€¦ · Web viewCase Name: Ozzy States Pty Ltd v Norton Property Group Pty Ltd & Anor. Medium...

District Court

New South Wales

Case Name:

Ozzy States Pty Ltd v Norton Property Group Pty Ltd & Anor

Medium Neutral Citation:

[2019] NSWDC 145

Hearing Date(s):

26 March 2019, 28 March 2019

Date of Orders:

26 April 2019

Decision Date:

26 April 2019

Jurisdiction:

Civil

Before:

Weber SC DCJ

Decision:

(1) Judgment and Verdict for the plaintiffs against the defendants in the sum of $178,000.(2) Interest thereon calculated pursuant to the rates prescribed from time to time in Practice Note DC (Civil) No. 15.(3) The cross-claim to be dismissed.(4) That the plaintiffs file and serve any written submissions which they may be advised to make in relation to the issue of costs, on or before 17 May 2019.(5) That the defendants file and serve any written submissions in response, on or before 24 May 2019.(6) That pending any further order, the issue of costs raised by the submissions referred to in Orders 4 and 5, be determined by me on the papers.

Catchwords:

CONTRACTS construction principles standard form agency agreement application of reasonable business person test- whether reference to contract for the purchase of the Property includes call option agreement juristic nature of call option agreement - where grantee of option had no obligation to purchase where options never exercised where plaintiff advanced part-commission to agentCONTRACTS misleading or deceptive conduct representations where defendant incorrectly asserted that payment due under agency agreement where plaintiff advanced part-commission to agent- whether representations causative of plaintiffs loss whether second defendant knowingly concerned in, and party to, first defendants contravention RESTITUTION mistake restitution of money paid by plaintiff mistake of fact whether defendant unjustly enriched whether defendants entitled to counter restitution on account of services under agency agreement

Legislation Cited:

Civil Procedure Act 2005 (NSW)Competition and Consumer Act 2010 (Cth), Schedule 2 (Australian Consumer Law)

Cases Cited:

Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570AIB Group (UK) plc v Martin [2002] 1 WLR 94Ballas v Theophilos (1957) 98 CLR 193Braham v Walker (1961) 104 CLR 366Browne v Dunn (1893) 6 R 67Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592Cherry v Steele-Park (2017) 351 ALR 521; [2017] NSWCA 295Dairy Containers v Tasman Orient Line CV [2005] 1 WLR 215GR Securities v Baulkham Hills Private Hospital Pty Ltd (1986) NSWLR 631Horne v James [2015] NSWSC 465I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd (2004) 12 BPR 22,879Russell Gould Pty Ltd v Ramangkura (2014) 87 NSWLR 552Tanwar Enterprises v Cauchi (2003) 217 CLR 315Tonitto v Bassal (1990) 5 BPR 11, 258WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd (2016) 341 ALR 467

Texts Cited:

The Interpretation of Contracts in Australia (2012), by Lewison and HughesMacquarie Dictionary (2nd Revised Edition) (1987), published by the Macquarie Library Pty Ltd

Category:

Principal judgment

Parties:

Ozzy States Pty Ltd (Plaintiff 1; Cross Defendant 1)JRNN Pty Ltd (Plaintiff 2; Cross Defendant 2)Norton Property Group Pty Ltd (Defendant 1; Cross Claimant)Christos Exarhos (Defendant 2)

Representation:

Counsel:Mr S Goodman SC (Plaintiffs; Cross Defendants)Mr A Byrne (Defendants; Cross Claimant)Solicitors:Clinch Long Woodbridge (CLW) Lawyers (Plaintiffs; Cross Defendants)Levitt Robinson Solicitors (Defendants; Cross Claimant)

File Number(s):

2017/00264811 001, 2017/00264811 002

Publication Restriction:

None

Judgment

Introduction

1. The plaintiffs are property developers (the Principals). The first defendant is a real estate agent (the Agent). The second defendant is a principal of the Agent. On 7 April 2016, the Principals and the Agent entered into a buyers agency agreement (Buyers Agency Agreement).

1. The Principals have made various payments to the Agent in respect of certain work performed in connection with the subject matter of the Buyers Agency Agreement, and now contend that those payments were not in fact payable to the Agent. By their Amended Statement of Claim, the Principals seek repayment of the sums paid. They do so on the following bases:

1. that the payments were induced by misleading or deceptive conduct on the part of the Agent and the second defendant, in breach of section 18 of the Australian Consumer Law;

1. reliant upon unconscionable conduct on the part of the Agent and the second defendant contrary to the provisions of section 21 of the Australian Consumer Law; and

1. pursuant to the principles of unjust enrichment in respect of payments had and received by the Agent.

1. The second defendant is sued as a primary contravener in respect to the above causes of action; and in the alternative, as being knowingly concerned in, and party to, the Agents alleged contraventions of section 18 and 21 of the Australian Consumer Law.

1. The Agent contends that the payments sought to be recovered by the Principals, represent part of a larger sum owed to the Agent, and pursuant to its Amended First Cross Claim, the Agent seeks the balance of the sum said to be owed to it pursuant to the provisions of the Buyers Agency Agreement.

Commercial Background

1. The Principals wished to undertake a property development in Ashfield. In order to undertake the development, it was necessary for them to obtain seven residential properties. Four of the properties were on Parramatta Road, and three were situated in Tideswell Street. It was necessary for all of the properties to be acquired in order to make the property development project viable.

