s solicitors emailed the plaintiff demanding payment of a proportion of the plaintiff’s commission pursuant to the conjunction agreement.[8]
  12. (o)
    On 15 January 2020, the defendant’s solicitor emailed the plaintiff, the vendor and its solicitors advising them of its client’s purported rights under the conjunction agreement.[9]
  13. (p)
    On or about 16 January 2020, the second contract settled.[10]
  1. [11]
    Upon settlement, the funds were distributed as follows:
    1. (a)
      The defendant received $176,000.00 (including GST);
    2. (b)
      The plaintiff received $88,000.00 (including GST); and,
    3. (c)
      The balance of $66,000.00 (including GST) was and remains held in the trust account of the vendor’s solicitors.

The Pleadings

  1. [12]
    The Statement of Claim sets out the above narrative. A Mr Holmes is the sole director and shareholder of the applicant; Mr Westwood occupies the same positions for the respondent. Paragraph 17 of the statement of claim pleads the introduction, by Turner (i.e. not the respondent), of an alternative purchaser, Aelone (paragraph 18 pleads the relationship of Lowe to Aelone) to the applicant and Toompani in early December. The amended defence denies this paragraph, saying Lowe was the third party financial backer for Turner (and giving details of the joint venture arrangements between them), and in effect he required the land to be acquired in the name of Aelone. It is not clear to me that this is, in terms, a denial of the proposition in paragraph 17 that the introduction, whatever its causes, occurred in early December (i.e. following the exclusive agency agreement and probably the conjunction agreement) or that it was Turner who did it.
  2. [13]
    However, the amended defence pleads in paragraph 15(e) that the Joint Venture agreement (which commenced on 9 December) created an “association” between Turner, Trevato and Aelone, such that Aelone was not an “alternative purchaser” of the land. This seems to be the basis of the denial of paragraph 17; the pleading seems to be that because of the association, the new company was not really separate from Trevato, in the sense of the two entities being mutually exclusive. However, as the applicant submits, there is no pleading or evidence that the applicant knew of these details such as to have any relevant impact on the true nature and construction of the conjunction agreement. It seems to me that this stylisation by the respondent of the association between Trevato and Aelone (i.e. were they separate or not?), and its impact, if any, on the contractual arrangements between the parties is an important issue in this matter.
  3. [14]
    The statement of claim also pleads that the payment of the $176,000 to the respondent at settlement was not contested in the context of threats to frustrate the settlement, giving rise to duress. Thus its return is sought. There is also reference to unjust enrichment. The defence joins issue with these matters.

The applicant’s argument

  1. [15]
    The applicant plaintiff says that the respondent’s defence should be struck out, and/or seeks summary judgment. It argues that the respondent was not entitled to a portion of the commission because:
    1. (a)
      The conjunction agreement was contingent upon the sale being made to Trevato, which had failed by at least 31 December 2019. The two entities (it and Aelone) were not related corporations under the Corporations Act and were simply quite separate. In the circumstances the agreement is clear and no entitlement to a share of the commission arises from it in the respondent’s favour;
    2. (b)
      The payment to the respondent was made where there had been a total failure of consideration and under duress as outlined above;
    3. (c)
      The defence relies on the implication of terms to the respondent’s benefit which should not, in the circumstances, occur, alternatively estoppel which also does not arise; and,
    4. (d)
      The respondent has no other entitlement to receive the commission in the circumstances.
  2. [16]
    In effect, the applicant argues that the respondent’s only entitlement to commission could have arisen pursuant to the conjunction agreement which specifically and singularly names Trevato as the purchaser, being the entity it introduced; no such transaction occurred and thus there is no entitlement to commission for the respondent; and the facts and issues are so clear as to make this an appropriate case for strike out and summary judgement.

The respondent’s argument

  1. [17]
    The respondent submits that it is entitled to commission pursuant to the conjunction agreement notwithstanding that the property was not sold to the Prospective Purchaser (or at least that this proposition is sufficiently arguable as to make strike out and summary judgement inappropriate).

