Proceedings Transferred to Supreme Court and Cross-Claim Allowed

The Supreme Court of New South Wales ordered the transfer of proceedings from the District Court to the Supreme Court and granted permission for a cross-claim to be filed, citing sufficient cause and the need for a just, quick, and cheap resolution of the real issues in the proceedings.

Supreme Court New South Wales

Medium Neutral Citation: [COMPANY] v [COMPANY] [2020] NSWSC 801 Hearing dates: 10 June 2020 Date of orders: 25 June 2020 Decision date: 25 June 2020 Jurisdiction: Common Law Before: Harrison AsJ Decision: [ADDRESS] orders that: (1) Pursuant to s 144 of the Civil Procedure Act 2005 (NSW) proceedings number 2019/326391 in the District Court of New South Wales, Sydney are transferred to this Court. (2) [COMPANY] are to file and serve a cross claim in this Court within 14 days. (3) Costs are reserved. (4) The matter is listed for a directions hearing before the registrar at 9.30 and on 16 July 2020. Catchwords: PROCEDURE – Whether proceedings in the District Court should be transferred to this Court – Whether leave should be granted to file cross claim Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Civil Procedure Act 2005 (NSW) Cases Cited: BOC v MDL [2019] NSWSC 278 Hau Shan v Fairfield City Council [2020] NSWSC 681 Hewins v Formica Plastics Pty Ltd [1968] 3 NSWR 793 Category: Procedural and other rulings Parties: [COMPANY] (Plaintiff) [COMPANY] (First Defendant) [COMPANY] (Second Defendant) [COMPANY] (Third Defendant) Representation: Counsel: [redacted] [NAME] (Third Defendant)

Solicitors: [redacted] [NAME] (Third Defendant) File Number(s): 2020/105279 Publication restriction: Nil

Judgment 1. HER HONOUR: By amended summons filed 7 May 2020, the plaintiff seeks an order pursuant to s 144 of the Civil Procedure Act 2005 (NSW) that proceedings number 2019/326391 in the District Court of New South Wales at Sydney be transferred to this Court.

2. In this Court, the plaintiff is [COMPANY] ([COMPANY]). The first defendant is [COMPANY] ([NAME]). The second defendant is [COMPANY] (EQ Products). The third defendant is [COMPANY] ([NAME]). [COMPANY] relied upon the affidavit of its solicitor [NAME] dated 6 April 2020. [NAME] relied upon the affidavit of its solicitor [NAME] dated 13 May 2020. [NAME] and EQ Products are not parties to the proceedings in the District Court and do not oppose this application. [NAME] opposes this application on the basis that there is no connection or relationship between the proposed claim in the [NAME]'s claim in the District Court. 3. [NAME] of counsel appeared for [COMPANY]. [NAME] of counsel appeared for [NAME].

4. On 20 May 2020, by consent, an order was made that the first and second defendants be excused from the contested hearing of this transfer application between [COMPANY] and [NAME].

Background 1. In 2012, [NAME] was the owner of land at [ADDRESS] and [ADDRESS], Liverpool (the property) on which 258 units were to be developed.

2. On 25 October 2012, [NAME] entered into a written "Sales Inspection Report and Exclusive Agency Agreement" with [COMPANY].

3. In summary, the agreement provided for [COMPANY] to be paid a commission of 4.4% GST incIusive of the sale price. Half that amount was payable on exchange and the balance on settlement "or if after the making of the contract the Principal and the purchaser mutually agree not to proceed with the contract". [NAME] has paid the commissions payable on exchange, but not on settlement.

The pleading framework 1. The statement of claim filed on 18 October 2019 in the District Court proceedings is between [NAME] as plaintiff and [COMPANY] as defendant. It pleads:

2. On about 3 February 2016, [NAME] and [COMPANY] entered into a conjunction agency deed in relation to the sale of off the plan properties in a development being carried on by [NAME] on land situated at [ADDRESS], Liverpool (the deed). The deed was in writing. 3. [NAME] was the co-joined agent as defined in the deed. [COMPANY] was the listing agent as defined in the deed. [NAME] was the developer as defined in the deed. [NAME] was the vendor as defined in the deed.

4. The commission payable to [NAME] was payable at 50% on exchange of contracts for properties sold by it and 50% on settlement of properties sold by it. In the period that [NAME] acted as agent on the sale of 70 properties to the terms of the deed.

5. In about June 2016, [NAME] issued invoices for the first tranche of 50% of the commission for properties sold by it to [COMPANY]. The invoices were sent by [NAME]'s account to [COMPANY].

