Coumat Ltd v Zest for Realty Ltd

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeWinkelmann J
Judgment Date10 Oct 2016
Neutral Citation[2016] NZCA 491
Docket NumberCA14/2016

[2016] NZCA 491

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Winkelmann, Brewer and Toogood JJ

CA14/2016

Between
Coumat Limited
Appellant
and
Zest for Realty Limited
Respondent
Counsel:

S H Barter and L M Herbke for Appellant

R M Dillon for Respondent

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.

Held: Clause 6.1 was designed to operate in a variety of circumstances and was not tailored to Zest's dealings with WPDL. As a clause of general application it could be read as operating in circumstances where the “Client” was several individuals or a partnership, or was represented by several people (such as would be the case with a trust) but where the agreement was not signed by all of the clients (all of the individuals, partners, trustees).

On this interpretation, cl 6.1 was not a representation by the client that it had the authority of all owners (future owners in this case) to commit them to the various obligations under that agreement but rather a representation that the person signing the form had authority to bind the client named in the agreement.

This interpretation was strongly supported by the fact that the representation was stated to be that of the person signing and not of the client. It was also supported by the fact that the agreement referred throughout to the obligations being those of the client. This interpretation of the was fatal to the “links in the chain” basis on which Zest brought its claims and was also not an interpretation which was addressed by the Associate Judge.

Even accepting Zest's argument as to the meaning and effect of cl 6.1, there was no evidence that WPDL intended to contract as agent for another entity at the point in time it entered into the agency agreement. The context in which the agency agreement was signed suggested that WPDL was signing on its own behalf and not acting as agent for another, as WPDL was the intended vehicle for the joint venture. Clause 6.1 was included simply because this was a standard form document. It was not a representation by WPDL that it was acting as agent for any other.

Accepting for the sake of argument under cl 6.1 WPDL represented it had the authority of future owners to enter into the agency agreement, the question became whether WPDL was purporting to contract on behalf of Coumat as a potential future owner. There was no evidence Coumat was on the horizon as a potential owner at the date of the agency agreement. It was hard to see how, as a matter of contractual interpretation, the meaning of “owners” could extend to “owners not within WPDL's contemplation as future owners” at the time WPDL entered into the agency agreement. And to extend WPDL's representation of authority to Coumat would extend it to an owner that did not even acquire its interest in the land through WPDL's successful tender, which was a difficult proposition to sustain.

These arguments provided arguable defences for Coumat which made Zest's claim inappropriate for summary judgment.

For a principal to ratify and adopt a contract made without its authority, it had to be sufficiently identified in the contract as the principal. Unidentified principals could not adopt and ratify a contract. As a matter of contractual interpretation, it was difficult to argue Coumat was within the term “owners” (even if Zest's submission that cl 6.1 was a representation by WPDL of authority to contract on behalf of future owners were to be accepted).

It was also well established that where the (alleged) agent did not even have the principal (or the entity claiming to be the principal) in mind at the time of entering into the contract, there could be no ratification by that principal. The evidence suggested that WPDL was contracting on its own behalf and not as agent for any other entity, let alone Coumat.

Even if these problems could be surmounted, it was a question of fact whether there had been a ratification of an agent's entering into a contract on behalf of a principal. The deed of novation was relied upon as that act of ratification. It was arguable that it was no such thing but, rather, an assumption by Coumat of WPDL's obligations to VH. There was nothing in the deed of novation which suggested Coumat intended to create rights exercisable against it by Zest.

Coumat had arguable defences to Zest's claim for payment of commission and the Associate Judge erred in entering summary judgment in Zest's favour.

This judgment was not changed by an argument that if this appeal was successful, the floodgates might open clearing the way for vendors to avoid the obligation to pay commission by entering into deeds of novation in agreements for sale and purchase, substituting some other entity as vendor. The vendor would not thereby be relieved of its contractual obligations under the agency agreement. Further, this decision was limited to a finding that Coumat had arguable defences to the claim for commission so that summary judgment should not have been entered.

Appeal allowed.

JUDGMENT OF THE COURT

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.

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...

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