Lim & 1ors v Timwin 2001C Pty Ltd & 1 ors [2007] NSWSC 185

New South Wales Supreme Court

CITATION : Lim & 1ors v Timwin 2001C Pty Ltd & 1 ors [2007] NSWSC 185

HEARING DATE(S) : 06/03/2007

JUDGMENT DATE : 13 March 2007

JUDGMENT OF : Associate Justice Malpass

DECISION : The appeal fails. The Summons is dismissed. The plaintiff is to pay the costs of the proceedings.

CATCHWORDS : Appeal from Local Court - claim for commission - underwriting agreement - implied terms and performance thereof - rescission and variation of contract - costs.

Alpha Trading Ltd v Dunshaw-Patten Ltd [1981] 1 QB 290 CASES CITED : RDJ International Pty Ltd v Performed Line Products (Australia) Pty Ltd (1996) 39 NSWLR 417 Dan v Barclays Australia Ltd (1983) 46 ALR 437

Alim Lim PARTIES : PT Graha Serasi Anugerah Timwin 2001C Pty Limited Timwin 2001B Pty Limited

FILE NUMBER(S) : SC 14163/06

COUNSEL : Mr B. Zipser (Pl) Mr A. Cheshire ( Def)

SOLICITORS : Accentro Legal (Pl) VTS Sydney Lawyers (Def)