6. In the period June 2016, [COMPANY] paid [NAME] $342,365 pursuant to the deed for the first commission payable for properties sold by [NAME]. The moneys were paid into [NAME]'s bank accounts.

7. On 21 May 2019, [NAME] issued invoices for the second tranche of 50% of the commission for properties sold by it to the [COMPANY]. The invoices were sent by email by Mr He, the director of [NAME], to [NAME] the director of [COMPANY].

8. By, at the latest, 21 August 2019, the sale of all properties sold by [NAME] in the development had settled. The purchasers' solicitor confirmed settlement of 70 properties with [NAME]. As a consequence of the properties settling, [NAME] became entitled to the payment of the remaining 50% of the commission.

9. On 22 August 2019, [NAME] demanded that [COMPANY] pay it the sum of $395,557 payable pursuant to the deed. 10. [NAME] pleads that in breach of the deed, [COMPANY] has failed to pay it the sum of $395,557 or any part thereof, and as a result, it has suffered loss and damage.

The defence in the District Court 1. On 20 December 2019, [COMPANY] filed a defence. [COMPANY] was directed to file any cross claim in the District Court proceedings by 1 April 2020. It has not done. [COMPANY] intends to join third parties to the proceedings the claim in the proposed cross claim exceeds the jurisdiction in the District Court. [COMPANY]' claim is a claim for the agents' commissions for the sale of the same properties in the same residential development as that claimed by [NAME] in the District Court proceedings.

2. The defence at [21] raises an issue as to the entitlement of [NAME] as conjunction agent to commission where commission has not been paid by [NAME] as vendor and/or [NAME] as developer.

The proposed cross claim 1. The proposed cross claim is wrongly identified as "Statement of Claim" ([NAME] 6/4/2020 p 23).

2. In the proceedings currently in the District Court, [COMPANY]' proposes to cross claim against [NAME] as first cross defendant and [NAME] as second cross defendant for the unpaid commissions owed to it. [COMPANY] entered into agreements with each of the proposed cross defendants in relation to commission. [NAME] is the vendor and [NAME] is the developer of the property.

The relevant legislation 1. Section 22 of the Civil Procedure Act reads: "22 Defendant's right to cross-claim (1) Subject to subsection (2), the court may grant to the defendant in any proceedings (the first proceedings) such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant against that person in separate proceedings commenced by the defendant for that purpose. (2) Relief may not be granted under this section against a person who is not a plaintiff in the first proceedings unless the relief relates to, or is connected with, the subject of the first proceedings. …"

1. Section 56 of the Civil Procedure Act reads: "56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. …"

1. Section 140(1) of the Civil Procedure Act relevantly reads: "The Supreme Court may, of its own motion or on application by a party to proceedings before the District Court or the [ADDRESS], order that the proceedings, including any cross-claim in the proceedings, be transferred to the Supreme Court."

1. The parties referred to BOC v MDL [2019] NSWSC 278 ("BOC") and Hau Shan v Fairfield City Council [2020] NSWSC 681("[NAME]").

2. In BOC, [NAME] at CL summarised the relevant legal principles that apply to an application pursuant to s 140 of the Civil Procedure Act. His Honour at [17]–[19] stated: "Legal principles 17 In exercising the discretion conferred by s 140 of the Civil Procedure Act, it is necessary for the Court to consider all relevant facts and circumstances (Sanderson Motors Pty Ltd v Kirby [2000] NSWSC 924 at [4], [NAME]; Harbourside Catering Pty Ltd v TMG Developments Pty Ltd [2006] NSWSC 631, [NAME] J). 18 The applicant for transfer bears the onus of satisfying the Court that there is "sufficient cause", "sound ground" or "good reason" to transfer the proceedings so that justice is best served between the parties: Sanderson Motors at [3]-[4]; Parry v WGE Engineering Pty Ltd [2003] NSWSC 337 at [3]. 19 [COMPANY] v [NAME] No 64972 [2010] NSWSC 656; 77 NSWLR 601 [NAME] (as he then was) said at [11]: "11 The purpose of the Civil Procedure Act, s 140, is to permit the removal from a lower court to a higher court of proceedings where there is good reason to do so. Typically, that has been where there has been a risk that a jurisdictional limit affecting the lower court would be exceeded, where there are complex and important issues, and where the proceedings involve allegations of significant notoriety or public importance."