1. On 7 April 2016, the Principals and the Agent entered into the Buyers Agency Agreement. Clause 3 of the Buyers Agency Agreement was in the following terms:

3.i A non-refundable retainer fee of $22,000 (GST incl.) applies. If the agent receives a payment under Clause 3 ii, then the non-refundable retainer fee shall be deducted from the calculation of the buying fee as stated in 3 ii.

iiThe Principal acknowledges that the Agent shall be entitled to a buying fee: calculated as a percentage of the total purchase price including GST, if any of 2.2% (GST incl.)

and the Principal hereby agrees to pay the fee in accordance with this agreement in the event that the Agent introduces to the Principal a vendor of a property or the Property and the Principal:

a.enters into a contract for the purchase of the Property;

b.procures another person or entity to enter into a contract for the purchase of the Property (whether by novation or otherwise);

c.where the Property is owned by a company; enters into a contract for the purchase of any shares of that company;

d.where the Property is owned by a company, procures a further person to enter into a contract for the purchase of any of the shares of that company (whether by novation or otherwise);

e.by any other means whatsoever becomes the legal and beneficial owner or both of the Property; or

f.where the Property is owned by a company, by any means whatsoever becomes the legal and beneficial owner or both of any of the shares of that company.

iiiA termination fee of $22,000 (GST incl.) is due and payable by the Principal if the Principal terminates the agreement.

iv. The Agreed Fee in 3 ii is due and payable by the Principal on exchange of any of the contracts referred to in (a) to (f) above or on completion of the transfer of the legal or beneficial ownership or both referred to in (e) and (f) above or upon demand if any of the contracts referred to in (a) to (d) above or the transfer of the legal or beneficial ownership or both referred to in (e) and (f) above are not completed owing to the default of the Principal.

v.The parties also expressly agree that the Agent shall also be entitled to payment of the agreed buyers fee in 3 ii if the vendor of a Property or a Property [sic] is introduced to the Principal by the Agent at any time prior to the termination of this Agreement, and the Principal satisfies any of the requirements set out in 3 ii (a) to (f) within 12 month(s) after such termination.

1. Following the execution of the Buyers Agency Agreement, the second plaintiff (JRNN) entered into various call option agreements with owners of the residential lots which were intended to be acquired for the purposes of the development (each, an Option Agreement). This occurred, in part at least, it seems through the efforts of the Agents. The Option Agreements were in substantially identical form, and provided for the period in which the option could be exercised by the grantee, the means by which the option could be exercised, the option expiry date, and an option fee. In addition, the schedule to each Option Agreement contained the terms of the contract for the sale of land in standard Law Society of New South Wales 2016/ Real Estate Institute of New South Wales terms, which would be entered into upon the exercise of the option. An additional schedule to each Option Agreement provided a form of Notice of Exercise of Call Option. The Option Agreements also contained the purchase price in respect of the premises the subject of the Option Agreement.

1. Clause 2.4 of the Option Agreements was in the following terms:

2.4Binding Contract

a.Upon the Grantor receiving the Notice of Exercise of Call Option and executed Contract, the Grantor will be bound to sell and the Grantee bound to purchase the Property on the terms set out in the Contract and the Contract will be deemed to be entered into upon the day of exercise of the Call Option.

b.The Grantor agrees to deliver to the Grantee an executed counterpart Contract noting as purchaser the Grantee within five (5) Business Days after the receipt of the Notice of Exercise of Call Option.

c.The parties

i.acknowledge and agree that the exchange of counterparts is intended only to permanently record the detailed terms of the Contract; and

ii.intend to be and will be bound by the Contract on the date of and by virtue of the exercise of the Call Option.

1. The word Contract in clause 2.4 is defined as the contract for sale of land in Schedule 2. As I have mentioned, that contract was in standard terms.

1. On 12 August 2016, Mr Christos Exarhos (the second defendant, often referred to in the correspondence as Chris by Mr Nigro) told Mr Nigro of the Principals that call option agreements for the properties at 122 Parramatta Road, 4 Tideswell Street, and 6 Tideswell Street, would shortly be ready to be executed. He also asserted that the Agent was entitled to its 2.2% commission upon the execution of each Option Agreement (Affidavit of Christos Exarhos dated 31 May 2018, [112] [113]).

1. These proceedings are concerned with these fees, which are the subject of clause 3(ii) of the Buyers Agency Agreement. I shall refer to these fees as the Buyers Fees.

1. It may be helpful to set out certain of the exchanges between the parties as to the Buyers Fees, in the context of the grants of the various options, and the payment of monies.

The Demands and Payments

1. In addition to the assertion of a right to be paid the Buyers Fees to which I have referred at paragraph 10 of these Reasons, Mr Exarhos made other oral demands for payment. As he stated in [153] of his 31 May 2018 affidavit, and agreed in cross-examination at (T60.48-50), I did from time to time request that Mr Nigro attend to payment of the outstanding monies owing. He told Mr Nigro that the Buyers Fees were due and payable on the execution of the Option Agreements (T61.1-2). In cross-examination, Mr Exarhos also agreed that he had said to Mr Nigro You have to pay me 2.2% of the contract price of each of the call option agreements when they are signed (T61.30-32).

1. On 22 August 2016, JRNN entered into an Option Agreement with the owners of 6 Tideswell Street (Ex. P1, p 5 93). On the same day, JRNN entered into an Option Agreement with the owner of 122 Parramatta Road (Ex. P1, p 94 146). On or about 23 August 2016, the first plaintiff (Ozzy) paid $50,000 to the Agent (Affidavit of Christos Exarhos dated 31 May 2018, [114]). On 24 August 2016, JRNN entered into an Option Agreement with the owners of 4 Tideswell Street (Ex. P1, p 147 208).

