Monopoly Company Pty Ltd v Diosta Pty Ltd [2004] NSWCA 369 (8 November 2004)

Last Updated: 9 November 2004

NEW SOUTH WALES COURT OF APPEAL

CITATION: The Monopoly Company Pty Ltd v Diosta Pty Ltd [2004] NSWCA 369

FILE NUMBER(S):

41229/03

HEARING DATE(S): 27 August 2004

JUDGMENT DATE: 08/11/2004

PARTIES:

The Monopoly Company - Appellant

Diosta Pty Ltd - Respondent

JUDGMENT OF: Sheller JA Giles JA Tobias JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 6796/01

LOWER COURT JUDICIAL OFFICER: Herron ADCJ

COUNSEL:

R J H Darke SC & G B Carolan - Appellant

N Cotman SC & G Thomas - Respondent

SOLICITORS:

Back Schwartz Vaughan - Appellant

Ratner Chiu & Co - Respondent

CATCHWORDS:

Agency agreement - for purchase of hotel - fee payable if principal procured another person to purchase - whether on construction of agreement procurement had to be the means by which the purchaser became the legal or beneficial owner - held no - whether on facts principal procured the other person to purchase - held yes. D

LEGISLATION CITED:

DECISION:

Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 41229/03

DC 6796/01

SHELLER JA

GILES JA

TOBIAS JA

Monday 8 November 2004

THE MONOPOLY COMPANY PTY LTD v DIOSTA PTY LTD

Judgment

1 SHELLER JA: I agree with Giles JA.

2 GILES JA: Diosta Pty Ltd ("Diosta") conducted a real estate agency in Sydney. Until late August 1999 it traded as L J Hooker Special Projects. Thereafter it traded as Raine & Horne Special Projects NSW.

3 Diosta was engaged on commission by The Monopoly Company Pty Ltd ("Monopoly") to find a hotel for Monopoly to buy. A Purchasing Agency Agreement ("the Agreement") was executed in July 1999. Diosta was entitled to its commission if it introduced to Monopoly a hotel vendor and, amongst other alternatives, Monopoly "procure[d] another person to enter into a contract for the purchase of the Property (whether by novation or otherwise)".

4 In August 1999 Diosta introduced to Monopoly the vendor of the Eastwood Hotel. In June 2000 the vendor accepted an offer for the purchase of the hotel by Monopoly. This did not mature into a sale to Monopoly. In early October 2000, in circumstances to be considered in some detail, Modern Motels Pty Ltd ("Modern") entered into a contract to purchase the hotel. The sale to Modern was completed at the beginning of December 2000. Modern was not a trustee for Monopoly, Monopoly had no shareholding in Modern, and it was accepted that Monopoly was not the legal or beneficial owner of the hotel.

5 Herron DCJ held that Monopoly had procured Modern to enter into the contract and that Diosta was entitled to its commission. There were two issues on appeal. The first was whether, on the proper construction of the Agreement, it was necessary that the procurement be a means by which Monopoly became the legal or beneficial owner of the hotel. The second, arising if it was not necessary, was whether Monopoly had procured Modern to enter into the contract within the meaning of the Agreement.

The Agreement

6 The sole director and shareholder of Monopoly was Mr Ross Visalli, who had been engaged in the hotel industry as hotel owner or operator for many years. In 1999-2000 Monopoly was the lessee of the Stardust Hotel at Cabramatta. The lessor was Lubo Medich Holdings Pty Ltd, of which more will later be said.

7 In January 1999 Mr Neville Green, a licensed real estate agent employed by Diosta, telephoned Mr Visalli in relation to the sale or purchase of poker machine permits. Other telephone conversations followed, and then a meeting in mid-April 1999. At the meeting Mr Visalli told Mr Green that he was interested´ in acquiring a freehold hotel. Mr Visalli said that he had a number of hotels he would like to nominate which he was interested in buying, and that he wanted Mr Green to follow them up on his behalf. For Mr Visalli, it was thought advantageous that the hotel owner did not know that he was the interested party.

8 Shortly afterwards Mr Visalli nominated the Coogee Bay Hotel. Mr Green and Mr James Duncan, a director of Diosta, had discussions with the owner of the hotel and reported back to Mr Visalli. A specific price was not named, but the inferred price of the order of $90,000,000 was too high and Mr Visalli said he was not interested in purchasing the hotel at that price.

9 Mr Duncan and Mr Green wanted confirmation of Mr Visalli's financial worth. Mr Visalli said he would arrange for his accountants "to get something to you". A letter dated 1 July 1999 from V J Ryan & Co was received by Mr Green, reading -

"We are Mr Visalli's Accountants and advise we are aware of Mr Visalli's intention to consider the purchase of additional interests in the liquor industry and give authority on behalf of our client for L J Hooker Special Projects to act for Mr Visalli.

We also advise Mr Visalli is an experienced and successful licensee and owner of a major Western Suburbs leasehold. We are of the opinion Mr Visalli would be in a position to make purchase offers if he is satisfied of the business performance and potential."

