Cross v Peebles[2013] QCA 26

SUPREME COURT OF QUEENSLAND

[1] FRASER JA: I agree with the reasons for judgment of Gotterson JA and the orders proposed by his Honour.

[2] GOTTERSON JA:  At all times material to these proceedings Cross Country Realty Pty Ltd (“the corporation”) held a property agents and motor dealers licence (real estate agent) which had been issued pursuant to Chapter 2 Part 6 of the Property Agents and Motor Dealers Act 2000 (“PAMD Act”) and was a residential property agent within the meaning of that Act.  Each of Kellie Lee-Ann Cross and Ronald Malcolm Cross was an executive officer of the corporation as that term is defined in Schedule 2 to the PAMD Act.  They were also concerned in the management of Park Trent Investments Pty Ltd (“Park Trent Investments”), Park Trent Real Estate Pty Ltd (“Park Trent Real Estate”) and Easy Plan Financial Services Pty Ltd (“Easy Plan”).  Those three corporate entities together with the corporation operated within a corporate group described as the “Park Trent Group”.

[3] By a complaint made on 24 August 2004, an officer of the Office of Fair Trading, alleged against the corporation some 38 counts of failing to disclose to a prospective purchaser of residential property the amount of a benefit that a person then expected to receive in connection with the sale of the property to the purchaser, in contravention of s 138(1)(c) of the PAMD Act.  For almost all of the counts, the recipient of the benefit was identified as being Park Trent Investments or Park Trent Real Estate.

[4] By separate complaints made the same day against Kellie Cross and Ronald Cross, the same officer alleged some 38 counts of failing to ensure that the corporation complied with s 138(1)(c), thereby committing offences pursuant to s 591(2) of the PAMD Act.  That section provides that if a corporation commits an offence against a provision of that Act, each of the executive officers of the corporation commits an offence of failing to ensure that the corporation complies with the provision. 

[5] The complaints were heard in the Magistrates Court at Southport over seven days in August 2010.  At the conclusion of the prosecution case, a no case submission was advanced on behalf of the corporation and the Crosses.  The submission was based upon the interpretation and application of two provisions within s 138(1)(c) applicable to all counts, which are elaborated later in these reasons.  After consideration of argument on the submission, the learned Magistrate upheld it and on 4 March 2011 made formal orders dismissing each complaint and ordering the complainant to pay the defendants’ costs.

[6] The complainant appealed against these orders to a judge of the District Court of Southport pursuant to s 222 of the Justices Act 1886.  The appeals were heard on 20 February 2012.  On 27 March 2012, the learned District Court judge ordered that the appeals be allowed and set aside the orders under appeal.  He remitted the charged offences to the Magistrates Court at Southport with a direction that the Magistrate proceed according to law, and further ordered that the defendants pay the complainant’s costs of the appeal on the standard basis unless agreed. 

[7] On 23 April 2012 the defendants filed applications in this Court pursuant to s 118 of the District Court of Queensland Act 1967 for leave to appeal against the orders made on 27 March.  In these reasons it is convenient to refer to the defendants as “the applicants” and to the complainant as “the respondent”.  In the event that leave is granted, each applicant seeks orders that the appeal be allowed, that the judgment appealed be set aside, and that the respondent pay the costs of this appeal and of the District Court appeal. 

The corporation’s business activities

[8] As its licence authorised it to do, the corporation at the relevant time engaged in the business of marketing and selling, as agent, residential properties in new developments in Brisbane, the Gold Coast and the Sunshine Coast.  Its activities were directed towards the interstate investor market.  Park Trent Investments and Easy Plan participated in these activities, the former by marketing properties via seminars and the latter by providing finance to prospective purchasers.

[9] The modus operandi generally adopted was that Park Trent Investments would initiate contact with prospective purchasers at its information seminars.  Once interest as a prospective purchaser was expressed by an individual, that company would make travel and accommodation arrangements for the individual to travel to Queensland to inspect a property or properties.  Upon arrival in Queensland, the individual would be met by a representative of the corporation, taken on an inspection tour of properties and offered finance through Easy Plan.

