Visser v Eldridge[2008] QDC 277

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   This is an application for leave to appeal against a decision of the Commercial & Consumer Tribunal given on 14 July 2008 allowing the claim by Mr & Mrs R & J Eldridge (the respondents) against the claim fund established by s 408 Property Agents & Motor Dealers Act 2000 (the Act) to the extent of $21,882-50.  The Tribunal ordered that the applicants Robert John Visser and Orchid Avenue Realty Pty Ltd trading as Ray White Surfers Paradise (the agent) (the respondents) reimburse the claim fund to the same extent - $21,882-50. 

2. [2]
   Mr Visser was a salesperson employed by the agent and his superior was Scott Harman.

Facts

3. [3]
   The facts were these. The respondents appointed the agent to sell their property 2/5 Whiting Street, Labrador.  An auction was held on 20 January 2007 and the property was passed in.  Later that day Mr Visser brought around “an interested buyer” to inspect the property.  The respondents agreed to sell to that “buyer” for $755,000.00 and a contract to that effect was entered into (the first contract).  Agent’s commission was $21,257.50.  The purchasers were Steven King and his de facto partner Amanda Rushworth.  Mr King was an employee of the agent and therefore s 145 of the Act applied. 

4. [4]
   Section 145 is in the following terms:

“145  Beneficial interest - - other than options

3. (1)
   This section applies to property placed by a person (client) with a real estate agent for sale, but does not apply if section 144 applies.

3. (2)
   The real estate agent commits an offence if the agent obtains a beneficial interest in the property.

Maximum penalty - - 200 penalty units or 3 years imprisonment

3. (3)
   A real estate salesperson employed by the real estate agent commits an offence if the salesperson obtains a beneficial interest in the property.

 Maximum penalty - - 200 penalty units or three years imprisonment.

3. (4)
   A person does not contravene subsection (2) or (3) if --

1. (a)
   the person - -

1. (i)
   before a contract for the sale of the property is entered into, obtains the client’s written acknowledgment in the approved form that the client - -

2. (ii)
   acts fairly and honestly in relation to the sale; and

2. (b)
   no commission or other reward is payable in relation to the sale; and

3. (c)
   the client is in substantially as good a position as the client would be if the property were sold at fair market value.”

5. [5]
   Sub-section (4) had not been complied with.

6. [6]
   That night Mr Visser discussed the matter with Mr Harman and then with Mr King and the following day, 21 January 2007, the purchasers gave notice “revoking” [sic] the contract relying on the cooling off period provisions of the Act (s 368). Mr Visser had also told Mr King that the sale “was exempt from commission” because of the contravention of s 145(3). The respondents claim was litigated on the basis that no commission was in fact payable on the first contract had that proceeded to settlement. Commission, if paid, is recoverable if a person is convicted of an offence against s 145(2) or (3), see s 145A.

Findings of Tribunal

7. [7]
   What happened next is referred to in para 37(f), (g), (j) and (k) of the Tribunal’s decision, quoting the applicants (now the respondents) statement:

“37 (f) Mr Visser then arrived at the applicants home:

‘When Mr Visser arrived, the contract was already signed by the buyers and a sale price of $733,742.50 had been typed into the contract together with a deposit amount of $73,374.20.  We immediately pointed out that the price was $755,000 and we were not prepared to change it.  Mr Visser went through the figures and showed us that this amount of $733,742.50 together with the commission of $21,257.50 made up the $755,000.00.  Mr Visser had a letter on [the Agency’s] letterhead in which the buyers … gave an undertaking to pay the commission of $21,257.50 to [the Agency] on settlement of the contract for [the property].  Mr Visser explained very carefully that this was exactly the same as signing a contract for $755,000.00 except that instead of us paying the commission of $21,257.50, the buyers would pay it directly to [the Agency].  This all seemed quite reasonable as we could not see the difference between our paying the commission and the buyers paying the commission directly to the [Agency].  At no time did Mr Visser ever tell us that … there was no commission payable on the contract for $755,000.00 under the [Act].’

7. (g)
   The applicants then signed the second contract:

‘The only reason we signed the unconditional contract for $733,742.50 was because we always believed, and were led to believe by Mr Visser, that we were effectively getting $755,000 less the commission which would be paid directly by the buyers.  We always believed that we were effectively paying the commission of $21,275.50.’…

1. (i)
   The applicants were busy travelling interstate during the next two weeks.  They did not see their solicitor about the contract ‘until the beginning of February’ 2007.  By that time the applicants had learned (from their daughter) ‘that no commission was payable where there was a relationship between the buyer and the Real Estate Agent that had to be disclosed under the [Act].’  The solicitor did certain things (which were set out in Ms Ziukelis’ statement) and then advised the applicants that the 21 January 2007 contract was ‘binding’ and the applicants ‘could not refuse to settle.’