10 On 20 July 1999 the Agreement was executed. It was expressed to be between Monopoly as Principal and Diosta as Agent, was signed by Mr Visalli and Mr Duncan, and was as an agency agreement -

" ... FOR PURCHASE OF a property meeting the following general description

TYPE OF PROPERTY Hotel Bondi or other Hotels nominated ...".

11 The Agreement had provision in cl 1 for details of location, size and other such matters, but they were not completed, nor were the approximate price range or any applicable special conditions. It said that Diosta was authorised -

" ... to identify and recommend potential properties and negotiate on behalf of the Principal for the purchase of the Property pursuant to the terms and conditions set out in cl 1.0 hereof but is not authorised to enter into nor sign a binding sale contract."

12 The provision for payment of commission was -

"8.0 Agent's Fee

8.1 The Principal or their [sic] duly authorised representative acknowledges that the Agent shall be entitled to payment (expressed as a percentage of the total selling price) of: «Fee» 1.5% of Gross sales price

as it's [sic] fee and the Principal of [sic] their duly authorised representative hereby undertakes to pay the Agreed Fee in accordance with this Agreement in the event that the Agent introduces to the Principal a Vendor of a Property or the Property and the Principal:

(i) enters into a contract for the purchase of the Property;

(ii) procures another person to enter into a contract for the purchase of the Property (whether by novation or otherwise);

(iii) where the Property is owned by a company, enters into a contract for the purchase of any of the share so [sic] that company;

(iv) where the Property is owned by a company, procures a further person to enter into a contract for the purchase of any o [sic] the shares of that company (whether by novation or otherwise:

(v) by any other means whatsoever becomes the legal or beneficial owner or both of the Property, or

(vi) where the Property is owned by a company, by any means whatsoever becomes the legal beneficial [sic] owner or both of any of the shares of that company.

THIS FEE HAS BEEN NEGOTIATED BETWEEN THE PARTIES TO THE AGREEMENT.

8.2 The Agreed Fee is due and payable by the Principal on completion of any of the contracts referred to in (I) [sic] to (iv) above or the transfer of the legal or beneficial ownership or both referred to in (v) and (vi) above or upon demand if any of the contracts referred to in (I) [sic] to (iv) above or the transfer of the legal or beneficial ownership or both referred to in (v) and (vi) above are onto [sic] completed owing to the default of the Principal.

8.3 The parties hereto expressly agree that the agent shall also be entitled to payment of the Agreed Fee if the Vendor or a Property or a Property is introduced to the Principal by the Agent at any time prior to the termination of this Agreement, and the Principal satisfies any of the requirements listed in clause 8.1(I) [sic] to (vi) any time after such termination."

13 As I have indicated, in these proceedings Diosta relied on cl 8.1(ii).

The offer to purchase the Eastwood Hotel

14 The Bondi Hotel was investigated, but was not for sale. Mr Visalli nominated also the Maroubra Bay Hotel and the Eastwood Hotel. The Maroubra Bay Hotel was not for sale. Interest in purchasing the Eastwood Hotel was not rebuffed, and through Mr Green's endeavours a meeting was arranged towards the end of October 1999 between Mr Visalli and the owners of the hotel, Mr Gedeon Lorence and Mrs Joan Lorence.

15 Mr Green had many more communications with Mr Visalli and the Lorences. He obtained incomplete trading information for the hotel. At the end of February 2000 Mr Visalli instructed him to offer to purchase the hotel for $9,500,000. Mr Duncan made the offer. Mr Lorence declined the offer, saying that the Lorences wanted at least $16,000,000 to $20,000,000 and had already been approached by another real estate agent with an offer of $14,000,000. Mr Green passed this on to Mr Visalli, who said that he would think about his position.

16 In March 2000 Mr Visalli nominated the Smithfield Tavern. Mr Green investigated, but it was not for sale. In early May 2000 Mr Visalli nominated the Sefton Hotel. He had not put aside the Eastwood Hotel, telling Mr Green that he would "still prefer to buy" that hotel. The Sefton Hotel also was not for sale.

17 In May 2000 Mr Lorence died. Mrs Lorence made known that anything about the sale of the Eastwood Hotel should be taken up with Ms Angela Frost, the solicitor handling the administration of his estate. Mr Green telephoned Ms Frost, said that Mr Visalli was still interested, and asked for trading figures. Some figures were provided in early June 2000, and were passed on to Mr Visalli.

18 On 9 June 2000 Mr Visalli instructed Mr Green to make an offer of $11,250,000 for the Eastwood Hotel, naming Monopoly as the purchaser. Mr Duncan did so by a letter to Ms Frost of that date.

19 Almost immediately Ms Frost telephoned Mr Duncan, told him that another offer to purchase the hotel had been received, and said that Mrs Lorence had said that the first to agree to purchase for $12,000,000 would be the successful purchaser. Mr Green passed this on to Mr Visalli. Mr Visalli instructed Mr Green to make an offer of $12,000,000. Mr Duncan did so, on a subject to contract basis.

