Coumat Ltd v Zest for Realty Ltd

JurisdictionNew Zealand
JudgeWinkelmann J
Judgment Date10 October 2016
Neutral Citation[2016] NZCA 491
Docket NumberCA14/2016
CourtCourt of Appeal
Date10 October 2016
Between
Coumat Limited
Appellant
and
Zest for Realty Limited
Respondent

[2016] NZCA 491

Court:

Winkelmann, Brewer and Toogood JJ

CA14/2016

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against the granting of summary judgment against the appellant for unpaid commission on the sale of a property — the appellant was not, at least on the face of it, party to the agency agreement — it had taken over a third party's rights as vendor of the property via a deed of novation — the third party had in turn been nominated to complete a tender after the agency agreement was signed — the respondent argued that the appellant was linked to the agency agreement through three agreements, which were links in a chain — The first was cl 6.1 of the agency agreement in which the client acknowledged that “he or she” had the authority of all owners to sign the agreement on their behalf — the second line was clauses which the respondent said evidenced an acknowledgment by the third party of the obligation to pay commission — the third link was cl the deed of novation under which the appellant agreed it would perform the third party's obligations — whether the third party had contracted with the respondent on behalf of owners other than itself — whether the appellant was an owner on whose behalf the third party purported to act — whether the appellant was sufficiently identified at the time of the agency agreement to enable it later to adopt and ratify the agreement.

Counsel:

S H Barter and L M Herbke for Appellant

R M Dillon for Respondent

A The appeal is allowed.

B The judgment in favour of Zest for Realty Limited for the sum of $446,775 together with interest is set aside. So too is the costs award of the same date.

C Costs in the High Court are to be dealt with in that Court.

D The respondent must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Winkelmann J)

1

Zest for Realty Ltd, the respondent, obtained summary judgment against the appellant, Coumat Ltd, for unpaid commission on the sale of property at Whitford (the Whitford land). 1 Coumat was not, at least on the face of it, party to the agency agreement pursuant to which the commission was payable. Associate Judge Christiansen was nevertheless satisfied that Coumat had no arguable defence to a claim it was bound by the terms of the agency agreement because, he said, Coumat had acknowledged and adopted the agreement and the obligation under it to pay commission. 2 He entered judgment in favour of Zest in the sum of $446,775 together with interest. Coumat now appeals that decision.

2

There is little if any dispute as to the factual background to this proceeding. The Whitford land was sold through a tender process by the mortgagee, ANZ Bank. Mr Wayne Allen was the successful tenderer. Around 18 June 2014 Mr Allen executed a deed of nomination in favour of Whitford Property Developments Ltd (WPDL) to complete the tender agreement and take title to the property. Mr Gregory Hayhow was the sole shareholder and director of WPDL but, in an affidavit sworn in opposition to the summary-judgment application, Mr Hayhow said he held half the shares in WPDL on trust for Mr Allen pursuant to a joint venture agreement between them. He said that WPDL was a company created solely to carry out the joint venture in respect of the Whitford land.

3

On 23 May 2014, before WPDL's nomination by Mr Allen and before settlement of the tender, Zest and WPDL entered into an agency agreement whereby it was agreed that Zest would onsell the Whitford land on behalf of WPDL. WPDL was named in the agreement as the client and both Mr Hayhow and Mr Allen signed on behalf of WPDL.

4

The agency agreement provided that Zest would market the land for sale. Commission of 1.85 per cent of the sale price would be payable by the client (WPDL) to Zest immediately upon the contract for sale of the land becoming unconditional. As to the scope of the obligation to pay commission, the client agreed:

If the property or part of it is sold by or through the instrumentality of the Agent or to anyone introduced through the agency of the Agent, the Client agrees to pay a commission …

5

Clause 6.1 of the agency agreement contained the following confirmation:

The person signing this form on behalf of the Client confirms that if they are not the sole owner of the Property, he or she has the authority of all owners to sign this agreement on their behalf.

6

Zest introduced Whitford Village Holdings Ltd (VH) to WPDL and, on 11 June 2014, VH and WPDL entered into a conditional contract for the sale and purchase of the land. The agreement for sale and purchase (the June VH agreement) listed Zest as the real-estate agent on the front of the agreement. Clause 12 of the June VH agreement provided:

If the name of a licensed real estate agent is recorded on this agreement it is acknowledged that the sale evidenced by this agreement has been made through that agent whom the vendor appoints as the vendor's agent to effect the sale. The vendor shall pay the agent's charges including GST for effecting such sale.