[10] The corporation and Park Trent Investments would customarily enter into an agreement or agreements with the property developer for a particular development before actively marketing the development.  Typically, the agreements would stipulate the fees that the corporation and Park Trent Investments would be paid for effecting a sale of a property within the development.  The fees were denominated as a fixed amount per sale to be divided between those two corporate entities in accordance with a formula referenced to the sale price of the property.

Section 138 PAMD Act

[11] Chapter 5 of the PAMD Act (ss 128-164) concerns real estate agents.  Part 2 thereof (ss 131-157) contains conduct provisions.  Section 138 constitutes Division 3 of Part 2.  Division 3 is headed “Disclosure of Interest” and s 138 itself has the heading “Disclosure to prospective buyer”. 

[12] Of the 38 counts, some are based upon conduct which occurred between 19 March 2002 and 23 April 2002 and the others upon conduct which occurred between 24 April 2002 and 12 June 2003.  Section 138(1)(b) was amended, effective from 24 April 2002, to substitute the word “benefit” for the expression “consideration, whether monetary or otherwise” and for the word “consideration” in that provision.  Section 138(1)(c), which is central to these applications, was not amended at that point. 

[13] Subject to those amendments to s 138(1)(b), the enacted s 138 was in the following terms during the whole of the period relevant to all of the 38 counts:

“138 Disclosures to prospective buyer

(1)A residential property agent for the sale of residential property must disclose the following to any prospective buyer of the property—

(a)any relationship, and the nature of the relationship (whether personal or commercial), the agent has with anyone to whom the agent refers the buyer for professional services associated with the sale;

Examples of relationships for paragraph (a)—

1.A family relationship.

2.A business relationship, other than a casual business relationship.

3.A fiduciary relationship.

4.A relationship in which 1 person is accustomed, or obliged, to act in accordance with the directions, instructions, or wishes of the other.

(b)whether the agent derives or expects to derive any benefit from a person to whom the agent has referred the buyer and, if so, the amount or value of the benefit;

(c)the amount, value or nature of any benefit any person has received, receives, or expects to receive in connection with the sale, or for promoting the sale, or for providing a service in connection with the sale, of the property.

Examples for paragraph (c) of persons who may receive a benefit—

• seller

• finance broker

• financial adviser

• financier

• property valuer

• solicitor

• residential property agent.

Maximum penalty—200 penalty units.

(2)The disclosure is effective for subsection (1) only if it is—

(a)given to the prospective buyer in the approved form; and

(b)acknowledged by the prospective buyer in writing on the approved form; and

(c)given and acknowledged before a contract for the sale of the residential property is entered into.

(3)Also, for subsection (1)(c), disclosure in compliance with the approved form is sufficient.

(4)   In this section—

“benefit” means monetary or other benefit.

“residential property agent” means—

(a)a real estate agent; or

(b)a real estate salesperson acting for the real estate agent; or

(c)a person acting as a real estate agent in contravention of section 160; or

(d)a person acting as a real estate salesperson in contravention of section 161.

[14] The form approved by the chief executive pursuant to s 598 of the PAMD Act for the disclosure required by s 138(1) is Form 27b.  It provides for disclosure of s 138(1)(a) and (b) matters in Section 3.1 and for disclosure of s 138(1)(c) matters in Section 3.2.

[15] The sufficiency of the disclosure given by the corporation in Section 3.2 of the Form 27b to the prospective buyer named in each of the 38 counts is in issue in these applications.  How that issue arises in fact may be outlined by reference to the circumstances of the transaction on which any one of the counts is based.  It is convenient to select the Weir transaction for which relevant documents have been included in the record of proceedings in this Court and to which the Court was taken in the course of argument.

The Weir transaction

[16] Mr and Mrs Weir entered into a contract of sale dated 23 December 2002[1] to purchase proposed Lot 16, a two-storey townhouse, in proposed Community Titles Scheme “Lakeside on Varsity” at Christine Avenue, Varsity Lakes.  The purchase price was $264,000.  The purchase was financed by a loan made by Adelaide Bank Ltd and brokered by Easy Plan.  Settlement occurred on 14 February 2003.  The contract of sale identified the vendor as Narson Pty Ltd (“Narson”) and the corporation as its agent for sale.