20 In a manner not disclosed in the evidence, the offer was accepted. By a letter to Mr Duncan dated 13 June 2000 Ms Frost wrote asking for particulars of the purchaser and of the directors who would guarantee Monopoly's performance, "[t]o enable me to issue a Contract for sale of land". Mr Green spoke to Mr Phillip Visalli, a son of Mr Visalli, who faxed him a note saying the "Buyers" were "Monopoly or Nominees" and identifying solicitors. Mr Duncan replied to Ms Frost giving the purchaser as "Monopoly Company" with its particulars and Mr Visalli as the sole director, and saying that the purchaser's solicitor was Mr Charles Monti of Smith Monti & Costa.

21 In circumstances which the evidence did not explore, it seems that in early June 2000 Ms Frost had agreed to place the hotel with Raine & Horne Special Projects NSW as well as other real estate agents as agents for sale, with an entitlement to commission from the vendor if bringing a sale about. An agency agreement was sent to Ms Frost on 22 June 2000. It is unclear whether the agency agreement was signed and returned, but as will be seen commission was later paid. How Diosta could legitimately wear two hats was not raised in the appeal; at the trial counsel for Monopoly said that earning double commission "was not an issue".

The contract with Modern

22 As I have said, the acceptance of the offer did not mature into a sale to Monopoly. On 6 October 2000 contracts were exchanged for the sale of the Eastwood Hotel to Modern. The price was $10,700,000, by special condition 1 apportioned as to $10,450,000 to "Land including building, fixtures, licence and goodwill" and as to $250,000 to plant and equipment. The contract named Raine & Horne Special Projects NSW as the vendor's agent, and by special condition 12 -

"The Purchaser warrants that it was not introduced to the Vendor or the property by an agent (other than the Vendors' agent named in this contract) in circumstances which could give rise to any claim by an agent for commission or expenses in respect of this sale and hereby indemnifies the Vendor against any such claim. The Vendor warrants that she will not be liable to pay commission to any agent other than the agent named in the Contract for Sale."

23 The directors of Modern were Mr Lubo Medich and his sons Mr John Medich and Mr Geoffrey Medich. Medich interests were its shareholders; as I have said, Monopoly had no shareholding in Modern. Messrs John and Geoffrey Medich guaranteed the performance of the contract. The purchaser's solicitor named in the contract was Mr Anthony Parisi.

24 On 6 October 2000 Ms Frost wrote to Mr Duncan stating that if contracts were exchanged on that day the vendor would pay commission of $100,000 inclusive of GST. The $100,000 was less than the amount in the agency agreement sent on 22 June 2000. The evidence did not further explain the commission arrangement.

25 The contract was completed on 1 December 2000. By a lease of that date Modern leased the hotel to The Wall Street Company Pty Ltd ("Wall") for five years from 1 December 2000, with two five year options to renew. Mr Visalli was the sole director of and shareholder in Wall. The wider circumstances of the purchase and lease will be considered below.

26 On exchange of contracts the deposit of $1,070,000, by a cheque of Lubo Medich Holdings Pty Ltd, was paid into Diosta's trust account. After completion Diosta accounted for the deposit in the normal manner, but retaining $110,050 as commission of $100,000 plus GST plus $50 for disbursements. So far as the evidence showed, Ms Frost did not protest that the commission arrangement was for a GST inclusive amount.

The circumstances of the contract with Modern

27 The Messrs Medich were the directors of Lubo Medich Holdings Pty Ltd, and Medich interests were its shareholders. Mr Visalli had known and been associated with the Messrs Medich in the hotel industry for nearly twenty years.

28 According to Mr Visalli, by the end of June 2000 he stepped aside from the Eastwood Hotel in favour of the Medich interests, and became the lessee of the hotel only at their suggestion made in early October 2000. His affidavit said, the initial reference being to the offer of $12,000,000 made on 9 June 2000 -

"19. I subsequently was advised by Mr Duncan that the offer was acceptable to the vendor. I thought that price was too high but considered that it might be possible to arrange finance or a joint venture partner.

20. In the course of looking for a joint venture partner I had a conversation with Mr John Medich was is [sic] a Director of Lubo Medich Holdings which is the owner of the premises occupied by the Stardust Hotel. We had a conversation to the following effect:

I said: `As you know I've had an offer accepted for the purchase of the Eastwood Hotel for $12 million. What do you think about doing a joint venture in it?'

He said: `Look, I have to talk to my father about it but we might be interested.

I said: `Fine'.

21. Some time later Mr Medich contacted me and we had a conversation to the following effect:

He said: `Look you know what dad is like. He doesn't want to get involved in a partnership.'

I said: `If that's the case, I'll step aside. I'm not going to get a partner who is prepared to go in for the price. Angela Frost is the solicitor who is acting on the sale. Get Anthony to contact her.'

I knew that Anthony Parisi was the solicitor for Mr Medich and his Companies.

22. In or about late June I went overseas. I returned to Australia in August 2000. When I got back I spoke to Mr Medich. We had a conversation to the following effect:

I said: `What's happening with the Eastwood?'

He said: `I'm having difficulties with Angela Frost on the purchase of the Eastwood.'

23. In or about October I was at South West Rocks. I had injured my back and was recovering. I received a telephone call from Mr Medich and he said to me words to the following effect:

He said: `I'm on my way to see Angela Frost to do the exchange to purchase the Eastwood at $10.75 million. Come back as soon as you can and we'll talk about a Lease.

