Guan v Lui

1. [1]

   BELL P: I agree with Meagher JA.

2. [2]

   BASTEN JA: I agree with Meagher JA.

3. [3]

   MEAGHER JA: The issue in this appeal is whether the respondent (Mr Lui) is unable to recover a “service fee” under an agreement with the appellant (Ms Guan) because he performed the relevant services “as a real estate agent” and was not the holder of a real estate agent’s licence or employed by the holder of such a licence: Property, Stock and Business Agents Act 2002 (NSW), s 8(2)(a) (2002 Act). The primary judge (Walton J) upheld Mr Lui’s claim to that fee, entering judgment in his favour for an amount of $780,000, and pre-judgment interest: Lui v Guan [2019] NSWSC 803 (Judgment) and Lui v Guan (No 2) [2020] NSWSC 398.

4. [4]

   Land owned by Shuangfu Development Pty Ltd (Shuangfu), a company controlled by Ms Guan, was the subject of a mortgagee sale. Her interest in the successful outcome of that process was as sole shareholder in the company and guarantor of its mortgage debt. Ms Guan retained Mr Lui to introduce prospective “investment developers” to the expressions of interest sales process conducted by the mortgagee’s exclusive selling agents.

5. [5]

   Ms Guan contends that in introducing prospective purchasers and encouraging them to make non-binding bids, Mr Lui was acting as a “real estate agent” and accordingly not entitled to sue to recover any fee for services performed in that capacity (s 8(2)(a)). That is said to be so notwithstanding that Mr Lui did not purport to represent Ms Guan in anything he did and had no authority from the vendor, or any selling agent retained by the vendor, to represent them in introducing prospective buyers to the sales process.

6. [6]

   The circumstances in which the agreement between Ms Guan and Mr Lui was made, its terms and the services provided by Mr Lui are not in issue. Each is summarised below. Before doing so it is convenient to set out the relevant statutory provisions.

The relevant provisions of the 2002 Act

1. [7]

   The 2002 Act repealed and, with modifications, re-enacted the Property, Stock and Business Agents Act 1941 (NSW) (1941 Act). In doing so it continued to require that natural persons and corporations carrying on particular agency activities be licensed, and that salespersons and managers engaged in those activities be registered and employed by the holder of a licence.

2. [8]

   The key provisions are ss 8(1)(a) and 8(2)(a):

3. [9]

   Section 3 includes the following relevant definitions. Ms Guan contends that the activities undertaken by Mr Lui fell within paras (a), (b) and (c) of the definition of “real estate agent”:

4. [10]

   Section 8(2) and the definition of “real estate agent" in s 3 were amended with effect from 23 March 2020 by the Property, Stock and Business Agents Amendment (Property Industry Reform) Act 2018 (NSW). That amendment was accompanied by a transitional provision which provided that s 8(2), "as in force" before this amendment, continues to apply in proceedings relating to services performed before the amendment: Sch 1, cl 31.

5. [11]

   As the relevant conduct of Mr Lui occurred in 2015, this proceeding is to be resolved by applying s 8(2) "as in force" before the 2020 amendments. As those amendments also redefined terms that are used in s 8(2), to apply that section as it was in force requires that the unamended form of the relevant definitions be used.

Factual Background

1. [12]

   Ms Guan was also the sole director of Shuangfu. Its acquisition of the land, comprising four older style commercial/retail buildings and one residential property in Kensington, was financed by Australia Capital Financial Management Pty Ltd (Australia Capital). Ms Guan guaranteed the repayment of that loan.

2. [13]

   On 20 November 2014, Australia Capital, as mortgagee in possession, appointed two partners of McGrathNicol as agents to sell the property. They in turn retained Jones Lang LaSalle (JLL) as exclusive selling agents. In late January 2015, JLL offered the property, described as a “mixed use development site”, for sale.

