Jones Lang Lasalle Ltd v Soft Technology JR Ltd

[2021] NZHC 351

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-001654

[2021] NZHC 351

BETWEEN

JONES LANG LASALLE LIMITED

Plaintiff

AND

SOFT TECHNOLOGY JR LIMITED

Defendant

Hearing:

15 – 19 February 2021

Counsel:

MC Harris and AGH Bradley for Plaintiff

DR Bigio QC, MAH Macfarlane and AC Eager for Defendant

Judgment:

3 March 2021

JUDGMENT OF DOWNS J

This judgment was delivered by me on Wednesday, 3 March 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 351 [3 March 2021]

A lease commission dispute in the context of film production

[1]    New Zealand is now an important destination for Hollywood productions, both television and film. This case involves the Kumeu Film Studios at 116 Access Road, Kumeu. Soft Technology JR Ltd owns the property.1 In 2017, Soft Tech leased the property to a council-controlled organisation called Auckland Tourism, Events and Economic Development Ltd, or ATEED.2 Jones Lang LaSalle Ltd3 contends it introduced ATEED to Soft Tech, and Soft Tech is liable for commission in relation to the ATEED lease because of its agency agreement with Jones Lang. Soft Tech denies any commission is payable. It describes Jones Lang’s claim as “tenuous”.

[2]    Many issues arise. One is whether  Jones  Lang  “introduced”  ATEED  to Soft Tech. Another concerns the effect of s 126 of the Real Estate Agents Act 2008. Jones Lang did not provide Soft Tech a copy of the agency agreement signed by Jones Lang “within 48 hours after the agreement was signed by … the client”.4 Section 126 says a real estate agent is not entitled to “any commission” in these circumstances. But, the same section also allows a Court to order commission is recoverable if conditions are met.5 Jones Lang says these are. Soft Tech says otherwise. It argues the provision does not permit recovery on the facts.

A confined judgment

[3]    Regrettably, this judgment cannot address everything. The five-day trial focussed on liability, not quantum.6 To compound matters, s 126(3)(b) permits recovery of commission if, among other things, “the commission … that will be recoverable if the order is made [is] fair and reasonable in all the circumstances”. This presupposes recoverable commission is known. The difficulty is that it is not; the parties disagree what the recoverable commission would be if relief is available to Jones Lang. Consequently, what would normally be questions of quantum are fused with questions of liability.

1      Soft Tech.

2      The ATEED lease.

3      Jones Lang.

4      Real Estate Agents Act 2008, s 126(1)(c).

5      Section 126(2).

6      This is not to imply the trial was confined to liability; it was not. But, liability was its focus.

[4]    This judgment addresses everything it can, but no more. If the parties cannot agree on the remaining questions, a further judgment will issue.7 This will not surprise the parties. I foreshadowed a confined judgment soon after reserving my decision and the parties said they were content with that.8

The property and parties

[5]    Number 116 Access Road, Kumeu comprises 27.12 hectares.9 The property is across two titles: Lot 1 DP79682;10 and Lot 10 DP59403.11 Lot 1 is 19.96 hectares; Lot 10, 7.16 hectares.

[6]    Peter Ryoo’s parents founded Soft Tech. Mr Ryoo manages the company and is responsible for its business.

[7]    Soft Tech bought the property in 2012. In 2015, Lot 10 was still covered in bush and readily accessible only by Lot 1. The large commercial buildings on Lot 1 (some 13,713 square metres) were largely occupied by timber industry tenants. The property is much different from what it was then.

[8]Jones Lang is a real estate agency.

Background

[9]    In March 2015, Conor McEvoy-Roberts of Jones Lang contacted Mr Ryoo about potential leasing opportunities in relation to the property. Nothing came of the approach.

[10]   In August  2015,  Jones  Lang  reinitiated  contact.  On  20  August  2015,  Mr McEvoy-Roberts sent a brochure and draft agency agreement to Mr Ryoo.  On   1 September 2015, Mr McEvoy-Roberts followed up.

7 See [109].

8      Jones Lang LaSelle Ltd v Soft Technology JR Ltd HC Auckland CIV-2017-404-1654, 23 February 2021 (Minute of Downs J).

9      The property.

10     Lot 1.

11     Lot 10.

[11]   Mr McEvoy-Roberts’ persistence bore fruit even though other agencies were also courting Mr Ryoo. On 4 September 2015, Mr Ryoo signed a general agency agreement with Jones Lang in relation to the property.12

[12]   ATEED has long promoted Auckland as a destination for international film production. It worked with different agents to find suitable venues for such production. One was Martin Hudson of Metro Commercial. Mr Hudson is a former Jones Lang employee.

[13]   On 5 May 2015, Harry Harrison, ATEED’s head of International Attraction for Screen Auckland, asked Mr Hudson for help in identifying venues for international studios.  In  late  August  or  early  September  2015,   Mr  Hudson  contacted   David Mayhew of Jones Lang. Mr Hudson did so as he knew Mr Mayhew was “active” in the Silverdale market, and considered he may be able to help. Mr Mayhew told Mr Hudson the property was coming to market and worth ATEED’s attention. Mr Hudson relayed this to Mr Harrison.

[14]   Mr Harrison was keen to investigate as he was familiar with the property. He had been to the property several times between 2012 and 2015.

[15]   Jones Lang agreed to work with Metro Commercial (through Mr Hudson), sharing any commission.

[16]   Mr Mayhew promptly relayed ATEED’s  interest  to  Mr  Ryoo.  However, Mr Ryoo was reluctant to engage.13 Similar discussions with ATEED three years earlier had gone nowhere. Mr Ryoo was also concerned leasing the property for film production could result in long periods when it was not in use.

