Supreme Court New South Wales Medium Neutral Citation: RWSC Pty Ltd v Gregory & Anor [2021] NSWSC 427 Hearing dates: 7 and 9 April 2021; written submissions 19, 20 and 26 April 2021 Date of orders: 27 April 2021 Decision date: 27 April 2021 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Costs of the plaintiff's Notice of Motion 24 February 2021 to be the plaintiff's costs in the cause Catchwords: COSTS – motion for determination of separate question – amendment to Commercial List Cross-Claim Statement made when motion part heard had effect that any answer to separate question would not be relevantly dispositive - whether motion for separate question would have been brought had the foreshadowed amendment been made earlier - whether separate question likely to have been ordered in any event Legislation Cited: Property and Stock Agents Act 2002 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Kockums AB v Commonwealth of Australia [2002] FCAFC 138 Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Tilling v Whiteman [1980] AC 1 Category: Procedural rulings Parties: RWSC Pty Ltd (Plaintiff) William Gregory (First Defendant) The Gregory Investments Group Pty Ltd (Second Defendant) Representation: Counsel: E Young with L Robb-Vujcic (Plaintiff) N Furlan (Defendants) Solicitors: Antcliffe:Scott (Plaintiff) Henry William Lawyers (Defendants) File Number(s): 2020/277356 Judgment 1. The plaintiff, RWSC Pty Ltd, carries on business as a real estate agent under the name "Richardson & Wrench Sydney City Commercial" ("R&W Commercial") 2. R&W Commercial alleges that in early 2014 it entered into an arrangement ("the Arrangement") with the first defendant, Mr William Gregory, whereby Mr Gregory would: " … operate as a licensed independent real estate agent to introduce to R&W Commercial clients who were interested in listing their properties for sale in return for a share of fees payable to R&W Commercial …" 1. Mr Gregory is the sole director and sole shareholder of the second defendant, The Gregory Investments Group Pty Limited ("Gregory Investments"). 2. R&W further contends that: "Although the precise terms of the arrangement were never put in writing, between 2 July 2015 and 6 March 2018 R&W Commercial paid fees [of $1,272,201.48] to Gregory Investments at the direction of Mr Gregory in relation to real estate agents work performed by Mr Gregory." 1. R&W Commercial alleges that Mr Gregory represented to it that he was a licensed real estate agent pursuant to the Property and Stock Agents Act 2002 (NSW) ("the Act"). 2. Mr Gregory denies making such a representation but admits that neither he nor Gregory Investments held such a licence at the relevant time. 3. R&W Commercial: 1. contends that, but for the alleged representation by Mr Gregory that he was licensed under the Act, it would not have entered into the Arrangement; and 2. seeks to recover the $1,272,201.48 "erroneously paid" to Mr Gregory. 1. By a Cross-Summons, Mr Gregory claims damages of some $9.9 million pursuant to his asserted entitlements under the Arrangement. 2. R&W Commercial seeks declarations the Arrangement was "null, void, and otherwise of no effect ab initio" and "unenforceable" by reason of ss 8(2) and 9(2) of the Act. 3. Those sections provide, relevantly: 8 Agents required to be licensed (1) An individual must not act as or carry on the business of (or advertise, notify or state that the individual acts as or carries on the business of, or is willing to act as or carry on the business of)— (a) a real estate agent, unless the individual is the holder of a real estate agent's licence … (2) An individual is not entitled to bring any proceeding in any court or tribunal to recover any commission, fee, gain or reward for any service performed by the individual— (a) as a real estate agent, unless the individual was the holder of a real estate agent's licence … at the time of performing the service … 1. Mr Gregory contends that the Arrangement constituted a contract of employment between him and R&W and that he is entitled to bring the Cross-Claim notwithstanding the fact that he did not hold a real estate agent's licence under the Act at the relevant time. 2. In these circumstances, by Notice of Motion filed on 24 February 2021, R&W Commercial sought an order pursuant to r 28.2 of the Uniform Civil Procedure Rules that the following question be determined separately, and prior to any other question in the proceedings: "Whether, or not, [Mr Gregory is] entitled to bring or maintain any proceedings against [R&W Commercial] to recover any commission, fee, gain or reward for any service performed by [him] as a real estate agent whilst ever [he did not hold] a real estate agent's licence at the time of providing the service." [1] 1. R&W Commercial's case is that even if, as Mr Gregory asserts, he was an employee of R&W Commercial, he was required by the Act to be licensed and, because he was not licensed, he is not entitled to bring the cross-claim. 