3. [14]

   The Information Memorandum issued called for expressions of interest (by way of a purchase proposal) to be lodged with JLL by 3pm on 4 March 2015. It invited “interested parties” to register their interest with JLL and described the sales process as follows:

4. [15]

   As at December 2014 Mr Lui was known to Ms Guan and was familiar with the Kensington project. They had first discussed that project in about September 2013, before the properties were purchased by Shuangfu. Between 2013 and 2014 Mr Lui contacted people who he thought could potentially partner with Ms Guan to undertake that development (Judgment [121], [141]).

5. [16]

   In December 2014, Ms Guan advised Mr Lui that the “Kensington Project had gone into receivership” and asked for his assistance. At that time Ms Guan said: “if you can get your friends or potential buyers to participate in the bidding, I will give you commission if the bidding process succeeds”. Mr Lui responded: “before we can do this business, we need to have some details of the terms and sign an agreement”. Following that meeting Mr Lui met with Mr Chen, described as the “principal” of Australia Capital, who advised that he was proposing to sell the mortgaged property through an expressions of interest process (Judgment [55], [172], [173]).

6. [17]

   On 18 January 2015, the agreement between the parties was signed. It was in simplified Chinese script, although some parts were written in English. The relevant parts, as recorded in the English translation accepted by the parties to be accurate, provided:

7. [18]

   In construing this agreement the primary judge held that the “tender rate” referred to in cl 5 was the amount of the highest “final bid/tender” made by an “investment developer” found or introduced by Mr Lui; and irrespective of whether that investor was the successful purchaser or that final bid the actual sale price (Judgment [343], [344], [510]). The bid answering that description was that of Anson City Developments 1 (Australia) Pty Ltd (Anson City) of $38 million. This construction of cl 5 is not challenged. Nor is it suggested that the amount for which judgment was entered in favour of Mr Lui was not calculated in accordance with cl 5 so understood (although 2% of $38 million is $760,000).

8. [19]

   The steps taken by Mr Lui to identify potential investors and introduce them to the sales process are recorded in detail in the extract of his affidavit at Judgment [203]. Mr Lui described himself as a “senior project development consultant” specialising in “obtaining funding for development projects in Australia from investors located both in Australia and overseas”. Over the years he had “formed associations and friendships with many high-net-worth individuals and developers, including a number of members of the Chinese community both in Australia and overseas”.

9. [20]

   Between early January and 4 March 2015, when the expressions of interest process closed, Mr Lui “contacted various investors and introduced others” to the project and that process (Judgment [201]). He encouraged those investors to participate “using his reputation and prestige” in the wider Chinese community (Judgment [224]). That process generated 22 bids, two of which were by companies introduced by Mr Lui. They were Fairway Investment & Development Pty Ltd (Fairway) and Anson City.

10. [21]

    Specifically, he arranged for a consulting firm (AECOM) to undertake a study of the project addressing its development potential. He introduced the project to Mr Chan and Mr Pak of Anson City. Mr Chan was a business advisor to Mr Pak who controlled that company. He visited JLL “a number of times” and got to know the process “in more detail”. He also obtained “a bundle of the information memorandum” to distribute to potential investors. He gave Mr Chan a copy of that memorandum and was in regular contact with him throughout the process. He introduced the project to Fairway whose directors were his friends and to another potential investor, Mr Zhao. He accompanied Mr Zhao on an inspection of the site and assisted Fairway in completing two expressions of interest bids.

11. [22]

    Between 23 January and 4 March 2015 there was email correspondence between representatives of JLL and Anson City with respect to the sales process. Mr Lui was not included or mentioned in any of that correspondence (Judgment [216], [217]). After that process closed negotiations proceeded between representatives of McGrathNicol, JLL and Anson City. They concluded on 25 March 2015 with the exchange of contracts for sale. Mr Lui was not included or mentioned in any of that correspondence (Judgment [222], [223]).

Disposition of the appeal

1. [23]

   The primary judge found that the services provided to Ms Guan by Mr Lui constituted, from Mr Lui’s perspective, a “one-off” transaction (Judgment [479]) that was not shown to be part of any real estate business carried on by him (Judgment [482]). His Honour also noted that there was no evidence that Mr Lui intended to be involved in future transactions and activities of the kind engaged in on behalf of Ms Guan (Judgment [480]).