[17]   Jones Lang encouraged ATEED to prepare draft heads of terms in the hope of interesting Mr Ryoo. On 22 September 2015 everyone met. A contemporaneous record describes Mr Ryoo as “obviously slightly nervous” about ATEED’s interest.

12     The agency agreement.

13     See fn 33.

That interest was on behalf of two studios, AMC and Warner Brothers. AMC’s interest later dropped away.

[18]   On 28 October 2015, after numerous exchanges, Jones Lang sent a draft lease agreement to Mr Harrison of ATEED.    Mr Harrison sent the draft  agreement to    Mr Ryoo the next day. The proposed lease concerned the entire property, that is, Lots 1 and 10.

[19]   Unlike AMC, Warner Brothers did not need to use the bush. It was proposing to shoot a movie about a giant, prehistoric shark: The Meg. Consequently, Lot 10 was removed from the draft lease agreement.

[20]   On 29 October 2015, Mr Ryoo demanded Jones Lang reduce its agreed commission. Mr Ryoo threatened to pull Soft Tech out of the deal if Jones Lang did not agree a reduction. Jones Lang offered a compromise but ultimately capitulated.

[21]   On 15 December 2015, Soft Tech entered a lease with Manu One Ltd,14 a subsidiary of Warner Brothers and the corporate vehicle for The Meg.15 As foreshadowed, the lease was confined to Lot 1. The term was 10 months, with two rights of renewal for one month each.

[22]Soft Tech paid Jones Lang its commission in relation to the Manu One lease.

[23]   In December 2015, Mr Mayhew showed a prospective tenant the property. Mr Mayhew followed up with Mr Ryoo in the New Year. In February and May 2016, Mr Mayhew introduced other interested parties in the property; one to buy, another to lease.

[24]   Unbeknown to Jones Lang, Soft Tech and ATEED had commenced their own discussions about the property. These began no later than 21 March 2016.

14     Manu One.

15     Manu One lease.

[25]   In June 2016, Mr Mayhew inquired of Mr Ryoo when the property would be available to lease. Mr Mayhew did so again in August, saying he had someone interested in the property after Manu One left. However, by about this time, Soft Tech and ATEED had agreed, in principle, ATEED would lease the property from Soft Tech; and Soft Tech would continue to develop facilities on the property for use in film production. To film The Meg, Manu One built, among other things, production workshops, offices, a very large green screen, a similarly large “Ocean Tank”, and a large dive tank on the property.

[26]   On 9 November 2016, Soft Tech and ATEED signed a “legally binding” memorandum of understanding. The memorandum identified the bases by which ATEED would lease the property from Soft Tech.

[27]   On 4 February 2017, ATEED, Manu One, and Warner Brothers16 entered a memorandum of understanding in relation to the property. The memorandum identified 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 the long-term use of these assets in film production.

[28]   On 21 February 2017, the lease between Soft Tech and ATEED began. The initial term was four years. Both Lot 1 and Lot 10 were included, apart from two small areas.

[29]   Shortly thereafter, ATEED announced the lease as a “fantastic milestone for Auckland’s film industry”. ATEED said it had “partnered” with the New Zealand Film Commission17 and Warner Brothers to form Kumeu Film Studios “as a result of a New Zealand screen production grants five per cent uplift”. To elaborate, NZFC administers government grants to eligible productions equivalent to 20 per cent of production costs. An additional five per cent, or “uplift”, is available for productions creating “legacy” infrastructure, meaning infrastructure left for use in film production.

16     And others.

17     NZFC.

[30]   In November 2017, Soft Tech and ATEED entered an agreement for the construction of new facilities to be leased to ATEED on completion. The lease expired 20 February 2021, the same date as the first ATEED lease.18

[31]   On 11 April 2017, Jones Lang informed Soft Tech commission was payable in relation to the ATEED lease.

[32]   On 17 May 2017, Soft Tech responded (through its lawyers) the agency agreement expired December 2015, as the Manu One lease meant the property was “fully leased”. Soft Tech said if the agency agreement were still in force, its letter should be treated as notice of termination.

The agency agreement between Jones Lang and Soft Tech

[33]The agency is a general one; with commencement recorded 20 August 2015.

[34]Commission is payable by Soft Tech if the property or any part of it “is leased

… to anyone introduced, either directly or indirectly, by” Jones Lang.19

[35]   Another clause provides commission is payable by Soft Tech if the property is leased to anyone introduced by Jones Lang “before the expiry or termination of this contract or if an agreement for lease is entered … within six months after the expiry or termination of this contract”.20

[36]   Commission is also payable if Soft Tech subsequently let additional space to an “associate or subsidiary” of the original lessee (if other conditions were met).21

[37]   The agency agreement expires when the property is “fully leased”. The agreement can also be terminated by notice.

18     In November 2019, Soft Tech and ATEED entered an amended and restated lease.

19     Clause 1.2.

20     Clause 1.3.

21     Clause 13.

Did Jones Lang “introduce” ATEED to Soft Tech in terms of the agency agreement?

[38]   Jones Lang contends Soft Tech is liable for commission in relation to the ATEED lease because it introduced ATEED to Soft Tech during the life of the agency agreement. The parties agree applicable law is clear, with one caveat.

[39]   In this context, “introduce” carries its ordinary, natural meaning. So, for example, the term has been held to mean “to bring a person into the knowledge of something” or “initiate in the knowledge of a subject”.22 An agent claiming commission need not necessarily be the first person to introduce a buyer or tenant to the property.23

[40]   The introduction (by the agent) must be an effective cause of the sale or lease. The causation test has been expressed in different ways:24

Was the action of [the agent] in introducing [the purchaser] and conducting the inconclusive negotiations the effective (but not the only or exclusive) cause of the transaction that ultimately resulted? Has there been a break in the chain of causation between her actions and the ultimate sale? Was there a connection between the introduction and the eventual sale? Or had that connection been broken?

