Tuesday, 15 August 2017

Is a real estate agent an 'agent' for the purposes of a notice under the Sale of Land Act, 1962 (Part 2)?

In my last post (see here: http://bit.ly/2uUgUU9), I discussed the decision of the Supreme Court of Victoria in Tan v Russell [2016] VSC 93. 

That decision was controversial among property lawyers, and led to amendments being made to the Sale of Land Act, 1962 (the SLA). 

The Court of Appeal recently handed down its decision in the appeal from that decision. 

In Lo v Russell [2016] VSCA 323, the Court of Appeal (Warren CJ, Tate and McLeish JJA) unanimously overturned the decision of Cameron J in Tan v Russell.  


Background
Subject to various modifications, the Contract of Sale of Real Estate in this case conformed to the standard form of contract in the Estate Agents (Contracts) Regulations 2008. 

The cover page of the Contract of Sale contained, within a box headed ‘IMPORTANT NOTICE TO PURCHASERS’, a notice as to the cooling-off period, as required by s 31(6) of the SLA. That notice relevantly read as follows: 
Cooling-off period (Section 31 Sale of Land Act 1962)You may end this contract within 3 clear business days of the day that your [sic] sign the contract if none of the exceptions listed below applies to you.
You must either give the vendor or the vendor’s agent written notice that you are ending the contract or leave the notice at the address of the vendor or the vendor’s agent to end this contract within this time in accordance with this cooling-off provision.
You are entitled to a refund of all the money you paid EXCEPT for $100 or 0.2% of the purchase price (whichever is more) if you end the contract in this way.
On the following page, under the heading ‘PARTICULARS OF SALE’, were listed the ‘vendor’s estate agent’ (giving contact details of Marshall White including the email address of Mr Gibbons), followed by the name (but not any contact details) of the ‘vendor’, the name and contact details of the ‘vendor’s legal practitioner or conveyancer’, the ‘purchaser’ and the ‘purchaser’s legal practitioner or conveyancer’, and particulars of the ‘land’, ‘property address’, ‘goods sold with land’ and ‘payment’.

Special conditions 3.1 and 3.2 of the Contract of Sale provided for the replacement of general conditions as to service, so as to read as follows:
17.1 Any document sent by—(a) post is taken to have been served on the next business day after posting, unless proved otherwise;(b) email is taken to have been served at the time of receipt as provided in section 13A of the Electronic Transactions (Victoria) Act 2000.
17.2 Any demand, notice or document required to be served by or on any party may be served by or on the legal practitioner or a conveyancer for that party. It is sufficiently served if served on the party or on the legal practitioner or conveyancer:(a) personally; or(b) by pre-paid post; or(c) in any manner authorised by law or the Supreme Court for service of documents, including any manner authorised for service on or by a legal practitioner; or(d) by email.

General condition 11.1, concerning payment of the deposit, provided:
The purchaser must pay the deposit:(a) to the vendor’s licensed estate agent; or(b) if there is no estate agent, to the vendor’s legal practitioner or conveyancer; or(c) if the vendor directs, into a special purpose account in an authorised deposit-taking institution in Victoria specified by the vendor in the joint names of the purchaser and the vendor.

Within the time required under the Contract of Sale and the SLA, Mr Tan emailed the real estate agent notifying the purchasers' intention to exercise their right to cool off from the Contract of Sale. 

Shortly after the Notice was given, the purchasers' lawyer demanded that the vendor refund the deposit (less 0.2 per cent of the purchase price) by 4:00 pm on the day of the demand. The vendor did not do so.

The purchasers filed a statement of claim in the Supreme Court seeking a declaration that the Contract of Sale was terminated, payment by the vendor of the balance of the deposit (plus interest), damages and costs.

Later, the vendor's lawyers served a Notice of Default on the purchasers for failing to pay the balance of the deposit by the end of June as provided for in the contract. The notice required that the default be remedied within 14 days of service of the notice. The purchasers did not pay the balance.

The vendor contended that the Contract was rescinded and made arrangements to re-sell the property.

Later again, the vendor filed a defence and counterclaim alleging that the purchasers had not lawfully exercised their cooling-off right. He sought damages, interest and costs. 

The property was re-sold at auction for $4.07 million. 

At trial, the vendor sought damages under his counterclaim consisting of the residue of the deposit, the loss on resale (being $410,000) and the costs incurred in respect of resale including by reason of the ensuing delay in settlement.

The Appeal
The only live question before the Court of Appeal was whether the trial judge was correct to conclude that the email terminating the contract was not effective under s 31 of the SLA.

Section 15 makes provision for the service of notices under the SLA. It relevantly provides:
(1) A notice in writing required or authorized to be given by this Act shall be sufficiently served upon any person—(a) if it is served personally or left at his last known place of abode in Victoria; or(b) if served personally or by post upon his legal practitioner or conveyancer named in the contract or otherwise authorized by the person to be served to act in the particular matter.

