Daji v Hub Realty Limited

[2012] NZHC 3095

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-005075 [2012] NZHC 3095

BETWEEN  SANGEETA DAJI Plaintiff

ANDHUB REALTY LIMITED First Defendant

ANDJOHN WILLIAM REDWARD Second Defendant

ANDHARCOURTS GROUPS LIMITED Third Defendant

ANDJAMES LEE Fourth Defendant

Hearing:         19 November 2012

Counsel:         C Orton for the Plaintiff

C Chilwell for the First and Second Defendants
P McDonald for the Third and Fourth Defendants

Judgment:      20 November 2012

[ORAL] JUDGMENT OF WYLIE J (Interim orders)

Distribution:

C Orton: [email protected]
C Chilwell: [email protected]

P McDonald: [email protected]

DAJI V HUB REALTY LIMITED & ORS HC AK CIV 2012-404-005075 [20 November 2012]

Introduction

[1]      The plaintiff, Ms Daji, is a licensed salesperson under the provisions of the Real Estate Act 2008.  The second defendant, Mr Redward, is a licensed real estate agent.  So is the fourth defendant, Mr Lee.  Mr Redward is the sole director of and the majority shareholder in the first defendant, Hub Realty Limited (“Hub”).  Hub operates the Harcourts’ franchise at Ellerslie in Auckland.  The franchisor is the third defendant, Harcourts Group Limited (“Harcourts”).

[2]      Ms Daji has filed proceedings asserting that Hub and Mr  Redward have breached the terms of a business venture relationship agreement, (the “BVA”), which she and Mr Lee entered into with Hub and Mr Redward in early June 2012.   She asserts and Hub and Mr Redward have breached the BVA by terminating it without cause or reason and that in so doing, they have breached implied terms of fidelity, fairness and responsibility.   She seeks damages for the alleged breach.   She also alleges that Harcourts induced the breach by Hub and Mr Redward.

[3]      Ms  Daji  is  also  seeking  interim  orders  against  Hub,  Mr  Redward  and Harcourts.   In an amended application dated 31 October 2012, Ms Daji sought a number of orders.  When the matter was called before me, the scope of the orders sought by Ms Daji was narrowed.  Ms Daji is now only seeking orders as follows:

(a)      Restraining Hub and Mr Redward from breaching the provisions of clause 7.0(h) of the BVA between the parties as it relates to listings for which she was responsible and either brought to Hub on 15 June

2012, or listed by her with Hub subsequent to 15 June 2012.

(b)Restraining Harcourts , pending the further order of the Court from blocking, restricting or in any way preventing her from having full and unrestricted access, whether from Hub’s premises at 101K Main Highway, Ellerslie, or remotely, to the Harcourts H1 database system, particularly as it relates to listings, sales and other information, for which she was responsible and brought to Hub under the BVA on

15 June 2012, or listed by her with Hub subsequent to 15 June 2012, relevant to her continuing to operate as a sales agent.

[4]      Hub and Mr Redward are not opposed to the making of the order sought against them, but only once it is ascertained what listings Ms Daji is responsible for. Harcourts is opposed to the making of the order sought against it.

Background

[5]      Ms Daji and Mr Lee were directors in a company known as New Zealand International Realty Limited  (“NZIRL”).   Ms Daji was the majority shareholder through an entity known as EID Trust Limited.  NZIRL carried on business as a real estate agency in Parnell.  It was a member of the Harcourts Group and it held the Harcourts’ franchise from Harcourts.  It traded under the banner “Harcourts Parnell”.

[6]      Harcourts became disenchanted with NZIRL and Ms Daji in particular, and it gave notice through its solicitors advising that the franchise agreement was to come to an end on or before 6 September 2012.  In addition, or perhaps as a consequence, NZIRL was suffering financial problems. The business was unable to achieve a level of  sales  sufficient  to  enable  it  to  meet  its  overheads  and  Ms Daji  and  Mr  Lee considered that it was unsustainable.   The company was placed into voluntary liquidation pursuant to a shareholders’ resolution dated 22 June 2012.

