MacFarlane v Independent Real Estate Limited
[2016] NZHC 404
•11 March 2016
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2015-419-240 [2016] NZHC 404
UNDER the District Courts Act 1947 IN THE MATTER
of an appeal against a decision of the
District Court at HamiltonBETWEEN
JOE HENRY MACFARLANE AND IRENE GAYE MACFARLANE Appellants
AND
INDEPENDENT REAL ESTATE LIMITED
First Respondent
WILLIAM MICHAEL TUNZELMANN Second Respondent
Hearing: 2 March 2016 Appearances:
C Gudsell QC for the Appellants
D M O'Neill for the RespondentsJudgment:
11 March 2016
JUDGMENT OF MUIR J
This judgment was delivered by me on Friday 11 March 2016 at 2 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Counsel:
C Gudsell QC, Barrister, Auckand
D M O’Neill, Barrister, Auckland
Solicitors:
D Shore, McCaw Lewis Lawyers, Hamilton
M Jones, Cooney Law, Solicitors, Cambridge
MACFARLANE v INDEPENDENT REAL ESTATE LIMITED [2016] NZHC 404 [11 March 2016]
Introduction
[1] This is an appeal against a decision of the District Court in which Judge Marshall held that the plaintiffs had not established, on the balance of probabilities, an oral agreement on behalf of the first respondent to reduce its commission on a real estate transaction from the contractually agreed $135,000 plus GST to $50,000 plus GST.
[2] No relevant issues of law are raised on the appeal, which proceeded on the narrow question of whether the District Court’s conclusion on the facts was correct.
Factual background
[3] I adopt, as did the appellants, the succinct summary which appears at paragraphs [6]-[20] of the District Court’s judgment.1
[6] The MacFarlanes purchased a 176 hectare farm in 2002 at Te
Kauwhata. They were dairy farming the property.
[7] They listed the farm in 2011 with a number of real estate firms for sale. That included PGG Wrightsons and at the time one of their agents was Mr Tunzelmann.
[8] Mr MacFarlane had known Mr Tunzelmann from high school some
45 years earlier as he was in the same year as Mr MacFarlane’s older brother.
[9] The farm did not generate a great deal of interest as far as a sale was concerned and in September 2011 they gave a sole agency to Mr Tunzelmann. At that time Mr Tunzelmann had changed firms and was working for Ray White Real Estate.
[10] The MacFarlanes had gone to Mr Tunzelmann as he had a listing in Ohaupo that the MacFarlanes were interested in, if they could sell their farm. Their farm went to tender but no acceptable tenders were received.
[11] Mr Tunzelmann’s sole agency then reverted back to a general
agency.
[12] The MacFarlanes’ property was left informally on the market.
[13] In 2013 the MacFarlanes purchased a further 67 hectares which was incorporated into their existing farm, making it a 243 hectare property. They also carried out improvements, including building a new home on the property.
1 MacFarlane v Independent Real Estate Limited [2015] NZDC 9908.
[14] By March 2013 Mr Tunzelmann had set up his own real estate firm, Independent Real Estate Ltd.
[15] The MacFarlanes’ farm property was listed with IRE. IRE was a duly incorporated company and Mr Tunzelmann was the sole director and shareholder in that company. On 30 March 2013 Mr MacFarlane signed a listing authority with IRE and commission was agreed on at 2.25 percent. Mrs MacFarlane did not sign that listing authority.
[16] In January 2014 Mr Tunzelmann presented the MacFarlanes with an Agreement for Sale and Purchase of their property, for $5,750,000. The prospective purchaser was a Mr Falconer.
[17] The MacFarlanes counter-offered at $5,900,000 and ultimately an Agreement for Sale and Purchase was signed by all parties for $5,800,000. The agreement was signed on 28 January 2014. The Agreement was conditional on the MacFarlanes finding a suitable property to purchase by 28
February 2014.
[18] The MacFarlanes looked around at other properties but could not find any that were suitable and the Agreement for Sale and Purchase lapsed on 28 February 2014.
[19] After a subsequent offer from Mr Falconer of $5,950,000, a further offer of $6,000,000 was negotiated by Mr Tunzelmann on 7 March 2014 from him to purchase the MacFarlanes’ farm property.
[20] The events of 7 March and subsequent are very much in dispute as between the MacFarlanes on one hand and Mr Tunzelmann on the other, in respect of the issue of commission.
Appeals against factual findings – relevant legal principles
[4] These are uncontentious. The appeal is by way of rehearing. In Jay v Jay the
Court of Appeal held:2
We accept that on an appeal involving factual challenges the appellant is entitled to have this Court form its own view.
[5] Likewise in Austin, Nichols & Co Inc v Stichting Lodestar the Supreme Court held:3
[5] The appeal court may or may not find the reasoning of the tribunal persuasive in its own terms. The tribunal may have had a particular advantage (such as technical expertise or the opportunity to assess the credibility of witnesses, where such assessment is important). In such a case the appeal court may rightly hesitate to conclude that findings of fact or fact and degree are wrong. It may take the view that it has no basis for rejecting
2 Jay v Jay [2015] NZAR 861 at [22].
3 Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141 (SC).
the reasoning of the tribunal appealed from and that its decision should stand. But the extent of the consideration an appeal court exercising a general power of appeal gives to the decision appealed from is a matter for its judgment. An appeal court makes no error in approach simply because it pays little explicit attention to the reasons of the court or tribunal appealed from, if it comes to a different reasoned result. On general appeal, the appeal court has the responsibility of arriving at its own assessment of the merits of the case.