[17] A number of significant events had occurred prior to the date of contract.  The first in time is that on 16 October 2002, Park Trent Investments and Narson entered into an Administration Agreement in a form which had been prepared within the Park Trent Group and forwarded to Narson that day.[2]  By its terms, Narson, as the Vendor, agreed to pay Park Trent Investments, as Marketer, in accordance with Annexure “A” of that agreement.  Annexure “A” which was located within the terms of contract, consisted of the following:

“ADMINISTRATION/MARKETING EXPENSES

The administration fee is the sum agreed upon by both the Marketer & Vendor.  The administration fee of $20000.00 plus GST shall be paid by the Vendor to the Marketer on settlement of each contract.

● $20,000.00 plus GST to be paid on settlement of each contract.

● The REIQ Commission will be payable to Cross Country Realty on settlement and is part of the total fee charged.

● The fee shall be agreed up upon by use of irrevocable authority or (sic) each sale.”[3]

Under the terms of the agreement, Narson agreed to sign an irrevocable authority for payment of the administration fee prior to the contract of sale concerned being released to its solicitor by Park Trent Investments.[4]  The parties also agreed that the terms of the agreement were confidential and that its details were not to be released to any person or entity.[5]

[18] The second event occurred after the Weirs had expressed interest in purchasing Lot 16 during a vendor-sponsored trip to the Gold Coast from Melbourne on 10 and 11 December 2002.  Bill Myers of the Park Trent Group had shown them Lot 16, mentioned a price of $264,000 and taken them to Easy Plan’s office.[6]  Then he took them to the office of a solicitor.  There, they were given a completed Form 27b[7] which was signed on behalf of the corporation by Mr Myers and dated 11 December 2002.  The Weirs signed an acknowledgement of receipt of it on that date.  They were also given an undated contract of sale for Lot 16 stating the purchase price to be $264,000 which was attached to a PAMD Act Form 30,[8] and, as well, a Deposit Power application form which also stated the purchase price to be $264,000.[9]  They signed the contract and left it with the solicitor.  In due course they received that document in the mail which, in the interim, had been signed by the vendor, dated 23 December 2002, and stamped.[10]

[19] Section 3.2 located on page 2 of the prescribed form was headed “Benefits other than by referral”.  It contained a direction to the person making disclosure which required them to disclose in that section, “ … the amount, value or nature of any benefit TO YOUR KNOWLEDGE, (other than those already disclosed by you in section 3.1) which any person has received, receives, or expects to receive in connection with the sale, …”  This section further directed the person to Notes on page 3 of the form “For guidance on completing table and meaning of benefit”.  Below this direction was a box in which disclosure was to be made.  The box made provision for two columns, the one on the left-hand side being headed “Person/Entity”, and the one on the right “Amount ($), value (%) or nature of benefit”.  Finally, this section contained the notation that if there was insufficient space in the box, then an additional sheet was to be used. 

[20] In the case of the form given to the Weirs, the box in section 3.2 contained in handwriting the words “Refer annexure “A””.  This Annexure “A” was on a separate page of the form.  It was comprised of the following:

“Selling Agent1.Commission of 5% of the first $18,000, and 2.5% of the balance of purchase price.

2.The agent has a business relationship with Easy Plan Financial Services. 

Kellie Cross as Queensland Manager of Cross Country Realty is a director of Easy Plan Financial Services but receives no financial gain. 

Easy Plan Financial Services offers the following Services

Providing Tax Depreciation Schedules 

Providing the best finance to suit particular situations

Financial Planning

Providing insurance solutions for clients

Developers

Consultants:A fee of up to 1.5% of the purchase price with respect to each of the following services:

1.Consultation and advisory services with respect to each of the following services.

2.Assisting with the drafting and preparation of advertising and promotional material; assisting with the design, structure and implementation of ongoing advertising and marketing programs.

3.Assisting with the Co-ordination and supervision of service providers with respect to sales and marketing, including advertising and public relations providers; provision of reports to the developer with respect to matters the subject of this agreement.

4.Consultation services with respect to project marketing the development: provision of sales information centre/s; conducting and staffing sales information centres

5.Liasing (sic) with real estate agents to introduce buyers to the project: undertaking promotional activities with respect to the development including; property exhibitions, database marketing and mail-outs, letter-box drops etc

6.Provision of and access to and use of database/s.

