Jones Lang Lasalle Limited v Soft Technology JR Limited

[2021] NZHC 2538

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-001654

[2021] NZHC 2538

BETWEEN

JONES LANG LASALLE LIMITED

Plaintiff

AND

SOFT TECHNOLOGY JR LIMITED

Defendant

Hearing:	1 September 2021
Counsel:	MC Harris and AGH Bradley for Plaintiff DR Bigio QC and AC Eager for Defendant
Judgment:	28 September 2021

JUDGMENT OF DOWNS J

(Second judgment)

This judgment was delivered by me on Tuesday, 28 September 2021 at 12 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Gilbert Walker, Auckland. Hesketh Henry, Auckland. DR Bigio QC, Auckland.

JONES LANG LASALLE LTD v SOFT TECHNOLOGY JR LTD [2021] NZHC 2538 [28 September 2021]

A sequel

[1]                 This case concerns a dispute over a real estate agent’s commission. The judgment is a sequel to my March 2021 decision.1

[2]                 In short, Soft Technology JR Ltd2 owns 116 Access Road, Kumeū, better known as Kumeū Film Studios. Jones Lang LaSalle Ltd3 and Soft Tech entered an agency agreement in relation to the property. Jones Lang later introduced Auckland Tourism, Events and Economic Development Ltd4 to Soft Tech. However, Jones Lang failed to provide Soft Tech a copy of the signed agency agreement under s 126(1) of the Real Estate Agents Act 2008.5 Soft Tech later leased the property to a Hollywood corporate vehicle, Manu One Ltd,6 then ATEED.7

[3]                 Soft Tech paid Jones Lang commission in relation to the Manu One lease, but not the ATEED lease. Jones Lang sued for its commission in relation to the ATEED lease, and a second, related lease between Soft Tech and ATEED.8

[4]A host of issues arose. I held, among other things:

(a)Jones Lang had introduced ATEED to Soft Tech in terms of the agency agreement.

(b)The introduction was an effective cause of the ATEED lease.

(c)Section 126(1)(a) of the Act does not require an agency agreement to be signed by both client and agent before the agent begins real estate work on which commission is payable.

1      Jones Lang LaSalle Ltd v Soft Technology JR Ltd [2021] NZHC 351.

2      Soft Tech.

3      Jones Lang.

4      ATEED.

5      The Act.

6      The Manu One lease.

7      The ATEED lease.

8      The second lease.

(d)Section 126(2) permits relief for an agent when the agent has failed to deliver a signed agency agreement in time, including when the agent has failed to sign the agency agreement in time.

(e)Jones Lang’s failure to give Soft Tech a copy of the agency agreement within time was occasioned by inadvertence.

(f)Commission, if recoverable, was confined to two months’ gross rent.

[5]                 Regrettably, the judgment could not address everything. By agreement, I convened a second hearing 1 September 2021 to determine the outstanding questions. This judgment does so—without further introduction. It begins where the first ends, familiarity of which is assumed.

Does turnover rent comprise “rent” in the agency agreement?

[6]By clause 1.2(e) of the agency agreement, Soft Tech agreed to pay Jones Lang:

Commission at the Agreed Commission Rate calculated on the GST exclusive rental (plus GST) as a standard fee plus any additional fees and other expenses in the attached fee scale (“Fee Scale”) plus GST …

[7]                 The schedule on the front page of the agency agreement describes “Agreed Commission Rate” as “Two months gross rental for 2 years plus”, meaning for a lease of two years or longer. Clause 7 of the fee scale in the agency agreement defines terms, including “rent”:

“rent” means the total rental reserved by the lease or agreement to lease for the whole term together with any additional charges such as outgoings, contributions, partitions or shop front rentals, naming or signage rights, carparking fees and any other payment to or on behalf of the lessor for which the lessee is responsible under the lease or agreement to lease.

[8]                 Turnover rent is payable under the ATEED lease. It is identified therein as a discrete component of rent (in the schedule of specific terms). And, clause 5 of the ATEED lease reads:

Rent

5.1     Rent: The Tenant must pay the Rent to the Landlord being the greater sum of:

(a)the Base Rent; and

(b)the Turnover Rent.

[9]                 Soft Tech disputes turnover rent comprises rent under the agency agreement. On its behalf, Mr Bigio QC acknowledges the definition of rent in the agency agreement is “very broad”. However, he argues other aspects of the agency agreement imply turnover rent is not captured. Clauses 1.3 and 10 provide when commission is payable. In short, that is when: someone enters an unconditional agreement to lease the property; a conditional lease agreement becomes unconditional; the lessee takes possession of the property; or when rent is payable by the lessee.

