Leesburg Pty Ltd v Jones
[1998] QDC 282
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- Leesburg Pty Ltd v Jones[1998] QDC 282
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Leesburg Pty Ltd v Jones[1998] QDC 282
Leesburg Pty Ltd v Jones[1998] QDC 282
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Appeal No 3092 of 1998 |
[Before Robin DCJ]
[Leesburg Pty Ltd t/a Knobel & Davis Real Estate v Alan Stanley Jones & Anor]
BETWEEN:
LEESBURG PTY LTD t/a KNOBEL & DAVIS REAL ESTATE | Plaintiff/Appellant |
AND:
ALAN STANLEY JONES | First Defendant/Respondent |
AND:
BEVERLY LORRAINE JONES | Second Defendant/Respondent |
JUDGMENT
Judgment delivered: 5 November 1998
Catchwords: | Contract – interpretation or construction of written contract – parol evidence rule – defendants (clients of plaintiff real estate agent) not permitted to displace clear meaning and effect of provision in agency agreement entitling plaintiff to reimbursement of advertising and like expenses “upon the satisfactory sale and settlement” of the subject property over and above commission by evidence that before they signed the agreement the agent had said it would “up the costs” if it did not effect a sale – sale effected by another agent and duly completed – defendants contended plaintiff's entitlement to reimbursement depended on (a) the plaintiff's effecting the sale, and (b) the sale occurring within a 90 day exclusive agency period following an unsuccessful auction implication of terms in written contracts considered Contract – plaintiff real estate agent claim reimbursement of advertising expenses from husband and wife – written agency agreement provides both will pay – husband alone signs – plaintiff failed to persuade wife to sign – wife held not bound – whether husband bound considered Appeal from Magistrates Court to District Court – Magistrate refused plaintiff real estate agent's claim for reimbursement of advertising expenses on ground plaintiff's entitlement did not survive expiration of plaintiff's exclusive agency – Magistrate's interpretation of agency agreement held incorrect – appeal allowed. |
Counsel: | Mr F L Harrison QC for appellant: Mr A Collins for the respondents: |
Solicitors: | Geoffrey Rapp & Associates for appellant: Hickey Lawyers for respondents: |
Hearing Date(s): | 20 October 1998 |
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Appeal No 3092 of 1998 |
BETWEEN:
LEESBURG PTY LTD t/a KNOBEL & DAVIS REAL ESTATE | Plaintiff/Appellant |
AND:
ALAN STANLEY JONES | First Defendant/Respondent |
AND:
BEVERLY LORRAINE JONES | Second Defendant/Respondent |
REASONS FOR JUDGMENT - ROBIN D.C.J.
Delivered the 5th day of November, 1998
The appellant plaintiff sued unsuccessfully in the Magistrates Court at Southport for $17,000.00, the aggregate of sums of $8,600.00 and $8,400.00 which it expended by way of advertising and like outlays in attempts to sell at auction properties of the defendants at 5680 Anchorage Terrace, Hope Island, and 16 Freyburg Street, Sorrento respectively. In each instance the expenditures were listed in a “promotional schedule” incorporated in a formal appointment of the plaintiff to act as the defendants' real estate agent. There are two such documents of appointment, each incorporating by reference the appropriate schedule, each being signed by both the defendants, as was the accompanying promotional schedule, all four documents bearing date 1st March 1996. The documents mentioned contemplated the conduct of auctions on 20th April 1996 and that the plaintiff would “have the sole and exclusive and selling rights over” the properties for 90 days following the auction date with a non-exclusive agency “at the expiration of the agency period (if the subject property has not been sold)”. Clause 16 of each agreement was:
“We undertake to pay the cost of advertising to the extent of $...as per schedule”,
plainly referring to the promotional schedule. Each of those schedules contains the following provisions immediately above Mr & Mrs Jones' signatures:
“I/We, Mr & Mrs Jones agree to accept this recommend promotion and advertising proposal to the extent of $8,005.00 and hereby undertake to pay Knobel & Davis Real Estate the set amount upon the satisfactory sale and settlement of any one of the two properties being marketed that is 16 Freyburg, 5680 Anchorage Tee. Further to this and upon the sale of the above property commission also payable will be the standard scale 5% of the first $18,000.00 and 2.5% on the balance purchase price.”