10. (j)
    The applicants settled the contract on 16 February 2007.

11. (k)
    The applicants state:

‘Had we known that there was no commission payable by us on the contract of sale, then we would never had [sic] agreed to the sale price of $733,742.50.  … at the time of signing the contract dated 21 January 2007 we believed, and were led to believe by Mr Visser, that the buyers were simply paying the commission directly to the agents rather than our receiving $755,000 and then our paying commission to the agents.’

8. [8]
   The applicants do not challenge any of the findings of fact by the Tribunal.

9. [9]
   Section 470(1) of the Act provides that a person may make a claim against the claim fund if the person suffers financial loss because of the contravention by an agent or the agent’s employee of s 145 and/or s 574.

10. [10]
    The Tribunal considered whether there had been a contravention of s 145 in respect of the second contract:

“97 Regarding the second contract, there is evidence that the applicants placed the property with the Agency for sale and that Mr King, a real estate salesperson employed by the Agency, completed the purchase of property, together with his spouse, Ms Rushworth, who was an associate of Mr King for the purposes of the Act.  It follows that there will have been a contravention of section 145(3) by Mr King in respect of the second contract, unless the exception found in section 145(4) applies. 

98 There is evidence that, before the applicants entered into the second contract, Mr Visser obtained the applicant’s written acknowledgement of their awareness of Mr King’s connection with the Agency and their consent to Mr King and Ms Rushworth obtaining the property.  This satisfies the requirements of section 145(4)(a)(i). 

99 The second requirement is found in section 145(4)(a)(ii).  It is that Mr King (being the person who would otherwise have contravened section 145(3)) acted fairly and honestly in relation to the sale…  In the circumstances, and in light of my conclusions below, I make no finding against Mr King in this respect. 

100 The next requirement is found in section 145(4)(b); it is that no commission or other reward is payable in relation to the sale.  The evidence on this point is quite clear.  On 21 January 2007 Mr King and Ms Rushworth agreed to pay a commission of $21,257.50 to the Agency in relation to the sale of the property; and they subsequently paid that amount.  It follows that Mr King is unable to rely on the exception in section 145(4) of the Act to avoid a finding that he contravened section 145(3). 

101 In the circumstances, it is not necessary to consider the final requirement (found in section 145(4)(c) of the Act) that the applicants are in substantially as good a position as they would have been if the property were sold at fair market value.  However, for completeness sake, I note that I accept the evidence of Mr Eden as to the market value of the property.  I took Mr Eden’s concession about the ‘range’ of values to mean that the fair market value of the property was in the middle of that range or about 2.5% lower than his valuation.  On this basis, the fair market value of the property was $755,625.00.  The applicants received $733,742.50, which is substantially less than the fair market value.  It is also below the lowest end of the range of possible values given by Mr Eden.  Even allowing for a commission payment, in the event of a sale to a person who was not an executive officer, employee or associate of the Agency, the applicants are not in substantially as good a position as the would have been had the property been sold at $755,625.00.”

11. [11]
    The Tribunal then considered whether there had also been a contravention of s 574 of the Act.

12. [12]
    So far as is relevant that section provides as follows:

“574  False representations about property

1. (1)
   A licensee or registered employee must not represent in any way to someone else anything that is false or misleading in relation to the letting, exchange or sale of property.

Maximum penalty – 540 penalty units.

4. (4)
   Also, if a person makes a representation in relation to a matter and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading. 

5. (5)
   The onus of establishing that the person had reasonable grounds for making the representation is on the person.

8. (8)
   In this section --

False or misleading, in relation to a representation includes the wilful concealment of a material fact in the representation.”

13. [13]
    The Tribunal found as follows:

“102 The evidence before the tribunal from the applicants and from Mr Visser establishes that on 21 January 2007 Mr Visser told the applicants that they would be in the same net position if they signed the second contract, as they would have been had the first contract proceeded to settlement.  This was a representation in relation to the sale of the property.  It was false.  It was also a representation that would reasonably tend to lead to a belief that the applicants would have been bound to pay a commission of $21,257.50 to the Agency, if the first contract had proceeded to completion.  That was not the state of affairs. 