[10]             Mr Bigio says these conditions envisage rent being calculable when commission is payable. However, turnover rent will often be unknown then. Indeed, it may not then be known whether any turnover rent is payable. Mr Bigio says the commission “figures must be available at this time, … or able to be reasonably estimated (as in the case of OPEX)”. Mr Bigio notes the agency agreement contains no mechanism to vary the date for payment of the commission. Mr Bigio also emphasises the vagaries of turnover rent in relation to film production:

During the trial, Mr Harrison gave evidence as to the vagaries of the film industry. Tax breaks can lure production studios to New Zealand, but the government expects investment to reward the tax breaks. The production studio must decide if it wishes to make such investment. Films are expensive and require funding, which may fall through. Some films require sophisticated infrastructure. Other films need multiple different locations proximate to the studio. As the Court  heard,  location  was  irrelevant  to The Meg so long as it could have water tanks, whereas the post-apocalyptic buildings and the Forest were desirable for other productions such as Into the Badlands and Monkey Kingdom. Simply, the occupation of the Property and the payment of turnover rent would come down to finding the right production at the right time. There remained a risk that the Property would sit empty.

In addition to the industry-specific risks, there were also the risks experienced by any commercial landlord that means the Property could sit empty. A contemporary illustration is the Covid-19 pandemic which prevented access to the site for several weeks. Another example would be interruptions to services, or damage from severe weather preventing use. None of these things can be anticipated in antecedent years.

For these and other reasons, as Mr Ryoo’s evidence demonstrates, even with specific agreements in place with licensees, the turnover rent can still fluctuate. And the turnover rental, even once ATEED has received the licensee payments informing turnover rent, can remain difficult to calculate.

[11]             Mr Bigio contends his analysis is supported by the evidence of Chris Seagar, a valuer. Mr Seagar said in this context, rent generally means “gross rental”.

[12] I do not accept these arguments for three reasons. First, the agency agreement defines rent widely; see [7]. The definition captures:

(a)The total rental reserved by the lease (across the whole term).

(b)Any additional charges, including outgoings.

(c)And, “any other payment to or on behalf of the lessor for which the lessee is responsible under the lease or agreement to lease”.9

[13]             The definition seeks to capture all income payable to the lessor, presumably to optimise the agent’s return. So, prima facie, turnover rent is captured.10

[14]             Second, that there may be difficulty in calculating an aspect of income when commission is payable is not a reason to treat that income as if it did not exist. An agent entitled to commission would presumably, as a rational economic actor, prefer to be paid late than never; in other words, await the income’s calculation. It follows I accept Mr Harris’s submission on behalf of Jones Lang that if turnover rent cannot be readily calculated, commission on it becomes payable when turnover rent is payable (hence known). As Mr Harris puts it, “the agent then rides the same fortune as the client”.

[15]            Third, Soft Tech’s arguments reduce to the following proposition: clause 1.2(e) of the agency agreement should be rewritten as “commission at Agreed Commission Rate calculated on the GST exclusive rental (plus GST) fixed on the face of the lease

9      Emphasis added.

10     That turnover rent is not expressly referred to in the definition—another argument of Soft Tech— is immaterial. Such rent is unquestionably caught as “any other payment …”.

documents or able to be reasonably estimated when the lease is executed”.11 There is, however, no reason to rewrite the agreement. It is clear. Mr Seagar’s evidence does not assist for the same reason (assuming it admissible on an issue of contractual interpretation).12

[16]Turnover rent comprises rent in the agency agreement.

Is commission payable in relation to the second lease?

[17]             Some orientation is necessary. The agency agreement expires when the property is “fully leased”. The agency agreement can also be terminated by notice. Soft Tech gave that notice 17 May 2017. Each variant is subject to a six-month sunset period: commission is payable if an agreement for lease in relation to the property (with someone introduced by Jones Lang) is entered within six months of expiry or termination of the agency agreement. The ATEED lease began 21 February 2017. As observed, Soft Tech and  ATEED  also  entered  the  second  lease.  It  commenced 18 May 2018.

The arguments

[18]             Soft Tech contends commission does not extend to the second lease because even if the property was not fully leased by dint of the ATEED lease—identified areas were excluded because of works to be completed by Soft Tech under a works agreement with ATEED—the sunset period unquestionably ended before an agreement in relation to the second lease was entered.13

[19]             Jones Lang argues otherwise. It contends totality of circumstance reveals the formation of a conditional lease agreement in relation to the second lease contemporaneous with, or proximate to, commencement of the ATEED lease.

11 See [6].

12     Mr Seagar also said if an agent had been involved in a lease which included an element of turnover, a “negotiated basis of commission would have been a logical outcome”. Soft Tech did not inform Jones Lang of the ATEED lease or the negotiations leading to it. The logical outcome anticipated by Mr Seagar could, therefore, not occur.

13 Mr Bigio says the sunset period began 21 February 2017 because the property was  then  fully leased by virtue of the ATEED lease. For reasons that will become apparent, it is not necessary to determine whether the sunset period began then or 17 May 2017 (when Soft Tech gave notice of termination).