[41]   Introduction cases often involve a claim to commission when the parties to the sale or lease have successfully reunited after the transaction when, for whatever reason it did not proceed initially. One example is sufficient. In Brandon v Baywide Realty Ltd, a sale collapsed because the purchaser could not secure finance.25 After the agency ended, the vendor contacted the purchaser and arranged finance so the purchaser could buy the property. The High Court upheld the agent’s claim for commission. It concluded the agent’s initial introduction was one of two materially causative factors:26

The fact that [the vendor] played the most immediate role does not destroy the causative link. There can be no doubt that [the vendor] was a major participant

… [and] that the sale … would not have gone ahead without [the vendor’s]

22     Max Christmas Real Estate Ltd v Schumann Marine Pty Ltd [1987] 1 Qd R 325 (QSC) at 335.

23     Asean Capital Partners Ltd v Power Beat International Ltd HC Hamilton CP73/79, 15 September 1999 at [41].

24     Albany Real Estate Ltd v Vousden [1998] ANZ ConvR (HC) 131 at 134.

25     Brandon v Baywide Realty Ltd (2006) 7 NZCPR 129 (HC).

26 At [15].

intervention and arrangement of finance for her purchasers. Equally, though, but for [the agent’s] introduction the sale would not have materialised.

[42]Harrison J observed:27

The Court considers the connection between the introduction and the eventual sale and whether there has been a break in the chain of causation sufficient to destroy it. The authorities establish ... the agent does not have to satisfy a high threshold to succeed.

[43]   On behalf of Soft Tech, Mr Bigio QC contends the italicised sentence is not supported by authority—the caveat I foreshadowed.

[44]   In Max Christmas Real Estate v Schumann Marine Pty Ltd, the purchaser went to the auction, but not as a buyer. 28 He attended “for the purpose of drawing attention to the fact that improvements thought to be made to the property lay at least partly outside it”.29 The purchaser told the auctioneer “it was totally improper that the property should be presented at public auction with ‘highly important factors completely omitted’”.30 The property was passed in. Early the next year, the purchaser bought the property from the vendor. A Full Court of the Queensland Supreme Court held the agent was entitled to commission even though the trial Judge concluded the purchaser “did not attend the auction in the capacity of purchaser”.31

[45]The case supports Harrison J’s observation. So too Tipping J’s observations in

Harcourts Group Ltd v McKenzie:32

In my judgment questions of causation, for present purposes, must be approached on the basis that the primary contractual stipulation is that commission will be payable if the property is sold to anyone introduced to the property through Harcourts’ agency. If the agent can show that the ultimate purchaser was introduced to the property through his agency then prima facie as a matter of construction commission is payable. The prima facie obligation to pay commission ceases only when the agent’s introduction ceases to have a material bearing on the sale. By that I mean that the agent’s introduction was no longer instrumental in any material way in bringing about the sale. That, in my judgment, is the only way to harmonise the words of the contract with the proposition established by the authorities that there must be some causal connection between the introduction and the sale. In an ordinary case the

27     Brandon v Baywide Realty Ltd, above n 25, at [14] (emphasis added).

28     Max Christmas Real Estate v Schumann Marine Pty Ltd, above n 22.

29     At 328.

30     At 328.

31     At 333.

32     Harcourts Group Ltd v McKenzie HC Christchurch AP 129/93, 9 September 1993 at 7.

connection will be self-evident. In a case where the point is in dispute it will ultimately be a matter of fact and degree whether the introduction remained instrumental.

[46]   As will be observed, Tipping J refers to “a material bearing on the sale”; “some causal connection between the introduction and the sale”; and of course, to the “prima facie obligation to pay commission”, which ceases only when the agent’s introduction was no longer instrumental “in any material way”. So, it is sufficient if Jones Lang establishes (to the civil standard) it introduced ATEED, directly or indirectly, to the property; and that introduction was an effective cause of ATEED’s lease with Soft Tech in the sense discussed by Tipping J.

[47]   Despite contrary argument, there can be no real doubt Jones Lang has established it introduced ATEED to Soft Tech. ATEED asked Metro Commercial to find a property for film production. The instruction was almost desperate: Mr Harrison told Mr Hudson “to look out WEST, NORTH … anything at this stage to be honest”. Mr Hudson approached Mr Mayhew of Jones Lang, as he thought Mr Mayhew may be able to help. Mr Mayhew told Mr Hudson about the property. Metro Commercial then told ATEED the property was available for lease. Jones Lang promptly referred ATEED’s interest to Soft Tech.

[48] Soft Tech (in the person of Mr Ryoo) was reluctant to engage for the reasons at [16].33 Jones Lang had to persuade Soft Tech to entertain ATEED. In the months following September 2015, Jones Lang brought ATEED and Soft Tech together to negotiate the Manu One lease. Jones Lang did so as Soft Tech’s agent. In terms of the agency agreement, Jones Lang introduced, directly or indirectly, the property to ATEED.

[49]   Mr Bigio contends otherwise for several reasons. He notes Mr Hudson of Metro Commercial—not Mr Mayhew of Jones Lang—liaised with Mr Harrison of ATEED in early September 2015. Moreover, Mr Mayhew might not have been at the property when Mr Harrison was first shown it that month. Mr Bigio contends “it was

33 Mr Ryoo said in evidence-in-chief this was “not entirely correct”. In cross-examination, Mr Ryoo accepted earlier discussions with ATEED had gone nowhere. Mr Ryoo also accepted this led to him settling on a more conventional tenant.

Mr Hudson of Metro [Commercial], not Mr Mayhew ... who brought ATEED to the table in September 2015”.