The purchasers submitted that ‘agent’ in s 31(3) was capable of comprehending an estate agent and that, in cases such as the present where the prescribed form of contract of sale was relevantly adopted, it included the person nominated as the ‘vendor’s estate agent’ in the particulars of sale.

The Court of Appeal concluded (at paragraph 45) that s 31(3) does not operate to designate a vendor’s estate agent as a person capable of receiving a cooling-off notice under s 31. In other words, ‘agent’ in s 31(3) has its ordinary legal meaning.

At paragraph 51, the Court of Appeal then considered: 
The issue is then whether the contract itself constituted Marshall White the agent of the [vendor] for the purpose of s 31. The starting point must be the ‘important notice’ which embodies the language of s 31(3) itself. It uses, of course, the words ‘the vendor or the vendor’s agent’ to describe the person to whom the notice must be given. At the top of the next page are found the details of the ‘vendor’s estate agent’. No other person is described in the contract using the term ‘agent’. Further, the cover page includes the words ‘Any person whose signature is secured by an estate agent acknowledges being given by the agent …’, indicating a use of the word ‘agent’ to describe an estate agent. As the applicants submitted, ‘agent’ is commonly used as shorthand for an estate agent. Whereas, for the reasons given, Parliament did not adopt that shorthand usage in s 31(3), the same conclusion does not necessarily follow when the same words are replicated in a contract of sale.
The Court of Appeal noted that the sale contract is to be construed in accordance with the general principles of construction of contracts. That requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.

The Court noted at paragraph 53 that: 
... there is no reason why the contract may not go further than the minimum requirements of the legislation. In particular, s 31 does not insist that the vendor nominate an agent or provide particulars for service on that agent, but a contract to which the section applies may well do so. Moreover, while s 31 does not have the effect that the vendor’s estate agent is an ‘agent’ for the purposes of the section, the contract may have that result.
The Court stated that it is commonplace, where the vendor has an estate agent, that the purchaser is likely, up until and including the point of signing the contract, to have dealt principally if not exclusively with that estate agent rather than with the vendor or the vendor’s legal practitioner or conveyancer. Ordinarily, where an estate agent has been appointed, those other parties have no involvement with prospective purchasers prior to sale. It is in the nature of an estate agent’s role that he or she deals with prospective purchasers, and a legal practitioner or conveyancer is generally not required until after the contract is signed. Moreover, the estate agent accepts the purchaser’s deposit in accordance with both statute and the present contract. The estate agent with whom a purchaser will have been so dealing is prominently identified as such in the contract. This is an important aspect of the context in which the contract of sale operates.

At paragraph 55, the Court concluded that:
... it is natural that a reasonable person in the position of the purchaser ... reading the contract would infer that the ‘vendor’s agent’ to whom reference is made in the ‘important notice’ is the person with whom the purchaser has been dealing in place of the vendor and who is described immediately thereafter as the ‘vendor’s estate agent’. That conclusion is supported by the use of the word ‘agent’ earlier on the cover page in a context where it plainly means ‘estate agent’.
The purpose of the notice provision is better achieved by a construction which enables the purchaser to rely on the common use of the word ‘agent’ to describe an ‘estate agent’, rather than requiring the purchaser to divine from provisions which do not even use that word that the true ‘agent’ is, in fact, somebody else. 

In the opinion of the Court of Appeal, the conduct of the vendor in signing the contract did convey that the requisite authority was given to the real estate agent. The court concluded that it was sufficient for the purchasers to demonstrate that the vendor’s signature of the contract authorised his estate agent to receive a notice under s 31(3).

The application for leave to appeal was granted and the appeal allowed. The orders of the trial judge were set aside. In their place it should be declared that the contract of sale was terminated by the purchasers on 9 April 2014. It was ordered that the vendor pay the purchasers the balance of the deposit in the sum of $341,040 together with interest and that the vendor’s counterclaim be dismissed.

Conclusion 
The Court of Appeal did not agree with the purchasers' argument that section 31 of the SLA authorised them to serve a Cooling Off Notice on the vendor's real estate agent. However, the particular terms of the Contract of Sale did grant that authorisation. 

Legislation amended
As a direct result of the decision in Tan v Russell, the Victorian Parliament passed legislation, with effect from 11 May 2017, confirming that real estate agents are, and always were, a vendor's agent for the purpose of section 31 of the SLA (see the amended section 31(3) and the new section 31A of the SLA)

After a period of some angst for property lawyers, it is now clear that a purchaser can serve a Cooling Off Notice under section 31 of the SLA on a vendor's real estate agent. 

WG Stark
Hayden Starke Chambers

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