Matom Enterprises Pty Limited v Central Coast Property Management Pty Limited [2011] NSWSC 799 (27 July 2011)

Last Updated: 29 July 2011

Supreme Court New South Wales

Case Title:	Matom Enterprises Pty Limited v Central Coast Property Management Pty Limited
Medium Neutral Citation:	[2011] NSWSC 799
Hearing Date(s):	31 January 2011, 1 February 2011, 2 February 2011, 21 February 2011
Decision Date:	27 July 2011
Jurisdiction:	Equity Division
Before:	Slattery J
Decision:	Judgment for vendor for balance of purchase price of $180,000 plus interest. Plaintiff/Cross Claim dismissed. Directions made for the assessment of interest.
Catchwords:	CONTRACTS - General contractual principles - sale of real estate agents' rent roll - vendor/plaintiff claims balance of purchase price - purchaser/defendant alleges vendor in breach of contractual provisions relating to the transfer of the rent roll properties - HELD: no breach of contract. TRADE PRACTICES ACT - Trade Practices Act, 1974 and related legislation - purchaser/defendant claims rent roll sale contract induced by the vendor's misleading and deceptive conduct - HELD - no misleading and deceptive conduct.
Legislation Cited:
Cases Cited:	Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
Texts Cited:
Category:	Principal judgment
Parties:	Plaintiff- Matom Enterprises Pty Limited Defendant- Central Coast Property Management Pty Limited
Representation
- Counsel:	Plaintiff- G.Laughton SC Defendant- M.Moir
- Solicitors:	Plaintiff- Robert Ferry, Ferry's Law Firm Defendant- Malcolm Cameron, Central Coast Family Law
File number(s):	2010/21833
Publication Restriction:	No

Judgment

1. Matom Enterprises Pty Ltd ("Matom") holds a real estate franchise for the North Gosford area from Richardson and Wrench real estate. As part of its franchise operations Matom conducted a property management business up until September 2009. On 30 September 2009 Matom contracted to sell the rent roll of its property management business to Cental Coast Property Management Pty Ltd ("Coast") for $200,000. A dispute has arisen between Matom and Coast about the performance of this contract. In these proceedings the plaintiff, Matom, says that it: performed the sale contract; transferred the rent roll to Coast by the completion date of 30 October 2009; and, is now entitled to the balance of the purchase price of $180,000 ($200,000 minus a $20,000 deposit); and specific performance of the sale contract. In its defence Coast contests Matom's allegations and says that Matom: has breached the sale contract; has not delivered the whole rent roll to Coast; and, is not entitled to either the balance of the purchase price or specific performance. Coast also frames allegations in a cross-claim for misleading and deceptive conduct. The Court must determine these issues. First though it is necessary to make findings in relation to the contested and uncontested events through which this sales contract was negotiated, executed and performed. These findings appear in the next section of these reasons.
   

Matom Sells its Rent Roll to Coast

2. Matom ran the Gosford Richardson and Wrench franchise from its premises in North Gosford for several years prior to 2008. Late in 2008 Matom's principal, Mr Mounir ("Michael") Matri decided to sell the Gosford franchise's rent roll.
   

Early Negotiations

3. Mr Matri approached a fellow real estate agent on the Central Coast, Mr Russell Anderson, about the sale. Mr Anderson conducted another Richardson and Wrench real estate franchise at Terrigal through Coast, a company he controlled. Mr Matri was keen to keep the rent roll with a Richardson and Wrench franchise. He had been approached by other real estate agents on the Central Coast in the area to sell the rent roll but preferred to sell to Mr Anderson rather than those other real estate agents. To further these negotiations, in March 2009, Mr Matri provided Coast with its then current rent roll, the list of the rental properties that Matom was then managing from its North Gosford office.
   
4. Mr Matri had decided in late 2008 that he wanted to leave the real estate industry. This was the reason for the sale. He had commenced work for a car sales yard in Gosford. He wanted to exit his commitments with Matom's real estate operations. In fact in March 2009 Mr Matri had personally moved out of Matom's office and its business was being conducted by his staff. His departure from the office did begin to reduce some of the listings in the rent roll he had provided to Coast in March 2009. He was an important point of connection for Matom with the rental property owners on the list.
   
5. But negotiations did not move quickly. Once the list was provided Mr Anderson expressed interest but indicated he would need to organise finance to fund the purchase. Very little happened to advance the negotiations until July 2009 when, upon further contact between the two, Mr Matri offered to sell the rent roll to Mr Anderson for $200,000 plus GST.
   
6. Mr Anderson's response to this offer was to say to Mr Matri, "I will need to obtain a valuation in order to obtain the finance". That was to take a little time, which Matri allowed. He understood as a result of what Mr Anderson had said that Mr Anderson was obtaining a valuation on behalf of Coast to support a finance application.
   

The Sale Contract

7. There was some further delay before a sales contract was eventually exchanged between Matom and Coast on 30 September 2009. Mr Anderson made contact in August and said that he wished to proceed. Solicitors were instructed in mid September 2009. A list of 136 properties that Matom was then said to be managing on its rent roll was attached to the final form of the sale contract.
   
8. The computer generated list of 136 properties attached to the sale contract ("the sale contract list") also listed the weekly, fortnightly or monthly rent, the percentage commission and the gross annual commission per property. The total of the gross annualised commissions for the 136 properties was $113,174.51. The average weekly rentals for the properties was $257.62 and the average commission was 6.18 per cent. The list also described "the rent roll value" at $373,475.88 by the application of a multiplier of $3.30 per $1 of commission.
   
9. There had been more properties than 136 on the original sale contract list Mr Matri gave to Mr Russell in March 2009. Some properties were omitted from the March 2009 list and the 136 in the sale contract list were the residue.
   
10. The sales contract provided for completion on 30 October 2009. The full price payable was $200,000 partly paid by way of a deposit of $20,000, which Coast paid to Matom on exchange. The special conditions of the 30 September 2009 sale contract are of considerable importance to the issues to be determined. They are set out in full below:-
    

(1) The Vendor and Purchaser understand and agree that the Rent Roll shall include all properties included on the rent roll list only as at the date of settlement being 30 October 2009.

(2) The Vendor and Purchaser agree that there shall be no retention period or retention amount in respect of this contract ad the Purchaser accepts the Rent Roll 'as is'.

(3) As soon as practicable after the date hereof the vendor shall as agent for the purchaser request the owner of each and every property shown in the said rent roll to execute a management agency agreement in the in favour of the purchaser. This Management Agency Agreement shall be in the same terms as the Management Agency Agreement held by the Vendor at that time. In respect of each owner who executes such agreement in compliance with the regulations under the Property Stock and Business Agents Act 2002 the vendor shall on completion hand on to the Purchaser the original agreement.

(4) On and from completion the Purchaser as agent for the Vendor will manage each property on the Rent Roll in respect of which the owner thereof has not signed a Management Agency Agreement in accordance with Clause 3 hereof. Where within a period of two (2) months any such Owner signs a Management Agency Agreement in favour of the Purchaser the Vendor shall forthwith deliver the same to the Purchaser. The Purchaser shall be entitled to any fees earned during this period and shall thereafter continue the management of such property on their own account. The Vendor shall be at liberty to make other arrangements for the management of any property the owner of which has not signed a Management Agency Agreement in favour of the Purchaser by the expiration of the said period of two (2) months, subject to clause 15.

(5) Pending completion the Vendor shall remain in possession of the said Rent Roll and shall continue to manage such Rent Roll in the same manner as heretofore and shall be entitled to all commissions accrued due in respect of rents received and leases negotiated up to the date of completion.

(6)(a) On completion the Vendor shall hand to the Purchaser the complete file containing all current and expired leases/tenancy agreements in its possession in respect of the properties which are the subject of duly executed Management Agency Agreements in favour of the Purchaser together with all keys, current records, information and documents and do all acts and things reasonably required to put the Purchaser in full possession and enjoyment of the business.