[7]      NZIRL had a number of agents working for it as independent contractors and it held a number of listings from vendors who wished to utilise its services to sell their properties.  The listings had been procured by the various agents.  The agent responsible for obtaining the listing was usually referred to as the “listing salesperson”.   Ms Daji was named as the listing salesperson on about 10 of the listings.

[8]      While the precise number of listings has not been identified, it is common ground between the parties that NZIRL had approximately 900 listings.  The listings contract was between each individual vendor and NZIRL.  There was no individual contract with the listing agent.

[9]      In anticipation of putting the company into voluntary liquidation, Ms Daji and Mr Lee entered into the BVA with Hub and Mr Redward in early June 2012. The BVA was drafted by Mr Lee.  It is not clear from the affidavits precisely when it was signed.  Ms Daji says it was on or about 5 June 2012.  Mr Redward says it was on or about 10 June 2012.  Nothing turns on the date.

[10]     In broad terms, the BVA provided as follows:

(a)       The parties would enter into a business relationship together;’

(b)      Ms Daji and Mr Lee agreed to release all salespersons from NZIRL

and to offer them new contracts as licensed salespersons at Hub; (c)  That Mr Redward and Mr Lee would manage the office of Hub;

(d)That the parties to the BVA responsible for any listing/sale were to receive 70 percent of the base commission, less various payments;

(e)       Mr Redward was to receive an agreed monthly salary;

(f)      The net profit after the payment of commissions and other expenses would be paid in equal shares to Ms Daji, Mr Lee and Mr Redward;

(g)The agreement would commence on 15 June 2012 and extend for six months on a trial basis.  Thereafter, Ms Daji, Mr Lee and Mr Redward were to discuss matters and decide whether to enter into a further agreement.

[11]     Relevantly, cl 7.0 provided as follows:

(e)       All listings from the execution of this agreement will be under HRL, which means NZIRL listings will be transferred to HRL from the H1 system and will still be under the respective salesperson’s name.

(f)       All parties are to have full administrator access to all systems, and accounts.

…

(h)      This agreement can be terminated by any party at any time by giving

2 weeks notice during this 6 months trial period.  If this agreement is terminated within this 6 months trial period all listings & sales will

be released to the responsible parties.

[12]     The BVA was implemented as from 15 June 2012.   Ms Daji, Mr Lee and those NZIRL salespersons who wished to enter into a contract with Hub, moved into the Hub premises in Ellerslie.  Ms Daji and Mr Lee brought with them the NZIRL listings.  The liquidators of NZIRL were appointed shortly thereafter and, according to  Mr Redward,  they  gave  approval  to  the  listings  being  transferred  to  Hub. Mr Redward also obtained clearance from the Real Estate Agents Authority’s legal officer for the transfer of the listings.

[13]     In   early  August   2012,   the  Chief  Executive  Officer  of   Harcourts,   a Mr Duncan, asked Mr Redward to terminate the agreement insofar as Ms Daji was concerned.  Mr Duncan has filed an affidavit, but he does not say in any detail why this request was made.  He simply says that Harcourts had reached the view that it did not want to have any further business relationships with Ms Daji.

[14]     Initially, Mr Redward resisted Mr Duncan’s request.   However, Harcourts then deactivated Ms Daji’s access to a computerised database it owns, which is known as “H1”.  When Ms Daji and Mr Lee transferred the NZIRL listings to Hub, a number of those listings were entered in the H1 database.  It is not clear whether or not Harcourts was aware that these listings originated from NZIRL.  There is nothing in the affidavits which have been filed dealing with this point.  In any event, once Harcourts deactivated Ms Daji’s access to the H1 database, Mr Redward formed the view that he had no alternative but to terminate the BVA insofar as Ms Daji was concerned.  He met with her on 10 August 2012 and told her that he was giving her two weeks’ notice terminating the BVA.

[15]     Mr Lee remained with Hub.

[16]     There was then correspondence between the respective solicitors.  Inter alia, Ms Daji’s solicitors, by letter dated 28 August 2012, requested immediate release to Ms Daji of all listings and sales that she had brought to Hub and all listings and sales

that Ms Daji was responsible for during her time at Hub.   There was no prompt response and the proceedings were filed the following day on 29 August 2012.

