Gounden v Lovegrove Realty Limited

[2012] NZHC 2010

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-001414 [2012] NZHC 2010

UNDER  the Judicature Act 1908

IN THE MATTER OF     an appeal of the decision of Her Honour Judge N Mathers in the Auckland District Court under CIV-2010-004-002596 and delivered on 14 February 2012

BETWEEN  LATCHMAN GOUNDEN Appellant

ANDLOVEGROVE REALTY LIMITED Respondent

Hearing:         9 August 2012

Counsel:         S Singh for the Appellant

J A K Waymouth for the Respondent

Judgment:      10 August 2012

JUDGMENT OF DUFFY J

This judgment was delivered by Justice Duffy on 10 August 2012 at 5.00 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Counsel:     J A K Waymouth P O Box 302690 North Harbour Auckland 0751 for the

Respondent

Solicitor:     S  Singh  C/-  D  Singh  P  O  Box  10018  Dominion  Road  Auckland  1446 (DX CP37512) for the Appellant

GOUNDEN v LOVEGROVE REALTY LTD HC AK CIV-2012-404-001414 [10 August 2012]

[1]      The  appellant,  Latchman  Gounden,  appeals  against  a  decision  of  the District Court finding that he and Suresh Ganesh are personally liable to pay the respondent, Lovegrove Realty Limited (Lovegrove) a fee/commission, pursuant to a real estate property listing authority, which appointed Lovegrove as the selling agent giving it authority to market a property at 7A Boeing Place, Goodwood Heights, Manukau. The appeal is opposed.

[2]      Mr Gounden raised five grounds of appeal, some of which challenged the factual findings of the District Court.  During the course of the hearing, the argument for Mr Gounden became more refined and ultimately it focused on grounds four and five of the notice of appeal.  In essence, these grounds relate to whether or not the District Court properly interpreted and therefore applied clause 10 of the listing authority.

[3]      For the reasons set out below, I am satisfied that the appeal should be allowed and that Mr Gounden cannot be liable to pay Lovegrove’s fee/commission under the listing authority.

[4]      Section 126 of the Real Estate Agents Act 2008 provides that 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 the work is performed under a written agency agreement signed by or on behalf of the client and the agent.

[5]      In this case, the agreement to satisfy s 126 is to be found in a document, dated 28 July 2010, titled as a real estate property listing authority.  On the first page of this document, the address of the property to be sold is set out and the vendor is described as LS Property Development Limited.  Initially, other descriptions of the vendor were recorded in the agreement, but these have been crossed out.  The now crossed  out  descriptions  refer  to  the  vendor  as  Mogans  Homes  Limited,  and LS Property Development Trust.

[6]      In a section on the first page headed “contact if not owner”, Mr Gounden’s

name has been inserted.  There is no suggestion in this document that Mr Gounden

personally was the owner of the property, and the only reference it makes to him is to the effect that he was not the owner.

[7]      Under clause one of the terms and conditions of the listing authority, the vendor agrees to the agent being entitled to fees, commissions and other expenses. Of key concern to the outcome of this appeal is clause 10.  It provides as follows:

If the person signing this authority is not the sole owner of the property then they hereby absolutely warrant and represent that they have the necessary authority of all owners to make this appointment and if a Trust specifically warrant that all trustees have consented to this agency appointment and any trustee executing this contract herein agree to be personally liable for the payment of fees, commissions, legal fees, interest and other entitled expenses at the rate appearing herein.

[8]      The signatory who appears on the listing authority as signing on behalf of the vendor is Mr Ganesh.  He wrote that he signed as trustee, despite the vendor being a limited liability company.   This is due to the fact that LS Property Development Trust had earlier been described as the vendor.   Mr Gounden did not execute the listing authority.  His signature appears nowhere on the document.

[9]      A historical search copy of the property’s certificate of title records a transfer of the property from Mogan Homes Limited to LS Property Developments Limited on 20 July 2010.  The listing authority was executed on 28 July 2010.  Consequently, at the time the listing authority was executed, LS Property Developments Limited was the sole owner of the property.  The deletions of the earlier descriptions in the listing authority of the vendor must have been made for the purpose of ensuring that the vendor as recorded in the listing authority was consistent with the legal owner of the property as recorded in the certificate of title, and that the corrections were made with the agreement of the signatories to this document.  I note that Ms Maynard, who is a licensed salesperson with Lovegrove, who was present when the authority was executed, gave evidence that she believed that the vendor was LS Property Developments Limited.  The same evidence was given by Mr van Wagoner, who is the licensed manager of Lovegrove.  So there is no dispute as to who the vendor was.