1. On 23 September 2016, JRNN entered into an Option Agreement with the owner of 2 Tideswell Street (Ex. P1, p 214 271).

1. On 20 October 2016 (11.20am), Mr Exarhos sent an email to Mr Nigro in the following terms (Ex. P1, p 272 276):

As discussed, please find attached the following invoices for the properties executed via option agreement to date as per our agreement:-

EXARESI117 - $124,300

EXARESI118 - $127,600

EXARESI119 - $39,820

EXARESI120 - $79,200

Total: $370,920

To date we have received $50,000, with a balance of $320,920 outstanding.

Our agreement was to receive payment on the execution of the option agreements.

Initially we were advised that we would receive $100,000 per month until the

balance was paid.

Please advise of a payment arrangement in when the outstanding can be paid.

1. There followed a series of email messages (emphasis added):

1. at 2:17pm, from Mr Nigro (Ex. P1, tab 8, p 277):

I already paid you 50K.

We also agreed that all the sites must be accomplished and this is where we are at.

We need 3 more to go.

Please obtain the 3 other properties otherwise it is no use to me and this was also agreed.


Furthermore I was promised in writing that they would be all done over 4 weeks. It has now been 3 months.

I give until end of October 16 to finalize them or I will need to present myself to them and make arrangements and all bets are off.

So your invoices are not payable until the whole deal is sealed.

1. at 2:31pm, from Mr Exarhos (Ex. P1, tab 10, p 282):

I have already confirmed in my below email that we have received $50,000.

You requested that you would be interested in acquiring the properties up to and inclusive of 114 Parramatta Rd, Ashfield.

Our fees were never conditional on the amalgamation of the whole site.

We should be paid our fees on the execution of the option deeds.

As per your request due to your cash flow issues, we accepted a payment arrangement as a sign of good faith; which you didnt uphold.

We understand that we are in discussions/negotiations with the 114 Parramatta Rd, 118 Parramatta Rd (4 apartments), 120 Parramatta Rd (Hungarian Community).

If we do not receive confirmation of a payment arrangement for our fees we will not be finalising the outstanding properties.

We simply cannot invest our time and not be remunerated for our efforts; we also have a business to run.


As previously mentioned, if we do not receive a payment arrangement to our fees, we are not prepared to do further work for nothing. If you choose to act in an underhanded manner in presenting yourself to the vendors that we are already in discussions/negotiations that is your prerogative.

All we are asking is for our fees that are due and nothing more.

However, we will not continue to finalise transactions for you to benefit from while we continue to beg for our fees.


On the basis that your email below confirms that you will not proceed with the 3 properties we will engage others to execute the 3 properties

As far as your claims please provide evidence of a signed agreement with dates for payment.

We will provide that you undertake to acquire all properties in 2 weeks from 12 August 2016

You have failed and continue to fail in obtaining all the 3 remaining properties.

The Arrangement was to be paid at the end of settlement not execution of Deeds being per month as they settle

You are confused

I will email you the paper that you wrote on yourself

You kept harassing me and pushing me for funds. I have always been consistent and gave you $50K in good faith as an upfront payment.

Never did I agree to pay any agents ever upfront.

So the balance is conditional on firstly obtaining the 3 properties remaining and then at settlement.

Happy to discuss further.


NOT AGREED

Please discontinue acting in my behalf

1. at 2:40 pm, from Mr Nigro attaching the handwritten note dated 12 August 2016, which is referred to above in Mr Nigros email of 2:37pm the same day (Ex. P1, tab 14, pp 296 and 297).


As requested we will cease to act on your behalf


As requested, please find attached the agency agreement you entered into.

The agreement stipulates that you have engaged us for 12 months.

No, what we are saying is to provide us with a payment arrangement plan and we will finalise the 3 properties.

We never agreed to be paid on settlement, we would never agree to that.

What you are asking is for us to execute all option agreements to amalgamate the site. Then in 18 months time if you do not take up the options, then who do we go to for payment.


Please note that if we are to discontinue acting on my behalf, we will be entitled to be paid for the remaining 3 properties as per the agency agreement.

Please advise how you would like to proceed.


Ok Chris,

Stop the games.

Ill write to you when I know what is happening

But the agreement is to accomplish all the sites

That is what we agreed all along

1. at 3:01pm, from Mr Exarhos attaching the handwritten note dated 12 August 2016 (Ex. P1, tab 19, pp 316 and 317):

These are my file notes illustrating to you the properties that you would like to acquire and the estimated price points.

Please note, at the bottom right, we agreed for you to pay us $100,000 per month until our fees are paid out.

We would never enter into an 18 month arrangement to get paid on settlement.

The hand writing of next week is your hand writing in relation to my expectations in when I would conclude negotiations; this was not an agreement.


Im not playing games Rem, you are

Im just asking for you to show us the respect that we deserve, by making us a priority of payment, not just paying the option fees.

I have kept you up to date with the remaining 3 properties and the challenges in relation to the Hungarian Community and the Indians in 114 Parramatta Rd.

We have been understanding to you cash flow issues, so respect ours.


Okay Chris,

When can you get the other 3 properties brother?


Ive dropped everything to amalgamate this site for you

It means as much to me as it does for you

I explained to you yesterday where we stand in executing the final 3 properties

However, I cant keep investing my time and our office resources without getting paid, and more importantly when we will get paid.


Ok Chris

Please stop emailing and we will have lunch next week say Sat

I have a few settlement next week and week after

Ill work something out.


No problem

1. On or about 11 November 2016, Ozzy paid $10,000 to the Agent (Affidavit of Christos Exarhos dated 31 May 2018, [121]). On or about 15 November 2016, Ozzy paid $40,000 to the Agent (Affidavit of Christos Exarhos dated 31 May 2018, [123]).

