Soft Technology Jr Ltd v Jones Lang Lasalle Ltd

• Jurisdiction: New Zealand
• Judge: Dobson J
• Judgment Date: 04 August 2022
• Neutral Citation: [2022] NZCA 353
• Docket Number: CA164/2021; CA630/2021; CA719/2021
• Court: Court of Appeal
• Year: 2022

Between

Soft Technology Jr Limited

Appellant

and

Jones Lang Lasalle Limited

Respondent

and

Real Estate Agents Authority

Intervener

[2022] NZCA 353

Court:

Clifford, Goddard and Dobson JJ

CA164/2021; CA630/2021; CA719/2021

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Commercial, Property — appeal against a High Court decision which allowed the respondent real estate agency's claim for commission — agency agreements — failure to provide a written signed copy of the agreement — Real Estate Agents Act 2008

Counsel:

D R Bigio QC and A C Eager for Appellant

M C Harris and A G H Bradley for Respondent

S A Armstrong and G S A Morrison for Intervener

• A The appeals are allowed.

• B The costs orders in the High Court are set aside. The respondent must pay the appellant costs on a 2B basis and usual disbursements in the High Court.

• C The respondent must pay the appellant costs for a standard appeal on a band A basis and usual disbursements in this Court.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Dobson J)

Table of contents

	Para no
The factual background	[6]
The agency agreement	[23]
High Court judgment	[25]
Section 126	[29]
Submissions	[30]
Discussion	[32]
Legislative history of s 126	[40]
Plain meaning of s 126 and surrounding context	[45]
Practical effect of the s 126 temporal condition	[53]
Overseas authorities	[66]
Conclusion	[70]
The remaining issues	[72]
Was JLL's omission inadvertent?	[74]
Did JLL introduce ATEED?	[84]
The second ATEED lease — did the MOU qualify JLL for commission?	[95]
Would commission be payable on turnover rent?	[108]
JLL's entitlement to interest	[114]
JLL's entitlement to indemnity costs	[117]
Costs	[122]
Result	[126]

1 These appeals arise from proceedings in which the respondent real estate agent, Jones Lang Lasalle Ltd (JLL), made claims for commissions from the appellant commercial property owner, Soft Technology JR Ltd (Soft Tech), in respect of two leases. The leases had been entered into after an initial lease of part of Soft Tech's property in respect of which Soft Tech accepted that it was liable to and did pay JLL a commission. In the High Court JLL succeeded on its claims for commissions for the two subsequent leases (the first High Court judgment). 1 The High Court also found in JLL's favour that its commissions could include amounts calculated on turnover rents, and that JLL was entitled to interest from the dates of demand for payment (the second High Court judgment), 2 as well as indemnity costs (the costs judgment). 3 Soft Tech appeals against all aspects of the orders against it.

2 Contractual dealings between property owners and real estate agents are materially influenced by the provisions of s 126 of the Real Estate Agents Act 2008 (the Act). In summary this section provides that a real estate agent is only entitled to commission for work performed under a written agency agreement, complying with applicable regulations, that has been signed by the client and agent where a copy has been given by the agent to the client within 48 hours of the client signing it. 4 The Court is, however, given a limited power to order that commission is payable despite failure by the agent to provide the client with a copy of the agency agreement within 48 hours. 5

3 In the High Court Downs J held that s 126 of the Act did not require completion of a signed agency agreement prior to the agent undertaking work for which commission was claimed. 6

4 That finding was contrary to the interpretation of the section that has been applied consistently by the Real Estate Agents Authority (the Authority), the independent body established pursuant to the Act to regulate real estate agents licensed under it. 7 Since inception, the Authority has administered its responsibilities under the Act on the basis that agency agreements are required to be signed by both parties before an agent undertakes real estate agency work on behalf of a property owner for which the agent would seek commission.

5 The Authority sought leave to intervene in the appeals to present arguments in support of its contrary interpretation of s 126. Leave was granted for it to do so. 8 As a result, we had the considerable benefit of the Authority's submissions in hearing this appeal, an advantage not enjoyed by the High Court.

The factual background

6 Soft Tech owns a substantial property at Access Road, Kumeu. It comprises two lots, Lot 1 of 19.96 ha and Lot 10 of 7.16 ha, making a total of 27.12 ha. The sole

representative of Soft Tech involved in relevant dealings was Mr Peter Ryoo, who manages the company and is responsible for its business

7 In early 2015 the then buildings on Lot 1 were occupied mostly by timber-industry tenants. Lot 10, which was practically only accessible via Lot 1, was covered in bush.