(6)(b) The Vendor warrants that each file will contain the following documents property completed in respect of the current tenant:-

(i) Signed Tenancy Application;

(ii) Current Lease/Tenancy Agreement;

(iii) Ingoing Inspection Report;

(iv) Proof of Bond Lodgement;

(v) Tenant History for the current year.

(c) The Purchaser agrees to retain and preserve all information and documents handed over a period of five (5) years from date of completion hereof and make that information freely available to the Vendor upon request at any time during this period of five (5) years if such information or any part thereof is required by the Vendor in order to comply with any statutory requirement.

(7) On completion the Vendor will hand to the Purchaser copies of all relevant Owner's Statements prepared at the final balance date to show Owners' balances at the time of completion. If the total of the Owner's balances at completion is not nil the Vendor will hand to the Purchaser a cheque for the total amount of the Owners' balances. The Owners' statements shall show the tenants current 'paid to' date and the Vendor warrants that such date will be correct.

(8)(a) On completion the Vendor agrees to provide the Purchaser with a copy of the Auditor's Certificate for the Vendor's property management trust account for the period from 1 July 2008 to 30 June 2009 as submitted to the Department of Fair Trading.

(8)(b) The Vendor warrants that since the date of the last audit referred to in 9(a) above hereof the trust account records have been properly kept and all requirements of the Property Stock and Business Agents Act have been complied with and the Vendor indemnifies the Purchaser against any costs which may be incurred by the Purchaser to comply with any requirements of the Department of Fair Trading which are due to the negligence or oversight of the Vendor.

(9) In this Agreement the expression 'annual collection commission' and 'projected annual collection commissions' shall mean the actual or deemed weekly rental of the property at the relevant time multiplied by fifty two then multiplied by the management fee percentage rate shown in the relevant Management Agency Agreement.

(10) The Purchaser agrees that he will pay to the Vendor interest calculated at the rate of ten per cent (10%) per annum on the balance of the purchase price. Such interest to be calculated for the period from the completion date until the date that the Purchaser shall complete the contract provided always that the Vendor shall waive payment by the Purchaser of such interest if:-

(a) The Purchaser shall complete the contract on or before the completion date; or

(b) The failure to complete on the completion date is due solely to the default of the vendor and the purchaser completes the contract within five (5) business days of the vendor notifying the purchaser that the vendor is in a position to complete this contract.

(11) In the event that either party shall wish to issue a notice to complete requiring completion of this Contract by the other party then the time under that notice given to the other party to complete shall be a period seven (7) days and this period of seven (7) days shall be regarded as reasonable time under this Contract.

(13) Notwithstanding any contrary term herein or imposed or implied by any law of the State of New South Wales or Australia, the Vendor gives no warranty as to the continuation of any of the owners referred to in the Rent Roll with the Purchaser following completion.

The Purchaser accepts the Contract and rent roll on this basis and on the basis that there will be no adjustment in the price if any owner shall not proceed to allow the Purchaser to manage their property or properties.

(14) The purchaser acknowledges that the provisions of this contract constitute the full and complete understanding between the parties and that there is no other understanding, agreement, warranty or representation whether express or implied in any way extending, defining or otherwise relating to the provisions of this contract or binding on the parties hereto with respect to any of the matters to which this contract relates.

(15) The Vendor agrees that it will do all things reasonably necessary and sign all documents reasonably required to assist the Purchaser to become the Managing Agent for all of the properties on the Rent Roll for Richardson and Wrench Gosford as at the date of completion.

The Vendor agrees that it will not act as Managing Agent for any of the properties in the Rent Roll for a period of 2 years commencing on the earlier to occur of:

(a) the date that the Purchaser becomes the Managing Agent for that property, and

(b) 1 January 2010.

The terms of this clause are fundamental to this agreement and shall not merge on completion."

11. The last clause, clause 15, was handwritten into the sale contract. Other terms were agreed between the parties but they are not of present relevance. There is now a dispute as to whether this contract was ever completed. Each party generally disputes the other's account of what happened in the month between 30 September and 30 October 2009 and after that. But not everything was in contest.
    

Ms Matri's Illness

12. Matom's property manager, who was responsible for the management of the rent roll, resigned just before 30 September 2009. In her absence Mr Matri's daughter Tiana took over management of the roll. The rent roll required considerable administration in the period between the making of the sale contract on 30 September 2009 and its completion a month later, administration in which Ms Matri was closely involved. Unfortunately whilst in the midst of this work she had a recurrence of an illness she had suffered earlier in the year and was incapacitated. She was hospitalised for a short period between 9 and 16 October 2009, effectively the second working week after the sale contract was exchanged. The increased workload associated with administration of the rent roll had exacerbated her illness. Upon her discharge from hospital she returned to property management duties associated with the rent roll.
    
13. There is an issue between the parties as to whether or not Ms Matri's illness made her incapable of properly administering the rent roll for the periods of time that she was out of hospital. Both Ms Matri and her father say that whilst she had problems at the time of the exchange of contracts with the workload, she was capable of handling the rent roll before she went into hospital. I accept their evidence as to this. After she was discharged from hospital she says, and I accept, that she continued to assist in Matom's rent roll management to help complete the sale contract by contacting landlords and following up the return of Management Agency Agreements to Coast. After 9 October 2009 her role was supplemented by more junior employees.
    
14. Mr Matri appreciated that Ms Matri's hospitalisation might impair the progress and the transfer of the rent roll as was contemplated by the sale contract. When Ms Matri was in hospital Mr Matri offered, and Mr Anderson accepted, a proposal that all the rent roll files, in three filing cabinets, be delivered from Matom's North Gosford office to Coast's Terrigal office. Ms Matri took no part in arranging or executing that transfer as it happened whilst she was in hospital. Mr Matri gives an account of the discussion between himself and Mr Anderson by which the transfer was arranged. I accept his account of this conversation. He said to Mr Anderson "we have a problem. Tiana is in hospital and it is in your interest as well as mine to take the files now". He says, and I accept, that Mr Anderson replied with a colourful colloquial expression and then said, "get it over here as soon as possible. I will take care of it". As a result of this conversation Mr Matri arranged for the files to be delivered to Matom's Terrigal office. I infer from what Mr Anderson said to Mr Matri that he was prepared to accept the files as they were, without any further administration at Matom's end and that it was understood between these two principals, Mr Matri and Mr Anderson that, if necessary the parties would sort out any other details later.
    
15. Mr Matri and Mr Anderson's discussion about transferring the files to Coast while Ms Matri was in hospital was actually not greatly different from an earlier informal verbal arrangement that they had made about what was to happen in any event after the exchange of contracts. Shortly prior to the exchange of contracts, when Matom's property manager had resigned and Ms Matri was running the rent roll, Mr Matri spoke with Mr Anderson about that issue and Mr Anderson had said to him, speaking as they were at Mr Anderson's office, "we can bring everything here on exchange of contracts. I will find a desk and Tiana can work from here". Mr Anderson was keen to obtain the files as soon as possible, so that he could start running the business on Coast's own account and derive revenue from the business as soon as he could.
    
16. Regrettably neither Mr Matri nor any of his other employees at the North Gosford office, nor Mr Anderson or any of his employees at Terrigal, took a detailed record of the contents of the files that were transferred to Terrigal. If a single event were to be identified as substantially responsible for the disputes that later arose between the parties it was their mutual failure to document exactly what files and what file contents left Matom's North Gosford office and exactly what files and file contents were received at Coast's Terrigal office. But they were all in a hurry at the time.
    