1. On or about 22 December 2016, Ozzy paid $50,000 to the Agent (Affidavit of Christos Exarhos dated 31 May 2018, [131]). On 23 December 2016, JRNN entered into an Option Agreement with the owners of Unit 4/118 Parramatta Road (Ex. P1, p 346 407).

1. On 21 February 2017, Ozzy paid $50,000 to the Agent (Affidavit of Christos Exarhos dated 31 May 2018, [135]).

1. On 30 March 2017, Mr Exarhos sent an email to the solicitor for the Principals and to Mr Nigro in the following terms (Ex. P1, p 408):

The attached invoices are for exchanged option agreements to date for the below properties:

Townhouses 1, 2 & 3 / Tideswell St, Ashfield

4 Units / 122 Parramatta Rd, Ashfield

4 Tideswell St, Ashfield

2 Tideswell St, Ashfield

Unit 4 / 118 Parramatta Rd, Ashfield.

The total invoiced amount is $400,620.

To date we have received $200,000.

Therefore, there is an outstanding balance of $200,620 which dates back to August 2016.

Although we have accepted several and various payment arrangements, they have subsequently been broken.

We initially accepted $100,000 per month to $50,000 per month until the fees were paid.

This non-payment has placed onerous pressure on our business that is not sustainable.

Therefore, we would like to advise that if we do not receive a minimum payment of $50,000 and an acceptable payment arrangement by the 7th April 2017, we will have no other alternative but to commence legal proceedings to recover the outstanding fees without further notice.

1. This email attached the four invoices that had been attached to the 20 October 2016 email referred to in paragraph 16 of these Reasons (Ex. P1, p 409-412), together with a further invoice dated 9 January 2017 with respect to Unit 4/ 118 Parramatta Road (Ex. P1, p 413).

1. On or about 7 April 2017, the Buyers Agency Agreement expired, as provided for in its clause 1.

The Principals Demand for Repayment

1. On 10 April 2017, the Principals demanded the return of the monies paid by Ozzy to the Agent. The letter from the Principals solicitor was in the following terms (Ex. P1, p 415):

We act for Ozzy States Pty Ltd and JRNN Pty Ltd, who are the Principal under the Agency Agreement entered into between Norton Property Group Pty Ltd (Agent) AND Ozzy States Pty Ltd and JRNN Pty Ltd (Principal) on 7 April 2016.

We refer to your email dated 30 March 2017 and are instructed that our client will not be making any payment of the invoices attached to your email.

Our client made payments in relation to the Agency Agreement to the Agent in good faith as an advance payment of the potential commissions under the Agency Agreement, given the longevity of the development that may take place on the properties. Our client in no way waived their rights under the Agency Agreement dated 7 April 2017. In fact, we are instructed that our client requires a refund of any monies provided by our client to the Agent in relation to the Agency Agreement.

Under clause 3(i) of the Agency Agreement, our client is not required to make payment of a buying fee as the Principal has not entered into any contract for the purchase of any Property listed in the Agency Agreement. The Call Option Agreements are not Contracts for the purchase of property, but simply options to acquire property, of which Contracts for purchase of property may be exercised on or before certain dates. There is the possibility that these Call Option Agreements may not be exercised.

We are instructed that our client requires payment of $220,000 to our trust account within 7 days of the date of this letter.

In the event that the Agent failed to pay the above fees within 7 days of the date of this letter, we are instructed to take immediate action to commence legal proceedings against you without further notice in order to recover all monies owed plus interest and legal fees.

1. On 10 April 2017, Mr Exarhos replied (Ex. P1, p 417):

Thank you for your email

We refer to our email dated 30 March 2017, and your letter dated 10 April 2017 in reply (attached).

The agreement that was entered into was for the payment of agency fees on the execution of the option agreements.

We would never had entered into an arrangement based on receiving our fees on based on the purchaser entering into a contract of sale.

There is no guarantee from our agencies prospective that the option holder will complete.

We (no agency would execute on the number of properties we have with no payment) would not undertake 12 months of work with no fees.

Therefore, the fees that have been paid to date (which are in arrears) are not an advance or in good faith, but simply fees for the executed options.

In relation to your email below;

We require an immediate payment of minimum $50,000 and an acceptable payment arrangement proposed by Remolo Nigro

1. Payments made by the Principals and the invoices seeking the same can be summarised in the following tables:

Table 1: Option Agreements

Date of Option Agreement

Property

Call Option Fee

Agreed purchase price on exercise of the Option

22 August 2016

6 Tideswell Street

$56,500

$5,650,000

22 August 2016

122 Parramatta Road

$58,000

$5,800,000

24 August 2016

4 Tideswell Street

$18,100

$1,810,000

23 September 2016

2 Tideswell Street

$36,000

$3,600,000

23 December 2016

Unit 4/ 118 Parramatta Road

$13,500

$1,350,000

TOTAL

$182,100.00

$18,210,000.00

Table 2: Payments and Invoices

Date

Payment

Invoice

23 August 2016

$50,000

26 August 2016

$124,300 (EXARESI 117 6 Tideswell Street)

26 August 2016

$127,600 (EXARESI 118 122 Parramatta Road)

26 August 2016


23 September 2016


11 November 2016

$10,000

15 November 2016

$40,000

22 December 2016

$50,000

9 January 2017

$29,700 (EXARESI 121-118 Parramatta Road)

21 February 2017

$50,000

TOTAL

$200,000.00

$400,620.00

1. It can be seen that the Agent has rendered invoices for $400,620, of which the Principals have paid $200,000. The Principals seek the return of the $200,000, less the $22,000 non-refundable retainer fee, which they concede is due and payable (Buyers Agency Agreement, clause 3(i)). That is, they seek repayment of $178,000.