1. In [NAME] at [14] said: "14 I think that the issue here is an assessment on my part in a broad sense of the likelihood of this claim succeeding in going beyond the District Court's jurisdiction. Patently, one would reject out of hand, as a matter of theory and practice, the idea that the work of the Supreme Court would be clogged up by matters that, for some reason or other, are sought to be either commenced here or transferred here when it is perfectly clear that a lower Court is ready, willing and able to deal with the matter, and to do justice in the matter."

The three agreements 1. Counsel for [COMPANY] referred to three agreements. I shall briefly refer to them. 2. [COMPANY] asserts that neither [NAME] nor [NAME] have paid the commissions that [COMPANY] claims are payable.

Agreement 1 1. On 25 October 2012, [NAME] entered into a sales inspection report and exclusive agency agreement with [COMPANY]. Clauses 3(i) and 3(vi) state: "Agent's Remuneration 3. i. The Exclusive Agent shall be entitled to a fee of 4.4% (GST incl.) … vi. The fee to which the Agent is entitled shall be due and payable on completion of the sale or upon demand if the sale is not completed owing to default of the Principal after the parties have entered into a binding contract or if after the making of the contract the Principal and the purchaser mutually agree not to proceed with the contract."

Agreement 2 1. On 18 September 2015, [NAME] entered into an Agency Agreement with [COMPANY].

2. In simplified form that agreement provided:

1. For the rescission and re-exchange of the contracts 2. It provided by Clause 10 for [NAME] (as developer) to pay commissions and fees... in accordance with the Schedule to the document.

1. Schedule 1(1) of the agency agreement states: (1) The agent is entitled to be paid commission as follows: At Exchange At Settlement Existing exchanges as at 14/9/2015 2.2% 2.2% Rescission & Re-Exchange 2.2% 2.2% - Original Exchange price N/A 3.3% - Uplifted Amount at Re-Exchange New Sales 1.65% 1.65%

Agreement 3 – the conjunction agreement 1. On 3 February 2016, [COMPANY] entered into a conjunction agreement with [NAME].

2. Clauses 3, 4.2 and 5 state: "3. Nature of Conjunction Agreement The Co-Joined Agent agrees and acknowledges: (a) it may only act as conjunction agent for the Property (according to the terms of this deed) in relation to the Conjunction Lots; (b) the Vendor is under no obligation to accept any offer presented by the Co-Joined Agent or Listing Agent; (c) the Co-Joined Agent must not offer to sell any part of the Property other than the Conjunction Lots to the same Previous Purchaser for the same respective lot on terms as may be required by the Vendor and Developer from time-to-time. … 4.2 Commissions (a) The Co-Joined Agent is only entitled to be paid commission from the li sting Agent where a Previous Purchaser of a Conjunction Lot enters into simultaneous rescission of the respective Prior Contract and enters into a new contract for sale of land for the same lot of the Property subject to terms acceptable to the Vendor and Developer, and the new contract is completed. (b) In the event the Vendor rescinds a Prior Contract (either by agreement with the Prior Purchaser or otherwise) then no commission will be payable to the Co-Joined Agent other than the amount already paid to the Co-Joined Agent in respect of the respective lot as set out in the Schedule. (c) Subject to clause 4.2(a) and (b), the amount of commission payable to the Co-Joined Agent is as set out in the Total Commission column of the Schedule, being payable in the following manner: (i) 50% on exchange of a new contract for sale of land; and (ii) 50% on completion of a new contract for sale of land. … 5. Benefit of Developer and Vendor The Parties acknowledges and agree that: (a) the provision• of this deed also operate to the benefit of the Vendor and Developer; and (b) the Vendor and Developer are not parties to this deed."

[COMPANY] submissions 1. The quantum of the [COMPANY]" proposed cross claim is for the amount $3,474,149, which exceeds the jurisdiction of the District Court: see Hewins v Formica Plastics Pty Ltd [1968] 3 NSWR 793. In accordance with s 22 of the Civil Procedure Act, the statement of claim against [NAME] is related to and connected with the claim, which is the subject of the District Court proceedings. 2. [COMPANY] submitted that [NAME]'s claim in the District Court recites the role of [NAME] as the owner, and [NAME] as the developer. The nature of the case is a construction issue as to how the three agreements overlap and whether they should be construed together. In the conjunction agreement there is an acknowledgement that the agreement acts to benefit of the vendor and the developer even though they are not parties to the agreement. These three agreements need to be construed together. (T 8).

3. There is express provision in all of the agency agreements, and relevantly in the [NAME] and [COMPANY]' agreement at clause 9, for the provision of a conjunction agent. It expressly says that there can, with approval of the developer and other agents, be a conjunction agent. Plainly, there is more involved in this conjunction agreement than simply an agreement between [COMPANY] and [NAME] in the District Court. (T 14).