The foregoing quotes the provision of the promotional schedule in respect of 5680 Anchorage Terrace; there is an intriguing discrepancy between the $8,005.00 and the “nett cost to client: $8,600.00” set out immediately above. The documentation in respect of 16 Freyburg Street refers consistently to $8,400.00.
The plaintiff/appellant's efforts did not lead to the sale of either property, although I was told that at some stage the defendants rejected an offer of $1.8 million or $1.9 million recommended by the plaintiff, at a time when the hope had been to realize $2 million. It is common ground that through the agency of others, both properties were sold, but for prices less favourable than the rejected offer involved. According to the statement of particulars of claim, which may be accepted for present purposes, 5680 Anchorage Terrace and 16 Freyburg Street “settled” on 30 September 1996 and 17 January 1997 respectively. The relevant sales and settlements may be taken to have been “satisfactory” from the point of view of the parties' agreement; no one contended otherwise.
Mr Harrison QC, for the appellant submitted, and I agree, that in the circumstances the defendants became liable to pay the promotional expenses (which the appellant had indulged them by “carrying”) on 30 September 1996.
The Magistrate, in support of whose conclusion Mr Collins appeared for the defendants, reached a different conclusion, namely, that the event which entitled the plaintiff to recover their “promotional expenditures” was that the properties, or one of them, must be sold within the 90 period stated in the agreement(s) of 4 March 1996.
According to this interpretation, if both properties remained unsold after the 90 day post-auction exclusive agency period, the appellant was in the position of having made a gift to Mr and Mrs Jones of $17,000.00 or, perhaps, $16,405.00. That would be quite a handsome gift and one most unlikely to have been intended, even in the circumstances of the case, which will be recounted more fully below. If the Magistrate's interpretation is correct, it would seem requisite that not only the sale, but also the settlement of the sale must occur within the 90 day period. Settlement might well be fixed for a date which allowed the purchaser, who would be paying a substantial sum of money for what must have been rather opulent premises, a long time to get ready. Nothing in the agreement says the appellant's entitlement must arise within the 90 day period or be forever lost. In my opinion it is not reasonable to imply such an onerous restriction. The case bears some similarity to Ward v Eltherington (1982) Qd R 561 in which consulting engineers engaged to do work in relation to the proposed construction of a clubhouse indicated they would not require payment “until the clubhouse was completed or the first beer pulled”. The clubhouse was never constructed (because finance was available to the club only on the basis of a switch to a brand of beer not favoured by the membership). However McPherson J found (see 563) a “common intention...that the plaintiff's should be paid for their work”. I think there must be found a common intention in the present case that the plaintiff would be reimbursed for the proposed expenditures, which it actually made in the event, in the course of attempting to sell the defendants' properties. I appreciate that Mr Jones gave evidence, as to which the Magistrate made no finding, that the plaintiff's representative said (some time before the agreements of 1st March were signed) he would “cop the costs” if he could not effect a sale; this says nothing about a 90 day time limit on effecting a sale. Mr Collins argued that there had to be some time limit and that the Jones' obligation could not go on for ever. If there is to be a time limit, it would be sensible, no doubt, to fix it by reference to features of the agreements of 1st March 1996. It is hardly helpful to think in terms of a “satisfactory sale and settlement within a reasonable time”. Mr Harrison's response was that the sale of the properties (one of them at least) was always going to be pursued actively, in the circumstances of Mr and Mrs Jones' matrimonial affairs. If the possibility must be contemplated of both properties being taken off the market, indefinitely, Ward v Eltherington (supra) may indicate the solution. As set out in the headnote, McPherson J held:
- “(1)That, the plaintiff firm having completed its work, the postponement of the time for payment of the debt to an event which did not occur did not have the consequence that payment never became due or recoverable.