The agreement and its definition of “Client”

  1. [18]
    The respondent points in particular to the definitions attached to the terms of the conjunction agreement,[11] where “Client” means “Seller/Vendor or Prospective Purchaser or Purchaser. It emphasises “or Purchaser” to submit that the agreement considered a circumstance where the purchaser of the property is not necessarily the (then) prospective purchaser of the property. However it seems to me that the difficulty with this argument is that the actual agreement, apparently prepared by the respondent, did not insert any reference to a “client”.
  2. [19]
    The agreement, at least in its form as signed, has the respondent as the Conjunction Agent and the applicant as the Listing Agency (these terms have been amended in handwriting on the document; there is not suggested to be any relevant factual dispute arising from this). It was the applicant which signed the “Listing Agency Agreement & Acceptance” at the foot of the operative part of the document. That is the only part of that document which refers to the term “client” and nothing is inserted in the relevant space. In context, if anything had been inserted, it may have been more likely to be the applicant’s client (Toompani) rather than the prospective purchaser or purchaser. This highlights the fact that the handwritten amendments to the agreement reverse the positions of the Listing Agency and Conjunction Agency on the printed form; this alone makes it very difficult, in my view, for the respondent to rely on the definition of “client” in the way it seeks to do. In any case, as set out above, nothing is inserted in the relevant space; the document only refers to a singular prospective purchaser.

Implied term of good faith

  1. [20]
    The respondent further argues that in the exercise of construing the agreement, a term of good faith is implied in fact and/or by law, such that the terms of the contract would be fulfilled if the agent had contributed to bringing about the sale and purchase of the land. To interpret the conjunction agreement otherwise, it says, is to act entirely outside the confines of good faith.
  2. [21]
    The defendant relies upon on the case of Propcare Pty Ltd v Orchid Avenue Realty Pty Ltd[12] to support the above proposition.
  3. [22]
    Propcare concerned an appeal from the Magistrates Court involving two real estate agents; the respondent recovered judgment against the appellant for an amount of $20,022.75 together with interest as money payable under a conjunction agreement for the sale of property for which the appellant held an exclusive agency. The appeal was dismissed; in effect the conjunction agreement was found to be operative in that case.
  4. [23]
    The central premise of the appellant’s argument at trial was that the respondent was not entitled to sue under the conjunction agreement by operation of law (under the Property Agents and Motor Dealers Act 2000), which is not strictly relevant to this matter. More relevantly, however, was that there were apparently a number of defects with the conjunction agreement, including that:
    1. (a)
      The description of the conjunction agent was ‘Ray White Main Beach’, whereas the evidence was that the respondent carried on business at Main Beach under the name ‘Ray White Surfers Paradise – Main Beach’;
    2. (b)
      The document referred to it being signed by the ‘licensee’, however the document was not signed by someone who held a real estate agents licence; and, importantly;
    3. (c)
      The ultimate buyer in the contract was a different legal entity from what was disclosed as the ‘prospective purchaser’ under the conjunction agreement.
  5. [24]
    McGill SC DCJ was not persuaded that there was any such technical deficiency so as to invalidate the contract and the appeal was dismissed with costs.
  6. [25]
    Although a copy of the conjunction agreement in Propcare was not annexed to the published judgment, what appears from his Honour’s reasons is that the ‘prospective purchaser’ nominated was an entity called Amalgamated Property Group; an incorporated legal entity capable of purchasing the property was not nominated. His Honour reasoned that:

It seems that a particular company associated with the particular developer, with whom the group was associated, undertook the purchase of the land, and in those circumstances it appears that the appropriate inference is that that company was a member of the group.[13]

  1. [26]
    His Honour then made the following observation, which is relied upon by the respondent in this matter:

I do not consider that a conjunction agreement would be rendered invalid because the prospective purchaser was nominated in that way, because it may be unknown even by persons in control of the group which particular company would be used ultimately to purchase the land…[14] and …Indeed, the document is somewhat cryptic as to the circumstances under which the conjunction agent’s commission will be payable, but the ordinary inference would be, if that agent had contributed to bringing about the sale and purchase of the land, that is, if he was an effective cause of the sale that eventuated.[15]