2. [24]

   In his Honour’s view these findings alone were sufficient to justify the rejection of Ms Guan’s case that the prohibition in s 8(2)(a) was engaged, and that was so irrespective of whether those activities were undertaken “as an agent” and within one of paras (a) to (c) of the definition of real estate agent (Judgment [481]). That conclusion followed from his Honour’s application of the Full Court’s decision in Farrell v Bannister (1952) 52 SR (NSW) 73 at 74 (Street CJ, Owen and Clancy JJ agreeing) to which further reference is made below.

3. [25]

   The correctness of that decision (which was applied without further consideration in Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229) and its application to the construction of ss 8(1)(a) and (2)(a) is not questioned in this Court. Nor, as appears below, is it necessary to consider whether it was correctly decided in order to dispose of the appeal.

4. [26]

   Ms Guan accepts that it is not sufficient for her to establish that Mr Lui “acted as” a real estate agent (cf s 8(1)(a)) in the sense that he undertook as an agent one or more of the activities in paras (a) to (c). Rather, applying Farrell, she must establish in accordance with s 8(2)(a) that the services for which the fee was claimed were performed by Mr Lui “as a real estate agent” as defined, namely as a person who was carrying on business as a real estate agent.

5. [27]

   Accepting that to be the position, Ms Guan submits that the primary judge erred in two respects: first, in not finding that the activities undertaken for her by Mr Lui were properly characterised as those of a real estate agent; and secondly in not finding that those activities were engaged in as part of a business which included not only undertaking transactions like that involving Ms Guan but also providing property investment advice and facilitating real property investments for applicants for visas based on their significant investments in Australia.

6. [28]

   The characterisation of Mr Lui’s services as activities of a real estate agent within paras (a), (b) or (c) is critical to the second part of this argument because it is accepted that, for there to be a business falling within the statutory definition, more than one transaction of the relevant kind was required.

7. [29]

   Before considering the first question I propose to return briefly to the argument that s 8(2)(a) in its form in 2015 was also capable of applying to a person who engaged in a one-off transaction of a relevant kind, rather than a series of such transactions in the course of carrying on a business.

8. [30]

   The definition of “real estate agent” describes a person who for reward “carries on business” as an auctioneer of land or “as an agent” for various transactions or activities. Paragraphs (a) to (e), each introduced by that preposition used in the sense ‘in respect of’ or ‘with reference to’, describe various types of transactions involving the disposal of land (itself a defined term) or interests in land (para (a)), activities undertaken in connection with the sale, leasing or licensing of land (paras (b) to (d)) and other activities “in connection with land” that are prescribed by regulations (para (e)).

9. [31]

   Section 8(1)(a) prohibits a natural person from acting as or carrying on the business of “a real estate agent” without holding a licence. Whilst the definition of “real estate agent” describes a person who carries on a business, s 8(1)(a) draws a distinction between acting as, and carrying on the business of, a real estate agent.

10. [32]

    Whereas carrying on a particular kind of business ordinarily requires repetition and continuity of the activities which characterise that business, to “act as” someone who carries on such a business is to undertake activities which if repeated would constitute carrying on the business of a real estate agent. Such a construction of s 8(1)(a) as applying to an isolated transaction by a person who does not carry on business as a real estate agent is consistent with the language of s 8(2)(a) which prevents a person from bringing any proceeding to recover a commission or other reward “for any service performed by the person as a real estate agent”. A “service” could answer that description whether or not in providing it the person was acting as, or carrying on the business of, a real estate agent.

11. [33]

    Furthermore there is no reason to construe these provisions in Pt 2 Div 1 of the 2002 Act narrowly. Their purpose is to ensure that persons who act as, or carry on the business of, a real estate agent are licensed, and accordingly appropriately qualified and subject to the general and specific provisions of the Act governing a licensee’s conduct. Those provisions include that the services provided by the licensed real estate agent be performed pursuant to a written agency agreement which complies with applicable regulations.