17. This apparently co-operative arrangement between Matom and Terrigal to deal with Tiana's illness was not surprising given the fairly open goodwill that had existed between Mr Anderson and Mr Matri during the pre-contract negotiations and shortly after exchange. This co-operation had showed itself in a number of ways. For example, Mr Matri says, and I accept, that immediately prior to the exchange of contracts on 30 September 2009 he had said to Mr Anderson words to the effect, "we should operate [after exchange of contracts] as if there is a joint venture. We will still be doing sales. If we get any rentals we will refer them to you and if there are any sales you refer them to us." Mr Anderson agreed with this approach and consensus was reached that Matom would pay Coast a referral fee for any sales which were referred over to Matom under this arrangement.
    

A Conversation on 29 September 2009

18. But there is an important disputed conversation between Mr Anderson on the one side and Mr Matri and his daughter on the other side which is said to have taken place just before the final exchange of contracts on 30 September 2009. Mr Anderson says that on 29 September 2009 Mr Matri introduced him to Ms Matri and they had a conversation to the following effect:
    

"Mr Anderson: 'Hi Tiana. How are things going?'

Ms Matri: 'Yeah ok, pretty busy. The Property Manager has left. She has walked out.'

Mr Matri: 'Yeah but Tiana has it all in hand'.

Mr Anderson: 'Michael, we have received the draft contract with a copy of the rent roll attached to it. I see that there has been a couple of properties list from the rent roll from the list that you have me before. Is everything else going ok?'

Mr Matri: 'There is a couple of more to come off'."

19. Mr Anderson said that Mr Matri then reached over and crossed another two properties off the sale contract list of rental properties. He says that he saw that the rent roll indicated that both of the properties were owned by Mr Matri. Mr Anderson says that they continued their conversation in words to the following effect:-
    

"Mr Anderson: 'What's happened to these two properties?'

Mr Matri: 'Oh they have been sold'.

Mr Anderson: 'Is that it? So the rest of it is right?'

Mr Matri: 'Yeah, that's it'.

Mr Anderson: 'That's good. When we get this exchanged there is a process that needs to be gone through. You have to make up the new Managing Agency Agreements with all the details of your clients. You need to get them over to me for me to sign and then they go out with a letter from you to all the landlords asking them to sign the new Agency Agreement and send them back to you. You have to get letters out to all the landlords telling them that there has been a sale of the rent roll and that they need to sign new agency agreements with us, but don't just depend on the letters. You will also need to ring all of these landlords yourself in order to get them over'.

Mr Matri: 'It will be fine. Don't worry. You are a worrier aren't you Russ? I will ring them, they will all come over'.

Mr Anderson: 'As each Agency Agreement comes back you will need to bring over the owner and tenant files, tenant ledger, owners statements, files notes, any actions or repairs that have been done and copies of routine inspections'.

Mr Matri: 'Yeah that's fine, it will all happen'."

20. Both Mr Matri and Ms Matri dispute this conversation. Ms Matri gives a different account of the conversation which I wholly accept. She says that there was a meeting between Mr Anderson, Mr Matri and Ms Matri in North Gosford. During that meeting Ms Matri informed Mr Anderson that the management of several properties would not be transferred to him for particular reasons. She says that she identified 9 properties in this conversation. Five of these properties were situated in Range Road, North Gosford, and were being redeveloped by New Build Developments Australia. The other 4 of the 9 discussed were properties that had been sold. Ms Matri says and I also accept that Mr Anderson himself offered to call each of the landlords of the properties on the sale contract list to introduce himself and his team once the management agency agreements and accompanying letters had been sent to the existing owners. I accept that this is what was discussed. Coast would have access to the addresses for the owners of the rental properties, because they would be on the copy letters sent to those owners enclosing the Management Agency Agreements that Matom was to supply to Coast. Moreover, Ms Matri says that she provided the details to Mr Anderson to enable him to make contact with these owners and I accept her evidence as to this. Ms Matri recalls, and I accept, that Mr Anderson said at this meeting that he would prepare the letter to accompany the managing agency agreements and would email it to her after exchange of contracts. Mr Anderson did prepare this draft letter. But it was not emailed to Matom until 8 October 2009.
    
21. Mr Anderson appeared in the witness box as a businessman who would not let a business opportunity pass without seeking to take advantage of it. He is someone who I am sure would not have left it to others to follow up the sale contract list of property owners. But rather he would have sought to put himself in a position to follow them up himself and ensure he obtained their business. He also was a man confident of his own business skills and I find wanted to draft the covering letter to the 136 property owners himself.
    
22. But there are other disputes about this conversation in which I also prefer the evidence of Mr Matri. Mr Anderson says that in this meeting on 29 September 2009 he explained to Mr Matri and his daughter that after exchange of contracts when the new management agency agreements were coming back from the owners of the rental properties, that it would be necessary to transfer the rent roll data and information out of Matom's "Sherlock" software onto certain "Console" software operated by Coast, and that it would have to be done manually because Coast had not had any experience with Sherlock software for some years and the two software programs were not compatible. Mr Anderson alleges that Mr Matri offered to load the Sherlock data onto a laptop and that Ms Matri would come to Coast's Terrigal office and retrieve the information manually as and when Coast required it. Mr Anderson then alleged that Ms Matri did not ever attend with a laptop as proposed.
    
23. But I do not accept Mr Anderson's evidence about this. Rather I accept Ms Matri's evidence that at the meeting on 29 September 2009 Mr Anderson suggested that she telephone the licensors of Sherlock software to see how the transfer of data to Console could be facilitated. She says, and I accept, that she did phone Sherlock and was advised that they had no way of extracting data so as to transfer it to Console and that the best course was to contact Console. She says that she informed Coast employees of this information and heard nothing further from them. This seems inherently more probable and I accept her account.
    

The Letter to the Rental Property Owners

24. Clause 3 of the contract provided for the vendor "as soon as practicable after the date" of the sale contract to request the owner of each property on the rent roll to execute a management agency agreement in favour of the purchaser, Coast. The pre-contract discussions recorded earlier in these reasons show that the parties both contemplated that this request would be made by Matom by letter to rental property owners on the list. That seems to be the most practicable course and was the only one that the parties appear to have discussed or arranged.
    
25. Mr Anderson wanted to influence the content of the letters of request that Matom was sent out pursuant to clause 3 of the sale contract to the property owners on the rent roll. Mr Anderson was keen to sign management agency agreements with as many as the existing property owners on the rent roll was possible. On 8 October 2010 he sent an email to Ms Matri attaching a draft letter to go out with the proposed management agreements notifying the owners on the rent roll of the reasons for the change. The draft letter is set out in full below:-
    

"Richardson and Wrench prides themselves on being the longest established real estate group in Australia. The longevity and success of Richardson and Wrench is due, in part, to the ability to move forward with the times. Clients are demanding professionals that specialise in their particular field, especially when it comes to caring for their investments.

For this reason we have evolved. Richardson and Wrench Gosford is now a sales focused office, specialising in the marketing of residential properties only. In order to complete this evolution we are transferring our rental properties to Richardson and Wrench Terrigal, who specialise only in residential property management throughout the Central Coast.

Richardson and Wrench Terrigal has been successfully owned and operated by Licensed Real Estate Agent Russell Anderson for the past seven years. Russell and his team Tracey Cummins and Lisa Adams have surpassed knowledge of the property management industry on the Central Coast. The repeat and referral business they receive is a testament to their customer focus and commitment. We recommend Richardson and Wrench Terrigal as the agent of choice for the management of any rental property on the Central Coast.

To facilitate the changeover, we ask that you sign and date the enclosed Managing Agency Agreement where indicated and return it to us in the reply paid envelope provided.

At this point we would like to thank you for your past support and remind you to contact us if you have any questions."

26. Matom did not send out the fresh management agency agreements and the covering letter before Ms Matri went into hospital. Mr Anderson's email was only received the day before Ms Matri went into hospital. A number of the letters which enclose the management agency agreements for signature by the rental property owners are in evidence. I infer from the documents in evidence that they were all sent out at about the same time and that Matom posted them out to the property owners on the sale contract list on or about 23 October 2009.
    