  1. [27]
    The main question which arises as to whether the reasoning and result in Propcare is analogous to this matter is whether in this case the conjunction agreement is ambiguous, or ‘cryptic’, as to the proposed purchaser, as Judge McGill considered. The further issue touched on by his Honour, as to the respondent having contributed to bringing about the sale and purchase of the land such that it was an effective cause of the sale that eventuated, is also engaged in submissions. Both must be examined.
  2. [28]
    The respondent’s case as advanced is that:
    1. (a)
      Firstly, the conjunction agreement contemplates a situation where the eventual purchaser of the property is not the same entity as the prospective purchaser named in the agreement, particularly with reference to the definition of “client” referred to above. Further, any inconsistencies in this regard are cured by a number of implied terms, including that:
      1. The parties will act and negotiate in good faith;
      2. There is a duty to co-operate and negotiate in order to perform the terms and purpose of the agreement; and,
      3. The parties will give business efficacy to the terms of the agreement to ensure that any actual purchase that eventuated with a connection or link either directly or indirectly with the Prospective Purchaser would be considered as the Prospective Purchaser for the purposes of the conjunction agreement.
    2. (b)
      Secondly, it says (in submissions, although not, as far as I am aware, in pleadings or evidence) that the defendant was the effective cause of sale of the property; it was through Trevato, which the defendant introduced to the plaintiff, that the eventual purchaser, Aelone, became aware and subsequently purchased the property. That is, the director of Trevato, Mr Turner, entered into a joint venture agreement with the eventual purchaser, Aelone, to develop the development sites.
    3. (c)
      In all these circumstances, the respondent submits it has an arguable case as to its proportion of the commission and ought not be summarily shut out at this stage from being able to properly contest the matter at trial, on the basis of the applicable tests for strike out and summary judgement against a defendant.

Consideration – the issues

  1. The express terms of the conjunction agreement
  1. [29]
    Whether an agent is entitled to commission will depend on the terms of the agency agreement.[16] The initial question, then, is what, on the proper construction of the contract, is the event upon which the agent acquires a right to commission?
  2. [30]
    The conjunction agreement is unambiguous in its terms. The basis of the conjunction agreement is that the Conjunction Agency introduces the (emphasis added, i.e. the definite article is used rather than, by contrast, an indefinite article such as “a”) Prospective Purchaser to the Listing Agency for the sale of the Property.[17] The Conjunction Agency will, at or before Settlement, provide an invoice to the Listing Agency and the Listing Agency will pay the Conjunction Agency’s Commission Entitlement forthwith upon the Listing Agency receiving payment of the sales commission.[18]
  3. [31]
    On a strict interpretation of the conjunction agreement, the respondent would not be entitled to a commission on the sale of the property if it were sold to anyone other than the named Prospective Purchaser. This is the result for which the applicant contends; the first contract did not proceed and was completely rescinded; the parties went back to their pre-contractual positions; and the new purchaser was a separate, unassociated entity.
  4. [32]
    For the respondent to succeed purely on the terms of the agreement, there would have to be a term in the conjunction agreement that would entitle it to commission whether or not the sale was not made to the Prospective Purchaser nominated under the conjunction agreement. Such a term does not exist in the conjunction agreement and for the defence to have any merit must be necessarily implied as a question of fact and law.
  1. Implication of a term
  1. [33]
    The term suggested is pleaded at paragraph 10(e) (iii) 8 of the amended defence, to the effect that any actual purchaser or vehicle for the actual purchaser that eventuated with a connection or link either directly or indirectly with the Prospective Purchaser would be considered as the “Prospective Purchaser” for the purposes of the Conjunction Agreement. It can immediately be seen that the term sought to be implied is very wide, and much broader in scope than the actual written term. It is pleaded to be necessary to ensure business efficacy of the agreement.
  2. [34]
    The respondent submits this can be implied, particularly where it was the effective cause of sale to the ultimate buyer (this is submitted by the respondent in paragraph 28 of its submissions; the footnoted reference to an exhibit does not, so far as I can understand, particularly support this; and I am not aware of other evidence, or pleadings, to this effect).
  3. [35]
    For there to be an implied term on the basis articulated in the preceding paragraph, it must be consistent with the tests enunciated in Codelfa Construction Pty Ltd v State Rail Authority (NSW). The relevant passage in the judgment of Brennan J, dealing with the implication of a term other than was is necessary ‘to make the written contract work, or conversely, in order to avoid an unworkable situation’ is as follows:

‘If it appears from the written contract that a term is to be implied, there are conditions which any proposed term must satisfy. They were stated by the majority judgment in BP Refinery and adopted by Mason J with the concurrence of the other members of this court in Secured Income Real Estate v St Martins Investments Pty Ltd (supra). Those conditions are:

‘1. It must be reasonable and equitable;

  1. 2.It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
  2. 3.It must be so obvious that ‘it goes without saying’;
  3. 4.It must be capable of clear expression;
  4. 5. It must not contradict any express term of the contract.’[19](citations omitted)
  1. [36]
    In my view, such a term should not be implied in the circumstances.
  2. [37]
    Firstly, it is not reasonable and equitable. It is true that the respondent introduced a buyer pursuant to the first contract and indeed brought them to the brink of sale (and ostensibly expended significant time and resources in doing so), however it is not reasonable and equitable then that they would be entitled to a commission simply by virtue of their unfruitful efforts. This would have had the effect of disproportionately benefiting the respondent and burdening the applicant.
  3. [38]
    Secondly, it is not necessary to give business efficacy to the agreement; it is efficacious in its present form, and would have entitled the respondent to commission if Trevato could have settled. Conversely if, as the respondent argued, it was the effective cause of the sale to Aelone, a new conjunction agreement could have been drafted nominating a new Prospective Purchaser (or the original agreement could have been more broadly drafted). In any case, this is not what occurred truly occurred in this matter; there is no, or at best a tenuous, causal relationship between the respondent’s actions and the sale.
  4. [39]
    Thirdly, it is not so obvious that it goes without saying. The obvious interpretation of the conjunction agreement is that if the nominated (specific, in contrast with the Propcare situation) Prospective Purchaser purchased the property in accordance with the agreement, then the respondent would be entitled to a share of the commission. It is not so obvious, in my view, that the respondent would still be entitled to a proportion of the commission if the director of the Prospective Purchaser, who was also the director of another company, entered into a joint venture agreement at some stage with yet another company, and that third company ultimately purchased the development sites.
  5. [40]
    Finally, it is not capable of clear expression, and it is not consistent with the express terms of the contract, which clearly provide that the conjunction agreement is contingent upon the property being sold to the nominated Prospective Purchaser. This is not a case, as in Propcare, where the nominated Prospective Purchaser was not an incorporated legal entity, and thus an inference had to be drawn as to what was intended by the parties. Rather, it was clearly expressed under the conjunction agreement that Trevato would be the purchaser, and when this did not transpire, the conjunction agreement had no authority over the eventual sale to a different purchaser.
  6. [41]
    The obligation to pay the respondent a commission was subject to the contingency outlined above, which did not come to pass; a term that the respondent would still be entitled to a commission if a different company under different directorship purchased the property should not be implied.
  7. [42]
    This is not to say that it is not be possible in the right circumstances to imply a term that if the vendor disposes of the property as a result of an introduction effected by the respondent, the respondent would be entitled to a commission notwithstanding the change from the nominated Prospective Purchaser under the conjunction agreement. The fact is, in this matter, the property was sold to an entity with which the respondent had no relationship and which it did not introduce to the applicant.
  8. [43]
    Thus, the articulated term should not be implied.

3. Implied duty to co-operate and act in good faith

  1. [44]
    The respondent further calls in aid the above duties, both, as I understand the submissions, as implied terms in their own right and to help the process of the implication of the essential term contended for.
  2. [45]
    It is trite that there is an implied duty upon the parties to co-operate in the performance of the contract; both parties are required to do all that is reasonably necessary on their part to enable the other party to have the benefit of the contract.[20] However, this duty has limits – a contract may contemplate many benefits, but each can only call on the other to provide, or co-operate in providing, benefits promised by that party.[21]
  3. [46]
    Similarly, the implied duty to act in good faith (although not settled in contract law) includes:

An obligation to act honestly and with fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for…[22]