2. It is common ground that determination of the factual question of whether Mr Gregory was an employee will be complex and likely to take up several days' hearing time. 3. Mr Young and Ms Robb-Vujcic put the R&W Commercial's case for a separate question this way in their written submissions: "[R&W Commercial's] application for a separate question seeks to obviate the need for the complicated and time-consuming inquiry into [Mr Gregory's] employment status. It is [R&W Commercial's] position that, by operation of the [Act], [Mr Gregory is] precluded from commencing proceedings to recover any fees or commissions claimed because [he was] unlicensed at the relevant time, regardless of whether [Mr Gregory] was an employee of [R&W Commercial]. Accordingly, notwithstanding the defendants' pleadings in the Commercial List Response … [of an employment contract], the employment status of [Mr Gregory] does not impact upon the resolution of the separate question: it can be answered even taking into account an argument by [Mr Gregory] that he was an employee of [R&W Commercial], and regardless of such argument." (Emphasis in original) 1. In effect, R&W Commercial's case was that the proposed separate question could be decided on the assumption that Mr Gregory was an employee of R&W Commercial; and in the hope that the answer to the separate question would obviate the need to determine whether, as a matter of fact, this was so. 2. In written submissions Mr Furlan, who appeared for Mr Gregory, foreshadowed an argument that Mr Gregory was an "assistant real estate agent" for the purposes of the Act and that, accordingly, s 8 of the Act has no application. 3. Mr Young, who appeared with Ms Robb-Vujcic for R&W Commercial, pointed out that this argument had not been pleaded. Accordingly, after the motion proceeded for some time on 7 April 2021, it was adjourned to 9 April 2021 to enable Mr Furlan to produce amended pleadings dealing with the matter. 4. The Amended Commercial List Response incorporated the amendments foreshadowed concerning Mr Gregory's alleged status as an "assistant real estate agent". 5. The Amended Cross-Summons and Commercial List Cross-Claim Statement also incorporated a hitherto unpleaded claim of restitution. 6. By that claim, Mr Gregory contends that, even if, as R&W Commercial contend, any agreement between Mr Gregory and R&W Commercial is of no effect or unenforceable by reason of ss 8 and 9 of the Act, he is entitled to "restitution … by way of a quantum meruit". 7. Mr Young accepted that there was no proper basis upon which R&W Commercial could resist Mr Gregory amending his pleadings to make this allegation. 8. Mr Young also accepted that the amendment had the consequence that a favourable answer to R&W of their proposed separate question would not be dispositive of Mr Gregory's cross-claim. 9. Mr Young accepted that it followed that R&W Commercial's Notice of Motion of 24 February 2021 should be dismissed. 10. I am now dealing with the costs of that notice of motion. 11. Mr Young submitted that R&W Commercial should have its costs of the cross-claim because the amendments introducing the quantum meruit claim fundamentally changed the scope of the issues to be considered in the case and that: "Plainly, if [Mr Gregory] had had any time, between filing his Cross Summons on 6 November 2020 and the bringing of the Motion, amended his case and brought the new equitable claim that he has now brought, the Motion would never have been filed". 1. Mr Young did not rely on any evidence to make this submission, but his ready and candid acceptance on 9 April 2021 of the matters at [23] points to the probability that it is correct. 2. Mr Young also submitted that: "In determining the issue of costs, the Court will not engage in a "mini-trial" or hypothetical exercise of attempting to determine what would have been the result if the amendments were not made. It may be acknowledged that there were reasonable arguments on both sides (i.e. literal construction v purposive construction, where the literal construction arguably gives rise to a lacunae and/or inconsistency with legislative intent)." 1. Where an application or case is withdrawn without any determination on the merits, it is often appropriate to make no order as to costs. [2] 2. However, in this case, R&W Commercial's application for a separate question was problematic in that it was, in a sense, hypothetical. 3. During argument, I raised the question of what facts could be agreed for the purpose of determining any separate question. 4. One possibility was the facts asserted by Mr Gregory in his List Response and Cross-Claim List Statement concerning his alleged employment by R&W Commercial. 5. Thus, the following emerged as a possible formulation of a separate question: "Assuming, but only for the purposes of the separate question, the correctness of the matters alleged in paragraphs C7, C8 and C12 (a) to (e) of the Defendants' List Response and in paragraphs C4 to C18(c) of the Cross Claim List Statement, is the effect of s8 of the Property and Stock Agents Act 2002 (NSW) that the Cross Claimant is not entitled to bring the Cross Claim". (Emphasis added) 1. The emphasised passage reflected Mr Young's instructions that R&W Commercial was not prepared to admit such matters for all purposes. 2. The difficulty was going to be that posing and answering a separate question on this basis could, in the long run, have created more problems than it might appear to solve. 