27. Of the 136 properties attached on the sale contract list, Coast initially conceded in the proceedings that 86 of the property owners on the rent roll had signed management agency agreements with Coast. But Matom claimed that 96 properties had been transferred and management agency agreements suitable to Coast had been signed over those 96 properties. By the time the hearing concluded Coast's concession increased and it agreed that between 97 and 99 properties had been transferred, a figure in excess even of that initially claimed by Matom. Thus between 37 and 39 of the 136 properties listed in the sale contract never became the subject of management agency agreements with Coast. The true figure seems to be 37 as Coast put its final submissions on the basis of a concession that 99 properties had been transferred. Much of the parties' energy in adducing evidence in the case was focused upon inferring the reasons why Coast did not gain the benefit of management agreements for these 37 properties.
    
28. Mr Matri's evidence was that the vast majority of these properties, about 26, had been lost to aggressive local competition. He explains, and I accept, that by the time of the exchange of contracts on 30 September 2009, given the long lead time in negotiations from March of that year, it had become common knowledge in the Gosford/Central Coast area that Matom's rent roll was being and then had been sold. Mr Matri says, and I accept, that a number of agents around the Gosford area, including LJ Hooker Real Estate, Gosford, Gosford National Real Estate, Starr Partners East Gosford and Ray White Real Estate Gosford, had forwarded letters to property owners on the rent roll offering free commission for up to 12 months to take over management of these properties. Some of the 136 rental roll owners on the sale contract list were attracted by these terms and changed their custom to these other agents and not to Coast. But there were a variety of reasons for the other property owners not transferring their properties to Coast. I infer from Mr Matri's evidence that some property owners wanted to stay with an agent in the Gosford location of Matom's office, not one based in the Terrigal area such as Coast. Yet others were developing their properties whilst others were sold.
    

Transferring Rental Properties to Coast's Management

29. During October and November 2009 work was being done both in Matom's offices and Coast's offices to effect the transfer of properties on the rent roll by having the property owners making new managing agency agreements with Coast. The impression of this period given by Coast's evidence is that little or nothing was being done by Matom's staff to assist in the transfer of the remaining properties. In contrast Matom says that it was actively involved in effecting the transfer of these properties. Just what was done by each of Matom and Coast in this period is a contested issue which is considered in more detail below.
    
30. The transfer of the properties had been made much easier by meetings that took place between Ms Matri and Mr Anderson's staff and specifically, Ms Lisa Adams, Mr Anderson's Property Manager. Shortly after the exchange of the sale contract an arrangement was made for Mr Anderson, Ms Adams, Mr Matri and Ms Matri all to meet at Coast's office at Terrigal to go through the list of properties and provide relevant information of the status of each property and anything else which Coast required. The evidence was not entirely clear but I infer that this meeting was organised to take place between the exchange of contracts and Ms Matri going to hospital. Mr Anderson was unable to attend the meeting because he was indisposed but Mr Matri and Ms Matri did attend. A great deal of information was given about all the properties to Ms Adams at this meeting to enable her to make contact with the owners of the rental properties once Matom had sent out the Management Agency Agreements to them. At this meeting it was also made clear by Ms Adams to Mr Matri and Ms Matri that once Matom had sent the letters out to the property owners that Coast's staff would be doing the rest of the follow up. I accept Ms Matri's evidence that Ms Adams said to her at this meeting:-
    

"Russell needs a minimum of 80 properties to come over...He will be thrilled with 90. Just get 80 properties over and don't worry about the rest. I will deal with the others."

31. In my view both the giving of detailed information to Ms Adams and then her making statements to this effect, communicated to Ms Matri and her father that considerable efforts were being made on Coast's side to perfect the transfer of the properties and that Coast did not expect that every property would be able to be transferred.
    
32. By late November 2009 Matom claimed that 96 properties had been transferred to Coast. Coast claimed that the balance of the properties were not transferred because the owners were not willing to sign fresh management agency agreements with Coast due to Matom's alleged delay and inactivity in pursuing its obligations under clause 3 of the sale contract. Mr Matri claims from what the property owners said to him at the time that their reasons for not transferring the rental management of their properties to Coast fell into a number of reasonably predictable categories: some owners did not want to shift their management agency services from a more conveniently located North Gosford real estate agency to a less conveniently located Terrigal real estate agency; they preferred to manage the properties themselves in the future rather than through a managing agent; some owners wished to go to a different managing agent altogether and not to Coast; some owners were not able to make contact with anyone at Coast; and, the properties of some owners were being developed in the future and as a consequence rentals were to be managed through the developer.
    
33. But as the findings above indicate in relation to the 29 September 2009 conversation, Mr Matri had foreshadowed to Mr Anderson prior to the exchange of the sale contract that some of the properties were unlikely to be transferred because they were old houses and the owner proposed to re-develop them. This was the case with the properties in Range Road, North Gosford owned by New Build Developments Australia. I find that Mr Matri said to Mr Anderson prior to exchange of these properties and probably on 29 September 2009 "the developer is considering commencing development and removing the tenants. That is probably good because if you establish a relationship with developer you will get the rentals back on completion". Mr Matri also says, and I accept, that there had been problems with the tenants at these old properties in any event. There were five properties owned by New Build Developments Australia in this category.
    
34. Mr Anderson says that prior to exchange he was never informed that the properties at Range Road owned by New Build Development Australia would be demolished. He says that he only found this out shortly after exchange in a telephone conversation he had with Ms Matri when he asked her "what is happening with the agency agreements for the Range Road properties?" Mr Anderson says that she then informed him that the owner was thinking about re-developing those blocks. I reject Mr Anderson's account of this alleged conversation and I accept Ms Matri's evidence that the conversation did not take place.
    
35. After she came out of hospital Ms Matri was involved in ensuring that the completed Management Agency Agreements in Coast's favour received back from the property owners on the sale contract list were delivered to Coast. I accept Ms Matri's evidence that she personally delivered to Coast's office, along with the keys to the property, the relevant Managing Agency Agreement in respect of each property, the tenant ledger, the landlord bank account details and a completed and signed transfer of Managing Agent form for the Rental Bond Board of NSW. She also completed notices to Gosford City Council and letters to Strata Managers and the trades personnel who undertook regular maintenance of the properties of the appointment of a new managing agent. Ms Matri concluded her work re-issuing management agency agreements where rental property owners requested another agreement. Coast took issue with the delivery of complete files to it on behalf of Matom. But Coast did not do an audit before the end of 2009 of what it had and had not received from Matom. I do not accept any of Coast's evidence that is inconsistent with Ms Matri's account of what she delivered. The difficulty with all of Coast's later evidence was that these same files had been operated by Coast after October - November 2009 and no satisfactory account could really be given of what had happened to the files in a way that could reliably contradict Ms Matri's evidence.
    
36. Ms Matri was involved in another point of administration of the rent roll properties being transferred. Special condition 5 of the agreement required the vendor to continue to manage the rent roll in the same manner as it had pending completion and it should be entitled to all commissions accrued, due in respect of rents received and leases negotiated up to the date of completion. I accept Ms Matri's evidence that some tenants continued to pay rent into Matom's trust account. This was unavoidable because some tenants were making direct deposits into that account often by automatic payment authorities.
    
37. Leaving aside the question of just when completion occurred, it is quite clear in my view that before completion of the sale contract occurred, that Ms Matri made reasonable efforts to stop the payment of moneys by rental property owners to Matom and to re-direct those payments to Coast in respect of transfer properties and that she transferred the balance of Matom's trust account in respect of those properties to Coast. Specifically she wrote to all the property owners on 3 January 2010 informing them that Matom was no longer their managing agent and that the new managing agent was Coast and providing Coast's contact details. Prior to the sending of those letters I find that Ms Matri and the staff under her direction had made continuing efforts to transfer the remaining un-transferred properties to Coast by contacting the property owners.
    