[17]     Hub  and  Mr  Redward,  who  were  the  only  defendants  to  the  initial proceedings, filed a notice of opposition on 4 September 2012.  They recorded that they were willing to deliver the listings which Ms Daji brought to Hub on 15 June

2012 and which she had listed with it subsequently, once she provided satisfactory evidence that she was working under the supervision of a licensed real estate agent, as required by the Real Estate Act.

[18]     It was clear however from an affidavit filed by Mr Redward that this offer was not as wide as first appeared.  He took the view that under cl 7.0(h), Ms Daji was only entitled to those listings where she was named as the responsible agent.  He attached to his affidavit a schedule of the 10 listings where Ms Daji was the listed agent.   He did however agree via his solicitors that he would not require to be satisfied that Ms Daji was working under the supervision of a licensed real estate agent before he transferred those 10 listings to her.

[19]     The matter came before Woodhouse J on 25 October 2012.  He noted that one of the orders then sought by Ms Daji against Hub and Mr Redward related to the H1 database which belonged to Harcourts.   Ms Daji had already signalled that she wished to join Harcourts as a third party to the substantive proceeding.  Woodhouse J directed that it should be joined as a third defendant, not only to the substantive proceedings, but also to the application for interim orders.   He also noted that the orders sought could affect Mr Lee and he directed that Mr Lee should also be added as a defendant.

[20]     Ms Daji  took  the appropriate steps  to  join  Harcourts  and  Mr  Lee to  the proceedings.  Mr Lee has filed an affidavit setting out his understanding of the BVA. He deposes that Hub had files containing “almost all, although probably not all” of NZIRL listings.  He was happy that those files should be released to Ms Daji.

[21]     It is common ground between counsel:

(a)       That approximately 900 listings held by NZIRL were transferred to

Hub on or about 15 June 2012;

(b)That approximately 450 listings were released to Ms Daji pursuant to a partial settlement agreed between the parties; and

(c)      That a further 200 listings or thereabouts, were released to Ms Daji in mid-November  2012  following  on  from  the  filing  of  Mr  Lee’s affidavit.

[22]     Ms Daji seeks the balance of the listings and also access to the H1 database, either on an unrestricted basis or on a supervised basis for a defined period.

Applicable Principles

[23]     There was no dispute between counsel as to the principles applicable in the interim injunction context.

[24]     The refusal  or  grant  of  an  interim  injunction  is  essentially discretionary. While the Court will not rigidly apply a formula, in broad terms, it will ask itself whether there is a serious question to be tried and where the balance of convenience lies as between the parties.  It will also consider where the overall justice of the case

lies.1

[25]     In the present case, Ms Daji is in effect seeking mandatory orders on an interim basis.   While there is, in principle, no objection to the grant of such injunctions, there is a greater potential for injustice to a defendant and the Courts generally require applicants in such circumstances to establish a strong case for the

making of interim relief of a mandatory nature.2

1      American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL); Klissers Farmhouse Bakeries Ltd v

Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).

2      Locabail International Finance Ltd v Agroexport 1985 [1986] 1 WLR 657; Oggi Advertising Ltd v McKenzie [1999] 1 NZLR 631; Weddel NZ Ltd v Taylor Preston Limited [1993] 2 NZLR 104.

Analysis

[26]     Ms Daji is seeking release of the listings pursuant to cl 7.0(h) of the BVA.  In this regard, she is seeking interim orders against Hub and Mr Redward.  She is also seeking access to the H1 database.  An interim order in this regard is sought against Harcourts.  I deal with each separately.

Release of Listings — First and Second Defendants

[27]     It  is  clear  from  the  affidavits  filed  that  Ms Daji  and  Mr  Lee  brought approximately 900 listings belonging to NZIRL with them when they commenced their business relationship with Hub and Mr Redward.   It is common ground that only some 650 listings have been released to Ms Daji.  I have set out cl 7.0(h) above. Ms Daji says that the clause requires Hub and Mr Redward to release to her all listings she and Mr Lee brought into the business arrangement.  Mr Redward says it requires Hub to release only the listings on which Ms Daji was recorded as the listing agent.