Mr Harris notes the agency agreement defines an agreement broadly; the definition includes a “deed or memorandum”.14 On 9 November 2016, Soft Tech and ATEED signed a Memorandum of Understanding.15 The memorandum was expressed as “legally binding”.16 The memorandum identified the bases by which ATEED would lease the property from Soft Tech. These were the ATEED lease; Soft Tech’s construction of additional facilities on the property (pursuant to a works agreement); and inclusion of these facilities in the second lease. All came to pass. Or, as Mr Harris explains:

Jones Lang’s claim to commission on the second ATEED lease is based on how Soft Tech and ATEED themselves described their commitment to enter into the second lease while the agency agreement was on foot. They described their commitment in their November 2016 MOU as an “obligation” and publicly announced the establishment of the studio in terms of obligation. In an effort to avoid paying commission on the first ATEED lease, Soft Tech submitted at trial that there would have been no first lease without the “commitment” it had made to enter into the second lease. Now that the Court has held against it, Soft Tech denies it had made any such commitment.

[20]             Mr Bigio resists this analysis. He contends the memorandum constituted a mere agreement to agree, or “road map”. Mr Bigio says the memorandum created a legally binding process (including an obligation to act reasonably and in good faith), not more. In particular, the memorandum did not confer legal rights or obligations in relation to the property. Mr Bigio says paragraph 5 of the memorandum makes this “abundantly clear”. It reads: “It is intended … three lease documents will be negotiated and entered … following  satisfaction  of  the  Conditions  Precedent”.  Mr Bigio also observes while appendix C to the memorandum contained a suite of possible conditions in relation to the second lease, annual base rent was not set. It could not be, for, the capital works were not yet confirmed.

Analysis

[21]             I begin with fact. In September 2016, the ATEED lease and second lease were presented to ATEED’s board as “a preferred legal structure”—singular.

14     Clause 1.6(a).

15     The memorandum.

16     Clauses 4 and 10.

[22]             On 4 October 2016, ATEED wrote to Soft Tech in relation to “its proposal for the development and leasing of [the property] for the purposes of a new film precinct”. ATEED said:

The First Lease will be entered into ...; The agreement to Design, Build and Lease requires the landlord to develop the new improvements ... Once the new improvements are completed the Second Lease is granted; … The Second Lease will commence upon completion of the landlord’s new improvements

…

[23]             On 9 November 2016, Soft Tech and ATEED entered the memorandum. As observed, it described itself as “legally binding”. The memorandum outlined the essential terms of both leases in detailed appendices; and included mechanisms for fixing terms that could not be fixed immediately. Clause 6 of the memorandum said Soft Tech and ATEED had an “obligation to enter … the second lease”, providing identified conditions were satisfied.

[24]             On 4 February 2017, ATEED and others entered a separate memorandum of understanding in relation to the property. Manu One would transfer the facilities it had constructed to Soft Tech as legacy assets; and ATEED would lease the property from Soft Tech to guarantee long-term use of these assets in film production.

[25]             The ATEED lease began 21 February 2017. Clause 2.1(d) of it gave ATEED the right to terminate if Soft Tech had not completed the required works in time; or if an agreement in relation to the second lease was not entered by a sunset date.

[26]             The commitment of Soft Tech and ATEED to the second lease was highlighted by public announcement of the deal in early March 2017. ATEED’s media release said:

The lease includes a clause for the construction of a purpose-built soundstage, planned to be up and running by early next year. Upon completion of the new sound stage, [Kumeu Film Studio] will double Auckland’s screen studio infrastructure. It will also provide a major transformational shift for the industry in Auckland, increasing the region’s capacity for large-scale screen productions.

Promotional material from the same time described the sound stage as “under development”.

[27]             ATEED later granted Soft Tech more time to complete the required works. The parties amended the memorandum formally, by deed.

[28]             All this reveals the memorandum as no mere “road map”. The parties considered themselves bound to a second lease provided: there was a first (the ATEED lease); Soft Tech completed the required works; and those works were included in the second lease. The ATEED lease began 21 February 2017; so, it was then beyond doubt. That left only the works agreement and the works themselves. By March 2017, these appear to have been treated, at least by ATEED, as something approaching formality. Clause 2.1(d) of the ATEED lease highlights the undeniable interdependence of the two leases. The ATEED lease presupposed completion of the required works and their inclusion in the second lease. Indeed, the ATEED lease and second lease were two sides of the same coin, for, an enduring commitment to film production at the property was in the interests of both ATEED and Soft Tech.