I subsequently entered into negotiations with Mr Medich to take a lease of the Eastwood Hotel."

29 Mr Visalli said later in his affidavit, rather curiously speaking of early December 2000, "I know that at that time Mr Medich was negotiating to purchase the Hotel for one of his companies". The distancing of himself from the purchase of the hotel was marked. In his oral evidence Mr Visalli said that he had no idea when contacted at South West Rocks that contracts for the purchase by Modern were to be exchanged the next day, and that he did not think that the Medich interests would spend $12,000,000 on a hotel: "I did not think it would go through. I did not." He said that Mr John Medich asked, "promise me you will sign the lease". He seemed to accept that there was a verbal agreement for a lease: this did not sit well with coming back from South West Rocks "and we'll talk about a lease" as recounted in his affidavit.

30 Mr John Medich said in his affidavit -

"3. I recall having a conversation with Mr Ross Visalli in the year 2000 as to the sale of the Eastwood Hotel. I believe it may have been in or about May or June of 2000. At that time he said words to the following effect:

He said: `The Eastwood Hotel is going to be sold. There are a number of agents involved in it.'

I said: `We looked at purchasing that one before. I think that's going to turn into a bidding war. You do what you like. If it's going to cost more than $10 million we're not interested in it. I think the owner wanted $15 or $16 million before.'

4. Subsequent to that conversation at a time in or about the middle of June 2000. I had another conversation with Mr Ross Visalli. He said words to the following effect:

He said: `I have put in a bid to purchase the Eastwood for $12 million, I won't be able to purchase it. Would you be interested in purchasing it?'

I said: `That's a ridiculous price. I don't think we can make it work because of the rent that would have to be paid.'

He then said: `Would you be interested in us purchasing it together? If you do purchase it could we reach an agreement where I would have a 25% interest in the freehold in the future?'

I said: `I don't think we'd be interested in that. All I can do is ask my father. As you know we don't go into partnerships with other people. We don't even go in with our own cousins.

5. After that conversation I had a meeting with my father and my brother and Mr Ross Visalli. During the course of the meeting we had a conversation to the following effect:

Ross said: `If you decide to purchase the Eastwood Hotel could we enter into an arrangement where I could have an interest in the freehold in the future?'

My father said: `No.'

The meeting concluded with us not having reached any arrangement to purchase the Hotel with Mr Ross Visalli.

6. After that time I instructed my solicitor and we entered into negotiations for the purchase of the Hotel. We obtained the trading figures from the Hotel and so forth so we could assess what we thought it was worth.'"

31 This conveyed that the Medich interests went ahead independently of Mr Visalli. In his oral evidence Mr Medich denied that Mr Visalli had spoken to him of a joint venture, saying that the proposal was that the Medich interests purchase the hotel with he (Mr Visalli) "playing some role", and that his initial view that $12,000,000 was a ridiculous price was changed when further enquiries made him think there was potential which could be realised if Mr Visalli, for whose abilities he had high regard, were the lessee. He did not agree that "his company was operating on the basis that it had tacked onto and joined the actions, offer and acceptance, that had been put in train by Mr Visalli".

32 Neither Mr Lubo Medich nor Mr Geoffrey Medich gave evidence.

33 The judge did not accept the evidence of Mr Visalli in a number of respects. It is plain from what follows that Mr Visalli and Mr Medich did not give a complete or frank account of what had occurred.

34 Ms Frost sent a contract to Mr Monti under cover of a letter dated 23 June 2000. On 30 June 2000 she wrote to Mr Monti referring to that letter and saying, "As I have not received any indication that your client wishes to exchange the property will be put back on the market". Ms Frost recorded on her copy of the letter -

"30/6 Charlie Monti rang & said he saw his clients the other day but there are other people involved & their solicitor is Vince Parisi. Either will respond next week. He believed they were still interested in proceeding.

35 There was no solicitor by the name of Vince Parisi; this was an error for Mr Anthony Parisi. Mr Visalli denied any communication with Mr Monti to the effect noted. In the light of other evidence, that can not be accepted.

36 Mr Visalli spoke to Mr Green in early July 2000, saying "Now that I have purchased the Eastwood Hotel, I will need seven extra poker machine permits so that I can install extra poker machines in there. Can you find some for me to buy?". Mr Green said that he could. Mr Visalli denied this conversation, but the judge found that it took place. On Mr Visalli's affidavit evidence, the conversation was after the time when he had stepped aside in favour of the Medich interests, and before any question of him becoming the lessee of the hotel.

37 There was much more to the contrary of Mr Visalli's distancing himself from the purchase of the hotel. For the moment following through the poker machine permits, in mid-September 2000 Mr Visalli said that he needed to buy ten poker machine permits for the Eastwood Hotel as soon as possible. In early October 2000 Mr Green arranged the purchase of seven poker machine permits for $1,400,000. In accordance with advice received from Mr Parisi, the sales advice he prepared identified as the purchaser Wall and Lubo Medich Holdings Pty Ltd, the licensee as Mr Visalli, and the purchaser's solicitor as Mr Parisi.