1. The Agent, by its cross-claim, seeks $200,620 being the difference between the invoiced amounts ($400,620) and the amounts paid ($200,000).

Construction of the Buyers Agency Agreement

1. The competing contentions of the parties, broadly stated, are as follows:

1. The Principals say the noun contract in clause 3(ii)(a) of the Buyers Agency Agreement, and where it appears in plural in the expression exchange of any of the contracts in clause 3(iv), are references to a contract stricto sensu, and that as a consequence, the word contract does not extend to cover a call option, at least of the type entered into between JRNN and the property owners; and

1. The Agents says that the expression contract extends, at least in the present context, to options to purchase of the kind entered into by JRNN.

The Principles of Construction

1. The principles of contractual construction which govern the competing contentions of the parties, are not in issue.

1. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, at 116-7, the plurality (French CJ, Nettle & Gordon JJ) stated:

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the

contract and the commercial purpose or objects to be secured by the contract.

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to

contradict its plain meaning.

However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, the background, the context [and] the market in which the parties are operating. It may be necessary in determining the proper construction where there is a constructional choice.

[Footnotes omitted]

1. The applicable rules of construction were recently described in the following terms by Leeming JA (Gleeson and White JJA agreeing) in Cherry v Steele-Park (2017) 351 ALR 521; [2017] NSWCA 295 at [46]:

[46] It is uncontroversial that the task of identifying the legal meaning of provisions in a commercial contract is the task of identifying the imputed intention of the parties, by reference to the contractual text construed in light of its context and purpose: Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd at [46][51] and [108][109]; Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392 at [51][75]; Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108 at [18] and [78].

1. His Honour went on to say:

[47] As is common in law, that uncontroversial generalised proposition is capable of concealing sharp divisions when it is sought to be applied at a lower level of abstraction.

1. So far as pre-contractual communications are concerned, Barrett AJA (with whom McColl JA and Sackville AJA agreed) stated at [57] in WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd (2016) 341 ALR 467 (Court of Appeal):

Evidence of prior negotiations is admissible to the extent that it establishes objective facts known to both parties and the subject matter of the contract. Conversely, evidence reflecting the subjective intentions of the parties is, in accordance with long-standing authority, necessarily inadmissible for the

purpose of determining the meaning of the contract (unless it demonstrates knowledge of surrounding circumstances). In recent times, the High Court has revisited the distinction between impermissible recourse to the parties subjective intentions and expectations and permissible regard to objective

matters known to the parties. In Victoria v Tatts Group Ltd [2016] HCA 5 (2016) 90 ALJR 392 at [51], the Court unanimously approved the formulation of principle advanced by three members of the Court (French CJ, Nettle and Gordon JJ) in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (at [46][51]) that, as a general principle of construction, the rights and liabilities of parties under a contractual provision fall to be determined by objective consideration of its text, context and purpose. The relevant enquiry is to be conducted on the footing of what a reasonable business person would have apprehended the terms to mean in light of the particular language used by the parties, the circumstances addressed by the contract and its commercial purpose.

1. The Buyers Agency Agreement is a standard form of contract, and as such, there is authority for the proposition that the Court should be circumspect in the use of background evidence in construing it.

1. As stated by Lewison and Hughes in The Interpretation of Contracts in Australia (2012) at pg 118 119:

Fourth, where the contract in question is a standard form, or is of a nature that third parties may acquire rights under it, the role of background is more limited. In AIB Group (UK) plc v Martin [2002] 1 WLR 94 at [7], Lord Millett said:

A standard form is designed for use in a wide variety of different circumstances. It is not context-specific. Its value would be much diminished if it could not be relied upon as having the same meaning on all occasions. Accordingly, the relevance of the factual background of a particular case to its interpretation is necessarily limited. The danger of course, is that a standard form may be employed in circumstances for which it was not designed. Unless the context in a particular case shows that this has happened, however, the interpretation of the form ought not to be affected by the factual background.

Similarly, in Dairy Containers v Tasman Orient Line CV [2005] 1 WLR 215 at [12] Lord Bingham said on behalf of the Privy Council:

There may be reasonably attributed to the parties to a contract such as this such general commercial knowledge as a party to such a transaction would ordinarily be expected to have, but with a printed form of contract, negotiable by one holder to another, no inference may be drawn as to the knowledge or intention of any particular party. The contract should be given the meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed.

To similar effect, in Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [38], Gummow, Hayne and Kiefel JJ said:

[T]he loan agreements and the indemnity agreements must be construed in their commercial context. Each was an important constituent document in a publicly marketed investment scheme. It is not readily to be supposed that documents of that kind are to be given meanings other than the meaning ordinarily conveyed by the words used.

Further, in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd (2004) 12 BPR 22,879 at [125] Young JA said:

Although one must have regard to the commercial background to the transaction, one gives far less emphasis to this factor when construing a public document than with one that affects only the parties. Indeed, one does not consider the background at all.

Consideration

1. It seems to me that the relevant terms of the Buyers Agency Agreement are tolerably clear. In my view, the reasonable business person postulated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, would construe the references to contract as references to a contract for the sale of land in the strict sense.

1. The Buyers Agency Agreement is a standard form prepared by the Real Estate Institute of New South Wales. In this state, there is a presumption that parties intend that there will be no binding contract for sale and purchase of land, until exchange of signed contracts for the sale or purchase of land (GR Securities v Baulkham Hills Private Hospital Pty Ltd (1986) NSWLR 631). The standard form of contract for the sale of land is also in a form approved in part by the Real Estate Institute of New South Wales and the Law Society of New South Wales. It was a contract of that type which was schedule 2 to each Option Agreement, and through clause 2.4 of the Option Agreement, defined as The Contract.

