Goldline Properties Limited v Marsh - [2023] NZCA 285

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA146/2023
[2023] NZCA 285

BETWEEN	GOLDLINE PROPERTIES LIMITED Appellant
AND	MAREE DAWN MARSH Respondent

Hearing:	10 May 2023
Court:	Mallon, Moore and Fitzgerald JJ
Counsel:	D R Bigio KC and H P Short for Appellant T D Rea for Respondent
Judgment:	7 July 2023 at 4 pm

JUDGMENT OF THE COURT

AThe appeal is allowed.
BCaveats 126191304.1, 12619253.1, 12619312.1 and 12619325.1 are deemed to have lapsed.
CMs Marsh must pay Goldline’s costs for a standard appeal on a band A basis and usual disbursements.
DIf an order for costs in the High Court was made in Ms Marsh’s favour, it is quashed and is to be reconsidered by that Court in light of this judgment.

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REASONS OF THE COURT

(Given by Fitzgerald J)

Table of contents

Introduction [1]

Factual background [10]

The High Court decision [17]

Submissions on the appeal [26]

Appellant’s submissions [26]

Respondent’s submissions [34]

Analysis [42]

Result [74]

Introduction

This appeal concerns the circumstances in which a vendor may cancel a contract to sell property when the real estate agent acting for the vendor is to acquire an interest in the property.
Cancellation in these circumstances is governed by s 134 of the Real Estate Agents Act 2008 (the Act). The full text of s 134 is set out at [8] below. In broad terms, however, s 134(1) prohibits a real estate agent, without the consent of their client, from acquiring the land or business that the agent is commissioned to sell. Similarly, s 134(2) prohibits a real estate agent from carrying out or continuing to carry out any agency work in respect of a transaction if he or she knows that the transaction will result in a person related to the agent acquiring the land or business to which the transaction relates. Section 134(3) sets out certain steps to be taken by the agent before a client’s consent for the purposes of s 134(1) will be effective. Section 134(4) provides that the client may cancel any contract “made” in contravention of subs (1) or “brought about” in contravention of subs (2). It is this last provision that is in issue in this case.
By way of background, Goldline Properties Ltd (Goldline) agreed to sell four vacant lots to Ms Maree Marsh, by way of four separate contracts (the Contracts). Goldline’s real estate agent acting on the transaction was Mr Ian Croft, the director of One Agency Counties Realty Ltd (Counties Realty). At the time Goldline and Ms Marsh entered into the Contracts, neither Counties Realty nor Mr Croft had acquired any interest in the properties. However, prior to settlement of the Contracts, Mr Croft entered into a joint venture agreement with Ms Marsh by which he would acquire a 30 per cent interest in the properties at settlement.[1] There is a dispute about whether Mr Croft told Goldline of his arrangements with Ms Marsh, however there is…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Goldline Properties Limited v Marsh

Details

AGLC: Goldline Properties Limited v Marsh [2023] NZCA 285
Case: [2023] NZCA 285
Decision Date: 7 July 2023 at 4 pm

CaseChat Overview and Summary

In this case, Goldline Properties Limited (Goldline) appealed against a decision of the High Court which found that Goldline's cancellation of contracts for the sale of four properties to Maree Dawn Marsh (Ms Marsh) was invalid. The appeal hinged on the interpretation of section 134(4) of the Real Estate Agents Act 2008, which permits a client to cancel a contract if it was "made" in contravention of subsection (1) or "brought about" by agency work carried out in contravention of subsection (2). The Court of Appeal allowed the appeal, holding that the right to cancel a contract under section 134(4) extends to instances where a real estate agent acquires an interest in the property after the contract is entered into, provided the agent was involved in the transaction from its inception.

The Court of Appeal rejected the High Court's narrow interpretation of section 134(4), which limited the right of cancellation to situations where the agent had an interest in the property at the time the contract was entered into. The Court reasoned that the purpose of the statutory provision is to protect clients from conflicts of interest arising from agents acquiring an interest in the property they are commissioned to sell, and this risk is present regardless of when the agent acquires the interest. The Court also considered the broader statutory scheme and purpose of consumer protection, concluding that the right to cancel should not be limited by the timing of the agent's acquisition of an interest.

The Court found that the plain and ordinary meaning of a contract being "made" in contravention of section 134(1) or "brought about" by a contravention of section 134(2) refers to the outcome of the transaction, not just the circumstances at the time the contract was entered into. This interpretation is consistent with the prohibitions in sections 134(1) and (2), which look to the outcome of the transaction and the identity of the person or persons who will take a legal or beneficial interest in the land or business at settlement. The Court emphasised that the statutory purpose of deterring conflicts of interest would be undermined if the right to cancel did not apply to all contraventions of sections 134(1) and (2), regardless of the timing of the agent's acquisition of an interest.

The Court acknowledged that interpreting section 134(4) in this way may result in an "innocent purchaser" being adversely affected in some circumstances. However, the Court considered that this outcome is appropriate given that the purchaser's involvement in the agent's contravention places them closer to the conflict of interest than the vendor. The Court also noted that the statutory directive that commission is not payable in respect of any contract made or brought about in contravention of sections 134(1) and (2) does not adversely impact the named purchaser. The Court concluded that the appropriate balance between the interests of vendors and purchasers is achieved by limiting the absolute right of cancellation to contraventions of sections 134(1) and (2) that existed at the time the contract was entered into.

The appeal was allowed, and the caveats over the properties were deemed to have lapsed. Ms Marsh was ordered to pay Goldline's costs for the appeal on a band A basis and usual disbursements. If an order for costs in the High Court was made in Ms Marsh's favour, it was quashed and is to be reconsidered by that Court in light of this judgment.

Orders