4. There has been no substantive delay in bringing this application. The District Court proceedings have not proceeded past the filing of the defence and it was indicated additional parties were to be joined by cross claim.

5. There is no evidence of any prejudice or other reason to refuse the transfer ([NAME] 13/5/2020). This is not a "pay and be paid" arrangement (referred to below) because there are agents who are both ultimately deriving payment from the vendor of the property.

[NAME]'s submissions 1. Counsel for [NAME] described [COMPANY]' case as a concept known as "pay when paid" in the construction industry that has received negative treatment in the Building and Construction Industry Security of Payment Act 1999 (NSW). "Pay when paid" is where a building contractor would say "I don't have to pay my subcontractors until the principal pays me". (T 10).

2. The clauses of the conjunction agreement require [COMPANY] to pay [NAME] in two tranches, the first on exchange, and the second on completion. There is no requirement for [COMPANY] to be paid by [NAME], as third parties, first. [NAME], while being mentioned in the conjunction agreement, are not parties to it.

3. It is common ground that [COMPANY] has paid the first tranche to [NAME], which is in compliance with clause 4.2(c)(i) of the conjunction agreement. The only issue is whether or not there has been completion such that the second payment is triggered under clause 4.2(c)(ii). The evidence in these proceedings will show that completion has occurred, that there has been no intervening factor. The claimed amount is due and owing, however, those are matters for the District Court.

4. Further, the proposed cross claim by [COMPANY] in the Supreme Court details issues involving two agency agreements between [COMPANY] and [NAME]. [NAME] is not party to those agreements. There is no pleading in the proposed Supreme Court proceedings involving the conjunction agreement. There is no allegation made against [NAME] in the Supreme Court proceedings. Counsel for [NAME] submitted that [COMPANY] claims an indemnity from [NAME] in respect of amounts owing to [NAME] and there is no basis identified for the indemnity. [NAME] is not named as a party in the proposed Supreme Court cross claim. There is no connection between the cross claim and the District Court proceedings. (T 10). There is simply no reason for [NAME] to appear in the proposed Supreme Court proceedings.

5. There is no reason to keep [NAME] out of its funds claimed in the District Court, which are relatively modest compared to the amounts claimed in the proposed Supreme Court proceedings, and to force it to take part in Supreme Court proceedings in which it is not even named would require it to suffer additional costs, which would be contrary to the provisions of the Civil Procedure Act, including s 56.

6. Therefore, application must fail because [COMPANY] has not discharged its onus of satisfying the Court that there is "sufficient cause", "sound ground" or "good reason" to transfer the proceedings so that justice is best served between the parties, and accordingly, the interests of justice dictate that the District Court proceedings run in that jurisdiction: see [NAME] at [18].

7. Patently, one would reject out of hand, as a matter of theory and practice, the idea that the work of the Supreme Court would be clogged up by matters that, for some reason or other, are sought to be either commenced here or transferred here when it is perfectly clear that a lower Court is ready, willing and able to deal with the matter, and to do justice in the matter: see [NAME] at [14].

Conclusion 1. While I accept that there are three separate written contracts involving [COMPANY] referred in the proposed cross claim, the overriding purpose is the resolution of the real issues in dispute. [NAME] submitted that there was no connection between the District Court proceedings and the proposed cross claim. However, [NAME] and [COMPANY], who are parties to the conjunction agreement, both derive payment of their commission from the vendor of the property, [NAME]. [COMPANY] will argue that there is more involved in the conjunction agreement than simply an agreement between [COMPANY] and [NAME]. 2. [COMPANY] has discharged its onus. I am satisfied that there will be a construction issue as to how the three contracts overlap and how they should be construed together. If the District Court proceedings were transferred to this Court all of the issues can be resolved in one hearing as opposed to three separate hearings in two different courts. If the cross claim is filed in the District the judgment amount is likely to exceed the jurisdiction of that Court. It is my view that these are good reasons to transfer the proceedings in the District Court to this Court and grant leave to [COMPANY] to file and serve a cross claim.

3. Costs are reserved.

[ADDRESS] orders that: (1) Pursuant to s 144 of the Civil Procedure Act 2005 (NSW) proceedings number 2019/326391 in the District Court of New South Wales, Sydney are transferred to this Court. (2) [COMPANY] are to file and serve a cross claim in this Court within 14 days. (3) Costs are reserved. (4) The matter is listed for a directions hearing before the registrar at 9.30 am on 16 July 2020.

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