8 In August 2015 a representative of JLL sent a brochure to Mr Ryoo seeking a retainer to pursue potential leasing opportunities for the property. The brochure was accompanied by a draft agency agreement. An earlier attempt to obtain instructions from Mr Ryoo in March 2015 had not borne fruit and by August other real estate agents were contacting Mr Ryoo about leasing opportunities for the property.

9 On 4 September 2015 two JLL representatives, Messrs David Mayhew and Connor McEvoy-Roberts, met with Mr Ryoo. Mr Ryoo signed a general agency agreement, after making some additions to its printed terms, and gave it to Messrs McEvoy-Roberts and Mayhew. As explained in more detail below, the agreement was not signed for JLL by Mr Mayhew until 21 December 2015. Even then, a copy was never provided to Mr Ryoo. He did not receive a copy of the signed agreement until it was provided on discovery in the High Court proceedings.

10 By September 2015 there was interest in the property being used for film production purposes. A former JLL agent, Mr Martin Hudson, had by mid-2015 become a representative of another agency, Metro Commercial Ltd (Metro Commercial). Mr Hudson had a working relationship with a Mr Harry Harrison, who was responsible for attracting international film production ventures to Auckland on behalf of an Auckland City Council-controlled organisation called Auckland Tourism, Events and Economic Development Ltd (ATEED). In early May 2015 Mr Harrison asked Mr Hudson to help him identify sites that might be appropriate for film production facilities. Around the time of Messrs Mayhew and McEvoy-Roberts' meeting with Mr Ryoo in early September 2015, Mr Hudson learned from Mr Mayhew that Soft Tech's property was likely to become available and might be of interest to ATEED. Mr Hudson duly relayed the possible availability of the property to Mr Harrison, who had previous familiarity with it.

11 Metro Commercial and JLL then agreed on some terms for a commission-sharing arrangement, which have no relevance to the present appeal. Thereafter Messrs Hudson and Mayhew joined forces in promoting the property to Mr Harrison for ATEED.

12 Mr Harrison had two international film studios interested in the property, one of which was Warner Brothers. Towards the end of October 2015 those interests were sufficient for JLL to provide to Mr Harrison a draft agreement that contemplated Warner Brothers taking on a short-term lease. Initially the draft contemplated a lease of both Lots 1 and 10 but Warner Brothers had no requirement for the bush-covered Lot 10, so that was removed. It was Mr Harrison who forwarded the draft agreement to Mr Ryoo, who had initially been unenthusiastic about the property being used for film production undertakings because of the uncertainty about consistent ongoing use.

13 Before making any commitment, Mr Ryoo insisted that JLL reduce the extent of the commission that it would charge from that stipulated in the agency agreement he had signed in early September. After negotiations, JLL agreed to Mr Ryoo's demand.

14 Soft Tech then entered into a lease with a subsidiary of Warner Brothers called Manu One Ltd (Manu One) on 15 December 2015 (the Manu One lease). The lease was for a term of 10 months with two rights of renewal of one month each. JLL invoiced Soft Tech for its commission on the Manu One lease shortly thereafter. That invoice was paid in full by JLL. Mr Harrison and ATEED's involvement was that of a facilitator or further broker. It appears that ATEED neither sought compensation for its involvement, nor did it contemplate accepting any liability under the lease that its involvement had facilitated.

15 The direct line of communication between Messrs Harrison and Ryoo that operated in October 2015 was either continued or was at least resumed some months into 2016. There is no dispute about the Judge's finding that further discussions about the property between Soft Tech and ATEED began no later than 21 March 2016. 9 The subject of the discussions was the use of the property after completion of the

movie being produced by Manu One, including the future of facilities that were built on the property for the purposes of that project

16 The New Zealand Film Commission | Te Tumu Whakaata Taonga (NZFC) administers grants to incentivise production of films in New Zealand amounting to 20 per cent of production costs for qualifying projects. The NZFC also has capacity to provide an additional five per cent uplift grant for projects that create and leave available for subsequent use so-called “legacy assets”. Warner Brothers sought the additional uplift grant with the help of ATEED, in negotiations with the NZFC. To optimise the opportunities for subsequent use of the property for film production, Soft Tech was drawn into discussions concerning the prospect of it committing capital to build additional facilities on the property. At...