38 It seems that this purchase did not proceed.

39 In November 2000 a Joe Ryan, solicitor, on behalf of one Anita Fung sent to Mr Parisi a draft deed providing for the sale of five poker machine permits to Mr Visalli (called Fisalli) for the Eastwood Hotel. This was replaced by an agreement for sale to Modern, although the signing page named the transferee as Mr Visalli and he signed as such.

40 On about 12 July 2000 Mr Visalli telephoned Mr Green and in the course of conversation said, "My other solicitor, Mr Anthony Parisi, will be handling the purchase of the Eastwood Hotel for me". By a letter dated 18 July 2000 to Ms Frost, Mr Duncan wrote -

"Mr Ross Visalli of Monopoly Co Pty Ltd the intending purchaser for the `Eastwood Hotel' at Eastwood has asked us to advise you that Mr Anthony Parisi, who is one of the joint solicitors involved with the purchase will be contacting you regarding the contract for sale prepared by yourself."

41 Mr Visalli denied saying this to Mr Green and any such communication with the real estate agency, saying "I had lost interest at that stage in the freehold of the Eastwood Hotel". The judge found that the communications took place.

42 By a letter dated 25 July 2000 Mr Parisi wrote to Mr Visalli under the heading "Proposal in respect of the Eastwood Hotel". The letter began -

"As you are aware my client The Lubo Medich Group has an interest in the acquisition of the Eastwood Hotel at a purchase price of $12M AUD.

Their interest is predicated inter alia upon the satisfaction of a number of conditions precedent those being:

1. ...

4. Availability of Finance

5. ...

8. You entering into an agreement setting the agreed terms satisfactory to my client on which you will lease the premises operate the Hotel and lease or hire the Fixtures and fittings at the Hotel.

I note that my clients are addressing the matters arising from 2, 3, 4, 5, 6 and 7. This correspondence is to set out the preliminary terms relating to 8, and will in due course be required by my client's financiers to satisfy 4.

Accordingly you should be aware that this letter and your written responses will be made available to those financiers for the purpose of finance. Otherwise, I note that the contents of this letter and all negotiations between us will be and remain strictly commercial in confidence.

To that end I also note that no formal agreement will exist between my client and you or any agreed nominee of yours unless my clients purchase of the Eastwood has been completed and until all contractual documentation required by my clients has been duly executed stamped and returned to me.

PROPOSAL

1. This Proposal related to the Eastwood Hotel ("the Eastwood), being the whole of the Licensed Premises situate at 115 Rowe Street Eastwood, being Lot 1-2 in Plan 304348 and Lot A in plan 407 059 together with the inventory of plant fittings and chattels of the Eastwood a copy of which is annexed and marked `A'.

2. PROPOSED LEASE OF PREMISES

2.1 Lessor - One of the Lubo Medich Group of companies or one or more individuals of the Directors of the Group as shall be nominated to purchase.

2.2.1 In the event that the Eastwood is purchased in individual names it may be that a Lease of the Eastwood to a Lubo Medich Group Company will be created. In those circumstances this proposal shall constitute the offer of a sub-lease and the Lessor and lessee shall refer to the Head Lessor and Sub Lessee accordingly.

2.2 Lessee - The Monopoly Company Pty Limited of at C/- V J Ryan & Co Services Pty Limited level 5, 255 George Street Sydney New South Wales whose sole Director/Secretary shall be Ross Julian Visalli of 42 Koala Road Greenacre New South Wales 2190.

2.2.1 In the event that some other company is nominated for as the Lessee the Lessor will require Mr Ross Julian Visalli to be the sole Secretary director of that company; and

2.2.2 The Lessor will be required to approve of the Articles of the company and its shareholdings.

2.2.3 The Lessor will also be required to approve of any proposed change to the shareholdings of the Monopoly Company Pty Limited.

2.3 Term - Five years with two (2) five-year Options.

... "

43 Further matters in relation to the proposed lease were then set out. The letter identified "collateral documentation" for the transaction. The documentation was to include a deed of restraint by which Mr Visalli "will during the time in which Mr Visalli has an interest in the hotel be precluded from entering into any other contractual arrangements or interests with other persons". It was also said that Mr Visalli was to take out and maintain keyman insurance of $500,000 in favour of a nominated company of the Lubo Medich Group "at all times in which Mr Visalli has an interest in the Eastwood".

44 According to Mr Green, on about 26 July 2000 he received a telephone call from Mr Visalli in which Mr Visalli said that the contract for the Eastwood Hotel had still not been received, that he was having meetings with the Council to discuss heritage and stormwater overflow concerns, and that he had arranged an appointment with his accountant to discuss the hotel's cashflow. Mr Visalli denied any such conversation. The judge did not specifically find that it occurred, but he said that he accepted Mr Green as a reliable witness. In my opinion, he should be taken to have found that it occurred, although the reference to the contract is unclear.

45 Mr Monti replied on behalf of Mr Visalli by a letter dated 8 August 2000. The letter commented on the proposal in the letter of 25 July 2000, and included -

"We understand that the parties have had some discussions concerning our client's right to acquire twenty-five per cent (25%) of the freehold within the first five (5) years of the lease. Please obtain your client's instructions in relation to this matter."