  1. [47]
    The respondent submits that in relation to the duty to act in good faith, it was the effective cause of sale and should be rightly compensated for having done so. It was sufficient that it “linked” a purchaser with the vendor and the sale eventuated. It argues that the contrary construction contended for by the applicant is overly technical.
  2. [48]
    As to the implied duty to co-operate, the respondent submits that where it was the effective cause of the sale, the applicant is duty bound to share the commission. This is within the duty of co-operation because it doesn’t override the express terms of the agreement, which requires the payment be made; this is a fundamental contractual obligation requiring the applicant’s co-operation; and it is not unreasonable. A number of authorities are referred to.[23] The referenced passages include the following quote from Justice McHugh:

“In terms (the duty of co-operation) applied only to a case where the parties have agreed to do something which required their joint cooperation. It does not apply to a case where one party has promised to pay money or confer a benefit in exchange for the other party’s act or forbearance. Where a person promises that he will pay money or confer a benefit the fulfilment of which is dependent upon the existence of a state of affairs or condition, a term that the promisor will do nothing to put an end to that state of affairs or condition will only be implied where the promisee has already given consideration for the promise and the promisor has a present obligation to fulfil the promise.” (see Elders IXL Limited v National Employers Mutual General Insurance Association Limited (1988-89) 5 ANZ Insurance Cases 60-847)

  1. [49]
    The duty to co-operate may be implied so as to require co-operation in certain matters, where such a term is necessary; there cannot be a duty to co-operate in bringing about something which the contract does not require to happen.[24] The duty requires performance only of acts necessary to preserve the “benefits of the contract”, not “the benefit of the party”[25].
  2. [50]
    In my view, in the present case the applicant acted reasonably and did nothing that would undermine any duty to co-operate or act in good faith. The applicant did not, on the present pleadings and evidence, sell the property to Aelone to deprive the respondent of its commission, and it is not relevant to the applicant’s liability or otherwise that the director of the proposed Prospective Purchaser agreed with Aelone to secure and develop the property under Aelone’s ownership. It was not by the vendor’s nor the applicant’s default that the sale pursuant to the first contract did not manifest. The dropping out of the Proposed Purchaser and the re-enlivenment of a different contract with a different purchaser on different terms including a valuation and/or guarantee the Proposed Purchaser could apparently not provide, did not involve a refusal to engage in joint co-operation or lack of good faith. The respondent’s argument that it is entitled to the commission on the basis of an implied duty to co-operate and/or act in good faith is without merit.
  1. Effective cause of sale?
  1. [51]
    The next question, then, is whether commission is payable in the event that the respondent was the effective cause of the sale, or in other words, that its completion was effected by the respondent’s agency? As noted above, although this arose in submissions, it does not appear to be pleaded; nevertheless, having been raised, it must be considered, particularly in an application of this kind, as I have mentioned, for, effectively, final relief.
  2. [52]
    The meaning of ‘effective cause of sale’ was considered in LJ Hooker Ltd v WJ Adams Estates Pty Ltd,[26] which was heard before the High Court of Australia on appeal from the Supreme Court of New South Wales. The decision, being of possible relevance (it was the subject of commentary in Propcare at [21]), was referred to the parties who made further submissions.

LJ Hooker

  1. [53]
    In LJ Hooker, the owner of land appointed an estate agent to sell it. The agent introduced the owner to company A, which made several unsuccessful offers to purchase the land. Meanwhile, the owner entered into negotiations with company B, which had not been introduced by the agent, but was prepared to meet the purchase price. Company A and company B became known to each other and agreed to complete the purchase and carry out the redevelopment of the site ‘jointly on a basis of equality’, however the vendor did not know of this agreement. The sale was made to company B. Shares in the purchaser company were then allotted to company A so that each companies held an equal number of shares in it.
  2. [54]
    It was plain from the evidence that the company which signed the contract to purchase the property was not the purchaser introduced to the vendor or to the respondent by the appellant; the appellant contended that it was entitled to commission upon the sale of the property because it introduced the property to a company on whose behalf the appellant claims the property was purchased jointly. The plurality, including Barwick CJ, did not find this to be an acceptable hypothesis, and that the agent had not introduced the purchaser to the owner or to the land, nor was he an effective cause of the sale, thus was not entitled to commission. Thus the result, at least, does not favour the respondent’s position.
  3. [55]
    Barwick CJ reasoned that:

No effort or activity of the appellant formed any part of the causation of that sale. It did not introduce the property to the actual purchaser: it did not introduce company A to company B: nor was it in any way instrumental in or the cause of the formation of the agreement…. The most that could be said is that, if the appellant had not introduced the property to company A, that company would have no interest in company B's efforts to acquire the property or to make the agreement of 6th May. But clearly, in my opinion, even if the appellant's introduction of company A to the property could be regarded as having any effect upon the creation of the joint venture, that effort could be no more in law than a causa sine qua non (a necessary cause or condition) and not a cause even of the formation of the joint venture, supposing there to be one, let alone a cause of the sale of the property to that joint venture, again supposing there was such a saleI am unable to accept the conclusion that, because company A made an agreement with company B through which it acquired an interest in the property the subject of sale by the respondent to company B, the appellant is entitled to any commission upon that sale.

Respondent’s Submissions

  1. [56]
    On this point, the respondent submits the present case should be distinguished as it introduced both the prospective purchaser and the eventual purchaser. It argues that at all material times Lowe was the joint venturer to Turner (Trevato) and vice versa, including from the time of the first contract, to the knowledge of all the parties; however as I understand it, the evidence and pleadings simply do not go that far.

Applicant’s Submissions

  1. [57]
    The applicant submits that the present case is distinguishable from LJ Hooker because the factual matrix was dissimilar; the court there was not considering the construction of a written contract of agency, as here. However, as in LJ Hooker, in the present case, again, the nominated “Prospective Purchaser” introduced by the defendant did not complete the contract, and further, by way of contrast, was not capable of doing so. An agent expending significant time and energy is not enough.[27] Barring collusion to deprive the agent of its commission[28] a joint venture agreement does not assist the respondent; and this is simply not suggested to be a case of collusion. The pleadings and evidence do not suggest the applicant knew of the joint venture, its terms, or the entity Frank Developments.
  2. [58]
    Further the applicant submits that even if it did have such knowledge, it is irrelevant to the present dispute because the present case concerns a conjunction agreement rather than an agency appointment by a vendor, as in LJ Hooker. What is being contested here is the rights to the proportions of the commission, pursuant to the conjunction agreement. The applicant says in the absence of evidence of collusion, any knowledge of the joint venture would in any case be irrelevant.
  3. [59]
    The applicant further submits that in truth the respondent concedes it did not introduce the ultimate purchaser, and there is no evidence or pleading that it was “instrumental” in Aelone signing and concluding the contract. It was not the “effective cause of sale”[29] (quaere whether the actions of the agent really brought about the relation of buyer and seller) and it does not plead or advance any evidence that it was (although, curiously, the respondent’s written submissions at paragraph 28 do use this phrase, as I have mentioned above).
  4. [60]
    The applicant submits that the only proper construction of the conjunction agreement which is sensible and consistent with the evidence is that the respondent was entitled to a proportion of the commission if Trevato settled the contract; this did not happen and the respondent fails.
  5. [61]
    Thus the applicant submits that the respondent cannot succeed in its defence, which has neither principle nor authority to support it[30]. It is not accepted by the applicant that the respondent could be found to be the effective cause of sale of the property to the purchaser.
  6. [62]
    In my view the applicant’s submissions on this point must be accepted.

Conclusion

  1. [63]
    It is clear that the respondent is not entitled to commission pursuant to terms of the conjunction agreement. It is not enough – in the context of the contractual arrangements clearly and mutually entered into by the parties - simply that the respondent exhausted considerable time and energy in the interests of the applicant and brought the original prospective buyer to the brink of settlement; the respondent must show that the sale – to that specifically nominated Prospective Purchaser - was actually effected by its agency.
  2. [64]
    For the reasons articulated above, it is my view that the applicant is correct in its argument that the defence discloses no reasonable defence where
  1. The respondent’s entitlement to commission under the express terms of the conjunction agreement does not arise;
  2. The consequential arguments for implied terms, including the pleaded terms, on the basis of the principles in Codelfa, or on the basis of a duty to co-operate or act in good faith, to assist it should be rejected;
  3. In the circumstances, there is nothing giving rise to an actionable estoppel;
  4. There is no pleading or evidence to support the proposition that the respondent was an effective cause of the eventual sale, either as an aid to the exercise of considering the implication of the required terms or amended terms of the agreement, or as a separate basis of recovery of the commission or a proportion of it.
  1. [65]
    Thus the defence does not disclose a reasonable defence and should be struck out pursuant to R 171; there are no further or other facts suggested to exist which would make any amendment of the pleading more arguable and thus it is not a situation where there should be leave to re-plead; the respondent has no real prospect of success and there is no need for a trial in this matter.