[29]             In short, I accept Mr Harris’s submission. Totality of circumstance reveals the existence of a conditional lease agreement in relation to the second lease contemporaneous with, or proximate to, commencement of the ATEED lease; as evidenced, among other things, by correspondence between ATEED and Soft Tech;

ATEED’s public statements; the memorandum;17 and the ATEED lease.18

[30]             Support for this conclusion comes from an unlikely quarter: Soft Tech’s closing address at the first hearing. One of the issues in the first judgment was whether  Jones Lang’s introduction of ATEED to Soft Tech was an effective cause of the ATEED lease. Soft Tech argued it was not. Mr Bigio said:19

a.     At this time [in 2016] it was apparent that in order to obtain the 5% uplift for Warner Bros, there needed to be further investment in the Property and the creation of additional infrastructure. As a result of the discussions with ATEED in mid-late 2016, Soft Technology agreed to develop the Property into a multi-stage screen studio – i.e., a screen precinct (at [5.32]).

b.     The November 2016 MOU “contemplated a lease over the existing improvements on the Property, entry into the Works Agreement, and,

17     And its formal amendment.

18     There is no reason why a lease agreement cannot be evidenced by several documents. Mr Bigio does not argue otherwise.

19     Emphasis added.

finally, following the building of the sound stages, entry into a second lease that would cover the Property including the new improvements.

c.     The commitment from Soft Technology was only one of the many conditions which needed to be satisfied for Warner Bros to obtain the 5% uplift.

d.     Entry into the Works Agreement was integral to the overall transaction and, as stated by Mr Harrison, the Kumeu Film Studio, as the Property is now known, would not have got off the ground without the commitment from Peter Ryoo to build two large sound stages.

e.     Significant effort, negotiation and time was expended in commercial arrangements which resulted in the First ATEED lease. Soft Technology’s involvement and willingness to incur significant risk, while investing over $20m was an essential part of those arrangements.

In other words, Soft Tech’s case was that an essential part of the ATEED lease was its “commitment” to build and lease new facilities to ATEED—the second lease.

[31]             Soft Tech’s second-hearing, volte-face characterisation emphasises the conditionality of the memorandum and related detail; for example, inability to fix annual base rent until the works had been completed, an incalculable carried into the (9 November 2017) works agreement.

[32]             This argument confuses conditionality for lack of contractual certainty.20 Enough was known by Soft Tech and ATEED—and agreed between them—to constitute a conditional lease agreement in relation to the second lease at, or about the time, the ATEED lease began. The emphasised term introduces the next, related issue.

Does the agency agreement distinguish a conditional lease agreement from an unconditional one?

[33]             Soft Tech contends the agency agreement draws a distinction between an unconditional lease agreement and a conditional one. The argument is best explained by reproducing clauses 1.2 and 1.3 of the agency agreement, which everyone agrees are determinative:

1.2   If the Premises or any part of the Premises is leased:

20 It is elementary an agreement must be sufficiently certain to constitute a contract; see Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at [3.7].

a)by Jones Lang LaSalle; or

b)through the instrumentality of Jones Lang LaSalle; or

c)to anyone introduced, either directly or indirectly, by Jones Lang LaSalle; or

d)by the Client or any other real estate agent or person during the term of any Exclusive Agency regardless of whether or not Jones Lang LaSalle introduced the lessee,

then the Client agrees to pay Jones Lang LaSalle without deduction or set off (legal or equitable) or counterclaim:

e)commission at the Agreed Commission Rate calculated on the GST exclusive rental (plus GST) as a standard fee plus any additional fees and other payments specified in the attached fee scale (“Fee Scale”) plus GST; or

f)if a percentage rate is not specified in the Reference Schedule, the fees and any other payments specified in the Fee Scale plus GST;

g)any other moneys owed to Jones Lang LaSalle pursuant to this contract.

1.3   The minimum fee referred to in the Fee Scale will apply in any event. Jones Lang LaSalle is entitled to be paid the fees and other amounts it is owed if the Premises or any part of the Premises is leased to anyone introduced to the Client by Jones Lang LaSalle before the expiry or termination of this contract or if an agreement for lease is entered into within 6 months after the expiry or termination of this contract. Jones Lang LaSalle shall be entitled to immediate payment of monies owed to Jones Lang LaSalle upon any of the following events occurring:

a)signing of an unconditional agreement to lease or agreement to assign a lease; or

b)the date on which a conditional agreement becomes unconditional; or

c)the lessee taking possession of the Premises; or

d)the date when rent payments are payable by the lessee.

[34]Mr Bigio argues:

It is well established that there is a distinction between an agreement to grant a lease and the actual grant of a lease—the difference is between “I hereby agree that I will grant you a lease” and “I hereby grant you a lease”.

On a natural reading the phrase “agreement for lease” means a leasing agreement whereby an actual (and unconditional) grant of lease is made. This reading is consistent with both clause 1.2 providing that commission is earned where the Property is leased and with the sub-paragraphs of clause 1.3 of the

Agency Agreement which contemplate that commission will actually become payable on the earliest of a number of possible dates including (inter alia):

(a)Signing of an unconditional agreement to lease or agreement to assign a lease, or

(b)The date upon which a conditional agreement becomes unconditional.

