Limitless Property Qld Pty Ltd v Smith
[2022] QCATA 13
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- Limitless Property Qld Pty Ltd v Smith[2022] QCATA 13
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Limitless Property Qld Pty Ltd v Smith[2022] QCATA 13
Limitless Property Qld Pty Ltd v Smith[2022] QCATA 13
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
CITATION: | Limitless Property Qld Pty Ltd v Smith [2022] QCATA 13 |
PARTIES: | limitless property qld pty ltd (applicant/appellant) v kevin daryl smith and joanne robyn smith (respondent) |
APPLICATION NO/S: | APL167-20 |
ORIGINATING APPLICATION NO/S: | Q185/19 Mackay |
MATTER TYPE: | Appeals |
DELIVERED ON: | 3 February 2022 |
HEARING DATE: | On the papers |
HEARD AT: | Brisbane |
DECISION OF: | Judicial Member D J McGill SC |
ORDERS: |
|
CATCHWORDS: | PROFESSIONS AND TRADES – AUCTIONEERS AND AGENTS – REMUNERATION – OTHER MATTERS – contract for sale of land subject to satisfaction with building report – buyer not satisfied – buyer purported to terminate contract – sellers accepted contract terminated and returned deposit – whether contract terminated by mutual agreement. Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 13, s 28, s 29, s 142(3)(a)(i) Campbell v Queensland Building and Construction Commission [2021] QCATA 34 Clarke v Prime Building and Pest Consultants Pty Ltd [2014] QCAT 325 Crime and Corruption Commission v Lee [2019] QCATA 38 Meehan v Jones (1982) 149 CLR 571 Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 |
APPEARANCES & REPRESENTATION: | |
Applicant: | Self-represented |
Respondent: | S McLennan instructed McKay’s Solicitors |
REASONS FOR DECISION
- [1]The respondents were at the material time the owners of a residential property in North Mackay. They engaged the appellant as real estate agent under an agreement in writing dated 19 May 2019. A buyer for the property was located, and a contract signed, but the buyer subsequently purported to terminate that contract, on the ground that he was not satisfied with the report of a building inspector. The respondents accepted this, and the deposit was returned to the buyer. The appellant claimed in the Tribunal commission it alleged was payable under the contract of engagement. Following a contested hearing, on 12 June 2020 a Member dismissed the claim. The appellant seeks leave to appeal from that decision.
- [2]Because this matter was a minor civil dispute, leave is required to appeal to the Appeal Tribunal.[1] As a general proposition, when leave to appeal to the Appeal Tribunal is required, it will be granted only where there is a reasonable argument that the decision was attended by error and an appeal is necessary to correct a substantial injustice caused by that error, or where the appeal raises a question of general importance upon which further argument and a decision of the Appeal Tribunal would be to the public advantage.[2] In deciding whether grounds for leave to appeal have been shown, it is relevant to consider that the proceeding was a minor civil dispute, and the obligation on the Tribunal was to make orders it considered to be fair and equitable to the parties to the proceeding in order to resolve the dispute: the QCAT Act, s 13(1). The Tribunal was also required to comply with the QCAT Act, s 28 and s 29.
Decision of the Member
- [3]The Member said that the case turned on the terms of the contract of engagement, and that the appellant had relied on the proposition that commission was payable on the basis that the contract for the sale of land had been terminated by mutual agreement between the respondents and the buyer.[3] The Member noted that the buyer had purported to terminate on the basis of an unsatisfactory building inspection report, and that termination on that basis was restricted by the terms of the land sale contract, including certain special conditions, the essence of which was set out in the reasons. The buyer had identified two areas of concern, a leak in the roof leading to water damage in the front entry, and a leak in the bathroom leading to water damage in the related walls. The buyer claimed that the costs to rectify these were of the order of $35,000, and made an offer involving a reduction in the price.
- [4]This was communicated to the appellant, who informed the respondents of the situation, using the term “significant structural damage”, advised that the work would need to be done and would not add to the value of the property, and suggested that the respondents settle with a reduced price. The respondents were provided with a copy of the building inspection report, and the quotes the buyer was relying on, and decided not to dispute that the buyer had validly terminated the contract. Hence the deposit was returned to the buyer. The Member said that in these circumstances the land sale contract had not been terminated by mutual agreement of the parties, and commission was not payable to the appellant on that basis. Hence the claim was dismissed. The Member said that the fact that further investigations later suggested that the buyer’s complaints were overstated did not affect the position, because they came too late to be relevant.
Grounds of appeal
- [5]The grounds of appeal in the Application were set out in the form of submissions. The appellant submitted that the decision of the Member was in error because there had been a failure to have regard, or sufficient regard, to the terms of the contract of engagement, and to the definitions in the contract for the sale of land. One of the documents relied on by the buyer as a quote was not a quote as defined in the special conditions of the land sale contract, and the other quote was rejected by the Member, on the basis that it included much more work than was necessary to overcome what was properly identified as a structural defect in the premises. Further, the buyer had not acted reasonably in terminating the contract. In fact the buyer was not entitled to terminate, so that in substance the termination of the contract occurred by the mutual agreement of the parties.