12. [34]

    As Ball J observed in Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 4) [2017] NSWSC 436 at [90]:

13. [35]

    In Farrell the Court construed ss 20(2)(b) and 42(1)(c) of the 1941 Act, they being in substantially the same terms as ss 8(1)(a) and (2)(a) respectively as in force in 2015, as applying “only to unlicensed persons who are carrying on business as estate agents” (at 74). That was the result of giving the words “real estate agent” their defined meaning in each of those provisions, a necessary element of that definition (at that time) being the carrying on of a business. It followed that s 42 was to be read as not preventing the recovery of an agreed reward for a single transaction not performed as part of a business.

14. [36]

    The correctness of Farrell did not arise in Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418; [1970] HCA 31 because the definition of “real estate agent” in The Auctioneers, Real Estate Agents, Debt Collectors and Motor Dealers Acts 1922 to 1961 (Qld) included an individual who did not carry on a business. Nevertheless, Walsh J observed (at 440) in relation to s 17(1) of that Act, which was in relevantly the same language as s 8(1)(a) of the 2002 Act under consideration here:

15. [37]

    And in Milne v Coxton (unreported, NSWSC, 7 December 1987), in considering s 20 of the 1941 Act in the same form as it was in Farrell, Clarke J (as his Honour then was) made the point that although bound by that decision:

16. [38]

    As has already been noted the current version of this legislation no longer takes this form. Accordingly this question of construction could only arise in a small number of historical cases. More relevantly for present purposes, irrespective of whether the prohibition in s 8(2)(a) applied to services performed whilst “acting as” a real estate agent, it remains necessary in the way Ms Guan puts her case to determine whether the services which Mr Lui provided answered that description.

17. [39]

    Ms Guan’s case was that in identifying prospective purchasers and encouraging them to participate in the expressions of interest process, Mr Lui was acting “as an agent for” the sale of land or for inducing or attempting to induce persons to make offers to purchase that land, or for introducing prospective purchasers to the vendor or its exclusive selling agent. Her submissions in that respect are summarised by the primary judge at Judgment [438]-[449]. In order to satisfy the requirement that those activities be undertaken “as an agent” it was Ms Guan’s case that it was sufficient that they were undertaken for the benefit of another person, not necessarily a buyer or seller, and it was not necessary that the agent have authority to negotiate the price or terms of purchase or sale. The primary judge recorded Ms Guan’s submissions on this issue at Judgment [450]-[465].

18. [40]

    In addressing these arguments, the primary judge focussed on aspects of Mr Lui’s activities rather than the capacity in which they were undertaken. With respect to activities of the kind described in paras (a) to (c) of the definition, his Honour observed that Mr Lui was not in a position to offer an inducement to anyone to enter into the bidding process and did not seek to persuade any party to enter into a contract for sale (Judgment [501]-[502]); that Mr Lui’s introduction of potential buyers to the selling process did not involve any negotiation of the sale price or terms (Judgment [503]); and that Ms Guan had no (immediate) interest in the sale because she was not a prospective vendor or purchaser (Judgment [508]). His Honour concluded (at Judgment [500]) that neither the agreement nor Mr Lui’s conduct was within the relevant definition.

19. [41]

    In its terms that definition requires that the activities be undertaken “as an agent”. As Ball J also observed in Ryde Developments at [88]: “It is plain from the definition that a real estate agent is limited to a person who engages in the identified activities and who engages in those activities as an auctioneer or as an agent.” The activities are expressed as alternatives and there is no good reason why the expression “as an agent” should be interpreted narrowly so as not to “catch a person unless that person performs all or most of the usual functions of a real estate agent” (per Ball J at [91]).

20. [42]

    Turning to the meaning of that expression, as a general rule, terms with a technical legal meaning used in legislation are to be understood in their legal and technical sense: Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59 at [45] (Gaudron, McHugh, Gummow, Hayne, Callinan JJ). “Agent” is such a term and no intention contrary to its being understood in that sense appears in its use in this legislation. Indeed the provisions of the 2002 Act and in particular those in Pt 3 Div 4 (Conflicts of interest), Pt 4 (Agency agreements), Pt 5 (Residential property and rural land sales) and Pt 7 (Trust accounts) make plain that “agent” is used in its legal and technical sense.