46 Mr Parisi responded by a letter dated 10 August 2000. He recorded agreement on the proposal, and the letter ended -

"I understand that Mr Visalli and The Monopoly Company accept that there will be no right to purchase a 25% interest in the Hotel if purchased. There have been private discussions in relation [sic] an incentive scheme between the parties and that the particulars of the scheme are to be finalised by agreement between them direct.

I further understand that Mr Visalli and The Monopoly company accept all remaining terms and conditions of the offer.

Please confirm in writing both Mr Visalli's and the proposed Lessee's accept these terms and conditions in order that a document may be prepared to embody that intent. The Proposed Lessor required a written commitment be in place prior to the purchase proceeding."

47 Mr Visalli explained these references to discussions as the early discussions following which he stepped aside. He said that he asked Mr Monti to "try it again ... and see what happens". That is not how the letters read. They reflect ongoing discussions, with current negotiation over an incentive scheme. Further, Mr Medich gave evidence that after the June 2000 approach Mr Visalli had "persisted", and that shortly before Mr Monti's letter of 8 August 2000 there was a meeting of Messrs Lubo Medich, John Medich, Geoffrey Medich, Parisi and Visalli in which they discussed Mr Visalli's wish to acquire a 25 per cent interest in the hotel. While his evidence was imprecise, he clearly enough said that the 25 per cent interest was rejected but the discussion included some sort of incentive for Mr Visalli to take a lease of the hotel, although he said that later the Medich interests declined to agree on an incentive.

48 Mr Monti immediately replied to Mr Parisi by a letter dated 10 August 2000 -

"We advise that our client accepts the proposals as outlined in your letter of even date. We need to establish the lessee's details. We will advise you shortly. Please commence preparation of the necessary documents."

49 Also on 10 August 2000 Mr Parisi wrote to Ms Frost. His letter began -

"I refer to my recent telephone conversation with you. I confirm that my client is the intending purchaser of the Eastwood Hotel for the sum of $12M. I write to you to confirm my client's involvement and to confirm that I am in the process of finalising agreements with Mr Ross Julian Visalli and the Monopoly Company (of which he is the sole director) for the lease of the Hotel.

To that end a proposal has been provided to Mr Visalli's Solicitors, Smith Monti and Costa and that that [sic] preliminary agreement has now been concluded and is in the process of being further documented.

My clients have approached their financiers for part finance for the purchase and it will be a requirement of finance (apart from prudent business planning) that an agreement be in place with the potential lessee."

50 Mr Parisi asked Ms Frost for patience, and said that he would have to address the contract separately. To Ms Frost, Mr Parisi's client must have been taking up the previously accepted offer in some manner as nominee of Monopoly but with Monopoly to become the lessee of the hotel. Ms Frost did not give evidence.

51 Mr Parisi must have received a contract from Mr Monti. He addressed it in a letter to Ms Frost dated 17 August 2000. He said that a "proposal to lease and ancillary arrangements have been put to and accepted by Mr Ross Julian Visalli", that draft documents had been prepared and provided to Mr Visalli's solicitors, and went on to comment on the terms of the contract.

52 Also on 17 August 2000 Mr Parisi sent to Mr Monti a draft lease and collateral documents. After documents 1 to 7, he noted -

"I am instructed that Mr Visalli intends to borrow funds required for the renovation of the Eastwood Hotel and that he has approached my client for that purpose.

In anticipation (but subject to my client's consent) I also enclose in draft:

8. Proposed Deed of Loan.

... "

In fact the Medich interests lent $400,000 to Mr Visalli.

53 The collateral documents included the deed of restraint. It was expressed to be between Mr Visalli, referred to as the Director, and Modern. The recitals to the Deed were -

"A. At the request of the Director, Modern Motels has agreed, subject to certain conditions precedent, to enter into contractual arrangements to purchase the Eastwood Hotel (the `Eastwood') 115 Rowe Street Eastwood and to enter into contractual arrangements with the Wall Street Company Pty Limited ACN 094 539 125 and the Director (as Guarantor) in respect of the Lease of the Eastwood, its operation and refurbishment.

B. The Director currently has the benefit of a Lease of premises known as the Stardust Hotel at 82-84 Broomfield Street Cabramatta (the `Stardust') and operates the Stardust through the Monopoly Company Pty Ltd ACN 079 160 599, of which he is the sole Director/Secretary.

C. Modern Motels has through a related company Milperra Pty Limited entered into certain secure agreements with the Monopoly Company and the Director as Guarantor in respect of the operation of the Stardust by the Monopoly Company Pty Limited ACN 079 160 599.

D. The Director acknowledges that Modern Motels will borrow substantial capital for the purpose of the acquisition of the Eastwood and that Modern Motels has concerns as to the ability of the Director to operate both Eastwood and Stardust effectively and profitably.

E. In order to better satisfy Modern Motels as to his continuing ability and commitment to operate the Eastwood and Stardust the Director for valuable consideration, voluntarily and freely agrees to enter into and be bound by the provisions of this Deed.