Submissions of the parties
- [6]In further submissions, the appellant said that the buyer relied on two quotes, one for the ensuite which was rejected by the Member because it involved additional work apart from remedying the water leak, and one for rectifying a roof leak which was not a quote, as required by the land sale contract, but only an estimate. Hence neither could support a valid termination by the buyer. It also submitted that the Member had given too much weight to the evidence of the respondents which was unreliable and inconsistent with other material, and that the respondents ha released the buyer from his obligations under the contract, which entitled the appellant to commission.
- [7]The respondents submitted that to have succeeded the appellant had to prove that the buyer was not entitled to terminate the contract. Under the land sale contract, the buyer in order to terminate had to identify in the building inspection report a single defect where the cost of rectifying the defect exceeds $5,000, and on the evidence there were two defects where the cost of rectification was in each case over $5,000. Even if the quote for the work on the ensuite involved more than just rectifying defects, it was for well over $5,000 and the relevant work was likely to be above $5,000 anyway. The document dealing with the damage from a leaking roof showed that the cost of rectifying the defect would have exceeded $5,000, because most of the cost was for rectifying water damage.
- [8]The respondent also submitted that the obligation on the buyer under the land sale contract was only to act honestly.[4] In view of the material then available to the buyer there was every reason to be unsatisfied with the report. The buyer was therefore entitled to terminate the contract. The response from the solicitors for the respondents to the solicitors for the buyer simply accepted that the contract had been validly terminated, but that did not mean that it had been terminated by mutual agreement.
Consideration
- [9]The land sale contract provided in the Terms of the Contract, Clause 4.1, that the contract was “conditional upon the Buyer obtaining a written Building Report from a Building Inspector … on the property by the inspection date on terms satisfactory to the Buyer.” The clause also provided: “The Buyer must give notice to the Seller that … a satisfactory Inspector’s report under Clause 4.1(1) has not been obtained by the Inspection Date and the Buyer terminates this Contract. The buyer must act reasonably.” or that the clause has been satisfied or waived by the Buyer. The Inspection Date in the Schedule was seven days after the contract date. It went on to provide that if the Buyer terminated the contract and the Seller asked for a copy of the Building Report, it must be given to the Seller without delay.
- [10]The Special Conditions of the Contract included that the Buyer’s right to terminate under Clause 4.1 was restricted to the extent that (relevantly):
The building inspection report … may only be deemed to be unsatisfactory to the Buyer if the report identifies structural defects in the dwelling.
A structural defect is defined as a single defect to the residence, where the cost of rectifying such defect exceeds $5,000.
In determining the cost of rectifying the defect any business providing a quotation must be prepared to give warranty consistent with the industry standards, for the work proposed.
Where the Buyer seeks to terminate this contract pursuant to Standard Condition 4, then a true copy of the report on which the buyer relies must be delivered to the Seller or the Seller’s Agent or Solicitor at the time the notice of termination is given.
- [11]It is immediately apparent that the term “structural defects” is misleading: the effect of the definition is that any single defect will be a “structural defect” if the cost of rectification exceeds $5,000.[5] In effect, there is something wrong with the building, which it is going to cost more than $5,000 to fix. There is a requirement that any quote relied on to prove rectification cost be one including an appropriate warranty, but there is no requirement that such a quote be produced at the time of termination. The position therefore is that before a buyer can terminate there must be a report by a Building Inspector which identifies at least one defect, the defect is going to cost more than $5,000 to rectify, and the buyer must give a notice that exercises that right, and a copy of the report, within seven days of the date of the contract.[6]
- [12]There is no requirement to produce a quote to the seller, or other evidence to show that the right exists. If it comes to the crunch, what matters is that the buyer can, at a trial for specific performance, prove (on the balance of probabilities) that the cost of rectification of the defect identified by the building inspector (if rectified by a business prepared to give the industry standard warranty) would have been more than $5,000. It would be open to the buyer, if the matter came to trial, to put forward further evidence, gathered after the purported termination, to demonstrate that the right to terminate did exist. It follows, in my opinion, that the appellant’s submissions about the distinction between a quote and an estimate are not to the point. What matters is, what is it in fact going to cost.
- [13]Obviously in such a situation there is room for argument about whether what the building inspector has identified is a defect in the building, and what it will cost to rectify the defect. But a water leak, whether from a roof or a shower, does strike me as the sort of thing which would qualify as a defect, and the cost of rectification would I expect extend beyond just plugging the leak to repairing any damage caused by the leak. That could be extensive, because it is usually the consequential damage which (eventually) shows the presence of a leak, once it is sufficiently extensive to be noticed. In view of the material available to the buyer at the time he terminated, it would have been difficult to show that he was not acting reasonably.[7] The proposition that the buyer had obtained contrived quotes (or estimates) is just speculation, and the sort of proposition which would be likely to be difficult to prove if a proceeding involving the buyer went to trial.