1. In Horne v James [2015] NSWSC 465 at [15], Stevenson J explained the presumption in the following manner:

[15] There was no dispute between the parties about the following:

(1) An agreement for the sale of property at a specified price does not necessarily indicate a legally binding contract. The magnitude, subject matter, or complexities of the transaction may indicate that the agreement was a limited one not intended to have legal effect (per McHugh JA (with whom Kirby P and Glass JA agreed) in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634 citing Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 316317);

(2) In NSW the usual method of selling real estateis by means of the signing and exchange of contracts in the form approved by the Real Estate Institute of New South Wales (Allen v Carbone (1975) 132 CLR 528 at 533);

(3) Accordingly, even though the parties agree in writing that real estate is sold for a specified price, the presumption [in NSW] is that no binding contract exists until contracts are exchanged (per McHugh JA in GR Securities citing Smith v Lush (1952) 52 SR (NSW) 207 at 212; see also the cases referred to by Stone J in McDonald v Commissioner of Taxation (2001) 109 FCR 207 at [18]);

(4) This was described by the High Court in Allen v Carbone as a first consideration (at 533). In Lezabar Pty Ltd v Hogan (1989) NSW ConvR 55-468 at 5838758388, Gleeson CJ said that:

One reason why this consideration is important is that the form of contract ordinarily used contains important provisions for the protection of both parties, and a court would not lightly attribute to knowledgeable parties an intention to forego such protection;

(5) Nonetheless, it is possible for a contract of sale of land in NSW to be effected otherwise than by exchange of contracts (for example, per Stone J in McDonald at [20]);

(6) The decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances (per McHugh JA in GR Securities at 634, citing Godecke v Kirwan (1973) 129 CLR 629 at 638 and Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332 to 334 and 337);

(7) If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction (per McHugh JA in GR Securities at 634);

(8) It may be that, upon the proper construction of the document, it will appear that the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms: Sinclair, Scott & Co v Naughton at 317. This is the familiar fourth class of case additional to the three mentioned in Masters v Cameron (1954) 91 CLR 353 (described by McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628); and

(9) Nonetheless, the practice in NSW of proceeding by exchange of contracts is so entrenched that a party contending for an intention to proceed other than in accordance with the established procedure will need clear evidence to support the contention (per Stone J in McDonald at [21] citing Bryson J in Dowdle v Inverell Shire Council (1999) ANZ ConvR 429 at 431).

1. In this case, there is no clear evidence of the kind referred to by Stevenson J in point 9 above of His Honours Judgment. As such, I consider that the hypothetical reasonable business person would understand that an orthodox exchange of contracts for the sale of land, was what the parties intended when they used the noun contract in the Buyers Agency Agreement.

1. The same hypothetical reasonable business person would, in all probability, be unaware of the controversy surrounding the juristic nature of an option, to which I shall later briefly refer. As I have indicated, in my view, he or she would assume that the word contract meant a contract for the sale of land, in the strict sense. That hypothetical business person would not consider that the meaning of contract extended to include a document such as an option. That hypothetical person would conclude that an option, if it is exercised, is a step along the way to a binding contract, but is not a contract for the sale of land, in and of itself. A contract for the purchase of land in this context, is a well-known concept, providing certainty as to the circumstances in which the Buyers Fees are payable. In contrast, an option, capable as it is, of taking on many forms, does not provide such certainty, and is a form of agreement which provides for rights which may never be exercised. Put another way, a contract contemplated by an option may be stillborn, whereas an exchanged contract for the sale of land is definitionally not.

1. When the Buyers Agency Agreement is read as a whole, as it must be, it becomes clearer that the noun contract where it relevantly appears, is a reference to a contract for the sale of land in the strict sense. On page 1 of the Buyers Agency Agreement, the property is regularly referred to as Property to be purchased. Options do not necessarily lead to purchase.

1. Clause 3(iv) also suggests that the parties intention in using the word contract was to refer to a contract in the strict sense. It does so in two ways:

1. It confirms that, in respect of each of the scenarios postulated in clause 3(ii)(a)-(f), the central concept triggering the right to receive the Buyers Fees is the transfer of a legal or beneficial interest in the relevant property. In the case of scenario 3(ii)(a), this would first occur on the exchange of contracts for sale. It would not occur on the grant of an option.

1. The second indication of that intention is that the Buyers Fees are payable on exchange of any of the contracts referred to in [the preceding clauses] (emphasis added). The reference to the concept of exchange points to the conclusion that the parties were referring to the exchange of contracts for sale, stricto sensu. The verb exchanged is perfectly consistent with contractual formation, but is quite inapt to describe the creation of options. Options are said to be granted rather than exchanged.

The Option Agreement

1. It is possible to postulate a form of option which in law is a contract for the purchase of property, albeit a conditional one. Whether that is the case is to be determined by a close examination of the form of the option under consideration.

1. There has been a standing controversy about the juristic nature of an option contract (Braham v Walker (1961) 104 CLR 366 at 376). One side of the controversy contends for the proposition that an option contract is an irrevocable offer; that is to say, an offer coupled with a contract that the offer will not be withdrawn during the option period (Ballas v Theophilos (1957) 98 CLR 193 at 207-8). The competing contention is that an option constitutes a conditional contract; that is to say, a contract to sell upon condition that the optionee, within a specified time, will bind himself or herself by complying with the condition expressed for the exercise of the option (Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57, at p 75-6). On the latter view, the option when exercised, turns what was a conditional contract, into a binding contract.