F. Without limiting the ambit of the constitution of valuable consideration contemplated by recital E, the Director acknowledges that in the acquisition of the business of the Eastwood he or his company shall acquire that business for no monetary payment for its existing goodwill." (emphasis added)

54 By the operative parts of the deed Mr Visalli agreed, in brief, to devote himself wholly through Wall and Monopoly to the businesses of the Eastwood Hotel and the Stardust Hotel.

55 Mr Visalli denied that he had requested that Modern purchase the Eastwood Hotel. Mr Medich denied that Modern had purchased the hotel at the request of Mr Visalli, and when recital A was put to him asserted that that was not what the recital said. Mr Parisi was not called to explain recital A. As recital F brought out, in the overall purchase and lease transaction Monopoly acquired the business conducted at the Eastwood Hotel, for which Modern had paid, paying for it through the rent under the lease.

56 Ms Frost replied as to the contract on 25 August 2000; the conveyancing details need not be described.

57 The Medich interests had asked Ferrier Hodgson to investigate the trading of the hotel, and on 26 September 2000 they reported to Mr John Medich. They said that it was not possible to estimate the value of the Eastwood Hotel based on the historic trading results which had been provided. Taking as their method "to capitalise a sustainable rent from a competent operator of the property", they applied a capitalisation range of 11.5 per cent to 12.5 per cent to a rent of $1,248,000 per annum to arrive at a valuation range "in the order of $10,000,000 to $10,850,000". The rent appears to have been that agreed between the Medich interests and Mr Visalli, or at least of the same order.

58 This report caused a change in the agreed price of $12,000,000. According to Mr Medich, Mr Parisi negotiated with Ms Frost and the lower price was agreed. The contract as exchanged, apparently that originally sent by Ms Frost to Mr Monti had the typewritten price of $12,000,000 crossed out and replaced by the handwritten price of $10,700,000.

59 In early October 2000 Mr Visalli had a telephone conversation with Mr Green, whose evidence of the conversation the judge accepted -

"He said `I have purchased the Eastwood Hotel for $10,700,000.'

I said `What. How come, I thought the purchase price was $12 million'.

He said `The Solicitors got together and we made a new offer of $10.7 million which was accepted'.

I said `Why weren't we told'.

He said `The deal was done through the Solicitors'."

60 I have referred to the evidence concerning Mr Medich contacting Mr Visalli as he was on his way to exchange contracts. According to Mr Green, on about 9 October 2000 he had a telephone conversation with Mr Visalli in which Mr Visalli said, "I have exchanged contracts for sale on the Eastwood Hotel". Mr Visalli denied the conversation, but the judge found that it took place.

Events after completion of the sale

61 On 1 December 2000 Mr Visalli telephoned Mr Duncan and asked that Diosta's invoice for its commission be held back until the following week as he did not want to complicate the settlement. The commission was $160,500 plus GST. Mr Duncan agreed.

62 Thereafter Mr Duncan and Mr Green met Mr Visalli at the Stardust Hotel. According to Mr Green, Mr Visalli said that he was too busy to discuss payment of commission. At the request of Mr Phillip Visalli, a copy of the Agreement was faxed. Mr Visalli said that he did not think they had done anything to earn their commission and offered $10,000, then $15,000, then $20,000 take it or leave it. Mr Duncan did not agree. According to Mr Visalli, he told Mr Green that either Ms Frost or Mr Parisi would pay commission, and he did not believe he owed Diosta anything. He said that at the meeting he told them they had already been paid $100,000 by Ms Frost, that they did not earn even that amount, and that when Mr Duncan or Mr Green suggested "a cash deal on the remainder" he said he might consider $10,000 or $20,000. Mr Duncan said "You're kidding", and Mr Visalli told them to leave. The judge preferred the evidence of Mr Green.

63 An invoice for the $176,550 was sent on about 8 January 2001. Again according to Mr Green he received a telephone call from an assistant to Mr Visalli, who said that Mr Visalli would contact him on the next Monday "to finalise payment of your commission". Another copy of the Agreement was requested and was sent. No contact was made.

Construction of the Agreement

64 As I have said, it was accepted that Monopoly was not the legal or beneficial owner of the Eastwood Hotel. It was lessee of the hotel and, in the manner I have described, acquired the business conducted at the hotel. The reference to legal or beneficial ownership is in the context of the competing submissions next set out.

65 Diosta submitted that cl 8.1(ii) of the Agreement was wide, and required no more than the fact of procurement. It was not necessary that the person who entered into the contract have any legal connection with the Principal, other than that of procurement.

66 Monopoly submitted that on its proper construction cl 8.1.(ii) required that procurement be a means by which the Principal obtained beneficial ownership of the Property. It said that cll 8.1(v) and (vi) showed that the clause was directed to the Principal becoming legal or beneficial owner either of the Property or of shares in the company owning the Property, and that cll 8.1(i) and (ii) were particular instances of the former and cll 8.1(iii) and (iv) were particular instances of the latter. Monopoly emphasised the words "by any other means whatsoever" in cl 8.1(v), saying that although "other" was omitted from the corresponding phrase in cl 8.1(vi) it should be read as if the phrase included the word.