21. [43]

    In International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 at 652; [1958] HCA 16, the Court (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ) observed that the term “agency” is “used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties”. See also Scott v Davis (2000) 204 CLR 333; [2000] HCA 52 at [227] (per Gummow J). The Court in International Harvester continued, citing the observation of Lord Herschell in Kennedy v De Trafford [1897] AC 180 at 188:

22. [44]

    In Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 at 50; [1931] HCA 53, Dixon J repeated those observations of Lord Herschell and added:

23. [45]

    In this context “representation” describes the acts and conduct of the agent undertaken with the principal’s authority and capable of affecting legal relations between the principal and third parties. For example an agent for the introduction of prospective purchasers to an owner of land may make statements, provide information and make an introduction, all whilst representing the owner. The legal relations which may thereby arise between the principal and a third party with whom the agent has dealt include, but are not confined to, contractual relations.

24. [46]

    The authorities on which Ms Guan relied in argument confirm that, as Dixon J observed, the essence of agency is the consensual representation of one person, the principal, by another, the agent. In the Restatement of the Law Second, Agency (American Law Institute, 1958) agency is similarly defined (at §1) as the “fiduciary relationship which exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf, and the other of whom similarly consents so to act or so acts”.

25. [47]

    In Freehold Land Investments, the issue was whether the statutory prohibition on the recovery of an agent’s fee applied to the appellant’s acting as agent to sell land in Queensland under an agreement which made Hong Kong law the proper law of the contract. The ultimate question was whether the appellant undertook activities as a real estate agent in Queensland (Walsh J at 440-441). The appellant contended that the words “as an agent for others” not only excluded from the activities to which the Act applied personal transactions in which the agent was engaged but also “actions, discussions or communications with his own principal (contrasted with actions, discussions or communications with the opposite party to the proposed transaction of sale etc)” [emphasis in original] (Walsh J at 442-443).

26. [48]

    That contention was rejected because to exclude the latter was to exclude conduct in which the appellant was communicating in his capacity as agent, albeit with his principal. There was no doubt that his communications with prospective buyers were undertaken in his representative capacity. Walsh J, with whom Barwick CJ agreed, concluded (at 443):

27. [49]

    Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303; [1995] FCA 1107 involved an agency for the introduction of potential purchasers to the owner of a leasehold interest in an island off Queensland. Mr Colbron did not hold a real estate licence in that State. In seeking to avoid the application of Auctioneers and Agents Act 1971 (Qld), s 71A(1) (the equivalent of s 8(2)(a) in the 2002 Act), he contended that the definition of “real estate agent” required that the alleged agent have authority to commit the client contractually, and that he lacked such authority.

28. [50]

    Lindgren J rejected that submission having regard to the width of that definition which included someone who “as an agent for others” exercises or carries on “the business of buying, selling, exchanging, or letting houses, land, or estates, or negotiating for such buying, selling, exchanging, or letting”. The definition of “real estate agent” in s 3 of the 2002 Act is broader, to the extent that it includes acting as an agent for the introduction of a purchaser in accordance with para (c). His Honour further observed (at 313) in relation to the scope of the capacity in which a real estate agent may represent a principal:

29. [51]

    The respondent in Jenkins v Kedcorp Pty Ltd [2002] 1 Qd R 49 engaged in a telephone marketing service directed to identifying prospective purchasers of “investment” properties for the purpose of negative gearing and tax minimisation. Once such purchasers were identified and, with the benefit of finance organised by the respondent, willing to proceed, they were introduced by the respondent to the selling agent of the vendor of the targeted property. As between the respondent and that selling agent, it had been agreed that the respondent would be paid an “administration fee” for that introduction.

30. [52]

    In proceedings prosecuting the respondent for acting as an agent whilst unlicensed, the respondent contended that at no stage in the relevant transaction did it act “as an agent for others”. The Court (McMurdo P, Pincus and Thomas JJA) rejected that argument, concluding at [14]:

31. [53]

    The appellant vendor in Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 1) [2009] 1 Qd R 589; [2008] QCA 357 agreed with the respondent financial planner that the latter would receive a certain sum for each of the appellant’s apartments unconditionally sold to a client of the planner introduced by the respondent to the appellant, and a further sum for each completed sale.