7

Also relevant is cl 25 which provided:

The Purchaser and the Vendor agree and the stakeholder is hereby instructed to pay the agents [Zest] their commission owing out of the deposit funds held by the stakeholder prior to disbursal of the deposit funds to the vendors or any other party.

8

For reasons it is not necessary to explore, the joint venture between Mr Allen and Mr Hayhow fell apart with the result that WPDL could not complete the purchase of the land. The tender contract was cancelled by ANZ for non-performance on 23 July 2014 and the deposit of $1.25 million that had been paid was forfeited.

9

It is at this point that Coumat, the respondent, enters the narrative. Mr Hayhow was Coumat's sole director and shareholder. Around 4 August 2014 Coumat entered into an agreement to purchase the Whitford land. On this occasion the agreement was not with ANZ as, in the intervening period between the first tender by WPDL and Coumat's agreement to purchase the land, a Mr Bruce had acquired the mortgage, exercising his right to do so as a guarantor of it. Accordingly, the new agreement was between Mr Bruce and Coumat.

10

Around 12 August 2014, Coumat entered into a deed of novation with WPDL and VH, in respect of the June VH agreement, whereby the rights and obligations passed from WPDL as vendor to Coumat as vendor. Coumat thereby obtained the benefit of the June VH agreement, enabling it to onsell the Whitford land to VH on the terms WPDL had agreed with VH. The deed of novation contains the following clause which is relied upon by Zest:

ACCEPTANCE

4.1 In consideration of [WDPL's] novation in clause 3 and the Continuing Party's [VH] consent, release and confirmation in clause 5, Coumat accepts the Novation with the effect that:

  • a. Coumat is substituted for [WPDL] under the Agreement as if it had originally executed the Agreement in place of Whitford;

  • b. all references in the Agreement to [WPDL] are to be read and construed as if they were references to Coumat;

  • c. Coumat may exercise all [WPDL's] rights under the Agreement;

  • d. Coumat will perform all of [WPDL's] obligations under the Agreement; and

  • e. Coumat accepts liability for any breach of the Agreement by [WPDL] which occurs prior to the Effective Date.

11

The deed of novation is signed for WPDL and for Coumat by Mr Hayhow.

12

However, the June VH agreement came to an end on 5 September 2014 when VH and Coumat entered into a separate sale and purchase agreement in respect of the land (the September VH agreement). Although the purchase price remained the same, there was a different amount payable for the deposit and some of the conditions were different. Although the deposit was for a smaller amount, the deposit paid by VH under the June VH agreement was simply transferred to the credit of VH under the September VH agreement. The September VH agreement became unconditional on 4 February 2015. The sale was due to settle on 1 April 2015 but did not do so and the agreement was subsequently terminated. Mr Stephens, the director of VH, provided an affidavit in support of the application for summary judgment in which he said he was later told that the reduction in the deposit in the September VH agreement was a mistake.

High Court proceedings
The parties' rival contentions
13

In the High Court, Coumat opposed the application for summary judgment on a number of grounds but principally upon the ground that Coumat was not a party to the agency agreement and was therefore not contractually obliged to Zest to pay the commission.

14

Mr Barter for Coumat argued not only was there no contractual relationship between Coumat and Zest, there was no compliance with s 126 of the Real Estate Agents Act 2008 which requires, as a precondition to an entitlement to commission, that a written agency contract exist between the agent and the party against whom a commission claim is made. Section 126 provides as follows:

126 No entitlement to commission or expenses without agency agreement

  • (1) An agent is not entitled to any commission or expenses from a client for or in connection with any real estate agency work carried out by the agent for the client unless—

    • (a) the work is performed under a written agency agreement signed by or on behalf of—

      • (i) the client; and

      • (ii) the agent; and

    • (b) the agency agreement complies with any applicable requirements of any regulations made under section 156; and

    • (c) a copy of the agency agreement signed by or on behalf of the agent was given by or on behalf of the agent to the client within 48 hours after the agreement was signed by or on behalf of the client.

  • (2) A court before which proceedings are taken by an agent for the recovery of any commission...

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