[28]     I am satisfied that Ms Daji has a strong case that there is a serious question to be tried in this regard.   Mr Redward’s interpretation seems to me to overlook a number of matters:

(a)      It  overlooks  the  fact  that  the  listing  contracts  were  between  the vendors and NZIRL, not between the vendor and the listing agents.

(b)It ignores the fact that the listings were brought to the Hub by Ms Daji and Mr Lee in their capacity as directors of NZIRL and in Ms Daji’s case, in her capacity as the majority shareholder in NZIRL.

(c)      Clause  7.0(h)  uses  the  expression  “all  listings  and  sales”.    The expression “all sales” is used elsewhere in the BVA.   Nowhere is it limited to sales brought to fruition by a particular agent.  Rather, the references are to “all sales” belonging either to Hub or NZIRL.

(d)Mr Redward’s interpretation does not recognise that NZIRL brought some 11 salespersons into Hub’s premises.   It makes no sense to suggest  that  each  salesperson,  acting  as  independent  contractor, should be entitled to his or her listings.   They have no proprietary interest in them that is the effect of his interpretation.

[29]     In my judgment, it is inconceivable that Ms Daji would have agreed to forego her interest in the listings in favour of Hub in the event that the BVA was terminated. In my view, she has a strong case that s 7.0(h) extends to all listings and sales brought into the business arrangement by NZIRL.

[30]     The BVA requires that all listings and sales be released to the responsible parties.  Here, the parties who introduced the listings and sales to Hub were Ms Daji and Mr Lee.   As I have noted, Mr Lee remains with Hub.   The BVA has been terminated only as it affects Ms Daji.   Prima facie, it seems to me that cl 7.0(h) requires  that  the  listings  and  sales  be  released  to  both  Ms Daji  and  Mr  Lee. Potentially, there could be a dispute between them as to who was entitled to each listing/sale.  There is, however, nothing in the papers filed to date indicating to any dispute in this regard.  Rather, it is implicit from Mr Lee’s affidavit that he agrees to all listings and sales being released to Ms Daji.  Accordingly, I take this issue no further.

[31]     I now turn to consider the balance of convenience.   In my view, it favours

Ms Daji.

[32]     Ms Daji  is  seeking detail  of the listings  so  she can  contact  vendors and entreat for their business.  While in theory, damages might be an adequate alternative remedy for her, in practice, damages would be difficult to calculate.  She is being deprived of the opportunity to treat with vendors, which opportunity may or may not have  a  monetary  value.    Of  course,  the  longer  Hub  and  Mr Redward  delay  in complying  with  their  contractual  obligation,  the  greater  the  disadvantage  is  to Ms Daji.   Hub, Mr Redward (and now Mr Lee) can exploit the situation, seek the business of the vendors and effectively shut Ms Daji out.

[33]     Hub  and  Mr  Redward  sought  to  make  much  of  a  claimed  difficulty  in isolating the listings introduced by NZIRL.  I am not persuaded that this is a genuine difficulty.  There is no evidence in the affidavits of any attempts made by them to isolate the information.   Further, Hub and Mr Redward have been able to release some 650 listings, albeit belatedly, without any apparent problem.   I also note that cl 7.0(e) of the BVA, which I have set out above, required Hub and Mr Redward to ensure that the listings introduced by Ms Daji and Mr Lee were kept under the names of the respective salespersons.  It should not be difficult to isolate those listings if Hub  and  Mr Redward  have  complied  with  their  contractual  obligation.     The identities of the agents who transferred to Hub should be readily ascertainable.

[34]     Finally,  I record that  in my judgment,  the interests of justice require  an interim mandatory injunction obliging the first and second defendants to release to Ms Daji all listings  and  sales brought into the business relationship by NZIRL. While  the  impasse  continues,  Ms Daji  is  not  able  to  operate  as  a  licensed salesperson, or to generate any income from real estate work activity utilising the listings, or to deal with the vendors and sales contracts in an effective manner.

[35]     I did have some reservations about Ms Daji’s ability to meet the undertaking as to damages which she has offered.  However, the defendants have not raised this as an issue and on balance, I am satisfied, albeit only just, that Ms Daji can meet any damages award she might be required to meet, following the substantive hearing.