32. [54]

    The Court (McMurdo P, Holmes JA and White AJA) concluded that notwithstanding that the financial planner acted as an agent for both buyer and seller and that the owner had appointed another company as its principal selling agent, the respondent negotiated the selling of apartments for the appellant for reward and thereby acted as a real estate agent. In carrying out those negotiations it was necessarily acting on behalf of and representing the appellant.

33. [55]

    Turning then to Mr Lui’s activities, he undoubtedly introduced prospective purchasers to the selling process and encouraged them to make bids. He did this in the financial interests of Ms Guan, as well as in his own fee earning interest. In doing so he arranged for a feasibility study to be undertaken; made that study available to interested parties; familiarised himself with the expressions of interest process; distributed copies of the Information Memorandum; had discussions with interested parties about the sales process being conducted by JLL, as well as the feasibility of the proposed development of the land; assisted one prospective purchaser to complete two expressions of interest; accompanied another on a site visit; and on at least one occasion spoke to Ms Guan about what she might do in encouraging one of the prospective purchasers to participate in the process.

34. [56]

    However, in undertaking each of these activities Mr Lui had no arrangement with, or authority from, the owner (Shuangfu), the mortgagee in possession (Australia Capital), the receivers and managers (McGrathNicol), the exclusive selling agent (JLL), or any of the prospective purchasers to represent them in any aspect of the expressions of interest process or any negotiation which followed. Nor did the evidence suggest that in undertaking any of these activities Mr Lui held himself out as acting for or representing any of these entities or persons.

35. [57]

    In performing his agreement with Ms Guan that he would “find appropriate investment partners” and “using his reputation and prestige in the industry” encourage them to “submit a sealed bid”, Mr Lui was not undertaking or required to engage in any activity representing Ms Guan, who was not a participant in any capacity in the expressions of interest process. Nor did Ms Guan purport to authorise him to act on behalf of the vendor or any of its representatives in that process. Rather, he was required to identify potential investors from his existing business and other connections and, using his own reputation and experience as a senior project development consultant, to encourage them to participate in the selling process.

36. [58]

    Addressing para (a) of the definition of real estate agent, Mr Lui encouraged his business and other contacts to participate by making bids in the first round of the sales process. However he did not do so acting or purporting to act in any representative or agency capacity for the vendor or any agent of the vendor. Nor did he do so purporting to represent Ms Guan. Rather Mr Lui was acting for himself, relying on his own expertise and reputation as a consultant and speaking to contacts and acquaintances who obviously valued his opinions and views.

37. [59]

    As to para (b), although Mr Lui sought to induce the making of non-binding offers, he did not do so representing or acting as agent for the vendor or its selling agent. Although the services he performed were to the financial advantage of Ms Guan they did not involve or require his acting as her representative in inducing the making of bids or offers (cf Colonial Mutual Life Assurance Society at 50).

38. [60]

    The position is the same in relation to para (c). Whilst Mr Lui sought to introduce prospective purchasers to the selling process, and accordingly to the exclusive selling agent or owner of the land, he was not required to and did not do so representing either of them or Ms Guan.

39. [61]

    In none of the activities in which he engaged with potential investors was Mr Lui acting in a representative capacity for a principal, whether disclosed or not. Accordingly in doing so he did not at any relevant time act as a real estate agent.

40. [62]

    Addressing the second part of Ms Guan’s argument (see [26]-[28] above), it also follows that irrespective of whether Mr Lui was carrying on a business of which the relevant activities were part, that business was not, and did not include, acting as a real estate agent.

41. [63]

    In the result, the primary judge did not err in concluding that Mr Lui was not prohibited by s 8(2)(a) of the 2002 Act from recovering the fee due from Ms Guan.

Conclusion

1. [64]

   The appeal should be dismissed with costs.