[10]     It follows that the document records a listing authority for a property that was owned by a limited liability company.

[11]     Mr  Ganesh  is  a  director  of  LS  Property  Developments  Limited,  as  is Mr Gounden.  So Mr Ganesh was an appropriate person to sign the listing authority. Whether or not he had authority to bind LS Property Developments Limited in the way that he purported to do is neither here nor there.   I consider that Lovegrove would have been entitled to rely on Mr Ganesh holding himself out in this way as being sufficient  ostensible authority to  bind  LS  Property Developments  Limited under the listing authority.   However, Lovegrove has not sought to claim for its fees/commissions from the company.  This may well be because, as I was advised in the course of the hearing, the company is now in liquidation.

[12]     The question, therefore, is whether Lovegrove can, on the strength of the listing authority, make a claim for its fees/commissions against the directors of the company, and in particular against Mr Gounden.   I consider that clause 10 of the listing authority would not of itself enable Lovegrove to commence a claim for payment  of its  fees  against  the directors  personally.   A director  cannot  incur a personal liability for a company’s obligation simply because he or she executed the document creating such an obligation.  Furthermore, I note that the focus of clause

10 is on the person who signs the authority warranting that they have absolute authority to do so on behalf of the owners.  Mr Gounden never signed the authority. Thus, for this reason alone, I do not consider that he could be sued on any warranty that might be found in the first part of clause 10.

[13]     Lovegrove argued that the second part of clause 10 provides that if the owner is a trust, anyone who signs the authority does so warranting that all trustees have consented to the appointment and any trustee executing the contract becomes personally  liable  for  payment  of  fees,  commissions  and  other  expenses.    The difficulty with this argument is that the owner of the property at the time the listing authority was executed was not a trust, but a limited liability company.   For this reason alone, I cannot see how the argument can stand.

[14]     The fact that the vendor was initially misdescribed as being LS Property Developments Trust cannot bring the aspect of clause 10 relating to trusts into effect. Lovegrove attempted to argue that LS Property Developments Limited was a company that held the property as a trustee for LS Property Developments Trust and,

therefore, for the purposes of clause 10, the company’s directors could be treated as a trustee who executed the agreement so that the directors could become personally liable for payment of Lovegrove’s fees, commission and other expenses.   I do not accept this argument.

[15]     I consider that the part of clause 10 that deals with trusts does no more than to provide for the situation where the trustee of a trust has executed the agreement. Here, if LS Property Developments Limited holds the subject property on trust for the LS Property Developments Trust, it is the limited liability company that is the trustee and not its directors.  To see the directors in their personal capacities as being trustees would be to fail to distinguish between the separate legal identities of the company and the directors.  Thus, I do not consider that the directors of LS Property Developments Limited could be viewed as being trustees in their personal capacity. So, for this reason, I do not think that clause 10 could impose liability on them.

[16]     Moreover,  even  if  I  were  persuaded  to  confuse  the  directors  with  the company, insofar as the company was a trustee for LS Property Developments Trust, there is the further difficulty that clause 10 only makes any trustee who has executed the agreement personally liable for payment of fees/commission.  This is a greater obstacle to Lovegrove recovering against Mr Gounden, because even if he were to be seen as a trustee in his personal capacity, he did not execute the agreement.   A trustee’s personal liability under clause 10 hinges on him or her having executed the agreement.

[17]     I was told that there had been a dispute on the evidence as to whether or not Mr Gounden was present at the time the listing authority was executed and whether he approved it being signed.  I do not consider that I need to determine whether the District Court was right to make factual findings against Mr Gounden on those questions.   The simple fact is that, legally, his presence at the time the licensing authority was signed and his approval of Mr Ganesh signing it cannot of itself bring clause 10 into effect when it comes to Lovegrove attempting to establish a personal liability on the part of Mr Gounden for payment of its fees/commission.

[18]     The parties are given leave to file memoranda on costs.   Ordinarily, costs follow the event and, therefore, a successful appellant would expect to receive an award of costs.  However, I have the impression that the focus in the District Court was on issues other than interpreting clause 10 of the licensing authority and insofar as  that  clause  may  have  been  given  some  attention,  it  is  likely  to  have  been subsumed by other arguments that were more factually focused.  If Mr Gounden’s success on appeal is largely due to arguments being raised that were not clearly put before the District Court, that could affect his entitlement to the usual award of costs. The parties should address this question in their memoranda on costs.

Result

[19]     The appeal is allowed. The findings and orders made in the District Court are set aside.

Duffy J