[50]   This contention overlooks that Metro Commercial was initially looking on behalf of ATEED; that Jones Lang referred ATEED’s interest to Soft Tech; and that Jones Lang advocated in favour of ATEED to Soft Tech. Moreover, as Mr Harris for Jones Lang observes, Jones Lang was “obliged and incentivised to secure the best possible leasing arrangement for its client”. It was therefore open for Jones Lang to exploit a relationship with Metro Commercial (through Mr Hudson) for Soft Tech’s benefit. The agency agreement recognises as much, for, it captures both direct and indirect introductions.

[51]   Mr Bigio’s argument also sits awkwardly with his acknowledgement during trial that Jones Lang had earned its commission on the Manu One lease despite     Mr Hudson’s involvement.

[52]   Mr Bigio contends Jones Lang did not introduce the property to ATEED because Mr Harrison was familiar with the property. Mr Harrison considered the property in 2012 and 2013 as a candidate for inclusion in ATEED’s Auckland screen infrastructure project. He shortlisted it in this respect.

[53]   There are two difficulties with this argument. First, it has long been clear the concept of introduction extends to re-introduction to the property.34 Second, ATEED’s 2012–2013 interest “petered out”.35 There is no evidence Soft Tech engaged with ATEED after October 2012. Mr Ryoo acknowledged in cross-examination he then turned his attention to a timber business as his primary tenant. ATEED repeatedly called on Metro Commercial to identify suitable production sites in 2014 and 2015. Yet, ATEED  did not raise the property as a possibility.   And in May 2015, when   Mr Harrison asked Mr Hudson to look for “anything at this stage to be honest”, the property was not being considered by ATEED as a production site. All this underscores the significance of Jones Lang’s introduction of ATEED to Soft Tech.

34    Max Christmas Real Estate v Schumann Marine Pty Ltd, above n  22, at 335, referring  to    Barnett v Brown (1894) 6 TLR 463 (QB) at 463 and Thompson v Thomas (1895) 11 TLR 304 (CA) at 305.

35 Plaintiff’s closing submissions at 10.

[54]   Mr Bigio also contends the facts are distinguishable from the paradigm introduction cases because ATEED’s re-introduction to the property was not as a tenant; ATEED was then interested in the property for AMC or Warner Brothers. One of these was to be the tenant, not ATEED itself.

[55]   Max Christmas addresses this scenario.36 Moreover, the case law does not suggest the terms of the resulting transaction need be foreseen or foreseeable, still less the final form of the transaction was the agent’s “idea”.

[56]   In any event, Jones Lang did encourage Mr Ryoo to consider film-related leasing opportunities beyond Warner Brothers. Mr Ryoo accepted in cross-examination that in September 2015 Jones Lang told him the successful establishment of a studio on the property would make it easier for others to follow. Jones Lang conveyed the same point in writing to Mr Ryoo in October 2015. These observations mirrored an earlier one by Mr Hudson, with whom Jones Lang was working, of the possibility of ATEED leasing the property from Soft Tech for film production. It follows while an introduction does not depend on Jones Lang having raised the possibility of a lease between ATEED and Soft Tech (for film production), this possibility was raised during Jones Lang’s agency with Soft Tech, and more than once.

[57]   This leaves causation. Mr Bigio contends the ATEED lease “occurred as a result of [a] series of significant changes in circumstances, none of which had anything to do with [Jones Lang]”. ATEED had been exploring Hobsonville Point as a film production site until November 2015. But, ATEED was unable to secure investors and the proposal was defeated at a Council meeting. ATEED then explored a purpose-built screen precinct at Westgate. This did not come to pass either. Only then, Mr Bigio argues, did the property become a real contender. Moreover, Warner Brothers needed to obtain the five per cent uplift, which in turn meant it needed to convince NZFC it was creating legacy infrastructure. There were other conditions too, including the marketing of New Zealand, casting a New Zealand actor in a particular role, and creating a skills and talent development programme. Mr Bigio argues Jones Lang

36 See [44].

“appears to seek some ‘credit’ for Warner Brothers’ investment” when that investment reflected the needs of a particular project. Mr Bigio also emphasises the significance of Soft Tech’s commitment to all this, including the construction of significant facilities on the property.

[58]   These arguments reduce to the proposition the ATEED lease was the culmination of several factors. However, as observed earlier, the test is whether Jones Lang’s introduction of ATEED to the property was an effective cause—not the only effective cause—of the ATEED lease.

[59]   Mr Harris contends the test is met, for, the ATEED lease “did not commence by chance long after the glow of the [Manu One] lease had faded”. The legacy infrastructure created by Manu One provided the impetus for the ATEED lease; so too Mr Ryoo’s close relationship with Mr Harrison. In cross-examination, Mr Ryoo accepted this relationship was “an important factor” in moving to lease negotiations with ATEED. Mr Harris argues there is a “clear and direct link between the connections ATEED made and the knowledge it gained through [Jones Lang’s] introduction … and ATEED’s lease of the site”.

[60]   I agree. Jones Lang’s introduction of ATEED enabled it to assess the property’s capacity to host a permanent film hub; to foster a close relationship with Soft Tech (through Mr Harrison’s close relationship with Mr Ryoo); to learn detail of the  Manu One lease, including when it would end; and to learn what arrangements might be attractive to Soft Tech vis-à-vis a lease of the property. A snapshot is Mr Harrison’s email to Mr Ryoo of 21 March 2016, four months after the Manu One lease was executed. Mr Harrison asked Mr Ryoo if they could meet the next day. The email continued:

I am aware of two or three projects that might be interested using the facility after Warner Bros. I am willing to start marketing the facility to a wider audience of studios in Los Angeles if you wish me to. If that’s the case I need to understand:

·      What your back up plan might be and timeframe

·      How long you will give me to find a new client from Warner Bros finishing until the new client starts

·      Annual rental for whole site

·      A plan on how to use the property for multiple productions

·      Roof replacement – timeframe and whether you will consider rain noise mitigation

·      Permission to market the property and work on a web site and marketing collateral together

·      Future expansion / purpose built sound stage and resource consent Best

Harry

[61]   Mr Ryoo  replied the same day,  with a personal  note about  a member of   Mr Harrison’s family.