38. I accept Ms Matri's evidence, that on or about 24 November 2009, she arranged the drawing of cheques from Matom's trust account in respect of each property owner for payment to Coast (payee "Richardson and Wrench Terrigal"), transferring the balance of the trust account for each of the transferred properties to Coast where there was such a balance and giving a break down of the moneys so transferred.
    
39. Mr Matri summarises thus, and I accept his summary. From the original list of 136 properties listed in the sale contract 5 of them owned by New Build Developments Australia were removed prior to completion by reason of the decision to re-develop them. Another 4 properties were withdrawn from the list by reason of the sale of those properties prior to exchange of contract. Of the remaining 125 properties Matom alleges that Coast obtained the benefit of 96 properties. Coast ultimately conceded the transfer of 97-99 properties. Thus, the contest about the reasons that some properties on the contract rent roll were not being transferred to Coast, came down to a dispute about 26-28 properties (being 125 properties minus 97-99 properties).
    

The Correspondence in Late 2009

40. In late November 2009 the parties' differences about completion of the sale contract came to a head. The balance of the contract price had not been paid by mid November 2009. On 17 November 2009 Matom's solicitor issued a notice to complete requiring completion on 24 November 2009 and making time of the essence. In the absence of completion occurring, the notice threatened termination of the sale contract, threatened action for breach of contract and threatened forfeiture of the $20,000 deposit. A covering letter with the notice to complete foreshadowed interest would be claimed in accordance with the contract at a rate of 10 per cent on the full balance of the purchase price due at settlement.
    
41. Coast's solicitors did not communicate back to Matom's solicitors to arrange completion. This is evident both from the correspondence and from Mr Matri's own evidence. On 20 November 2009 Matom's solicitors forwarded settlement figures and directions for the drawing of cheques on completion to Coast's solicitors in anticipation of settlement on 24 November 2009. But Coast's solicitors did not reply before the appointed date and settlement did not occur on that date.
    
42. In Coast's case Mr Anderson suggested that in late November 2009 Ms Matri had removed files from Coast's office without proper authorisation thereby making it difficult for Coast to contact owners on the sale contract list. I do not accept this is what happened. Rather I accept Ms Matri's evidence that she only removed files from the filing cabinet that had previously been delivered to Coast, where the property owners had notified Ms Matri that they were transferring to other agencies, not to Coast. This was done with Coast's permission.
    
43. By late November 2009 Mr Matri was under increasing financial pressure to secure the funds due to him on settlement. He had further discussions with Mr Anderson about the possibility of settlement. He agreed to reduce the purchase price to $180,000 provided that settlement was effected by 5pm on 4 December 2009. Matom's solicitors recorded this arrangement in a letter to Coast's solicitors on 3 December 2009. Settlement did not take place on the revised date of 4 December 2009.
    
44. Coast's solicitors explained verbally to Matom's solicitors why settlement would not take place on 4 December 2009. This explanation was then formally recorded in Coast's solicitors' letter to Matom's solicitors on 9 December 2009. This letter alleged: a breach of special condition 15 of the contract under which the vendor was required to do all things reasonably necessary and sign all documents reasonably required to assist the purchaser; a breach of special condition 3 of the contract by Matom failing to contact the owners of each of the properties on the rent roll; a breach of special condition 5 of the contract by Matom failing to manage the rent roll prior to completion and after exchange of contracts; and, finally allegations that Matom had engaged in misleading and deceptive conduct by including in the sale contract list some properties that should not have been on the list as they had been sold prior to exchange of the sale contracts, or were properties that were being developed and notices to vacate had been given to tenants, such as the Range Road properties. On 15 December 2009 Matom's solicitors responded denying these allegations.
    
45. The positions taken in this correspondence became the entrenched positions which each party presented in the course of the proceedings. Coast alleged in this correspondence that Matom had not done enough to effect transfer of the rent roll properties.
    
46. Apart from a small number of properties which Matom had considered to have been sold, Matom alleged that identified properties had been lost to Coast for a number of different reasons. First, Mr Anderson had not contacted the rent roll property owners to reassure them that the properties would be properly managed, which had allowed competing agencies an opportunity to capture the business of these property owners by contacting them. Secondly, Coast had increased the management fees for the properties despite an understanding between Mr Matri and Mr Anderson that they would not be increased. Thirdly, Coast was not providing a good service to the owners by meeting them personally and effecting leases over the rent roll properties. Coast denied these allegations and said that the incomplete transfer of the rental roll properties was Matom's fault.
    
47. These disputes could not be resolved. Matom commenced these proceedings on 3 May 2010 pleading breach of the sale contract. Y mid 2010 it was only managing 86 of the properties transferred under the sale contract.
    
48. The Statement of Claim was amended at hearing to additionally claim specific performance of the sale agreement and a claim for interest and expenses incurred by Matom as a result of Coast's default based on Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 principles. The Defence to the Statement of Claim pleaded various breaches of contract as a set-off against the payment of the balance of the purchase price.
    
49. In addition Coast launched a Cross-Claim alleging that Matom induced Coast to enter into the sale contract by engaging in misleading and deceptive conduct before 30 September 2009. The Cross-Claim also alleges other misleading conduct after the making of the sale contract, allegedly causing Coast further loss. The remainder of these reasons is divided into two principal sections, the first of which deals with issues raised on the Statement of Claim and Defences, and the second of which deals with the issues arising on the Cross-Claim.
    

The Statement of Claim and Defence Issues

50. There is no dispute about the terms upon which Matom agreed to sell its rent roll to Coast. Nor is there any dispute that Matom remains unpaid under the sale contract. The issues for determination are raised on Coasts' Defence. Coast denied that its non payment of the purchase price was a breach of the sale contract. Instead it said that it was entitled to set- off Matom's breaches of the sale contract against Coast's obligation to make payment under the contract. This raises questions as to whether Coast's allegations of breach are made out, and if they are, whether they occasion a loss which may be set-off against the amount due under the contract. I now turn to these issues.
    
51. Coast alleges in its defence that Matom breached the sale contract in the following ways:-
    

(a) Matom failed to transfer to Coast each and every property shown in the rent roll on or before completion of the contract.

(b) Matom failed as agent for Coast to request the owner of each and every property shown in the rent roll to execute a management agency agreement in favour of Coast as soon as practicable after 30 September 2009.

(c) Matom failed pending completion of the sale contract to continue to manage the rent roll in the same manner as prior to the sale contract.

(d) Matom failed on completion of the contract to hand over to Coast the complete file in respect of every property shown in the rent roll including rental ledgers, owners' statements, trust statements and any outstanding trust moneys.

(e) In the case of owners executing management agreements in favour of Coast within two months after completion of the contract, Matom failed forthwith to deliver those executed agreements to the defendant.

(f) Matom failed to do all things reasonably necessary and to sign all documents reasonably required to assist Coast and to put Coast in full possession and enjoyment of the rent roll specifically Coast alleges that Matom failed to deliver to Coast all trust statements, rental ledgers and other file documentation necessary for the effective running of the rent roll.

52. Coast also raises equitable defences which appear on analysis to be reducible to one further allegation to the following effect:-
    

(g) When Matom acted in a fiduciary capacity as agent for Coast in managing the rent roll after 30 September 2009 it was liable to account to Coast for moneys not received in respect of properties on the rent roll but it has failed to account to the defendant for those moneys.

53. The defendant seeks to quantify the loss of the rental properties and to set their value off against the purchase price. Each of these matters will now be dealt with in these reasons.
    

(a) Failure to transfer every rent roll property

54. This first allegation of breach of contract misapprehends Matom's obligations under the sale contract as vendor. The allegation of breach of contract is constructed as if the sale contract warranted that every rent roll property would be transferred to Coast.
    