Both of the above clauses are referring to an agreement whereby a grant of lease is made either unconditionally or subject to conditions that are then satisfied such that the grant of lease is, without more, effective.

Clause 10 of the Scale of Fees reinforces this view, again providing that commission will become payable on the earliest of a number of dates, including:

-execution of an unconditional agreement for lease, a memorandum of lease, deed of lease or deed of assignment;

-the date on which a conditional agreement to lease becomes unconditional;

-the lessee taking possession of the premises;

-date when rent payments are payable by the lessee.

The more fulsome wording of clause 10 recognises a clear difference between an unconditional agreement for lease and a conditional agreement to lease on which commission is earned only when the conditions are satisfied.

As submitted above, reading clauses 1.2 and 1.3 as a whole, the phrase “agreement for lease” in clause 1.3 properly refers to an agreement whereby a lease is granted, not to a conditional agreement to lease, i.e., an agreement that a lease will be granted at some point in the future subject to certain conditions being satisfied.

[35]             In short, Mr Bigio contends the agency agreement distinguishes an unconditional agreement for lease and a conditional agreement to lease. The second lease did not become unconditional until 18 May 2018. It, therefore, lies outside the sunset period and does not attract commission.

Analysis

[36]             First, Soft Tech’s argument rests on a distinction between an “agreement for lease” and an “agreement to lease”. It says the former means “I hereby grant you a lease”, the latter “I hereby agree I will grant you a lease”. This distinction, using “for” and “to”, is bereft of authority.

[37]             Second, the agency agreement is a standard form one. Doubt attaches to whether a document of this nature would employ the subtlety for which Soft Tech contends, particularly when as observed earlier in this judgment, the agency agreement appears to be framed to optimise the agent’s return.

[38]             Third, most would consider an “agreement for lease” and an “agreement to lease” the same thing.

[39]             Fourth, clause 10 of the fee scale in the agency agreement does not support Mr Bigio’s submission—it undermines it. Clause 1.3(a) provides for commission upon the “signing of an unconditional agreement to lease”.21 Clause 10 of the fee scale, however, provides for commission upon “execution of an unconditional agreement for lease”.22 In other words, the agency agreement draws no meaningful distinction between the terms “to” and “for” in the context of a lease agreement. It uses them interchangeably.

[40]             Fifth, property transactions, including commercial leases, are often subject to conditions. These may include conditions that take months to satisfy; think for example of the delay that can accompany an application for a resource consent. Moreover, satisfaction of a condition is typically beyond the agent’s control.

[41]             Sixth, as Mr Harris observes, Soft Tech’s construction could “work serious injustice”. The facts are illustrative. Soft Tech originally had to 31 October 2017 to complete the building works. In June 2017, it and ATEED agreed to extend the deadline to 31 March 2018. The extension was beyond Jones Lang’s control. Indeed, Jones Lang did not know anything of this. On Mr Bigio’s argument, an extension such as this could preclude recovery of a commission that would otherwise by payable even though the extension was: (a) not known to the agent; and (b) beyond its control even if known.

[42]             The correct interpretation is apparent on the face of the agency agreement.  By clause 1.2, Soft Tech “agrees to pay” commission if the property is leased to a

21     Emphasis added.

22     Emphasis added.

person introduced by Jones Lang. This clause does not impose a rule concerning when the lease must be entered. Its only concern is whether Jones Lang has made the requisite introduction.

[43]             Clause 1.3 addresses when Jones Lang is to be paid commission. Jones Lang is not entitled to payment until the lease becomes unconditional. This clause does require a lease agreement be entered during the sunset period. It does not, however, require a conditional agreement become unconditional during that period. This may occur beyond the sunset period, provided of course, the lease agreement is entered within that period.

[44]Commission is payable in relation to the second lease.

An alternative basis for this conclusion?

[45]             Clause 13 of the agency agreement makes commission payable “on any subsequent letting … of additional space to the lessee” provided the lessee “commences rent payment or takes possession or enters into an agreement to lease no later than 24 calendar months after the commencement date of the lease of the initial space”. Because: (a) ATEED is the lessee under both the ATEED lease and the second lease; (b) the latter was entered within 24 months of the former; and (c) the second lease included newly constructed space (pursuant to the works agreement between Soft Tech and ATEED), Jones Lang argues commission is payable under clause 13 irrespective of my conclusion in relation to the sunset period and the existence of a conditional agreement for the second lease. Soft Tech contends otherwise.

[46]             Courts are reluctant to decide points they need not. This is orthodox common law methodology: decide only what you need to. However, Soft Tech has appealed my first judgment and said it would do likewise if this judgment were against it. The existing appeal is to be heard April 2022. Soft Tech said it hoped a second appeal, if filed, could be heard at that time too. I address the point for this reason.