- (2)That, the condition precedent to performance by payment having been discharged by impossibility of performance, that condition was discharged leaving the plaintiff's right to a fee unconditional and unimpaired.”
There is no necessity to resort to such a solution in this case, both properties having been sold; completion of one of the sales happened within 10 or 11 weeks of the termination of the exclusive agency.
Mr Collins sought to buttress his argument by reference to the final sentence in each promotional schedule which may be seen as linking entitlement to be paid promotional expenses to entitlement to commission, which would arise only if the plaintiff could show a subsisting written appointment as selling agent. In the end, I consider these final sentences (which contain no promise or undertaking to pay commission) as mere surplusage intended to make it clear to Mr and Mrs Jones that promotional expenses and commission create separate, cumulative liabilities.
If the two liabilities were inseparable, the appellant would be entitled to recoup the promotional expenditures from the Jones' only if it was the effective cause of a sale of one of their properties. Mr Collins so contended. The Magistrate expressed no view regarding this issue. I do not accept Mr Collins' contention. It involves implying into the reference to a “satisfactory” sale words such as “effected by Knobel & Davis Real Estate”, inconsistently with the firm's clearly expressed entitlement to commission elsewhere in the document even if some other agent was the cause of a sale. There is too much unreality about a scenario in which a vendor is invited to avoid having to make good expenditures incurred in that vendor's interests, which would ordinarily be payable promptly, by entering upon a sale in which the agent had no involvement.
The Jones' claimed, however, the protection of a specific verbal agreement between Mr Jones and Mr Davis whereby the plaintiff having any rights at all depended on its effecting a sale. Mr Collins' filed outline of submission refers not only to Mr Davis' willingness to “cop the costs” if he could not sell, but to another statement, or another version of the same at page 82 of the transcript:
“Well, look I'll look at the advertising and all the rest of it and I'll get on and I'll tell you what if I can't sell the house, you know, you don't pay anything.”
There were no findings by the Magistrate as to whether or not this was said. Even if it had been, the appellant submits that the parol evidence rule precludes reference to such material in order to cut down the effect of the subsequent written agreements appointing the plaintiff as the defendants' agent, each dated 1st March 1996. Mr Harrison referred me to Cheshire & Fifoot's Law of Contract (7th Australian Edition) 10.3 as an accessible statement of the parol evidence rule:
“Extrinsic evidence may be inadmissible where a contract is in writing. Where the parties have recorded terms of their contract in a document, the so-called parol evidence rule may apply. Broadly the parol evidence rule excludes the use of evidence of extrinsic matter “to subtract from, add to, vary on contradict the language of a written instrument”
The rationale of the parol evidence rule lies in the desirability of preserving “finality in written instruments meant to be final”, and of not allowing written words to be altered or qualified by the uncertain testimony of slippery memory. It would indeed be pointless to have documents at all if they were to be given no particular weight as evidence of what was agreed. But the circumstances in which documents are used are infinitely various, and it is obviously unwise to give mechanical credence to them. It must remain possible for a court, when necessary, to look beyond the document and to take account of its context.
All that is required is that the court should have the discretion, in the interest of speedy resolution of the litigation, to exclude evidence when it is patently at variance with that of an obviously genuine, complete and unequivocal written record of the parties' contract. The parol evidence rule is best understood as stating no more than that. Its more detailed prescriptions, examined below, may then be regarded as guidelines for the exercise of a discretionary power, which will not be used to exclude evidence of manifest substance and relevance. The modern tendency is “to apply the parol evidence rule in a less restrictive way”.