1. In Tonitto v Bassal (1990) 5 BPR 11, 258 at 14, Bryson J (as His Honour then was), after referring to the debate, said:

The true nature of an option is not treated as established by general considerations but is decided only after close examination of the form of the option

1. I turn then to the Option Agreements to determine whether, if in law they do constitute conditional contracts for sale, and as such may possibly come within the concept of a contract as the term is expressed in the Buyers Agency Agreement, which would consequently trigger the obligation to pay the Buyers Fees.

1. The intention of JRNN and each of the grantors of the options (each, a Grantor) as to the manner and timing of the creation of a binding contract for the purchase and sale of the properties, is expressed in clause 2 of the Option Agreements.

1. That clause provides (emphasis added):

2. Call Option

2.1 Call Option

In consideration of the Grantee paying to the Grantor the Call Option Fee, the Grantor grants to the Grantee an option to purchase the Property on the terms set out in the Contract.

2.2 Period of Call Option

The Grantee may only exercise the Call Option during the Call Option Exercise Period strictly in accordance with this Agreement failing which it shall lapse.

2.3 Exercise of option

The Grantee may only exercise the Call Option by serving on the Grantor during the Call Option Exercise Period:

(a) the Notice of Exercise of Call Option;

(b) the Contract, duly executed and dated; and

(c) the balance of the 10% deposit payable to the Grantor;

or the Call Option will expire.

2.4 Binding contract

(a) Upon the Grantor receiving the Notice of Exercise of Call Option and executed Contract, the Grantor will be bound to sell and the Grantee bound to purchase the Property on the terms set out in the Contract and the Contract will be deemed to be entered into upon the day of exercise of the Call Option.

(b) The Grantor agrees to deliver to the Grantee an executed counterpart Contract noting as purchaser the Grantee within five (5) Business Days after the receipt of the Notice of Exercise of Call Option.

(c) The parties

(i) acknowledge and agree that the exchange of counterparts is intended only to permanently record the detailed terms of the Contract; and

(ii) intend to be and will be bound by the Contract on the date of and by virtue of the exercise of the Call Option.

2.5 Payment of Call Option Fee to stakeholder

(a) Upon the exercise of the Call Option, the Call Option Fee shall constitute part of the 10% deposit under the Contract in accordance with clause 3.

1. It can be seen that JRNN and the Grantors were explicit as to when JRNN would be bound to purchase, and the Grantors would be bound to sell. This was at the time of the exercise of the option by JRNN. On that occurrence, JRNN would acquire an equitable interest in the property commensurate with its capacity to obtain an order for specific performance (Tanwar Enterprises v Cauchi (2003) 217 CLR 315 at [53]).

1. This outcome is achieved by clauses 2.4(a) and 2.4(c)(i) of the Option Agreements, which record the objectively ascertained intention of the Grantors and JRNN that neither party would be contractually bound to sell or purchase land unless and until the options were exercised. Thus, at all times prior to any exercise of the option, no contract for the purchase of the property existed.

1. As the options were never exercised, no contract for the purchase of the properties was ever brought into existence.

1. The parties drew my attention to various cases in which options have, on the one hand been considered to constitute conditional contracts for the sale of land, and those in which the opposite result was achieved. As Bryson J suggested in Tonitto v Bassal (1990) 5 BPR 11, 258, each of these cases turns on its facts, and more particularly, each turns on the terms of the option before the Court.

1. In my opinion, the Option Agreements do not create a form of conditional contract such as to trigger an obligation to pay the Buyers Fees. I should add that, even if on their proper construction, they did constitute a conditional contract, I do not believe that such a conditional contract would come within the contractual definition of contract pursuant to the Buyers Agency Agreement.

Recovery of Sums Paid by the Principals to the Agents

1. Before embarking on the consideration of this aspect of the proceedings, I should comment on the manner in which the proceedings were conducted. The proceedings proceeded by way of affidavit, and the respective counsel for the parties informed the Court that they would greatly limit their cross-examination, with neither taking Browne v Dunn points against the other. That was an entirely appropriate course to take, consistent with the obligations of the parties, pursuant to section 56(3) of the Civil Procedure Act 2005 (NSW). The course adopted, however, has the consequence that I am not prepared to determine contested factual issues, that were not the subject of cross-examination. To do otherwise, in my view, would be unfair to the witnesses concerned, and the parties upon whose evidence they rely. I should also add that the commendable course adopted by counsel has not in any way adversely affected my consideration of the matter.

1. It is clear that Mr Exarhos has, on a number of occasions, represented to the Principals that the Buyers Fees were payable upon execution of the relevant option. On the construction of the Buyers Agency Agreement and the Option Agreements to which I have come, that was not correct. These representations were not made as expressions of opinion, but as representations of fact. As such, they were misleading or deceptive. Mr Byrne for the Agents, did seek to characterise Mr Exarhos statements as statements of opinion, which opinions were genuinely held by him. I do not accept this characterisation. The demands for payment did not carry with them any suggestion that the payments were sought as a consequence of the formation of an opinion by Mr Exarhos, rather they were statements as to the fact that the monies were owed.

1. Mr Nigro gave evidence that he relied upon the representations. In his affidavit of 20 March 2018, he stated at [12]:

I made these payments and later payments because I wanted to get option agreements over all 7 properties and I was worried that if I didnt pay Chris he wouldnt get the owners of the other properties to sign call option agreements. As I mentioned above, Chris was like a dog with a bone in chasing me for payment. I also believed what he had told me about having to pay him 2.2%of the contract price in the call option agreements.