[62]   A similar exchange occurred 7 April 2016: Mr Harrison offered Mr Ryoo encouraging news about three studio projects on “the horizon … interested in leasing 116 Access Road after Warner Brothers”. Mr Ryoo replied warmly.

[63]   In June 2016, Mr Harrison introduced Mr Ryoo to NZFC, so it could assess Soft Tech’s commitment to ongoing studio production at the property. The next month, Mr Harrison reassured Mr Ryoo of ongoing “interest from film and television productions” at the property. Mr Ryoo thought this “great news”.

[64]   Mr Harrison accepted in cross-examination “Soft tech’s commitment to invest and ATEED’s commitment to lease persuaded [NZFC] to grant … the uplift”.

[65]   I recapitulate. While other factors undoubtedly played a part in the ATEED lease, Jones Lang’s introduction was an effective cause of that lease.

[66]   That Jones Lang did not participate in the negotiations between ATEED and Soft Tech in relation to the ATEED lease is beside the point. They could not. They did not know they were occurring.

Did the agency agreement expire with the Manu One lease?

[67]   This question arises because the agency agreement expired when the property was “fully leased”. Soft Tech contends the Manu One lease meant the property was fully leased even though that lease excluded Lot 10. This because:

(a)Lot 10 was covered in bush and without real access other than through Lot 1.

(b)Chris Seagar, an experienced registered valuer, said it was “most unlikely” Lot 10 could have been commercially leased as a separate lot given (a) and Lot 10’s future urban zoning (which would prevent general commercial or industrial activity as of right).

(c)Jones Lang’s marketing of the property during the Manu One lease was not confined to Lot 10.

(d)Of the existence of an informal arrangement between Soft Tech and Warner Brothers (or Manu One) in relation to Lot 10 because of Warner Brothers “sensitivity around privacy, security and noise”.

[68]   Points (a), (b) and (c) are self-explanatory. Point (d) requires elaboration. As will be recalled, Lot 10 was included in the draft lease with Warner Brothers. However, the draft contemplated Warner Brothers would not pay rent for Lot 10 (beyond rent for Lot 1). Mr Ryoo was not prepared to include Lot 10 on this basis. Mr Harrison reported this to Jones Lang, noting this would  be  acceptable  if  Warner Brothers could use Lot 10 with Soft Tech’s permission; and that Lot 10 would not be a source of noise absent Warner Brothers’ permission. Lot 10 was excluded from the Manu One lease, but these conditions were not recorded in the lease.

[69]   Given all this, Mr Bigio contends “for all practical purposes … the property was objectively fully leased” with the Manu One lease, hence the agency agreement expired.

[70]   I disagree. First, contrary to Mr Bigio’s submission, the informal arrangement between Soft Tech and Warner Brothers fell appreciably short of providing the latter “effective control” over Lot 10. Soft Tech still occupied the lot and Warner Brothers could only use it with Soft Tech’s permission.

[71]   Second, Lot 10 had value. On 20 August 2015, Mr Ryoo met, at the property, a real estate agent from Harcourts. Shortly thereafter, the same agent published an information memorandum about the property, advertising its possible sale. The document said the “pine trees that cover the majority of the balance of the land will be harvested and the stumps … ground out by the current owner.” Mr Ryoo’s response to this evidence was implausible. He claimed the agent had “made up” these remarks, and they were “illegal”.

[72]   Relatedly, Lot 10 was of potential interest to film production studios. AMC was interested in leasing the entire property. And, a studio tenant after Manu One used Lot 10 to film parts of Monkey set in bush.

[73]   Third, the parties’ conduct is consistent with the property not being fully leased. Jones Lang continued to market the property. Mr Mayhew took a potential tenant to the property within days of the Manu One lease being signed. He took other interested parties to the property with Mr Ryoo’s agreement. Mr Ryoo never said to Mr Mayhew or Jones Lang more generally its agency had ended with the Manu One lease. In mid-October 2016, a RE/MAX agent contacted Mr Ryoo about the property. She then emailed Mr Ryoo to thank him for his time; and encouraging contact when “other agents can lease or sell the property”. While Mr Ryoo denied it, this piece of contemporary correspondence implies Mr Ryoo told the agent he already had an agency agreement (with Jones Lang).37 In any event, Mr Ryoo accepted in cross-examination he considered the opportunities Jones Lang presented to him during the life of the Manu One lease.

[74]   Fourth, the telling point is also the most obvious. Lot 10 was included in the draft lease agreement but then specifically removed; the Manu One lease was for Lot 1 only.

[75]   It follows not all of the property was leased by Soft Tech to Manu One, hence the agency agreement endured between Soft Tech and Jones Lang. This conclusion makes it unnecessary to address Jones Lang’s first alternative argument, which was

37     Mr Ryoo read his (English) brief of evidence in English. He answered many questions in cross- examination in English (and some in Korean).

that commission remains payable (even if the property were fully leased) because the introduction occurred during the life of the agency agreement. I do, however, address Jones Lang’s second alternative argument.

Is ATEED “an associate” of Manu One?

[76]   Clause 13 of the agency agreement provides commission is “payable on any subsequent letting by the lessor of additional space to the same lessee (or an associate or subsidiary of the lessee)” provided the lessee “enters an agreement to lease no later than 24 calendar months after the commencement date of the lease of the initial space”.