The following paragraphs in the textbook are an instructive attempt to categorise the circumstances in which relaxation of the rigour of the old rule has been permitted. None seems to apply in the present matter. Reference to the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 347, also a relevant and helpful statement for purposes of this appeal regarding the conditions necessary to ground the implication of a contractual term, indicates that the parol evidence rule is by no means dead. His Honour said:
“The conditions necessary to ground the implication of a term were summarized by the majority in B.P. Refinery (Westernport) Pty Ltd v Hastings Shire Council (56): “(1) it must be reasonable and equitable; (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; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”
In the present case the New South Wales Court of Appeal placed much emphasis on the speeches of Lord Wilberforce in Prenn v Simmonds (57), and in Reardon Smith Line v Hansen-Tangen(58). Their Honours, though acknowledging that his Lordship's remarks were directed not to the implication of a term but to the application of the parol evidence rule, for in each of the two cases the issue was one of orthodox construction of a contract, thought that the remarks had significance for the implication of a term in a contract. With this I agree. But there is a question whether these two cases and other authorities support the Court of Appeal's view that it is legitimate to take into account the common beliefs of the parties as developed and manifested during their antecedent negotiations.
The broad purpose of the parol evidence rule is to exclude extrinsic evidence (except as to surrounding circumstances), including direct statements of intention (except in cases of latent ambiguity) and antecedent negotiations, to subtract from, add to vary or contradict the language of a written instrument ((Goss v Lord Nugent(59). Although the traditional expositions of the rule did not in terms deny resort to extrinsic evidence for the purpose of interpreting the written instrument, it has often been regarded as prohibiting the use of extrinsic evidence for this purpose. No doubt this was due to the theory which came to prevail in English legal thinking in the first half of this century that the words on a contract are ordinarily to be given their plain and ordinary meaning. Recourse to extrinsic evidence is then superfluous.”
The Magistrate twice in his reasons referred to the contra proferentem rule, whereby ambiguities in a contractual document are construed against the party proffering the document, typically an insurance company or financier or - less commonly, perhaps, a real estate agent with a standard form appointment.
I find no ambiguity in the agreements of 1st March 1996, accordingly no occasion for adopting some strained construction which would cut down the plaintiff's rights or for implying any term which is not there. I cannot forbear from setting out the elegant exposition of the rule in the judgment of Jordan CJ in Fenwick v Federal Steam Navigation Co (1943) 44 SR (NSW) 1, at 5-6, to which I was referred:
“Now, it is well established that “where there is any doubt as to the construction of any stipulation in a contract, one ought to construe it strictly against the party in whose favour it was made”: Burton v English.(7) Thus, in relation to clauses providing for an exception from some liability assumed by one of the parties, it has been said that “The rule of construction as to exceptions is, that they are to be taken most strongly against the party for whose benefit they are introduced. The words in which they, are expressed are considered as his words, and, if he do not use words clearly to express his meaning, he is the person who ought to be the sufferer:” Blackett v Royal Exchange Assurance Coy.(8) This rule has been applied against an insurer in the construction of an exception from the insurer's promise to indemnify, ibid; against a shipping company in construing an exception from a promise to carry safely: Taylor v Liverpool & Great Western Steam Company (1); Burton V English (2); against a lessor in construing an exception from the property conveyed: Earl of Cardigan v Armitage (4); Savill Bros Ltd v Bethell. (5) In all these cases except the last, the person in whose favour the exception is introduced is also the person who prepares the document; but in the case of a conveyance it is against the conveyor that an ambiguous exception is read, notwithstanding that it is the purchaser who prepares the conveyance.
In Philippson v Imperial Airways Limited (6), the cases of Elderslie Steamship Company v Bortkwick (7) and Nelson Line (Liverpool) Limited v James Nelson & Sons Ltd (8) are treated as attempts by shipping companies to limit their liability by an exception which was inoperative because ambiguously expressed.