Orders

  1. [66]
    The orders will be as follows:
    1. (a)
      The defence is struck out pursuant to r 171 of the UCPR as not disclosing a reasonable defence, without leave to re-plead;
    2. (b)
      Summary judgment is given in favour of the plaintiff against the defendant pursuant to r 293 of the UCPR;
    3. (c)
      The defendant pay the plaintiff’s costs, unless a party contends for a different order as to costs, in which case the contending party should file a further written submission on that issue within seven days, with the opposing party to have seven days to respond, upon which the issue shall be determined on the papers.
  2. [67]
    The above orders are necessarily somewhat broad brush in nature, following as they do the relief sought in the application. Hopefully their effect is clear and no further disagreements arise in their application. If any refinement thereof, or more particular orders is necessary or desirable to put the orders into practical effect, the parties have liberty to apply.

Footnotes

[1] LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd [2011] QCA 105 at [30] per White JA.

[2] Deputy Commissioner of Taxation v Salcedo [2002] 2 QDR 232 at [2] per McMurdo P.

[3] Queensland University of Technology v Project Instructions (AUST) Pty Ltd (in liq) [2003] 1 Qd.R. 259 at [265] per Holmes J.

[4] [2007] QSC 059 at [6] per McKenzie J

[5] Exhibit “WHR-1” to the affidavit of Mt Redmond sworn 16 July 2020

[6] Exhibit “NWH 16” to the affidavit of Mr Hatcher, Court file document no. 8

[7] Statement of Claim, paragraph 20 (b); not admitted in paragraph 17 of the Amended Defence

[8] Paragraph 25 of the Statement of Claim

[9] Ibid paragraph 26

[10] Ibid paragraph 23

[11] Affidavit of Mr Hatcher, court file document no. 8, exhibit “NWH 16 at p 3

[12] Propcare Pty Ltd v Orchid Avenue Realty Pty Ltd [2012] QDC 361 (‘Propcare’)

[13] Ibid [19].

[14] Ibid [20].

[15] Ibid [21].

[16] Luxor (Eastbourne) Ltd v Cooper [1941] QC 108.

[17] Item 4 of the conjunction agreement.

[18] Clause 4: Remuneration, of the conjunction agreement.

[19] (1982) 149 CLR 337 at 404

[20] Secured Income Real Estate (Australia) Ltd v St Martins Investment Pty Ltd (1979) 144 CLR 596.

[21] Australis Media Holdings Pty Ltd v Telstra Corp Ltd (1998) 43 NSWLR 104.

[22] Paciocco v Australian and New Zealand Banking Group Limited [2015] FCAFC 50, 228.

[23] Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 125; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51 at 607-608; Jackson Nominees Pty Ltd v Hanson Building Products Pty Ltd [2006] QCA 126 at [52]

[24] Australis Media Holdings Pty Ltd v Telstra Corporation Ltd. supra at 123-4

[25] Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979 144 CLR 596 at 607 per Mason J

[26] LJ Hooker Ltd v HJ Adams Estates Pty Ltd 138 CLR 52 (‘LJ Hooker’).

[27] LJ Hooker p 67, final paragraph, per Gibbs J

[28] Ibid at p 65 per Gibbs J

[29] Note the meaning of the phrase in Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR per Gummow J at [85], p376-377, referring to comments of Jacobs J in LJ Hooker

[30] See LJ Hooker per Barwick C.J. at 60

Close

Editorial Notes

  • Published Case Name:

    Equity 2 Pty Ltd v Best Price Real Estate Pty Ltd

  • Shortened Case Name:

    Equity 2 Pty Ltd v Best Price Real Estate Pty Ltd

  • MNC:

    [2020] QDC 180

  • Court:

    QDC

  • Judge(s):

    Kent DCJ

  • Date:

    03 Aug 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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