- [14]Of course, if a buyer elects to terminate under this clause as modified, and provides a copy of the report, it is open to the seller to investigate the position, perhaps by getting quotes, or even by getting the defects rectified, to see what that actually costs, in the meantime reserving all rights under the contract. What the respondents did was take legal advice. They had in fact been provided with some evidence of costs by the buyer, but it would have been open for either party to gather additional evidence. For example, the cost of rectifying the defect in the ensuite could have been more rigorously shown, and may well still have come to more than $5,000, in circumstances where the first quote obtained was for over $24,000.
- [15]At that point the respondents had a choice between accepting the purported termination as valid, disputing the validity of the termination (with the potential to become involved in court proceedings, which would be expensive) or investigating the matter further, which would also involve spending money. Having taken legal advice, the chose the first of these, accepted that the contract had been terminated, and cooperated to return the deposit. They gave evidence that, in the light of the material provided to them, they then believed that the buyer was entitled to terminate. It was open to the Member to accept that evidence; the appellant has not shown that it was not open, despite what was stated in the response to the claim. It appears that they later did some investigations with their own builder, although the extent to which that builder investigated the existence of damage to be repaired is not clear.[8]
- [16]The question then is, does this meet the description in the contract of engagement of a termination of the land sale contract “by mutual agreement”. I do not consider that that term describes a situation where a buyer asserts a right to terminate a contract and purports to exercise it, and the seller acquiesces in that situation, at least so long as the existence of the right to terminate is plausible. I have not been referred to any authority on the point, but the contract should be given a practical, commercial interpretation consistent with the words used,[9] and the notion that there was some obligation on the respondents, owed to the appellant, to resist the purported termination of the contract by the buyer is not attractive. There is a difference between a situation where the buyer asks to be let out of the contract (for whatever reason, good or bad) and the seller agrees to that, and what happened here. It is the former which is termination “by mutual agreement”.
- [17]I agree with the Member that any information obtained after the respondents had accepted that the contract had been terminated does not affect the position. At best it might show that they might have had a defence, depending on whose witnesses were accepted, if a proceeding between the respondents and the buyer had gone to trial, but that is not to the point.
- [18]I was referred by the appellant to the decision of the Tribunal in Clarke v Prime Building and Pest Consultants Pty Ltd [2014] QCAT 325, at [30], where the point was made that the buyer in that case would not have been acting reasonably in terminating a land sale contract on the basis of three defects costing $7,133.50 in total to rectify when this was such a small proportion of the purchase price of $585,000. By comparison the amount claimed by the buyer in this matter was about $34,000 of a purchase price of $483,000. This decision is distinguishable.
- [19]I was also referred to the decision in Meehan v Jones (1982) 149 CLR 571, which is authority for the proposition that a term of a contract which makes performance by one party conditional on something being satisfactory to that party did not have the effect that the contract was void for uncertainty. It shows that the contract in the present case was not invalid because of the inclusion of Clause 4.1 of the general conditions, but is not otherwise of relevance, since it involved a “subject to finance” clause. Since then such clauses have become much more sophisticated anyway.
- [20]The appellant has failed to show that the decision of the Member is doubtful enough to justify the grant of leave to appeal, or that for another reason leave to appeal should be granted. The application for leave to appeal is dismissed. Any submissions in writing seeking an order for costs are to be filed and served within twenty-one days from the date of this decision. If such submissions are filed and served, any submissions in writing in response by the other party are to be filed and served within twenty-one days from the service of such submissions, and the question of costs will be decided by the Appeal Tribunal on the papers on a date to be fixed.
Footnotes
[1] Queensland Civil and Administrative Tribunal Act 2009 (Qld) (“the QCAT Act”), s 142(3)(a)(i).
[2] Crime and Corruption Commission v Lee [2019] QCATA 38 at [12], citing appellate authority. See also Campbell v Queensland Building and Construction Commission [2021] QCATA 34 at [17].
[3] Document B annexed to the Appellant’s application to the Tribunal, Clause 5.1.4 in the “Essential Terms and Conditions” attached to the From 6 contract of engagement.
[4] Citing Meehan v Jones (1982) 149 CLR 571.
[5] A better term would have been “significant defect”.
[6] From the terms of Clause 4.1(1), the Buyer also has a right to terminate if, despite taking reasonable steps to do so, he has failed to obtain a written report from a building inspector before the inspection date. That issue did not arise here.
[7] In view of the terms of Clause 4.1(2)(a) I expect the buyer was under an obligation to act reasonably in deciding whether to give a notice to terminate. But he was entitled to look to his own interests in doing so.
[8] In a letter from their solicitors of 12 September 2019 it was said that their builder had a “quick look”.
[9] Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at [15]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 at [78].