55. The sale contract does not warrant the transfer of the rent roll properties to Coast. The sale contract: identifies the properties in the rent roll (clause 1); requires Matom as agent for Coast to request owners to execute a Management Agency Agreement in favour of Coast (clause 2); requires Matom on completion to give the purchaser the complete rent roll file (clause 6); disclaims any warranty by Matom as to the continuation of any of the property owners with Coast following completion (clause 13); and, Matom then agrees that it will do all things "reasonably necessary" to "assist the purchaser to become the managing agent for all of the properties on the rent roll" (clause 15). None of this amounts to an express warranty of transfer. This allegation of breach of contract fails.
    

(b) Failure to request each owner to execute a Management Agency Agreement

56. This breach of contract is also not made out. I have found that Matom did not fail to request each rent roll property owner to execute a Management Agency Agreement. The method agreed between Mr Anderson and Ms Matri for making this request was that she would send out the Management Agency Agreements with the covering letter that he wanted. She did that by letter sent out on or about 23 October 2009. The follow up to the property owners was then mainly up to Coast. This was only a little over three weeks after the sale contract was exchanged on 30 September 2009. From what the evidence disclosed Coast's employees did little follow up. But Ms Matri continued to make contact with the property owners on the sale contract list, who had not yet signed Management Agency Agreements with Coast, to request them to do so. She did all in this respect that could be reasonably expected of her under the sale contract. This allegation of breach also fails.
    
57. Coast puts in final submissions that on a proper construction of the sale contract, special condition 3, that Matom was required to prepare the relevant agreements and make the necessary contact with property owners without delay after 30 September 2009. In my view the contract required in accordance with these terms for this to be done "as soon as practicable" after exchange. In my view that was done. Mr Anderson did not get his draft email to Ms Matri until a little over a week after exchange on 8 October 2009. She was absent due to illness for a little over a week and the letters went out approximately a further week after that. In light of Mr Anderson's own delay that timing was "as soon as practicable".
    

(c) Failure to continue management pending completion

58. Contrary to the substance of this allegation Ms Matri did continue to manage the operation of the rent roll pending completion. There is objective evidence of what she and the other employees of Matom did between the sale contract and completion. First she collected rent. The product of those collections was offered to Coast by cheque. Second she sent the executed Management Agency Agreements on to Coast. Indeed, Coast produced these executed agreements at the hearing, showing that it had received them. Coast received back so many (99) of these signed Management Agency Agreements that the Court can infer that Matom did have a regular practice of sending on to Coast the signed Agreements that the owners had sent to Matom. Third, the parts of the files that had not been included in the original transfer of the filing cabinets when Ms Matri was in hospital were also sent on to Coast.
    
59. The sale contract does not require pending completion any more active management of the rent roll on Matom's part than was "in the same manner as heretofore" (special condition 5) and was necessary to achieve completion. Matom's effectiveness in management is partly to be judged by its transfer of rent roll owners' custom to Coast and accounting for the balance of rent received before completion. It did that well.
    

(d) Failure to hand over complete files

60. Coast did not make good its allegation that Matom had not handed complete files of each property over to Coast. Coast poorly constructed and presented its evidence of failure to hand over complete files. Indeed until Coast responded to a subpoena from Matom for the documents which had been handed over to Coast under the sale contract, Coast actually had no evidence of this alleged breach. Exhibit VC, the scanned version of the files now in Coast's possession, has been shown to be unreliable in several ways. It includes material which is not in Exhibit 1, being Coast's record of the 86 properties it originally claimed had been transferred and still being managed by Coast as at 17 June 2010. It also lacks material which is recorded in Exhibit 1. Mr Anderson admits Exhibit VC is his attempt to reconstruct the files. I do not regard Mr Anderson as a reliable witness. His evidence was too clouded by self interest. Consequently, the reliability of the content of Exhibit VC is low. Despite Coast's contractual obligations to maintain these files and make them accessible to Matom (special condition 6(c)), Coast did not produce the transferred files in its possession for months before trial. It was not until the Court ordered production on 24 January 2011, less than a week before hearing, that it actually occurred.
    
61. The lack of objective reliability in Exhibit VC means that the Court is not prepared to draw any inferences about what was present or missing from the files handed over on 16 th of October 2009. Instead, I infer that Ms Matri produced to Coast any other documents which belonged to the files that came into her possession once she came back to work. She did not deliberately withhold documents from Coast. Once she was discharged from hospital in my view she did work diligently and efficiently both in contacting rental property owners and to give the balance of any files to Coast.
    
62. Also the lack of any evidence from Coast in logging staff time to go through each of the files that were said to be deficient and to ascertain what was missing is a remarkable gap in Coast's case. If the files were in such a poor state that staff members had to be hired to go through each file, find out what was missing, and restore what was missing, it would be quite easy to adduce evidence from staff members about that whole restoration process. The fact that the evidence is not available is another basis to infer that Coast did not perceive any deficiency with the files it received from Matom.
    
63. Moreover, Coast did not send letters of demand in late 2009 to Matom, listing exactly what it believed was then missing from the files and asking for particular materials to be restored. If there were substantial amounts of documents and data missing from the files that were genuinely needed by Coast, it would have been a worthwhile business exercise for Coast to list what was missing and ask Matom for it. Coast did not give particulars of what was alleged to be missing to Matom at any time before trial. This assists the inference that nothing was actually wrong with the files delivered to it that seriously troubled Coast.
    

(e) Failure to deliver executed Management Agency Agreements

64. Coast's allegation that Matom failed to deliver executed Management Agency Agreements to it also fails. I have already found that Ms Matri did deliver the executed Management Agency Agreements to Coast. This may be inferred from the large number of executed agency agreements, almost 100, which found their way into Coast's possession. I accept Ms Matri's evidence that she sent these agreements to Coast. That is consistent with the letter Mr Anderson drafted for the rental property owners on the sale contract list to sign and return these management agreements to Matom, who would in turn send them, as executed, on to Coast.
    
65. Moreover this inference is further assisted by the fact that there is no evidence from Coast employees that they had to obtain the management agreements directly from rent roll owners because Matom had not sent them on to Coast. Nor indeed is there any correspondence from Coast to Matom listing missing executed Management Agency Agreements which would be consistent with Coast perceiving a failure on Matom's part in performing this obligation.
    

(f) Failure to do all things necessary to effect the transfer

66. In addition to the allegations already made, this allegation of failing "to do all things necessary to effect the transfer", is really an allegation on Coast's part that Matom has failed to deliver trust statements, rental ledgers and other file documentation said to be necessary for the effective running of the rent roll. The problem with this allegation is the same as with respect to alleged breach (d) above. The Court cannot place reliance upon any of Coast's evidence as to what it claims was missing from the documents provided to it nor can the Court infer that "things" that were necessary to effect the transfer were not done.
    

(g) Failure to account

67. Coast's allegations of a failure to account also fail. There was no failure to account. Matom adduced evidence, which I accept, of Ms Matri and Matom's other employees carefully searching through the rental ledgers in order to ascertain what rent Matom had received after 30 September 2009, and then offering to provide a cheque to Coast for the balance of rent received since that date.
    
68. There is a dispute as to whether that cheque was offered to Coast. Coast ultimately banked the cheque so I do not have to decide that dispute. The banking of the cheque for $9,646 is the final accounting. Coast has not adduced any direct evidence of tenants paying other specific sums of money to Matom for which Matom has not accounted to Coast. Indeed given that special condition 5 allows Matom all commissions received up to "completion", Matom may not have to account for any money received before 24 November 2009 when it regarded itself as in a position to complete.
    
69. Coast's evidence in support of the allegation of a failure to account consisted of little more than suspicions. In the result, these suspicions were vague and not enough in my view to establish a failure to account.
    

(h) Calculation of compensation and set-off

70. The sale contract contains a threshold obstacle to Coast's claim for compensation. Matom gives no warranty to Coast following completion as to the continued custom of any owners referred to in the rent roll: clause 13. Under the sale contract (clause 13) Coast accepted that there would be no adjustment to the purchase price if any particular owner listed on the rent roll did not proceed to allow Coast to manage the owner's property or properties. The sale contract clearly contemplates as a possibility that rent roll owners may simply decline to sign a Management Agency Agreement with Coast. If that scenario were to occur, it would not be a basis for Coast resisting completion or seeking an adjustment of the purchase price.
    