[36]   Accordingly, I make an interim injunction against the first and second defendants requiring them to release to Ms Daji all listings and sales introduced to the business arrangement from NZIRL on or about 15 June 2012, except insofar as those listings and sales have already been disclosed.  The listings and sales are to be released to Ms Daji within five working days of the date of this oral judgment.

H1 Database — The Third Defendant

[38]     It seems to me that this application causes considerably more difficulty for Ms Daji.   She seeks access to the H1 database because it has all the detail on it, which she says she requires to make use of the listings she is entitled to.  It is not clear whether this detail was originally on the listings or whether it has subsequently been added onto the database.   If the latter position applies, Ms Daji is effectively trying to enhance her position.

[39]     An additional problem from Ms Daji’s perspective is that Harcourts is not a party to the BVA.  The H1 database belongs to Harcourts.  There is no contractual obligation on it under the BVA requiring it to give access to the database to Ms Daji.

[40]     The only cause of action pleaded by Ms Daji against Harcourts is inducement to breach of contract.  It is not in dispute that Mr Duncan endeavoured to persuade Mr Redward  to  terminate the  BVA insofar  as  it  applied  to  Ms Daji.   The BVA however provided that it could be terminated by any party at any time by giving two weeks’ notice during the six-month trial period.  On the limited materials available to me in the context of this interim application, it is  not obvious that Hub and/or Mr Redward breached the BVA by terminating it.   Nor is it obvious that inducing somebody to exercise their legal rights is actionable. As a result, I am not persuaded that there is a strong case that Harcourts’ actions amount to inducement to breach of contract.

[41]     Moreover, Ms Daji has failed to persuade me that she has any identified legal right to access Harcourts’ H1 database.  Her counsel points to cl 7.0(f) which I have set out above.  I doubt that this clause creates any legal right in Ms Daji to access the database at all.  Rather, it seems to me that it requires Hub and/or Mr Redward to give Ms Daji and Mr Lee full administrative access to their systems and accounts. The affidavits filed by Mr Redward make it clear that he has no right or entitlement to restore Ms Daji’s access to the H1 database.  There is nothing obliging Harcourts to provide Ms Daji with that access.

Costs

[43]     I have heard from the parties in relation to costs.  All agree that they should be fixed on a 2B basis, although uplifts/deductions from 2B costs are sought.

[44]     Mr Orton seeks  costs on a 2B basis against  Hub and Mr Redward.   He initially sought costs against Mr Lee as well, but I indicated that I was not prepared to consider costs against Mr Lee.  It seems to me that if anything, Mr Lee has been a moderating influence in these proceedings.  Further, Ms Daji does not seek any relief against Mr Lee.

[45]     Ms Chilwell resisted an application that her clients should be required to pay costs on a 2B basis, and submitted that any costs ordered against her client should be discounted for two reasons:

(a)      The proceedings filed by Ms Daji were unsatisfactory from the outset and required amendment;

(b)The plaintiff initially sought a number of additional orders against Hub and Mr Redward which were not pursued.  She was not advised in advance that the additional orders were not to be sought.   She prepared lengthy submissions in relation to them and only became aware that Ms Daji was not seeking those orders when the matter was called before me in Court.

[46]     As between Ms Daji and Hub and Mr Redward, I award costs in favour of Ms Daji on a 2B basis.  Such sum is to be reduced by 50 percent to recognise the rather unsatisfactory way in which matters had been dealt with in this Court to date. Ms Daji is also entitled to her reasonable disbursements.  Any dispute in that regard is to be referred to the Registrar.  Liability for the costs and disbursements is to be joint and several as between Hub and Mr Redward.

[47]     As between Ms Daji and Harcourts, Mr McDonald sought costs on Harcourts’

behalf.  He also sought an uplift to recognise that Ms Daji’s case against Harcourts

was in difficulty from the outset.  Mr Orton opposed any uplift and submitted that the plaintiff was required to join Harcourts to the proceedings pursuant to a Court order.

[48]     Having considered these submissions, in my view, Harcourts are entitled to an order for costs against Ms Daji on a 2B basis and I so order.  I am not satisfied that any uplift is appropriate and I decline to order the same.   Harcourts are also entitled to their reasonable disbursements. Again, in the event of dispute, the same is

to be referred to the Registrar.

Wylie J