[77]   The ATEED lease was obviously entered less than 24  months  after  the Manu One lease. And, Mr Bigio accepts additional space was let.38 This leaves  Jones Lang’s contention ATEED is “an associate” of Manu One. The term “associate” is not defined in the agency agreement, nor the phrase “an associate”.

[78]   Mr Harris acknowledges ATEED “would not ordinarily be thought of” as an associate of Manu One. However, he contends the clause contemplates commission when there is “a sufficiently close nexus between the two [entities] to render them ‘associates’”. Mr Harris argues the clause is not confined to an associate being a related company. He submits:

Manu One and ATEED were both parties to the February 2017 MOU that paved the way for occupancy of the site to pass from Manu One to ATEED, thereby allowing ATEED to promote the facilities constructed by Warner Bros to other studios. Manu One paid for the facilities in part with a Film Commission grant for which ATEED strenuously lobbied, a grant that the Film Commission was only prepared to make against an obligation for Manu One to pass on the facilities to a successor. ATEED announced its lease as the result of having “partnered” with Manu One and Warner Bros.

[79]   Because the term “associate” is not defined by the agreement, I begin with its natural, ordinary meaning.39 A typical dictionary definition is broad. For example, the Concise Oxford English Dictionary defines an associate as a partner or companion in business or work.40 To this extent, Jones Lang’s argument has traction.

38     Defendant’s closing submissions at [7.2] and [7.3].

39     Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [63].

40     Concise Oxford English Dictionary (11th ed rev, Oxford University Press, Oxford, 2006).

[80]   However, context is everything. The clause makes commission payable on the subsequent letting of additional space to the same lessee, or an associate or subsidiary of the lessee (within the specified time). Read in this light, the clause appears to contemplate some organisational connection between the lessee and associate; the obvious example being when the associate is a related company of the lessee, another being when the lessee and associate share personnel. The clause’s next phrase, “or subsidiary”, supports this interpretation.

[81]   It follows what Mr Harris calls “transactional” associates are not encompassed by the clause. But, even if they were, there would need to be a very close connection between the lessee and the other for the other to be “an associate”. An organisation controlled by Auckland Council is not “an associate”, in this context, of a Hollywood corporate vehicle.41 Had Jones Lang’s claim rested on cl 13, I would have dismissed it.42

Section 126 of the Real Estate Agents Act 2008

[82]This says:

126 No entitlement to commission or expenses without agency agreement

(1)   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—

(a)the work is performed under a written agency agreement signed by or on behalf of—

(i)the client; and

(ii)the agent; and

(b)the agency agreement complies with any applicable requirements of any regulations made under section 156; and

(c)a copy of the agency agreement signed by or on behalf of the agent was given by or on behalf of the agent to the client within 48 hours after the agreement was signed by or on behalf of the client.

41 Despite their memorandum of understanding and dealings.

42 Mr Bigio referred me to the definition of associate in the Overseas Investment Act 2005, noting ATEED would not be an associate of Manu One if this definition were adopted. I acknowledge the point but question the utility of a different context.

(2)   A court before which proceedings are taken by an agent for the recovery of any commission or expenses from a client may order that the commission or expenses concerned are wholly or partly recoverable despite a failure by the agent to give a copy of the relevant agency agreement to the client within 48 hours after it was signed by or on behalf of the client.

(3)   A court may not make an order described in subsection (2) unless satisfied that—

(a)the failure to give a copy of the agreement within the required time was occasioned by inadvertence or other cause beyond the control of the agent; and

(b)the commission or expenses that will be recoverable if the order is made are fair and reasonable in all the circumstances; and

(c)failure to make the order would be unjust.

(4)   This section overrides subpart 5 of Part 2 of the Contract and Commercial Law Act 2017.

[83]   The provision is engaged because Jones Lang did not give Soft Tech a copy of the agency agreement within 48 hours of Mr Ryoo signing it 4 September 2015. Indeed, Soft Tech did not receive a copy of the agency agreement signed by Mr Ryoo and Jones Lang until it was disclosed in relation to this claim. Several arguments arise. But first, a little history.

[84]   It has long been the law here, and in parts of Australia, that a real estate agent may not recover commission unless she or he is a licensed agent, and the agent’s appointment (by the client) was recorded in writing. This was the effect of s 79 of the Real Estate Agents Act 1963 and s 62 of the Real Estate Agents Act 1976. Early Australian    provisions    are    found    in    Somers    J’s     discussion     in  McKillop Ltd v Borthwick.43 So too the law’s rationales: “to avoid the danger of perjury”; to “obviate false claims”; and to “put an end to arguments about claims for commission”.44 To these may be added another: consumer protection.

[85]   The Real Estate Agents Act 2008 emphasises the last. Its purpose is to “promote and protect the interests of consumers in respect of transactions that relate to real estate” and “promote public confidence in the performance of real estate agency

43     McKillop Ltd v Borthwick [1976] 2 NZLR 482 (SC).

44     At 490.

work”.45 The Act does so by regulating agents,46 raising industry standards,47 and “providing accountability through a disciplinary process that is independent, transparent, and effective”.48

[86]   Section 126 must be interpreted in this light, especially as its requirements of agents are much more taxing than its antecedents.49 However, this is not the whole story. Section 126 differs from its antecedents in another respect: Courts may now allow commission to be payable even though the agent has not met her or his statutory obligations, provided strict criteria are met. In this respect, s 126(2) and (3) ameliorate the potential harshness of earlier regimes. As with contemporary Australian counterparts, these subsections strive to bring “a reasonable balance between the rights of honest agents and the requirement to protect vendors from improper claims for commission by agents”.50 So, while s 126 must be applied with a firm eye to consumer protection—the unifying purpose of the 2008 Act—it must also be applied with an eye to the rights of honest agents.