[47]Mr Bigio contends:

When read in the context of the Agency Agreement, it is submitted that “additional space” contemplates the subsequent leasing of an additional site by the tenant.

For example, “additional space” would not come into play in the event of a “renewal” at an enhanced rental where the property had been improved during the currency of the lease, such that that portion of the site developed an increased value. The Agency Agreement makes numerous references to commission being payable on renewals of subleases and assignments of leases, including how the fee on any such renewal will be calculated. Given the overt references to the renewal of subleases / assignments, it could be expected that had Jones Lang sought to claim commission on renewals of leases that it would have stated this.

...

If, nevertheless, it were found that the sound stages (i.e. the completed construction) fell within the definition of “additional space” then commission would be payable only on that portion of the rent attributable to them, and not on any other leased space. The intent of clause 13 is to apply to space that was not initially leased. In Soft Technology’s submission this leads ineluctably back to the proposition that where the space was “fully leased” there was nothing further to which commission could attach. This is consistent with the intention of the parties that the Agency Agreement would come to an end when the “property” i.e. 116 Access Road was “fully leased”.

[48]Mr Harris responds:

Soft Tech says that the clause does not apply because “additional space” means “additional site”. On this reading of the clause, the agent would receive commission on a new lease of an entirely different site but no commission on additional space leased at the same site. If the parties had intended this (odd) result, they would have used “site”, not “space”. Additional “space” readily encompasses space at the original address. It can capture an office tenant taking additional space on the same floor of its current premises or an additional floor of the same building; or new carparks constructed for the tenant; or additional warehousing space constructed for an industrial tenant on the same site—or any additional space on which the lessor earns income.

If commission is allowed under this clause of the agency agreement, the same commission would be payable. This is because the completion of the “additional space” led to an increase [of] both the base rent and turnover rent. The income attributable to the additional space is thus the additional rent reserved under the second lease that exceeds the rent under the first lease.

[49]             I agree with Mr Harris for the reasons he gives. Commission is also payable under clause 13.

Is recovery of the whole or part of the commission  claimed  by Jones Lang  “fair and reasonable” under s 126 of the Act?

[50]             Mr Bigio says no. He contends Jones Lang’s “technical entitlement to commission” should be reduced because:

(a)“The causal potency of [Jones Lang’s] introduction was spent and had nothing to do with the fulfilment of the conditions which gave rise to [the second] lease.” All conditions to be fulfilled “related to acts of Soft Technology,  and  the  substantial  financial   investment   of   Soft Technology, in respect of which Jones Lang should not be entitled to benefit.”

(b)Turnover rent “is designed to compensate the lessor for the cost of” its “substantial investment in the premises” and “generate a return on that investment”. Commission based on turnover rent would “represent a windfall” to Jones Lang.

(c)Jones Lang’s involvement of Metro Commercial circumvented the protections created by the Act. Permitting Metro Commercial to share commission “would result in the complete circumvention of the … Act”. Commission should therefore be reduced by 50 per cent.

[51]             It is useful to repeat two of the first judgment’s conclusions. First, s 126 of the Act governs the enforceability of a promise to pay commission, not the validity of agency agreements.23 More simply, s 126 affects recovery of commission, not more. Second, s 126 must be applied with the rights of consumers in mind, but also in a manner respecting the rights of honest agents.24 So, while the commission must be “fair and reasonable in all the circumstances” before a Court may order it  payable  in whole or part, it does not follow an agency agreement should be refashioned according to judicial preference—as if the parties had not freely bargained. Restraint (from refashioning) may be thought especially warranted when: (a) the agreement was made at arm’s length; (b) the consumer of the agent’s services is commercially astute;

23     Jones Lang LaSalle Ltd v Soft Technology JR Ltd, above n 1, at [87].

24     At [86] and [93].

and (c) the breach of the Act is unconnected to the fairness and reasonableness of the agreement (being one of the relevant circumstances).

[52]             All three caveats apply. The agency agreement between  Jones  Lang  and Soft Tech was made at arm’s length. Soft Tech in the person of Mr Ryoo is commercially astute. (Mr Ryoo presents as a hard-headed businessperson, well capable of protecting Soft Tech’s interests.25) Jones Lang’s inadvertent failure to provide Soft Tech a timely copy of the signed agency agreement is unconnected to the fairness and reasonableness of the agreement. Indeed, as will be apparent, Mr Bigio made no attempt to connect the breach to any of his arguments concerning fairness and reasonableness. However, in deference to Mr Bigio’s contentions, I address each.