In considering which of the two aspects of the maxim should prevail in case of conflict, it is important to notice that the rule that ambiguities in a document should be read against the party who prepared it (which has been said to be one to be applied only where other rules of construction fail, Lindus v Melrose (9) derives its force from the fact that the opportunity which that party had of framing the document put him, to this extent, in a position of superiority. He had an opportunity of making it plain, it is he who should suffer if it is not. Hence, the case for applying this aspect of the maxim is at its weakest when the other party had a real opportunity of checking his draftmanship before accepting it, as in the case of a conveyance of land, is stronger when no such opportunity exists, as where a policy of insurance is issued to a member of the public, and becomes stronger still when the person who prepared the document stood, in relation to the provision in question, in a fiduciary relationship to the other party: Joel v Law Union & Crown Insurance Coy. (10)”
It is probably desirable that I record some more of the history both preceding and following the signing of the agreements of 1st March 1996. All of these matters I have considered, as the Magistrate considered them. In the circumstances, however, they do not call for any adjustment of my conclusion that the Jones' undertakings in the agreements discussed so far may properly be called upon.
An earlier agency agreement (Exhibit 1 before the Magistrate) appears to have been signed by Mr and Mrs Jones on 12th April 1995. It gave the plaintiff a sole and exclusive agency for a lengthy period of 365 days. It may have been associated with a promotional schedule dated 30th May 1995 (Exhibit 2) it is difficult to tell from the exhibit whether Mr or Mrs Joes signed it. The undertaking to pay above the place for their signatures is in different terms from those whose terms are indicated above. Parts of the undertaking, along with part of the line where the Jones' might have signed, has been covered up (presumably by some kind of sticker) when the tendered photocopy was made. I was told that the plaintiff ultimately bore the cost of a good deal, if not most, of the promotional expenses. I am unable to understand how anything to do with this document helps resolution of the present dispute. It tends against the correctness of a simplistic approach that the various authorities the defendants signed should be treated as valid for their own lifetimes, indicated by the duration of the agency, but devoid of any consequences thereafter. There is a considerable overlap of the periods of operation of Exhibit 1 and the two authorities signed on 1st March 1996 (Exhibits 4 and 5).
The approach I have been doubting seems to have been adopted by the Magistrate, particularly in respect of the last appointment of the plaintiff to act as a real estate agent (Exhibit 26), which is dated 31st July 1996. Exhibit 26 is in respect of 16 Freyburg Street only and is a 60 day appointment of the plaintiff as sole or exclusive agent. The items in the promotional schedule incorporated total $5,200 and the relative undertaking is:
“We, A.S. & B.L. Jones agree to accept this recommended promotion and advertising proposal to the extent of $5,200.00 plus $17,000.00 as attached being expenses for the previous promotional campaign and hereby undertake to pay Knobel & Davis Real Estate the said amounts totalling $22,200.00 on the sale of the said property by Knobel & Davis or any other agent or ourselves. Further to this and upon the sale of the said property commission also payable will be the standard scale 5% of the first $18,000 and 2½% on the balance purchase price.”
(This time, the authority and promotional schedule were signed by Mr Jones only, which raised issues, discussed below, whether they were binding on Mrs Jones or even on Mr Jones.)
Referring apparently to the undertakings, the Magistrate expressed the view that:
“They, the plaintiff, were aware that the clause contained in the prior appointment or agency agreement were binding on the parties for the period of the agreement and they then attempted in the final agreement to expand the clause...when it became apparent that they were unable to sell the properties in accordance with the terms outlined.”
It is clear from the foregoing that I regard Exhibits 4 and 5 as effective according to their terms to require Mr and Mrs Jones to pay the promotional expenses, notwithstanding that more than 90 days from the auction date had elapsed before settlement of the sale of the first of the properties occurred (and notwithstanding that the plaintiff was not the cause of either sale). I am unable to construe the new undertaking as any kind of abandonment of claims based on Exhibits 4 and 5. It seems to me the draftsperson, in line with the plaintiff's demonstrated practice, was doing no more than make clear, by collecting them together in a convenient place, the sum total of the Jones' contractual obligations. There is, I suppose, room for argument that the plaintiff was seeking to improve a claim of $16,405.00 by increasing that to $17,000.00. This would involve inferring (and I do not infer) that the apparent error in Exhibit 4 alluded to above had been noticed and was being sought to be overcome in a somewhat devious fashion. I do not think there is any merit in Mr Collins' suggestion that there was an attempt being made to render payment of the $17,000.00 (or whatever be the correct sum) in some fashion more free of conditions than it otherwise would have been.