LOWER COURT JURISDICTION : Local Court

LOWER COURT FILE NUMBER(S) : 10694/05

LOWER COURT JUDICIAL OFFICER : Denes LCM

LOWER COURT DATE OF DECISION : 26/07/06

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

ASSOCIATE JUSTICE MALPASS

13 MARCH 2007

14163/06 Lim & 1 ors v Timwin 2001C Pty Ltd & 1 ors

JUDGMENT 1 HIS HONOUR: The first plaintiff has been described as an Indonesian businessman. The first defendant has been described as a developer. On 20 September 2002, they entered into an underwriting agreement (the underwriting agreement). 2 I shall mention certain features of the underwriting agreement. It underwrote the purchase of Apartment 22 (later known as 801) at 32-34 Regent Street, Chippendale at a price of $612,381. Hereafter, I shall refer to it as the unit. The commission payable to the first plaintiff as underwriter was to be the price difference between the sale price and the underwritten price. The underwriter was to pay a non-refundable deposit of 10% of the underwriting price and it was to be released to the vendor. The commission was expressed to be payable on successful settlement. The underwriting agreement gave a broad discretion to the developer (see clause 5). 3 On 23 July 2004, the first defendant sold the unit to Fransi Widjanarko at a sale price of $649,000. Little is known as to the terms and conditions of the contract of sale (the contract of sale). However, it seems to be common ground that it contained a right of recession in the event of death. On or about 16 August 2004, Fransi Widjanarko died. 4 Because of superstitions had by the family, an arrangement was made whereby a member of the family purchased Unit 25 in lieu of the unit and the underwriting deposit was transferred towards the purchase of Unit 25. On 15 October 2004, a purported recession was given on behalf of the estate of the deceased. 5 Settlement of the sale of Unit 25 took place (apparently in November 2004). The first plaintiff became aware of the settlement and made a claim for commission (inter alia, he sent an invoice). He was seeking commission in the order of $36, 000. 6 Discussions took place between the parties, which did not produce a consensus. The first defendant took the course of paying the sum of $25,000 to the first plaintiff on what might be described as a without admission of liability basis. 7 This was not satisfactory to the first plaintiff. He brought and pursued proceedings in the Local Court. He came to be seeking a sum in the order of $10,000. His claim was defended. The claim was heard and determined by Denes LCM. 8 An Amended Statement of Claim was filed on the morning of the hearing. This process put the claim in the alternative. The first basis appeared to be that there was an obligation to pay the commission because the first defendant had obtained a sales price of $649,000 in relation to the unit. The second basis was a claim in damages. It was founded on certain alleged implied terms (that the first defendant would do everything necessary to perform the contract with the buyer and would not do anything to prevent the earning of the commission). An allegation of breach was deleted from the Amended Statement of Claim (paragraph 8G). The result of this decision was a failure to allege any alternative cause of action founded on breach of implied term. 9 The Magistrate identified the real issue as being one in relation to as to whether or not the plaintiff was entitled to a commission at all. She found that the unit was not sold (but was rented out by the first defendant). 10 Despite the pleading inadequacies, the first plaintiff was allowed to advance an argument founded on Alpha Trading Ltd v Dunshaw-Patten Ltd [1981] 1QB 290. 11 In her judgement, the Magistrate observed as follows:- "20. The underwriting agreement is akin to an agency agreement in this case. The purpose of the underwriting agreement with the plaintiff was to ensure that the property would be sold at the minimum price. The plaintiff introduced a purchaser who then warranted to purchase the unit at a higher price. The plaintiff had performed his side of the agreement. The plaintiff had no role in the substitution of lot 25 for lot 22. He was not even advised that it was to happen. The underwriting agreement with the plaintiff was never amended to reflect the change in circumstances. It was never envisaged, when the underwriting agreement for Lot 22 was entered into between the parties, that the subject unit would be substituted for another one. The complicating feature is that the contract for lot 22 could not be completed because, with the death of the purchaser, the contract was extinguished. It was not just the defendant that was unable to complete the contract. There was no contract. New negotiations had to be entered into with the executor – who could have declined to continue with any purchase arrangements. If she had, would the plaintiff be entitled to any commission? In the language of the Alpha Trading, what had the defendants done so as to deprive the plaintiff of his remuneration? 21. The present case is to be distinguished from the case of Alpha Trading. The contract between the defendant and Widjanarko could not be completed as it was rescinded by the death of one of the parties. Annexure 1 to the affidavit of Mr Lee (ex B) sets out clearly that the executors of the estate sought to rescind the contract and the underwriting agreement between Widjanarko and the defendant. The defendants did no "act" which deprived the plaintiff of his commission. Lot 22 was not "successfully settled" in terms of clause 2 of the agreement and therefore no commission is due. The plaintiff was given a not insignificant amount as compensation." 12 The Magistrate came to the view that the first defendant's claim for commission in respect of the unit should fail. This was not the only claim advanced in the proceedings. There were two other claims for commission. Both of these claims were successful. 13 The parties argued questions of costs. The Magistrate came to the view that each party should bear their own costs. 14 On 23 August 2006, the plaintiff filed a Summons in this Court. The plaintiff propounds an appeal as of right (based on alleged error in point of law). The Summons contains two grounds of appeal. They are as follows:- "1. Denes LCM found at paragraphs 20 and 21 of her decision that the plaintiff was not entitled to commission in relation to Lot 22 because "the contract for lot 22 … was extinguished" on the death of the purchaser and "the contract between the defendant and Widjanarko could not be completed as it was rescinded by the death of one of the parties". This proposition is not correct. As a matter of law, the contract between the defendant and Widjanarko was not rescinded on the death of Widjanarko. 2. Denes LCM ordered that each party pay its own costs. One reason Denes LCM made this order was because of her concern that the plaintiff had acted as a real estate agent within the definition of the Property Stock and Business Agents Act 2002. This point was an irrelevant consideration to which Denes LCM should not have had regard. Denes LCM erred in law in having regard to this consideration." 