1. The reference in the first sentence of the above evidence is to two payments made on 23 August 2016 totalling $50,000. The Agent points to the pleaded definition of Representation as being representations between October 2016 and April 2017. This was said to lead to the conclusion that the two payments made on 23 August 2016 were not causally linked to the pleaded representation. As a pleading point, that submission is correct, but it does not accommodate Mr Nigros evidence set out immediately above; and as such, it does not address the manner in which the proceedings were in fact conducted. Mr Nigros evidence above shows that there was in fact a causal relationship between Mr Exarhos Representations, and the payments made by Mr Nigro on 23 August 2016. He gave similar evidence at paragraph 20 of the same affidavit. There was no objection to this aspect of Mr Nigros evidence and he was not cross-examined on this evidence, which I accept.

1. The Agent makes further submissions on causation. The Agent submits that, by August 2016, the Principals and the Agent were in dispute as to whether the Buyers Fees were payable, and that each stuck to their guns in respect of the issue. The Agent goes on to contend that the Principals decided to make the good faith payments in order to maintain the commercial relationship with the Agents (defendants written submissions at [33]). This submission implicitly carries with it the conclusion that the good faith payments were not induced by the Representations.

1. I do not accept this submission. There are two matters which tell against it. The first is that, even if the Principals desire to keep the Agents working on obtaining the remaining options, and the Agents assertions that the Buyers Fees were due and payable, can be considered to be separate considerations inducing the payments, it is sufficient for the Principals to succeed in their Australian Consumer Law claim if the assertions as to the fact that the Buyers Fees were due and payable on grant of the option, were a material cause of the Principals loss (I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [57], per Gaudron, Gummow and Hayne JJ, and at [62] per McHugh J). Mr Nigros uncontradicted evidence is that the assertions as to the fact that the Buyers Fees were due and payable, did induce his payments. As such, Mr Exarhos Representations were a material cause of the Principals loss.

1. The second matter telling against the Agents submission, is that such submission inherently assumes that the Principals desire for the Agents to continue to work to obtain the remaining options, and on the other hand, the making of the good faith payments, were unrelated. I do not believe that this is so.

1. Pursuant to the Australian Consumer Law and its predecessor, the Trade Practices Act 1974 (Cth), in assessing whether any representations were misleading or deceptive, the Court must consider the circumstances in which the impugned representation was made (Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, at [109], per McHugh J). The Agents threats to cease work were themselves ultimately based on their assertion that the Buyers Fees were already due and payable in respect of granted options. Even if the Principals began to harbour doubts as to the correctness of that assertion, they ran the risk that if they refused to make any payments to placate the Agents, their actions might be relied upon by the Agents as constituting repudiatory conduct, which in turn might justify the Agents termination of the Buyers Agency Agreement.

1. Seen in this way, the assertions of the Agents, even if they came to be doubted by the Principals, remain causative of the making of the payments.

1. In this regard, it is relevant to note that Mr Nigro made explicit that his payment of monies was in good faith as an upfront payment (see email set out in paragraph 17(e) of these Reasons). Upfront is relevantly defined in the Macquarie Dictionary as advance. The dictionary gives an example of its use in context as the upfront money for the project. It can be seen, therefore, that the payments were made in the face of repeated assertions that they were due and payable; and on the basis that if, at the end of the day, they were found to not in fact be owing, they would be repayable. Until it was determined that the Buyers Fees were in fact payable, the payments remained an advance.

1. In my view, the representations made by Mr Exarhos were a material cause of the Principals loss, and are therefore recoverable.

Unconscionability

1. I do not believe that there is any realistic argument available to the Principals, that there was any species of unconscionability present in the acts and omissions of the Agent and Mr Exarhos.

Restitution

1. It is strictly speaking, unnecessary for me to proceed to consider restitution, and as such, I will only do so briefly. On the findings I have made, Mr Exarhos assertions that the Buyers Fees were payable upon grant of the options, was incorrect, and that assertion was a material cause of the mistaken view by Mr Nigro that such payments were due and payable. This constitutes a mistake of fact, and the Agents are unjustly enriched at the expense of the Principals, and are required to give restitution. The essence of the action for money had and received is the notion that the retention of the monies by the payee would be against conscience (Russell Gould Pty Ltd v Ramangkura (2014) 87 NSWLR 552 at [28]). In my view, the retention of monies paid on account of the Buyers Fees would be against conscience.

1. The defendants assert that the restitution claim is capable of being defended by what they called counter restitution. This was said to arise from the fact that the Agent had provided some benefit to the Principals. I do not believe that this submission is well placed. I take this view, as the Buyers Agency Agreement provided a non-refundable retainer fee of $22,000. This fee can be seen to be in consideration of work done by the Agent, in the event that the Agent did not become entitled to the 2.2% commission by virtue of the fact that the contracts for the sale of the relevant land were not exchanged, as was the case here.

1. It was also submitted that Mr Nigro never had the mistaken view that the Buyers Fees were payable, rather he made the payments for commercial reasons. These submissions mirror the causation submissions made in respect of the statutory misleading or deceptive conduct claim. I reject them for the same reasons I rejected the causation argument in relation to the statutory claim.

The Position of Mr Exarhos as Accessory

1. No submissions were made in relation to Mr Exarhos position in respect to his pleaded accessorial liability. As such, I have not considered the issue.

Conclusion

1. I make the following Orders:

1. Judgment and Verdict for the plaintiffs against the defendants in the sum of $178,000.

1. Interest thereon calculated pursuant to the rates prescribed from time to time in Practice Note DC (Civil) No. 15.

1. The cross-claim to be dismissed.

1. That the plaintiffs file and serve any written submissions which they may be advised to make in relation to the issue of costs, on or before 17 May 2019.

1. That the defendants file and serve any written submissions in response, on or before 24 May 2019.

1. That pending any further order, the issue of costs raised by the submissions referred to in Orders 4 and 5, be determined by me on the papers.

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