It is unfortunate that the plaintiff decided to amend its pleading to raise Exhibit 26. The plaintiff pleaded that Mr Jones signed as agent for his wife so that she became bound. That was a hopeful pleading, giving the plaintiff's knowledge that, at the relevant time, Mrs Jones was not disposed to sign anything. There being an agency of Mr Jones for Mrs Jones was inconsistent with the manner in which all previous authorities had been executed. The plaintiff demonstrated little confidence in any such agency, making determined attempts to get Mrs Jones to sign for a time. On the appeal it was not suggested Mr Jones was bound by Exhibit 26. Authorities confirming the wisdom of the appellant's retiticence are referred to in Wanstall J's judgment in Farrelry v Hircock (No. 1) (1971) QdR 341.
Mr Collins submitted that Mr Jones was no more bound by Exhibit 26 than his wife, any obligation on him being dependent by her signing to become liable along with him. Arguing against an implication that Mr Jones was to be bound only if Mrs Jones also bound herself, Mr Harrison cited Cumberledge v Lawson (1857) 1 CB NS 709, 726; 140 ER 292, 299, Marston v Charles H Griffith & Co Pty Ltd (1985) 3 NSW LR 294, 300 and Thames Guarantee Limited v Campbell (1985) 1 QB 210, 219, 234, 236. Mr Collins cited Taubmann Pty Ltd v Loakes (1991) 2 Qd R 109 and Walter & Morris Ltd v Lymberis (1965) SASR 204 as indicating Mr Jones ought to be held not liable. It is the view I incline towards; it is supported by other local decisions such as Martinez v Rowland (1983) 1 Qd R 496 and Re Accornero (1987) Q Conv R 54 - 270. In the circumstances it is unnecessary to resolve this interesting question. I am doubtful that it ought to be resolved by considerations of what the parties thought. It is significant to note, however, that as paragraph 6B of Mr Collins' amended outline of submissions of 15th October 1998 puts it, in explanation of how Exhibit 26 came about: “Mr Jones asked for a new agreement to be done up (T84-10).” He signed Exhibit 26, and was doubtless correct in his approach that without it the plaintiff would be most unlikely to devote effort to bringing along a buyer said to be just around the corner. He then went to his wife to ensure that she would not sign, in the expectation that would leave them both uncommitted to the plaintiff. From the plaintiff's point of view, Mr Jones had been making assertions to it that his wife was now leaving all making of arrangements to him. (There is no finding by the Magistrate which enables this court to take any confident view of the facts.) At the least, this canny approach by Mr Jones, which I ought not to be taken as criticizing, shows the point of what Jordan CJ said in relation to the contra proferentem rule, and the inappropriateness of rushing to construe the documents appointing the plaintiff as agent against it. Mr Harrison pointed out that from the outset variations had been made to the printed forms, including variations in relief of the Jones' as vendors - all suggestive that the parties ought not to be treated as markedly unequal in their bargaining power.
In my opinion, none of the reasons assigned for denying effect to the undertakings in Exhibit 4 and 5 according to their terms was valid.
The appeal will be allowed, and presumably with costs. There ought to be judgment for the plaintiff in the action, rather than the orders which the Magistrate made, which will be set aside, and costs. I am inclined to think the judgment amount ought to be $16,405.00 rather than $17,000.00, but in this respect, and indeed in all respects, I am willing to receive submissions from the parties as to what the final orders should be.