103 Mr Visser had no reasonable grounds for making this representation.  He knew, because Mr Harman had told him the evening before, that the applicants would not have to pay any commission on the first contract.  I am satisfied that Mr Visser wilfully concealed from the applicants that fact that no commission would be payable in any circumstances in respect of the first contract.  The substantial reason Mr Visser and Mr Harman suggested the second contract to Mr King and sought to persuade the applicants to enter into it was their concern that no commission would be paid on the first contract.  I am satisfied that Mr Visser knew it was a false representation, knew he was misleading the applicants in a material respect, and did so in order to induce the applicants to sign the second contract.

104 In the circumstances, there was a contravention of section 574(1) by both the Agency (through Mr Visser) and by Mr Visser himself.”

14. [14]
    Section 488 of the Act deals with financial loss and is in the following terms:

“488 Deciding claims other than minor claims

3. (1)
   The tribunal may allow the claim wholly or partly, or reject the claim.

3. (2)
   However, the tribunal may allow the claim only if satisfied, on the balance of probabilities, that –

1. (a)
   an event mentioned in section 470(1) happened; and

2. (b)
   the claimant suffered financial loss because of the happening of the event.

3. (3)
   If the tribunal allows the claim, wholly or partly, the tribunal must –

1. (a)
   take into account –

1. (i)
   any amount the claimant might reasonably have received or recovered if not for the claimant’s neglect or default; and

2. (ii)
   any amount ordered to be paid to the claimant as compensation under section 530A, 572D or 592A; and

2. (b)
   decide the amount of the claimant’s financial loss; and
3. (c)
   name the person who is liable for the claimant’s financial loss.”

15. [15]
    In considering whether the respondents had suffered financial loss the Tribunal said:

“105 For the applicants to recover any amount from the claim fund, the tribunal must also be satisfied that they suffered financial loss because of contravention of section 145(3) and/or section 574(1)

106 The contravention of section 145(3) occurred on 16 February 2007 when Mr King and Ms Rushworth completed the second contract and purchased the property.  The contravention of section 574(1) occurred on 21 January 2007.  The earlier contravention induced the applicants to enter into the second contract, subsequently completed.  Once the applicants signed second contract they became bound to complete it.  By doing so, the applicants exchanged their right to be owners of the property for an obligation to transfer the property to Mr King and Ms Rushworth and a right to receive $733,742.50 for it.  As the fair market value of the property was $755,625.00, upon signing the second contract the applicants became bound to exchange the property for the (lower) purchase price.  It follows that the applicants suffered a financial loss of $21,882.50 upon signing the contract.  That loss was contingent only upon Mr King and Ms Rushworth completing the purchase.  When they did so on 16 February 2007 no additional financial loss was suffered.

107 In the circumstances I am satisfied that the applicants suffered a financial loss of $21,882.50 because of the contravention of section 574(1) by the Agency and Mr Visser.  This is the amount of their financial loss for the purposes of section 488(3)(b) of the Act.  I am also satisfied that the Agency and Mr Visser are the persons who are liable for the applicant’s financial loss.

108 As noted above, Mr King did not contravene section 145(3) until he completed the purchase on 16 February 2007.  He could have avoided a contravention of section 145(3) by acting before the second contract was signed by the applicants – to ensure that no commission was payable in respect of the sale and to ensure that the applicants in [sic] substantially as good a position as they would have been in had the property been sold for the fair market price.  Instead, he undertook to pay commission to the Agency and he offered the second contract at a price substantially below the fair market price.  Mr King and Ms Rushworth could have terminated the second contract within the cooling off period, which expired no earlier than 29 January 2007.  After that time, they could avoid completing the contract only with the agreement of the applicants.  There was no evidence to support a finding that the applicants would have agreed to such a course.  It follows that after 29 January 2007 (or a later end of the cooling off period) Mr King and Ms Rushworth were contractually bound to complete the purchase; and there was nothing Mr King could do to avoid a contravention of section 145(3).

109 It is difficult to avoid the conclusion that but for Mr King’s contravention of section 145(3), the applicants would not have suffered the financial loss.  However, no submission to that effect was put by the applicants or the respondents.  Mr King was not a respondent to the claim.  As a result he was not represented at the hearing; nor was he able to adduce evidence or make submissions on his own behalf.  In the circumstances it is not appropriate to name Mr King as a person responsible for the applicants’ financial loss.