[87]   Second, a conclusion. Section 126 governs the enforceability of a promise to pay commission, not the validity of agency agreements. So, the section does not preclude an agent from providing real estate services before the agency agreement is signed by, and given to, the client.51 This because:52

(a)The Act’s definition of “agency agreement” is not confined to agreements in writing.53 The formation of an agency agreement is thus left to ordinary, contractual principles.

(b)The New South Wales Supreme Court has reached the same conclusion in relation to similarly worded provisions of the Property, Stock and

45     Real Estate Agents Act, s 3(1).

46     Section 3(2)(a).

47     Section 3(2)(b).

48     Section 3(2)(c).

49     For example, by requiring the written agency agreement be given to the client (signed by both parties) within 48 hours of the client’s signature.

50     Terry Pfeiffer Real Estate Pty Ltd v Connors [2000] NSWSC 452 at [18].

51     And signed by the agent, all within time.

52     See also Laws of New Zealand Agency: Relation between Principal and Agent (online ed) at [93].

53     Real Estate Agents Act, s 4(1).

Business Agents Act 1941 (NSW).54 Section 126(2) and (3) are modelled on the New South Wales successor to the 1941 Act, s 55 of the Property, Stock and Business Agents Act 2002 (NSW).

(c)A contrary conclusion would often be unworkable. The facts are illustrative. Mr Ryoo said his approach is to formally appoint agents only once they have brought him an idea he finds sufficiently attractive. As Mr Harris observes, this frequently means agents have provided real estate services before a written agency agreement is concluded.

[88]   This brings me to Soft Tech’s pre-eminent argument. Mr Bigio contends s 126 precludes, absolutely, the recovery of commission if an agency agreement is not signed by both client and agent before the agent provides services on which commission is payable.  Jones Lang signed the  agreement (through Mr Mayhew)   21 December 2015, by which time any introduction of ATEED to Soft Tech had occurred. Mr Bigio contends s 126 draws a distinction between the existence of a signed agency agreement and provision of that agreement to the client. On this argument, relief under s 126(2) and (3) is available only when the agent fails to provide the signed agreement in time. Put the other way, relief is not available under s 126 if an agency agreement signed by both parties did not exist when the agent provided services otherwise attracting commission.

[89]   Mr Bigio says this interpretation is consistent with the Act’s “intention to tighten the rules governing real estate agents and … limit the circumstances in which they are entitled to claim commission”. Mr Bigio emphasises the consumer protection purpose of the Act and the heightened requirements on real estate agents in relation to residential property, hence pre-empting any argument s 126(1) is designed to protect residential consumers only.55 Mr Bigio says s 126 was formulated to overturn earlier law, ending what s 62 of the 1976 Act permitted, “appointment … in writing signed either before or after the performance of that service or work”, citing again the consumer protection imperative of the 2008 enactment.56

54     Investmentsource v Knox [2002] NSWSC 710, (2002) 56 NSWLR 27 at [66].

55     Real Estate Agents Act, s 127.

56     Real Estate Agents Act 1976, s 62(b).

[90]   I do not accept these arguments. First, the observation at [87] applies equally here. Again, s 126 affects recovery of commission, not more. The provision does not invalidate an agency agreement.

[91]   Second, Soft Tech’s interpretation rests heavily on the phrase in s 126(1)(a), “unless the work is performed under a written agency agreement”. This language would be a subtle way to effect a change as dramatic as that for which Soft Tech contends.

[92]   Third, support for such a change cannot be found in the legislative history. Indeed, this history provides no support for Soft Tech’s position.

[93]   Fourth, while s 126 must be applied with the rights of consumers in mind, it must also be applied in a manner that respects the rights of honest agents. Herein lies the insurmountable problem for Soft Tech: s 126(2) and (3) were enacted to ameliorate earlier regimes’ potential harshness, not compound it. Relatedly, as Mr Harris observes, it is not clear why Courts should have the power to grant relief from a failure to provide a countersigned copy but no power to grant relief from a timely failure to sign.

[94]   As will be apparent from s 126(3), relief for an agent in relation to commission is available only if: (i) the failure to give a copy of the agreement within time was “occasioned by inadvertence or other cause beyond the control of the agent”; and

(ii) the commission is “fair and reasonable in all the circumstances”; and (iii) “failure to make the order would be unjust”. These questions are intensely factual. For the reasons foreshadowed at [3], I answer (i) and the first of several questions in (ii).

Inadvertence?

[95]   Mr McEvoy-Roberts and Mr Mayhew went to the property 4 September 2015. They met Mr Ryoo there. Mr Ryoo signed the agency agreement that day.  Neither Mr McEvoy-Roberts nor Mr Mayhew did. Mr McEvoy-Roberts was Jones Lang’s listing   agent.    He   left   the   company   some   time   ago.    Mr   Mayhew   said Mr McEvoy-Roberts was usually good with his paperwork but appeared to have been “sloppy”.

[96]   On  28  October  2015,  Mr  Hudson   (of   Metro   Commercial)   emailed  Mr McEvoy-Roberts and Mr Mayhew. Mr Hudson said the agency agreement was “a little loose” as it was not signed by Jones Lang. Mr Hudson encouraged Jones Lang to “collect the deposit” as its position would be “a lot stronger in the case of any dispute”. Mr Mayhew was then overseas on holiday. However, he accepted that by virtue of this correspondence Jones Lang knew 28 October 2015 it had not signed the agency agreement with Soft Tech.