71. Moreover, there is evidence, which I accept, of other competition in the local market for the management of these properties. In order to make out damages for any breach it is necessary for Coast to establish that the Management Agency Agreements that were not signed were not signed because of misconduct on the part of Matom, rather than because of market competition. This is an important element of Coast's onus of proof on damages. Coast has not made that out. I have not found any default on Matom's part. It is therefore not necessary for the Court to consider the quantum of damages issues or related issues of set-off any further.
    
72. Nor is there any convincing evidence that connects the respective owner's failures to sign the approximately 37 Management Agency Agreements which were not signed with Coast, to any conduct on the part of Matom. Coast's case might have been assisted by just one example of a property owner who was otherwise willing to sign with Coast but whose custom was lost to Coast because Matom did not send to that owner a Management Agency Agreement for execution or did not send one in a timely way, so Coast could make contact with that person. There is no such evidence. The better inference in my view is that the rental property owners who did not sign with Coast simply decided for their own reasons not to sign a Management Agency Agreement, not because of the conduct of Matom. Clause 13 applies. There should be no adjustment to the purchase price on account of the property owners on the rent roll not instructing Coast to manage their properties.
    

The Remedy for Specific Performance

73. It follows from my earlier findings that Matom has established that it is ready willing and able to perform the contract. Matom has done everything required of it to achieve completion. None of the defaults alleged against it are made out. Each of Matom's contractual obligations for completion (clauses 6, 7 and 8) have now been performed. But there seems to be little scope here for a decree of specific performance. This is now really just a claim for the balance of purchase money under the sale contract. Matom should have judgment for the balance of the purchase price, $180,000 contract plus interest (special condition 10) from 24 November 2009 to date at the rate of 10 per cent.
    

Cross Claim Issues

74. Coast's Cross Claim against Matom is divided into two parts. It pleads four representations inducing contract. Then it pleads three more representations subsequent to the sales contract that are also said to result in loss to Coast.
    
75. The misleading and deceptive conduct alleged to induce the sale contract is said to be constituted by Matom representing before 30 September 2009 that:-
    

(a) The rent roll consisted of at least 136 currently tenanted properties and at least a corresponding annualised commission income of $113,174.51;

(b) The management rent roll was operating efficiently and profitably and to the satisfaction of the owners of the property on the rent roll;

(c) Notwithstanding that the property manager employed by Matom had recently resigned, the rent roll was being properly managed by Mr Matri and Ms Matri; and

(d) Immediately following exchange of contracts Matom both intended to and would take all necessary steps to contact the owners of each and every rent roll property to execute a Management Agency Agreement.

76. The post sale contract misleading and deceptive conduct is said to be constituted by three pleaded representations. Coast alleges that Matom represented after 30 September 2009 that:-
    

(e) The management of the rent roll was continuing to operate efficiently and profitably and to the satisfaction of the owners of each property;

(f) The rent roll was continuing to be properly managed by Mr Matri and Ms Matri; and

(g) Matom was taking all necessary steps to contact the owner of each and every property in the rent roll to execute a Management Agency Agreement in favour of Coast.

77. The Cross-Claim also seeks damages for breach of the sale contract. But the plea for breach of contract in the Cross-Claim is no wider than the plea set out in the Defence. It is now necessary to consider the issues raised by each of these two groups of representations.
    

Pre Sale Contract Representations

(a) Contents of the Rent Roll

78. Mr Matri was honest in describing the state of the rent roll to Mr Anderson before the sale contract was exchanged on 30 September 2009. I accept Mr Matri's account of events that when negotiations started in earnest with Coast in March 2009 that the rent roll contained about 160 properties. I also accept Mr Matri's account that Mr Anderson did not conclude the agreement quickly after March and that consequently information leaked into the marketplace about Matom's proposal to sell its rent roll. The dissemination of this information led to competing agencies making opportunistic approaches to property owners on Matom's rent roll. This competitive behaviour reduced the size of the rent roll from 160 to 136 properties by the time the contract was signed on 30 September 2009.
    
79. I accept Mr Matri's evidence that he explained to Mr Anderson that 3 or 4 of the properties were to be sold by their owners. But that did not necessarily mean that they would be removed from the rent roll. He otherwise correctly represented to Mr Anderson that there were 136 properties on the rent roll, subject to those sales. He also correctly represented the pre sale management contract rental income at that time at $113,174.51.
    
80. It was also suggested that some of the properties were vacant. A small number were but this is to be expected on a rent roll from time to time. A small number of owners were going to terminate with Matom but the list in my view was still accurate. There was a mistake about one property, which was managed by another agent but this was of no material importance. This first representation was made but there was nothing misleading in it.
    

(b) Satisfaction of the Rent Roll owners as to Management

81. Coast's allegation is correct that Mr Matri did represent the rent roll was operating efficiently and profitably prior to the sale contract. But I find this representation to be true.
    
82. Mr Matri was proud of his operation. Matom had built up a substantial rent roll. I infer from several factors that it was being run efficiently and profitably in late September 2009. I accept Mr Matri and Ms Matri's evidence that it was being operated efficiently. They were credible witnesses. The building up of such a substantial rent roll over several years prior to 2009 is not compatible with the conduct of inefficient operations. There were surprisingly few recorded complaints in the proceedings from owners about Matom's conduct of the rent roll. The complaints that were demonstrated to have been made were only in respect of relatively few properties. Interestingly the only complaint made to New South Wales Department of Fair Trading about Matom's conduct of the rent roll seems to have been partly orchestrated by Mr Anderson after 30 September 2009. None of the complaints made were complaints of major mismanagement. It must be expected that in the best run business of this kind, which is labour intensive, that some property owners would be unhappy from time to time. Importantly the sale contract list of 136 properties was accurate, showing that any complaints had not led to the termination of Matom's services.
    
83. I find that this representation was not misleading.
    

(c) Mr Matri and Ms Matri's efficient Management of the Rent Roll

84. The making of a representation as to Mr Matri and Ms Matri's proper management of the rent roll is only partly made out. To the extent that it is made out the representation was true.
    
85. The representation was only partly made out, because Mr Anderson understood that Mr Matri was not actively managing the rent roll himself. He was already actively involved in the used car sales business. When discussing the sale of Matom's rent roll Mr Anderson even met Mr Matri on several occasions at the used car sales yard which Mr Matri had adopted as his new business. Mr Anderson could not have believed that Mr Matri was still occupied full time in Matom's business managing the rent roll. Meeting him at the used car sales yard clearly showed that Mr Matri was not in Matom's office on a day to day basis. Mr Anderson was well aware of this situation. Knowing that Mr Matri was no longer running the business on site at North Gosford and was at the used car sales yard, as the preferred buyer Mr Anderson played something of a waiting game in the contract negotiations. Mr Matri offered a very attractive price to Mr Anderson which he accepted. Mr Anderson's strategy was based upon an understanding that Mr Matri was absent from the business and that the business was likely to decline in value over time as a result.
    
86. To the extent that the representation was made out it was true. Ms Matri was managing the rent roll. As I have found in respect of the contract claim, I regard her as an efficient and competent manager of the rent roll, who was given a substantial additional task to normal rent roll management in sending out the Management Agency Agreements. But I find that she also did that extra work efficiently despite her illness. She did send the Management Agency Agreements out to owners on the rent roll by the third week of October. She did follow up the property owners to get the draft back. She did send the completed drafts on to Coast. This efficiency is to be directly inferred from Exhibit VC and the extracts from it. The available letters to owners were all sent out on approximately 23 October 2009. The time delay between those letters and the dating of the Management Agreements between Coast and the rent roll owners is on average quite small, a period of about 2 to 3 weeks. I do not accept Coast's evidence that it was Coast's employees that chased the owners up for the executed management agreements. Quite the contrary, Coast's attitude to generally seems to have been collecting Management Agreements was passive. I accept Ms Matri's evidence that she did not perceive any follow up from Coast about the executed agreements.
    