110 It has been admitted that the Agency while acting as the applicants’ agent, accepted a commission from Mr King and Ms Rushworth.

112 On the basis of the above findings, the applicants’ claim will be allowed under section 488(1) of the Act.”

16. [16]
    The Tribunal found that both ss 145(3) and 574 had been contravened but that only the contravention of s 574 caused financial loss to the respondents and that no additional financial loss was caused by the contravention of s 145(3).

Applicants arguments

17. [17]
    The applicants contend that there was in fact no contravention of s 145(3) and that any contravention of s 574 did not in fact cause any financial loss to the respondents. Basically they submit that the Tribunal was wrong to find for the respondents and that they should not have been ordered to pay anything to them.

18. [18]
    The applicants contend that the Tribunal’s decision is vitiated by four particular errors of law (see s 100(1)(a) Commercial & Consumer Tribunal Act 2003.

First Error – s 145(4)(b)

19. [19]
    The applicants submit that s 145(4)(b) only applies to commission payable by the agent’s client (the vendor) and not, as the Tribunal found, also to commission payable by the purchasers in relation to the sale. Mr Hackett submitted that this follows from the terms of s 145(1) and from the emphasis on the position of “the client” in s 145(4)(a)(i) and (c).

20. [20]
    In my view s 145(4)(b) is not, by its terms, limited to commission payable by the client in relation to the sale and is capable of covering all commission paid in relation to the sale regardless of by whom.

21. [21]
    Mr Hackett relied upon certain remarks by McGill SC DCJ in Berceanu v Boltons Real Estate Pty Ltd and Ors [2004] QDC 018 at para [28] but in my view they do not have anything to do with the present situation.  There commission there was paid to the agent and the argument was that s 145(4)(b) applied because the salesperson who committed the offence under s 145(3) (an employee of the agent) was not the person to whom the commission was payable.  That argument was, with respect, quite correctly rejected by his Honour.  His Honour did not decide that s 145(4)(b) was limited to commission payable by the vendor.

22. [22]
    The construction advanced by the applicants would, in my view, circumvent the mischief against which the section is directed and, to adopt the submissions of Mr Bowden, “lead to the very sort of artificial device which was constructed in this case to get around the clear provisions of s 145(4)(b)”.

23. [23]
    I also agree with Mr Bowden’s submissions that:

“In any event, it is perfectly clear that it was in fact the Eldridges who paid the commission under the second contract.  What they did was reduce the price between themselves and the purchasers to make available to the purchasers a fund which the purchasers could then use to pay the deposit.”

24. [24]
    Mr Hackett also relied on the Explanatory Notes to the Property Agents & Motor Dealers Bill 2000, clause 145 which state

“The agent or salesperson is required to act fairly and honestly in relation to the sale, and is not permitted to receive commission or other reward from the client for the sale.”

25. [25]
    Section 145(4)(b) does not in fact limit commission to commission paid by “the client” i.e. the vendor.  In any event this is not a situation where recourse need be had to the explanatory notes because s 145 is not in my view ambiguous or obscure, its ordinary meaning is clear and that meaning does not lead to a manifestly absurd or unreasonable result, on the contrary the interpretation adopted by the Tribunal is one that best achieves the purposes of the Act which is to regulate real estate agents and protect consumers.  See Acts Interpretation Act 1954, ss 14A and 14B and Property Agents and Motor dealers Act 2000 s 10.

26. [26]
    In my view the Tribunal did not err in interpreting s 145(b) in the way it did. What realistically occurred was a purchase by a salesman employed by the vendor’s real estate agent with commission effectively paid by the vendors by way of a reduction in the purchase price by an amount equal to the commission and that in my view contravenes s 145(3). Mr Hackett’s reliance on termination based on s 368 (cooling off) rather than because of a breach of s 145(3) (T 1-42) cannot disguise the actual circumstances which caused the purchasers to terminate the first contract and the respondents to enter into the second contract.

27. [27]
    The respondents property was placed with the agent for sale (s 145(1)). Thereafter neither the agent nor a salesperson employed by the agent is to obtain a beneficial interest in the property by purchasing it. If they do so the commit an offence (s 145(2) & (3)) unless (inter alia) no commission is payable in relation to the sale (s 145(4)(b)) by the vendor to the agent or by the agent by way of a reduction in the sale price by an amount equal to the commission (the benefit of which is received by the agent). Either way the agent obtains a commission and that is not allowed by the section.