7.The payment of expenses including advertisements, printing and stationary (sic), postage and sign-writing and general expenses.”[11]

I note that the disclosure made in Section 3.1 located on page 1 of the form did not refer to any of the above benefits. 

[21] On 12 December 2002 Narson signed two documents each headed “Irrevocable Authority” which it faxed to the corporation on 15 December.[12]  Both related to the sale of Lot 16.  In one of the documents, Narson acknowledged that, on settlement, it would pay to the corporation REIQ commission of $7,050 plus GST.  That amount is equal to five per cent of $18,000 and 2.5 per cent of $246,000 ($264,000 less $18,000) plus GST.  In the other document, Narson acknowledged that, on settlement, it would pay to Park Trent Real Estate an Administration Levy of $12,950 plus GST.  The REIQ commission and the Administration Levy together equal the amount of the administration fee of $20,000 plus GST which the Administration Agreement provided be paid on each sale. 

[22] After settlement and on 18 February 2003, separate tax invoices for $7,755 ($7,050 plus GST) and $14,245 ($12,950 plus GST)[13] were submitted to Narson on behalf of the corporation and Park Trent Real Estate respectively.  The invoices were paid by Narson on that day.

The issues for consideration

[23] Argument of the appeal before the learned District Court judge was centred upon two issues concerning the Annexure “A” to the form 27b.  They were:

(a)whether the description of each of the recipients of the respective benefits was sufficient to satisfy the requirements of s 138(1)(c); and

(b)whether the description of what was to be received by the developer consultant was sufficient to satisfy the requirements of that section.  (There appears to have been no issue that the description of the amount to be received by the selling agent, the standard REIQ commission, was sufficient.)[14]

[24] His Honour concluded on the first issue that the descriptions were insufficient in that they failed to identify the recipient selling agent and developer consultant by name.[15]  On the second issue, he concluded that the formulaic description of the benefit to be received by the developer consultant, namely up to 1.5 per cent of the purchase price with respect to each of the some six listed services,[16] was inaccurate and therefore insufficient.[17]  Adapted to the Weir’s case, his Honour would have regarded either a “precise $ figure” or a description which incorporated the formula “$20,000 – the REIQ commission on purchase price” as a sufficient description for the disclosure required.[18]

[25] In the appeals for which leave is sought, the applicants propose to challenge his Honour’s conclusions on each of these issues.  It is convenient to consider the two issues separately.

Issue (i) – description of recipient

[26] It may be accepted that neither s 138(1)(c) nor the prescribed Form 27b, in terms, stipulates that the identity of the recipient person must be disclosed by stating the name of the person.  The applicants rely on that feature of the section and also upon the further feature of it that the examples of persons who might receive a benefit given by the section all describe the person by reference to the person’s status which, in turn, is referenced to the function that the person performs, for example, as a finance broker, a property valuer or a solicitor.  These examples themselves have statutory force as part of the enacted s 138(1)(c).[19]  Relying upon these matters, the applicants argue that disclosure of the identity of the recipient by name is not required.

[27] The applicants supplement their argument by reference to the interpretative provisions in s 14A(1) of the Acts Interpretation Act 1954 (“Interpretation Act”).  They submit that the legislative objective of consumer protection enunciated in s 10 of the PAMD Act is best achieved by interpreting s 138(1)(c) as permitting the required disclosure by disclosure of the function – referenced status of the recipient rather than as compelling mere disclosure of the name of the recipient.

[28] The respondent argues that disclosure of the identity of the recipient by name is mandatory.  Reliance is placed on the provision in s 36 of the Interpretation Act which ascribes to the word “person” in an Act, a meaning that includes both an individual and a corporation.  Further reliance is placed on the heading “Person/Entity” in Section 3.2 of the form and the provision in s 49(2)(b) of the Interpretation Act to the effect that if a statutorily prescribed form requires specified information to be included in it, then the form is not properly completed unless there is compliance with that requirement.