87. If the work of chasing up these executed agreements was done by Coast one might have expected it to have been done by Mr Anderson's employees, Lisa Adams and Tracey Cummins. Neither of them gave evidence to support Coast's case that it did this work.
    
88. Ms Matri showed an obvious competence in the witness box. She was well acquainted with the detail of the rent rolls. She was a precise and careful witness who obviously prided herself on understanding the detail of the rent roll which she was managing. She had the assistance of two more junior employees. Ms Matri struck me as the kind of person who could manage junior employees well. Although she was not there to manage them while she was in hospital they kept the business of managing the rent roll turning over whilst she was away for what was a relatively short period.
    

(d) Taking Steps to Execute a Management Agency Agreement

89. I find that Matom did represent that it would contact the owners of each and every property. But it was agreed with Mr Anderson that was to be done principally by letter. Mr Anderson was careful of his franchise. I accept Ms Matri's evidence that Mr Anderson told her not to contact property owners until the letter had gone out. Once the letter had gone out I find that he indicated to her that he wanted to make contact with them himself. This makes sound commercial sense and is consistent with the care that he took in drafting the letter which was to go to these property owners. Thus, in the end the only thing which Mr Anderson really expected Mr Matri and Ms Matri to do was to send out the letters with the draft Management Agency Agreements and process them back to him when they had been signed. He took responsibility for making contact with his new clients. He seemed understandably proprietorial about obtaining this new custom. His version that he left all his contact to Ms Matri is neither credible nor consistent with his determined approach to building this rent roll into his own business.
    

Post Sale Contract Representations

(e) Continuing Satisfaction of Rent Roll owners as to Management

90. After 30 September 2009 Matom made no further express representations of continuing efficient management of the rent roll the subject of the sale contract. By then the relationships between the parties are defined by the contract. There was no occasion for Matom to make any further representations of this character after 30 September 2009.
    
91. Nevertheless I have found that the rent roll was being operated efficiently and profitably to the satisfaction of the owners of each property after 30 September 2009. Were this pleaded representation to have been made it would not have been misleading.
    

(f) Mr Matri and Ms Matri Continuing to Manage the Rent Roll Efficiently

92. There was no further express representation post contract representation that Ms Matri and Mr Matri were both continuing to manage the rent roll. There was perhaps only an implied representation based upon her continuing presence in the office, her communications' with Coast's staff and the content in the sale contract management mechanism prior to completion that she was managing the rent roll, but no more.
    
93. Mr Matri did not make any commitment after the date of the sale contract that he was actively involved in managing the rent roll. To the extent that Ms Matri was managing the rent roll it was made clear to Mr Anderson, when it occurred, that she was absent from that work between 9 and 16 October 2009 while she was in hospital. That is why the filing cabinets were delivered to Coast with Mr Anderson's consent. Mr Matri's implied representations by conduct that Ms Matri was managing the rent roll were neither misleading nor deceptive. When she was out of hospital she continued to efficiently manage the diminishing numbers of properties on the rent roll that remained under her management control.
    

(g) Matom taking all necessary steps to contact owners

94. Ms Matri did represent to Mr Anderson after 30 September 2009 that she was continuing to take steps to have new owners of the properties execute a Management Agency Agreement in Coast's favour. But she did so only to the limited extent that she communicated to Mr Anderson and his staff that she would send out the Management Agency Agreements with his covering letter. She did that. There was no representation on her part that she would do any more to communicate with the owners on Mr Anderson's behalf although she did in fact continue to encourage those that had not yet returned agreements to do so. No misleading conduct is made out in relation to this representation.
    

Some Cross-Claim Damages Issues

95. Even were the allegations of post contract misleading and deceptive conduct in the Cross-Claim to have been made out, it is difficult to see what damages would arise. Coast claimed the wages of employees said to be called in to undertake extra work to rectify the rent roll, I do not accept Mr Anderson's evidence about their work. The two extra employees seemed to have been called in to replace Lisa Adams, the Coast Property Manager who went on maternity leave in January 2010. Coast was not able to distinguish between work those employees did in relation to the rent roll acquired from Matom and any other work they did to fill in for Lisa Adams whilst she was on leave. I cannot infer that the $16,000 claimed is an expense of Coast that has anything to do with Matom's rent roll.
    

Conclusion and Orders

96. Accordingly, I found that Matom succeeds both on its Statement of Claim and on the Cross-Claim. It should have judgment for the balance of purchase money of $180,000. Completion of the sale contract should have occurred on 24 November 2009 in accordance with the first notice to complete when in my view Matom had done all that was required for completion. I find that interest will at least therefore be payable under special condition 10 of the sale contract on the balance of outstanding purchase money of $180,000 at the rate of 10 per cent from the date of 24 November 2009 up until the date of judgment. But there is a claim for compound interest on Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 principles that it seems has not been fully argued. It perhaps may not be pursued in light of the express interest provision in the contract. If the claim is still to be pursued the parties may need an opportunity to put on short submissions in light of these reasons.
    
97. Costs would normally follow the event unless one or other party seeks a special order as to costs.
    
98. I direct the parties to undertake the necessary calculation of interest and bring in Short Minutes of Order to give effect to these reasons. Those Short Minutes should provide for the entry of judgment and any agreed calculation of interest.
    

[Short Argument then took place after the delivery of judgment]

99. Mr Laughton of counsel now applies for indemnity costs in the proceedings based upon a Calderbank letter dated 21 October 2010 served by the solicitors for the plaintiff, Matom. That application is successful. A letter of that date which was open for acceptance until 28 October 2010 offered to settle the proceedings on Calderbank principles for the receipt of $150,000 plus a figure for costs, which appears to me to be quite reasonable in the circumstances.
    
100. This is a case where the preconditions to order indemnity costs based upon Calderbank principles are made out. The date after which the costs should be assessed on an indemnity basis is the date of expiry of the offer, 28 October 2010.
     
101. I also note that the plaintiff, Matom does not now pursue any claim for interest based on Hungerfords v Walker (1989) 171 CLR 125 principles.
     
102. I also note that there has been correspondence between the parties about compliance with the Court's orders of 16 February 2011 which required that the sum of $300,000 be retained pending the outcome of the Court hearing. The evidence attached to Ms McKensey's affidavit suggests that there has not been very full communication given by Coast to Matom about compliance with that order.
     
103. Accordingly, I will grant liberty to apply in respect of those orders should further enforcement action be required.
     

Later the same day short minutes of order were provided to the Court giving effect to these reasons and the following order were made in chambers.

104. Accordingly, the Court orders:-
     

(1) Judgment for the plaintiff against the second defendant in the sum of $180,000.

(2) Interest in accordance with special condition 10 of the contract for sale dated 30 September 2009 at 10 per cent per annum from 24 November 2009 on $180,000:

25 November 2009 to 24 November 2010 - 1 year: $180,000.00

25 November 2010 to 27 July 2011 - 244 days;

$18,000 / 365 x 244: $12,033.00

(3) Order that the defendant pay interest in accordance with Special Condition 10 of the contract for sale of: $30,033.00.

(4) Judgment therefore for the plaintiff against the defendant in the total sum of $210,033.00

(5) Order that the defendant pay the costs of the plaintiff, up to 28 October 2010 together with the costs of the plaintiff in seeking the orders made by this court on 16 February 2011, on the ordinary basis, and pay the costs of the plaintiff from 29 October to 2010 on an indemnity basis.

(6) Grant liberty to apply on three days notice for orders enforcing the orders made by this Court on 16 February 211, and including, if necessary by motion, for leave to serve subpoenas for production of records demonstrating where the sum of $300,000 from the proceeds of sale of the rent rolls of the defendant is now held.