67 Apart from needing a good proof-reader, cl 8.1 is strangely worded. A Principal acquiring the shares in the company owning the Property does not become the legal or beneficial owner of the Property. Even on a layman's notion of ownership, when a minority shareholding in the company owning the Property would suffice for cl 8.1(iii) there is not legal or beneficial ownership. The structure of the clause essential for Monopoly's submission breaks down, and where none of cl 8.1(iii), (iv) or (vi) involves legal or beneficial ownership of the Property, there is no occasion to read cl 8.1(ii) down to require the Principal to have the beneficial ownership of the Property.

68 Clause 8.1 provides for a reward to the Agent if there is the introduction and one of the alternative situations specified. Each alternative must be given effect according to its terms, in the case of cl 8.1(ii) the situation being that the Principal procured the other person to enter into a contract for the purchase of the Property. There is nothing uncommercial in such a bargain between the Agent and the Principal. The Principal procuring the contract will normally thereby satisfy its commercial interests, and so the Agent's performance of its role has been of value to the Principal.

69 In my opinion, Monopoly's submission should not be accepted. In the present case, it is sufficient if Monopoly procured Modern's entry into the contract for purchase of the Eastwood Hotel.

Was there procurement?

70 The issue in the present case was not over any link between the introduction and the situation in cl 8.1(ii), whatever the situation was on the proper construction of the Agreement: cf David Leahey (Aust) Pty Ltd v McPherson's Ltd (1991) 2 VR 367. It was over the existence of the situation of procurement.

71 The judge regarded the relationship between the Medich interests and Mr Visalli as one of co-adventurers, using that expression in a broad sense. He considered that the Medich interests "would not have entered into this venture without Mr Visalli", and expressed his conclusion thus -

"It seems to me that `procure' obviously means amongst others things to bring about by care and pains. That is really the way in which the authors of the Macquarie dictionary define the word: `Procure: To obtain or get by care effort or use of special means'. Likewise if one looks at the most recent Oxford dictionary of the English language, it seems to me that a similar if not identical meaning is ascribed to what really is a well known word. I would also refer to the definition of `procure' in Words and Phrases Legally Defined. One of the cases referred to is Re Royal Victorian Pavilion v FTS (1961) 3 All ER 83 at 86. There is was said: `The word "procure" is defined in the Oxford English dictionary as meaning "obtain by care or effort" and can be more simply paraphrased as "see to it".' It seems to me however that the situation here is, that, firstly, Mr Visalli was intimately connected with this commercial enterprise. He did not become the eventual purchaser of the property but I come to the conclusion that he was very instrumental in that purchase going ahead and indeed, at the risk of repeating myself, there is no doubt in my mind that had he not agreed to give his services to the Medich group in the way he did agree, the purchase would not have gone ahead and I think that there is ample evidence there to show that he and henceforth his company indeed `procured' the purchase of the property by the Medich group."

72 Monopoly submitted that the judge erred in treating Monopoly's participation by taking a lease of the hotel as a "but for" event in the purchase of the hotel by Modern, sufficient in itself for procurement, when the correct question was whether Monopoly had brought about the purchase by its care or effort or taken steps to achieve it. I do not think that is correct. The judge's references to co-adventurers, intimate connection, and being very instrumental in the purchase going ahead show that he regarded Monopoly's participation as more than a "but for" event.

73 "Procure" is not a term of art. It is an ordinary English word, no doubt with shades of meaning according to the context in which it is used. In my opinion there was procurement in its ordinary meaning, within any reasonable penumbra.

74 It was accepted that Mr Visalli and Monopoly are to be equated. The deed of restraint recited that Modern purchased the Eastwood Hotel at the request of Mr Visalli, and the evidence amply bore out that he was the driving force in its purchase. The Medich interests had previously looked at purchasing the Eastwood Hotel, but were not interested. Mr Visalli then came to them with the acceptance of his offer of $12,000,000. There was worked out a package by which the Medich interests would purchase the hotel and lease it to Mr Visalli. Once the package was in place, the purchase proceeded with its accompanying lease. Mr Visalli spoke of Mr Parisi as his solicitor in dealings with the vendor, and of the purchase as his purchase, showing his close involvement in the purchase by Modern. Effectively there was a purchase by Mr Visalli, because through the package in real terms he acquired the business of the Eastwood Hotel for fifteen years financed by the Medich interests. All this was under Mr Visalli's impetus, and for their part the Medich interests would not have gone ahead without Mr Visalli's participation - the requested promise on the eve of exchange of contracts is eloquent, and although Mr Medich said that would have contemplated someone else he was constrained to agree that "it was him". By the deed of restraint the Medich interests locked Mr Visalli in.

75 The judge correctly rejected Mr Visalli's stance of stepping aside in favour of the Medich interests. The circumstances I have described, summarised in the preceding paragraph but to be taken in full, made out that he procured the purchase by Modern.

The result

76 In my opinion, the appeal should be dismissed with costs.

77 TOBIAS JA: I agree with Giles JA.

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LAST UPDATED: 08/11/2004