15 The appeal was heard on 6 March 2007. The hearing occupied in excess of three hours. The parties relied on written submissions, which were supplemented by oral argument. 16 I shall first address that which was enunciated in the Grounds of Appeal. I should also mention that an attempt was made to give a wider meaning to the literal construction of what appeared in Ground 1. Subsequently, an attempt was made to effect an amendment to it. I shall return to that matter of amendment in due course. 17 Ground 1 contains a limited ambit challenge. Because of lack of knowledge of the terms and conditions of the contract of sale, little can be said in relation to the finding that it was extinguished. It may be observed that the concept of extinguishment is a novel one in this context. In any event, what is said concerning it can be treated as surplusage. 18 The question which the Magistrate was posing to herself was "in the language of the Alpha Trading, what had the defendants done so as to deprive the plaintiff of his remuneration?". She then expressed the view that the present case was distinguishable from the case of Alpha Trading. It was this comment that led her to considering the question of recession. 19 What is known as to the terms and conditions of the contract of sale is that it did contain a provision which allowed either party to rescind the contract in the event of death of a party. There was a purported exercise of that right on behalf of the deceased. It is difficult to see how an exercise of that right could be challenged. Apparently, nothing was put before or to the Magistrate to suggest that there was any challenge to the purported exercise. Indeed, the evidence would suggest that it was accepted by the first defendant. 20 In my view, any challenge to the finding of recission is doomed to failure. The materiality of the finding is restricted to questions of breach of implied terms. 21 As earlier mentioned, it was sought to advance alternative claims in the Amended Statement of Claim. The first of the two alternatives could not succeed for two reasons. Firstly, what was pleaded was untenable by reason of the terms of the underwriting agreement. Secondly, a claim under the underwriting agreement had to fail because the contract of sale had not been settled. 22 The second alternative had its pleading deficiencies. Despite those problems, the first plaintiff was allowed to put an argument foundered on the decision in Alpha Trading. In essence, a case of breach of an implied term of co-operation was argued. The Magistrate rejected this claim. It founded on findings of fact made by her (in effect, there was a failure to prove breach). Those findings have not been challenged. 23 During this appeal, what was really argued was an attempt to further widen the scope of the pleadings and to ventilate matters which were not argued before the Magistrate. I shall return to these matters in due course. 24 The second matter raised in the Grounds of Appeal is the decision concerning costs. In my view, this ground is misconceived. 25 The Magistrate had a discretion in deciding questions of costs. The discretion is exercisable subject to the provisions of the relevant statute and rules. The Court has regard to the relevant circumstances of the particular case before it and exercises the discretion so that the dictates of justice are best served. 26 In this case, it was sought to be contended that she took into account an irrelevant consideration, which was material to her decision. 27 It does appear that the Magistrate had a concern (which she expressed from time to time) that the claim advanced by the first plaintiff may have been tainted by illegality. Her concern arose from what had been put in issue in the pleadings. However, it did not come to form any part of the issues agitated on this claim for commission. The first defendant did not pursue this defence. It was raised by the solicitor for the first defendant in submissions on the question of costs. In contrast, Counsel for the plaintiff submitted that it was not a relevant consideration and this submission was accepted by her. In my view, the Magistrate correctly rejected it as a relevant consideration (and she did so expressly more than once). I consider that, the transcript makes it clear that she did not take it into account in reaching her decision and that the decision was reached having regard to other matters (including the success had by the parties in the proceedings). 28 The first plaintiff sought to put as an appellate argument the following:- "21. As stated in the above paragraph, the evidence before the Local Court indicated that there was a variation of the contract for sale between the defendant and Widjanarko (or Widjanarko's estate in place of Widjanarko): see Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (157) 98 CLR 93 and the cases considering and applying Tallerman. 22. Denes LCM erred in law in overlooking this legal issue and recognizing that there was a variation of the contract." 29 This was an argument that was not open on the pleadings. It was not advanced before the Magistrate and accordingly was not the subject of her adjudication. It did not fall within the scope of Ground 1. In my view, the first plaintiff should not now be allowed to agitate it in this appeal. In any event, I consider that it was also devoid of merit. 30 In advancing this argument, Counsel took the Court to a number of cases (including RDJ International Pty Ltd v Preformed Line Products (Australia) Pty Ltd (1996) 39 NSWLR 417 and Dan v Barclays Australia Ltd (1983) 46 ALR 487). 31 I should briefly mention what the Court was taken to in one of those cases. In RDJ International, Young J (as he then was) referred to classes of cases where the claimant is entitled to succeed because there is an implied term that the circumstance from which the person is to get their remuneration will not by voluntary act of the other party be terminated. In my view, such a principle has no application in the present case. The first plaintiff had not been denied entitlement to commission by reason of voluntary act of the first defendant. 32 I earlier mentioned that there had been a belated application to amend the Grounds of Appeal. This application was first advanced after Counsel for the first plaintiff was engaged in making submissions in reply. I refused the application for a number of reasons (including the lateness of the making of the application and lack of utility). In my view, the allowing of the proposed amendment would not have assisted the first plaintiff in this appeal. 33 The first plaintiff bears the onus of demonstrating an entitlement to relief. In my view, it has failed to discharge that onus. 34 The appeal fails. The Summons is dismissed. The plaintiff is to pay the costs of the proceedings. Exhibits may be returned. **********