[97]   On 21 December 2015, Mr Mayhew sent Jones Lang’s invoice to Soft Tech for its commission on the Manu One lease. Mr Mayhew said Jones Lang’s internal procedures meant he could not submit the invoice absent a signed agency agreement, so, he signed the agreement (signed by Mr Ryoo 4 September 2015) before sending the invoice. Mr Mayhew did not send Mr Ryoo a copy of the agency agreement with the invoice.

[98]   Mr Bigio put to Mr Mayhew he “made a deliberate decision not to send [the agency agreement] at that time because you feared a challenge to the invoice?”.     Mr Mayhew replied:

A: No I didn’t have that in my mind – I mean the difficult part was getting him to sign in the first place, I certainly wouldn’t have thought – as I say, I’m aware of the Act but I wasn’t aware that us not signing would ... effect our commission, so it was probably all a little bit rushed being so close to Christmas.

[99]   Unsurprisingly for a term used in everyday life, “inadvertence” is not defined by the Act. Its common meaning is “not resulting from or achieved through deliberate planning”.57 Context supports this interpretation, and I adopt it.

[100]   Jones Lang has established the first criterion; I find its failure was occasioned by inadvertence:

(a)It was in Jones Lang’s interests to provide Soft Tech a copy of the signed agreement when Mr McEvoy-Roberts and Mr Mayhew visited Mr Ryoo 4 September 2015, or shortly thereafter. That

57     Concise Oxford English Dictionary, above n 40.

Mr McEvoy-Roberts did not do so is consistent with inadvertence. I did not understand Mr Bigio to argue otherwise, at least strongly.

(b)While Jones Lang is not synonymous with Mr Mayhew, it is relevant he was on holiday, overseas, when Mr Hudson questioned the absence of a signed agreement 28 October 2015. When Mr Mayhew returned to work, Jones Lang was focused on Mr Ryoo’s efforts to re-negotiate commission.

(c)Mr McEvoy-Roberts was not a witness. Mr Bigio did not suggest I draw an adverse inference because Mr McEvoy-Roberts was not called.

(d)I accept  Mr Mayhew’s  evidence.  He impressed as honest.  While  Mr Mayhew did not provide Mr Ryoo a copy of the signed agreement when he generated the invoice, Mr Mayhew made no attempt to conceal when he signed the agreement. The document itself makes that clear from the date Mr Mayhew recorded: 21 December 2015. Mr Mayhew could have signed without entering a date. He did not. Moreover, tasks can be overlooked in the period immediately before Christmas; and most people are familiar with the phenomenon of a Christmas rush.

[101]   Mr Bigio argues against these conclusions because on 2, 3 and 4 November 2015, Mr Mayhew reminded Mr Ryoo the agency agreement between Jones Lang and Soft Tech provided terms of commission.  Mr Mayhew  did  so  in  the  context  of Mr Ryoo’s late re-negotiation of commission, obviously hoping to convey that the agreement was binding. Mr Bigio observes Mr Mayhew had been told only days earlier (by Mr Hudson) the agency agreement was unsigned by Jones Lang. However, this sequence is consistent with Mr Mayhew’s evidence he did not appreciate the significance of this aspect, and equally consistent with Mr Mayhew’s actions in pointing out, repeatedly, the agreement bound Soft Tech.

Is the commission that will be recoverable if the order is made fair and reasonable in all the circumstances?

[102]   As I observed at the beginning of this judgment, this question presupposes recoverable commission is known, when it is not. I address the one question I can.

Would commission be 8.33 per cent of net rent or two months’ gross rent?

[103]   The question arises this way. The agency agreement proposed two months’ gross rent (the standard commission). Mr Ryoo amended this by hand, so that commission would be one month of gross rent if the lease was less than two years. On 29 October 2015, with the Manu One lease within reach, Mr Ryoo demanded a further reduction in the commission. He threatened to pull out of the deal if Jones Lang did not agree. Jones Lang offered a compromise, but ultimately capitulated to Mr Ryoo’s formula of 8.33 per cent of net rent.

[104]   When doing so, Jones Lang said this through Mr Mayhew in a 4 November email: “But as agreed if the rent increases or the term of the leases increases our fee will be amended …”. Mr Ryoo agreed, by email, the same day.

[105]   Jones Lang contends Mr Mayhew’s email, construed objectively, encompasses any lease beyond Manu One. Mr Harris argues “the arrangement was to reflect a risk/reward structure … somewhat akin to the base rent/turnover rent structure in the ATEED lease”.

[106]   Soft Tech contends the same email, construed objectively, is confined to the Manu One lease. Mr Bigio emphasises context; the parties were re-negotiating commission in relation to the Manu One lease. References to “rent increases” or increases to the length of term necessarily refer to the Manu One lease.

[107]   I agree with Mr Bigio for the reasons he gives. Commission, if payable, is confined to two months’ gross rent.

A summary of my conclusions

[108]Because this judgment does not address everything, I restate what it decides:

(a)Jones Lang introduced ATEED to Soft Tech (in terms of cl 1.2 and 1.3 of the agency agreement).

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

(c)The property was not fully leased by the Manu One lease beginning 15 December 2015.

(d)ATEED is not an associate of Manu One (in terms of cl 13 of the agency agreement).

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

(f)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.

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

(h)Commission, if recoverable, is confined to two months’ gross rent.

Telephone conference

[109]   I direct the Registrar to convene a telephone conference with the parties within a month. I propose a timetable and directions at that conference to resolve outstanding questions.

Suppression order

[110]   By agreement, I made a suppression order at the beginning of the trial in relation to confidential information. This judgment is to be given to the parties, but no one else, until they have identified possible redactions. These should be expressed

in a joint memorandum of counsel by Monday, 15 March 2021, along with any typographical errors. [No redactions were sought.]

……………………………..

Downs J