[53]             The question of “causal potency” is not whether other factors played a role in the second lease; plainly, they did. Rather, it is whether Jones Lang’s introduction of ATEED to Soft Tech was an effective cause of the second lease. As I observed in the first judgment, Jones Lang’s introduction enabled ATEED to assess the property’s capacity to host a permanent film hub; foster a close relationship with Soft Tech (through Mr Harrison’s close relationship with Mr Ryoo); learn detail of the Manu One lease; learn what arrangements might be attractive to Soft Tech in relation to the property; and establish a connection between Mr  Ryoo  and  the  New  Zealand  Film Commission, the body responsible for administering government grants in relation to film production costs.26 Moreover, the second lease was agreed at or about the time the ATEED lease began, and that lease presupposed the second lease. As emphasised earlier, the two were interconnected. So, contrary to Mr Bigio’s submission, Jones Lang’s introduction of ATEED to Soft Tech was an effective cause of the second lease between those parties.

[54]             Next, turnover rent is captured by the agency agreement. So too related commission. Mr Mayhew said commission under the agency agreement was consistent across the market. This testimony went unchallenged. It is thus awkward to characterise commission on turnover rent as a “windfall”.

25     For example, Jones Lang LaSalle Ltd v Soft Technology JR Ltd, above n 1, at [20].

26     At [60]–[64].

[55]             Finally, Metro Commercial’s involvement did not infringe the Act. It cannot seek commission from Soft Tech; its relationship is exclusive to Jones Lang. Jones Lang’s agency agreement with Soft Tech did not preclude Jones Lang from entering  other  arrangements  to  benefit  Soft  Tech.  Its  arrangement  with  Metro Commercial did, for, Mr Hudson’s connections facilitated Jones Lang’s introduction of ATEED to Soft Tech. Furthermore, Soft Tech was aware from early 2015 that Jones Lang was working with Metro Commercial. Soft Tech did not question this. Any reduction in commission would thus be illogical and unprincipled.

[56]             It follows I am satisfied (the entire) commission is fair and reasonable in all the circumstances, and not to make an order under s 126(2) would be unjust.

Commission: the correct figure?

[57]             The two disputes here are best introduced with this lightly edited table of Jones Lang:

$ excl GST	Comment
Base rent	[REDACTED]	This is the figure that was agreed  at  trial.  Jones Lang has not accepted Soft Tech’s additional reduction for the southern platform construction costs.
Turnover rent	[REDACTED]	First lease turnover rent (common ground).
[REDACTED]	Second lease turnover rent through 30 November 2019 (that is, until lease was amended and restated). All figures common ground except Jones Lang has not accepted Soft Tech’s reduction for southern platform construction costs.
[REDACTED]	First year of GSR lease (Amazon). Monthly turnover rent of [REDACTED] as per ATEED rent calculation less: Covid-19 lockdown rent abatement; ATEED fees; and base rent.
[REDACTED]	Second part year of GSR lease 1 December 2020 to 20 February 2021. Monthly turnover rent calculated on same basis as for prior period.

Opex	[REDACTED]	All  figures  common  ground  except   for Jones Lang’s estimated balance owing of [REDACTED] for the period from 1 January 2019 for which actual opex figures are not available to Jones Lang. It is Jones Lang’s best estimate of what additional opex would have been paid if opex had continued to be charged at the same rate. Likely to be less than actual opex.
Gross rent	[REDACTED]	Sum of all above columns.
Average per annum	[REDACTED]	[REDACTED]
Two months’ gross rent	[REDACTED]	Two months’ gross rent being [REDACTED] per cent of the average annual rent.

[58]             Soft Tech contends arrangements in relation to: (a) the construction of the southern platform; and (b) operating expenditure; mean that commission is less than [REDACTED] (plus GST).

Southern platform

[59]             In 2018, Soft Tech, ATEED and a tenant, Cricket Hop, agreed Soft Tech would develop backlot 2 and construct a building platform known as the southern platform. Soft Tech contributed [REDACTED], which it paid by foregoing the same amount in rent. Soft Tech contends the base rent figure ([REDACTED]) and the second lease turnover rent figure ([REDACTED]) should be reduced to account for Soft Tech’s contribution to the southern platform.

[60]             Mr Bigio advances the same argument already rejected: turnover rent must be calculable from the outset. Mr Bigio also relies on clause 8 of the fee scale to the agency agreement, which reads:

Incentives: Where the minimum commission predetermined rental increases are incorporated, the average rental over the term of the lease shall be used for calculation purposes. In calculating the fee, regard shall be had to any fixed rent escalations negotiated during the term certain of the lease, however no regard shall be taken of any rent free periods, rental discounts, rebates, cash allowances or any other incentive that is offered by the lessor as an inducement to lease.

[61]             Mr Bigio contends Jones Lang could have included a similar clause to capture base rent otherwise excluded by agreements like that in relation to the southern platform. But, Jones Lang did not.

[62]             The short answer to this submission is found in clause 7 of the fee scale in the agency agreement: commission is payable on the “total rental reserved by the lease or agreement to lease for the whole term”. This language means what it says.  That  Soft Tech considered it expedient to make an arrangement  with  ATEED  and Cricket Hop does not affect the commission payable to Jones Lang.