[29] In my view, the applicant’s argument on this issue is to be preferred.  The absence of any express requirement for disclosure of identity by name affords a sound basis for this preference.  I consider that the respondent’s argument ought not be accepted for the following reasons.  To interpret the word “person” in the section as meaning both an individual and a corporation has the consequence that any recipient of a benefit, be it an individual or a corporation, must be disclosed.  It does not have the consequence that the recipient individual or corporation must be identified by name, to the exclusion of disclosure by way of status referenced to function.  Similarly, with respect to the heading “Person/Entity”, that denotation is not apt to specify that the name of the recipient person or entity must be disclosed.  The heading is sufficiently general to allow for disclosure by way of status referenced to the function of the recipient.

[30] For these reasons, I respectfully disagree with the learned judge on this issue.

Issue (ii) – description of benefit

[31] Here, it may be accepted that the description in Annexure “A” of the benefit to be received by the developer’s consultant was not untruthful.  The description gave a range in which the fee might fall of between nothing – if no services were provided, and nine per cent of the purchase price – if all six of the services were provided.  Adopting a purchase price of $264,000, that range was from $0 to $23,760.  The fee in fact received by Park Trent Real Estate was $12,950 plus GST, an amount well within that range.

[32] However, the statutory requirement for disclosure of the benefit was not merely that whatever description might be given of it not be untruthful.  What was required was truthful disclosure of particulars of the benefit in accordance with all applicable statutory provisions.  I have already outlined both the requirement in s 138(1)(c) that the amount, value or nature of the benefit be disclosed and the relevant content of Section 3.2 in the prescribed form.  Attention needs to be given also to the notes on page 3 of the form to which the party making disclosure was directed for guidance by Section 3.2.  Those notes contain the following statement:

“‘Amount, value or nature’ of the benefit

You must provide the amount, value or nature of the benefit as accurately as is possible at the time of the disclosure. You should express the benefit as follows:

(1) an amount ($). If you can not do this, then –

(2) a value (%). If you can not do this, then –

(3) describe the nature of the benefit. You should ONLY do this if the benefit can not be described as an amount or value.

If you do not know the exact amount or value of the benefit, provide a reasonable estimate of the final amount or value, based on the purchase price at the time of disclosure.”

[33] Section 49(2) of the Interpretation Act at all relevant times provided:

“(2)If a form prescribed or approved under an Act requires—

(a)the form to be completed in a specified way; or

(b)specified information or documents to be included in, attached to or given with the form; or

(c)the form, or information or documents included in, attached to or given with the form, to be verified in a specified way;

the form is not properly completed unless the requirement is complied with.”

[34] A question arose in argument whether the notes were to be regarded as a requirement that Section 3.2 be completed in a specified way for the purposes of s 49(2)(a) of the Interpretation Act or a requirement that specified information be included in Section 3.2 for the purposes of s 49(2)(b) thereof.  If either, then a failure to comply with the requirement would have the statutory consequence that the form was not properly completed.

[35] The applicants submit that the descriptor “For guidance” indicated that compliance with the notes was not a requirement as would engage s 49(2).  I do not accept that submission.  Firstly, that descriptor does not imply choice on the part of the disclosing party as to whether it takes guidance from the notes or not.  To the contrary, in my view, the descriptor connotes that the party is to obtain guidance from them.  Secondly, the mandatory terms in which this extract from the notes is expressed – exemplified by the words “must provide” in the first paragraph and the imperative “provide” in the second – are indicative of a requirement to comply rather than of choice. 

[36] The applicants point to s 138(3) of the PAMD Act which provides that for s 138(1)(c), disclosure in compliance with the approved form is sufficient.  They submit that disclosure in compliance with the form, not any notes to it, is sufficient.  This submission overlooks that the notes are part of the prescribed form.  They are set out on page 3 of a five page document.  There is no reason for treating them as separate from the form.

[37] Linked to that submission is a proposition suggested in oral argument by the applicants that s 138(3) overrides the application of s 49(2) of the Interpretation Act to disclosure for the purposes of s 138(1)(c).  That is not so.  The role of s 138(3) is a limited one.  It addresses the circumstance that a form that has been approved for s 138(1)(c) disclosure might fail to provide accurately or comprehensively for disclosure in accordance with the requirements of that section properly construed.  The section has the effect that, in that circumstance, disclosure in accordance with the approved form is sufficient.  However, for the purposes of compliance with s 138(1)(c), s 138(3) has no bearing upon what is sufficient for proper completion of the approved form.  That topic is one that falls within the province of s 49(2).  Neither s 138(3) nor s 49(2) encroaches upon the field of operation of the other. 