3. To adopt a colloquial expression referred to by the Full Court of the Federal Court in Kockums AB v Commonwealth of Australia, [3] "what might seem the longest way around is the shortest way home". [4] 4. That case involved a separate question answered by the trial judge on the basis of a number of assumptions. [5] The Full Court ultimately concluded that the appropriate answer to the separate question was "Inappropriate to answer". [6] 5. Their Honours said: [7] "His Honour the primary Judge referred to the need for caution before embarking on the course proposed on behalf of Kockums. Unfortunately, we have felt constrained to conclude that the course taken was not a proper exercise of discretion. The vice which often infects the separate decision of questions and making of "free-standing" declarations has been variously described. In Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 ("Bass") the High Court held by majority that certain questions had been inappropriate to answer. The reason given in the joint judgment of the majority (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ) was that the answering of the questions did not satisfy the requirement of a judicial determination because it did not represent (at 355) 'a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy.' Their Honours distinguished between an advisory opinion and a valid declaratory judgment on the basis that the latter is, whereas the former is not, 'based on a concrete situation', and the latter does, whereas the former does not, 'amount to a binding decision raising a res judicata between the parties' (at 356). Their Honours held that, since certain answers to separate questions given by the Full Court of this Court and a declaration it made, 'were not based on facts, found or agreed, they were purely hypothetical.' (at 357)." 1. The authorities urge caution against deciding separate questions on the basis of facts agreed only for the purpose of the separate question. 2. Thus, in Tilling v Whiteman [8] their Lordships refer to the practice of deciding preliminary points when the correctness of the facts "remain to be tried". Lord Wilberforce said: [9] "I, with others of your Lordships, have often protested against the practice of allowing preliminary points to be taken, since this course frequently adds to the difficulties of courts of appeal and tends to increase the cost and time of legal proceedings. If this practice cannot be confined to cases where the facts are complicated and the legal issue short and easily decided, cases outside this guiding principle should at least be exceptional." 1. It may be argued that, in this case, the facts are "complicated" and the legal issue sought to be decided is "short". 2. But the potential difficulties can be illustrated by assuming that the answer given to the question at [33] was "yes". 3. In that event, Mr Gregory would not have been able to prosecute his cross-claim. The question of whether he was in fact an employee would have ceased to be relevant because of that fact and because that issue is not relevant to R&W Commercial's case. 4. Mr Gregory would have had to decide either to seek leave to appeal from the determination of the separate question (which would cause the proceedings as a whole to be delayed whilst that application was determined) or to wait until determination of R&W Commercial's claim (in which the question of whether or not he was employed would not be determined), and then appeal the separate question. If that appeal were to be successful, the matter would have had to be remitted for the further hearing of Mr Gregory's cross-claim, in the course of which the factual question would have to be determined. 5. Thus, although determination of a separate question in the terms set out at [33] above might, in the short term, have simplified matters, it might well, in the long term, have made them more complicated. 6. For those reasons, I was disinclined to order the separate question sought by R&W Commercial. 7. The belated amendment made in the pleadings by Mr Gregory put the matter beyond question. 8. However, I accept that had the quantum meruit claim been pleaded from the outset, R&W Commercial may well not have brought the application for a separate question at all. 9. The position is thus that R&W Commercial made an application that would probably not have been successful, but which would probably not have been made at all had the quantum meruit claim been pleaded timeously. 10. In those circumstances, my opinion is that the fair order to make is that the costs of the R&W Commercial's motion be its costs in the cause. 11. I also order that: 1. the costs of the plaintiff's notice of motion of 24 February 2021 be its costs in the cause; and 2. the defendants and cross claimants pay the plaintiff's and cross defendant's costs thrown away by the amendment to the Commercial List Response, the Cross-Claim Summons and the Cross-Claim List Statement. 1. I stand the proceedings over for further directions on 7 May 2021. Endnotes 1. The prayer for relief in the notice of motion referred to both Mr Gregory and Gregory Investments, but R&W Commercial now accepts that, as only Mr Gregory brings the cross-claim, the proposed separate question should concern only Mr Gregory. 2. For example see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6. 3. [2002] FCAFC 138 (French, Lindgren and Stone JJ). 4. At [52]. 5. Eg see at [44]. 6. At [51]. 7. At [37]-[39]. 8. [1980] AC 1. 9. At [17]. 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