28. [28]
    Section 145 requires only that a vendor (not a purchaser) place the property with the agent. Thereafter the agent is to receive no commission or must return any received on the sale however and by whomever paid.

Second, third and fourth errors – ss 145(4)(c), 574 & 488

29. [29]
    The applicants argued that the Tribunal (erred in para 101) in not finding that “fair market value” in s 145(4)(c) means an amount less commission. Mr Hackett submitted (T 1-18) that “market value includes in its make up commission payable on a transaction and the Tribunal did not bring that to account when considering whether the respondents were in substantially as good a position as they would be if the property sold at fair market value.” On this basis the result according to Mr Hackett should have been calculated as follows:

“10 (a) Market Value (before commission)  $755,625.00

 (b) Commission on $755,625.00 =  $  21,274.00

 (c) Position the First and Second Respondents

  would have been in if sold at market value $734,351.00

 (d) less the amount received   $733,742.50

 (e) Difference     $       608.50

11. Had the (Tribunal) performed the above calculation (it) would have found that the First and Second Respondents were in substantially as good a position as the First and Second Respondents would be if the property were sold at fair market value as those words are used in s 145(4)(c).”

30. [30]
    Mr Hackett also submitted that the Tribunal erred (in para 102) in proceeding “on the assumption that the first contract could or would have gone to completion” (T 1-20). With respect that is not how the Tribunal approached the matter.

31. [31]
    Both sides have to an extent been sidetracked by the Tribunal’s use of fair market value as the starting point for calculating the respondents financial loss and this led to some confusion during argument and unnecessary supplementary written submissions dealing with different approaches to the assessment of loss and damage and associated findings made by the Tribunal.

32. [32]
    The misrepresentation found to have been made by Mr Visser was twofold

3. (1)
   if the respondents signed the second contract they would be in the same position as they would have been in had the first contract settled, and

3. (2)
   commission of $21,257.50 would have been payable by the respondents had the first contract settled.

33. [33]
    The respondents loss was predicated on the fact that no commission would in fact have been payable on the first contract had that contract proceeded to settlement. That was the basis upon which the respondents claim was litigated in the Tribunal.

34. [34]
    Had the first contract proceeded to settlement (with no commission payable because of the contravention of s 145(3)) the respondents would have received $755,000.00. That is the starting point for calculating their financial loss not the fair market value of their property.

35. [35]
    The financial loss suffered by the respondents was the difference between the first and second contract prices, namely $21,257.50. That is the amount which would put them in the same net position they would have been in had the first contract settled and had no commission been payable on that sale.

36. [36]
    References by the Tribunal to “fair market value” (paras 101 & 106) and to ensuring that the respondents would be in substantially as good a position as they would have been had the property sold for fair market price and to the second contract price being substantially below fair market price (para 108) unnecessarily and incorrectly imported into s 488 the formula used in s 145(4)(c).

37. [37]
    To place the respondents in the position represented to them they should have received $755,000.00 for the sale of their property not $733,742.50.

38. [38]
    The Tribunal erred in using fair market value rather than $755,000.00 as the starting point because $755,000.00, not $755,625.00 was the figure which would have put them in the same net position they would have been in had the first contract settled without any commission being payable.

39. [39]
    This results in a reduction of $625.00 in the respondents claim which is sufficient only to slightly vary the amount payable to the respondents but not to otherwise warrant any alteration in the result or any reason to allow the appeal and set aside the decision of the Tribunal.

40. [40]
    It is not necessary for present purposes to decide what is meant by “market value” other than to say that the authorities are against Mr Hackett. I refer in particular to Spencer v Commonwealth (1907) 5 CLR 418 and Bennett v Goodwin [2005] NSWSC 930 both referred to in Mr Bowden’s supplementary outline.  Commission may though be a cost of selling the property which may have to be brought to account in the assessment of loss or damage depending on the circumstances.  That is not the case here though.

41. [41]
    The applicants have not established any error of law on the part of the Tribunal in its consideration of the matters involved in ss 145(c), 574 & 488 except for a minor error in the starting figure for loss calculations – it should have been $755,000.00 not $755,625.00.

Result

42. [42]
    Leave to appeal will be granted, the second and third orders of the Tribunal will be varied reducing the amount referred to in each from $21,882.50 to $21,257.50 and the appeal will be otherwise dismissed with costs to be paid by the applicants on the standard basis unless agreed.