[38] It is convenient at this point to note that the applicants seek support for this submission from an observation made at first instance by Cooper AJ of the Supreme Court of New South Wales in defamation proceedings, Cross v Queensland Newspapers Pty Ltd,[20] in which the Weir and many other like transactions were considered.  Referring to s 138(3) his Honour expressed the view[21] that that section does not mean that disclosure not in compliance with “the explanatory notes” to the Form 27b is insufficient.  He concluded that the form which had been provided to the Weirs did comply with s 138.[22]

[39] For the reasons just given, I do not agree with this view.  His Honour’s reasons suggest that his view was reached without regard for the provisions in s 49(2) of the Interpretation Act.  It also appears that the Administration Agreement was not in evidence before him.  It remains to note that the judgment was set aside by the Court of Appeal of New South Wales[23] although his Honour’s view on this matter is not discussed in the Court’s reasons for judgment. 

[40] The respondent submits that Annexure “A” was not compliant in two respects with the notes in the form for stating the amount, value or nature of the benefit to be received by the developer’s consultant.  First, the description of the benefit in Annexure “A”, whether regarded as a description by value (as a percentage) or by nature, was not as accurate as possible at the time of disclosure, as required by the first paragraph in the extract from notes which I have set out.  The respondents submit, correctly in my view, that under the Administration Agreement, the benefit to be received by the developer’s consultant was an amount to be calculated by deduction from $20,000 plus GST of the REIQ commission plus GST: it was not an amount to be calculated (and, in fact, was not calculated), by reference to a fee of up to 1.5 per cent of the purchase price for any one or more of the six services listed in the Annexure “A”.   The description given was not accurate.

[41] Secondly, the respondent submits, also correctly in my view, that the amount of the benefit could and should have been stated at the time of disclosure.  In the Weirs’ case, the Form 27b was given to them contemporaneously with the unsigned contract and the Deposit Power application form both of which stated the purchase price to be $264,000.  In those circumstances, an accurate calculation of the amount of the REIQ commission payable on that price could have been made and, further, an accurate calculation of the amount of the developer’s consultant fee could also have been made by a simple deduction of the commission plus GST from the amount of $20,000 plus GST. 

[42] There is no substance in the applicant’s claim that the corporation was excused from stating the amount of the fee because a different purchase price might have been negotiated after the Form 27b had been provided to the Weirs but before the contract had been executed by all parties.  The second paragraph of the notes in the extract stated that if the exact amount was not known at the time of disclosure, then an estimate based on the purchase price at the time of disclosure was to be made and disclosed.  This was not done notwithstanding that the purchase price at the time of disclosure was known to be $264,000. 

[43] Accordingly in my view, the part of the Form 27b which required disclosure of the amount, value or nature of the benefit to be paid to the developer’s consultant was not properly completed.  The benefit was not effectively disclosed for the purposes of s 138(1)(c).  On this issue I am in respectful agreement with the learned judge.

[44] For the Weir transaction, effective disclosure of the fee to be received by the developer’s consultant required that the amount of the fee be stated.  That could have been done by either stating that it was $14,245 or that it was $12,950 plus GST.  I would add that, for that transaction, I would not regard disclosure by means of the formula proposed by his Honour as complying with the requirements in the notes for completing the form.  Disclosure by the formula would not have been disclosure of an amount which, at the time that the form was provided, could have been calculated accurately, or, at least, reasonably estimated. 

Disposition

[45] The issues raised by these applications warrant the grant of leave to appeal. 

[46] The failure of the applicants’ appeal with respect to Issue (ii) has the consequence that these appeals must be dismissed.  The orders and directions made on 27 March 2012 ought to be affirmed.

[47] In this court, each side has been successful on one of the two issues for decision.  In these circumstances, I consider that there ought to be no order as to costs of these applications and appeals.

Orders in each application

[48] 1.Grant leave to appeal.

2.Appeal dismissed.

3.Affirm the orders and direction made on 27 March 2012 in the District Court at Southport.

[49] HENRY J:  I have read the reasons of Gotterson JA.  I agree with those reasons and the orders proposed.