Operating expenditure

[63]             At trial, Jones Lang accepted Mr Ryoo’s figures about operating expenditure with a caveat: it noted bank statements and other disclosure did not show any outgoings since late 2018, save rates and insurance. In a post-trial affidavit, Mr Ryoo disclosed for the first time that Soft Tech and ATEED had agreed from late 2018 ATEED would directly pay all outgoings apart from rates and insurance.

[64]             Mr Bigio contends this arrangement in relation to operating expenditure reduces commission because “there is no provision in the agency agreement for an OPEX wash up”.

[65]             The similarly short answer to this submission is the definition of “rent” in clause 7 of the fee scale in the agency agreement, which extends to “any additional charges such as outgoings, contributions …”. The definition does not turn on whether outgoings are paid in the first instance by Soft Tech. So, this arrangement does not affect commission either.

Interest

[66]            Jones Lang seeks interest under the agency agreement (clause 1.4), which attracts a rate of 1.5 per cent per month on “monies owed  by  the  Client  …  at Jones Lang LaSalle’s election”. Mr Harris contends interest should be ordered because “[i]t was Soft Tech’s choice to oppose the claim, to rely upon s 126, and to place s 126 at the heart of its defence”. Mr Harris cites Ryde Developments Pty Ltd v

The Property Investors Alliance Pty Ltd.27 In that case, interest was awarded on a commission allowed under the New South Wales equivalent to s 126, albeit without discussion.

[67]             Soft Tech resists. Mr Bigio contends no monies were owed by Soft Tech to Jones Lang because the latter breached the Act, and commission then turns on the Court’s discretion. Mr Bigio also says s 87 of the Judicature Act 1908 applies because interest under the agency agreement is not as of right; this because it is only payable at Jones Lang’s election. Mr Bigio says I should award interest only from judgment. He relies on Marchand v Jackson, in which Kós J held:28

Any award of pre-judgment interest would be calculated to put the plaintiffs in the position they would have been in had they had NZI Echelon Home cover. Interest should run only from the date it is likely NZI would have made payment under that policy to the plaintiffs. I am not satisfied on the evidence that the plaintiffs have demonstrated that NZI would likely have made payment any earlier than the date of this judgment. I therefore decline to award pre-judgment interest under s 87.

[68]             Marchand was about the liability of a broker who falsely claimed to have insured his clients’ home. Kós J held the insurer would have paid on the policy had the broker placed the policy as promised. However, the Judge declined to award interest because the insurer would not have paid any earlier than the date of judgment. Marchand holds nothing of relevance to this case.

[69]             That interest is payable at Jones Lang’s election does not mean it is not payable as of right. The right belongs to Jones Lang.

[70]             This leaves s 126. There is no reason in principle why interest should not be recoverable. The section refers to “commission or expenses that will be recoverable if the order is made”.29 Again, s 126 does not invalidate an agency agreement; it creates a barrier to recovery of commission. Plainly, interest or any other expense must be fair and reasonable in the circumstances, and it must be unjust were the order not made.

27     Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd [2017] NSWCA 339.

28     Marchand v Jackson [2013] NZHC 1752 at [31].

29     Emphasis added.

[71]             There is no suggestion this aspect of the agency agreement is unfair or unreasonable, let alone oppressive. Had Mr Ryoo  thought it any of these things,  Soft Tech would not have entered the agency agreement. Moreover, Soft Tech has deployed s 126 as sword rather than shield; and with gusto. Soft Tech is, of course, entitled to raise s 126, just as it is entitled to defend Jones Lang’s claim. The point, however, is that it is hollow for Soft Tech to complain about interest when but for Jones Lang’s modest inadvertence, there could be no contest about the reasonableness or fairness of interest. The statutory test is met.

[72]Interest is payable, as claimed.

Result and orders

[73]Soft Tech must pay Jones Lang:

(a)Commission of [REDACTED] (in relation to the ATEED lease and second lease).

(b)GST.30

(c)Interest, as sought.

Costs

[74]             Jones Lang should have scale costs. If the parties disagree, they may file memoranda of not more than seven pages each:

(a)Jones Lang by 19 October 2021.

(b)Soft Tech by 26 October 2021.

(c)Jones Lang in reply by 2 November 2021.

30 Jones Lang seeks payment of GST on the basis the agency agreement says commission is payable “plus GST” (clause 1.2(e)). Soft Tech’s table of figures (dated 6 September 2021) in response to Jones Lang’s does not include GST. This appears to be an oversight.

Temporary suppression

[75]             Soft Tech and ATEED may seek suppression of commercially sensitive detail. The judgment is suppressed until 12 October 2021 to allow each to identify proposed redactions. Soft Tech and ATEED may wish to focus on the figures in the table at [57].

……………………………..

Downs J