[6] The Supreme Court further noted:4
[13] … The appeal court must be persuaded that the decision is wrong, but in reaching that view no “deference” is required beyond the “customary” caution appropriate when seeing the witnesses provides an advantage because credibility is important. …
The District Court’s decision
[7] Having identified that the case raised one factual issue only, the District Court reviewed in detail the evidence of each of Mr and Mrs MacFarlane, their daughter Andrea and Mr Tunzelmann. The Judge regarded all of them as “hopelessly confused over timings, calls and what conversations took place at what particular time”. He considered that there was only one “clear bright line” in the evidence being that of Mr Tunzelmann’s office administrator Ms Needham.
[8] Her evidence, as recorded in the judgment, was that she was at her desk shortly before 4 pm (a time she recalls because of an imminent requirement to pick up her daughter) on 7 March and that she heard Mr Tunzelmann on the phone in the adjacent conference room. He was speaking to Mr MacFarlane and said words to the effect:
You expect after all this time and the advertising and work that I have done that I am not going to get paid? It is not going to happen.
She said she heard Mr Tunzelmann tell Mr MacFarlane on several occasions that he was not going to accept $50,000 in commission and that, although she left before the call ended, there was nothing at any stage to suggest Mr Tunzelmann’s attitude would change. The Court accepted Ms Needham’s evidence noting that, although she had been employed by Mr Tunzelmann for a period, she was an “objective and
reliable witness”.
4 Citations omitted.
[9] The District Court Judge held the plaintiffs needed to establish, on the balance of probabilities, that there was an oral variation of the contract for commission and stated that he was being asked to accept there was a subsequent call from Mr Tunzelmann to Mr MacFarlane, heard by all the MacFarlanes, where such oral variation was agreed. He noted that the documentary evidence did not support such a conclusion having regard to the time at which the MacFarlane’s said the call occurred and rejected the appellants’ proposition that the call “could have been made from a phone box for all I know” and that Mr Tunzelmann may have been “premeditating” by using another phone, as involving an “illogical inferential leap”. The Court held that there was a clear pattern of calls between Mr Tunzelmann’s mobile phone and Mr MacFarlane’s mobile phone during the course of 7 March and that there was simply:
… no evidential basis on which I could conclude that Mr Tunzelmann had made the call on another phone.
[10] The Judge identified that there was “considerable stress and pressure” relating to the transaction as a result of various time constraints and that this was exacerbated by the recent failure of Andrea MacFarlane’s marriage. He said that this was a possible explanation for why events had become muddled or misconstrued. In the result, the Court held that the plaintiffs had not established on the balance of probabilities that Mr Tunzelmann had made a return phone call after 3.58 pm to reduce his commission to $50,000. The Court recognised that there were numerous calls that day and in that context “more than enough scope for the parties to be at cross-purposes and for bits and pieces of various telephone conversations to become mingled and misconstrued with the passage of time”.
[11] The plaintiffs’ claim was accordingly dismissed.
Appellant’s submissions
[12] For the appellant Mr Gudsell QC submitted that the District Court was wrong to conclude that the plaintiffs had not established the variation to the requisite standard of proof. He submitted that the District Court had erred in focusing too narrowly on whether the documentary (and in particular telephone) record supported the existence of a call (during which the alleged concession was made in relation to
commission) in the time period stated by each of the plaintiffs’ witnesses and, having concluded that it did not, finding on the balance of probabilities that the variation was not made out. He emphasised the fact that the District Court Judge had found each of Mr and Mrs MacFarlane, their daughter and Mr Tunzelmann equally confused about the contents of individual telephone calls, that upwards of 20 such calls had been exchanged between the appellants and Mr Tunzelmann on 7 March and that there was, accordingly, ample opportunity for the parties to have at some stage agreed the variation (albeit outside the window relied on by the plaintiffs in their evidence). He submitted that the case raised a credibility issue – was there a telephone call during which Mr Tunzelmann agreed to reduce his commission – and that such issue was not answered simply by reference to evidence establishing such call could not have occurred when the plaintiffs said it did.
[13] Mr Gudsell further submitted that in determining what he described as “the ultimate issue as to whether the oral variation was agreed” it was necessary to carry out an assessment of all of the evidence relevant to the respective parties credibility and to make a finding accordingly. This he said the District Court had failed to do.
[14] In terms of such an assessment Mr Gudsell submitted that context was everything and, on an overall assessment of all relevant facts, this Court could be satisfied, on the balance of probabilities, that the plaintiffs’ evidence was truthful, Mr Tunzelmann’s evidence was not and that the appeal should accordingly be allowed. Alternatively, he submitted that the case should be remitted to the District Court for it to make the relevant credibility findings.
[15] The specific contextual matters on which he relied were:
(a) The property was listed with Mr Tunzelmann for $6.1 million. He had formerly had a sole agency but this had recently expired and the property was now subject to a general listing. It was therefore “up for grabs”.
(b)Mr Tunzelman had one interested party only, Mr Faulkner. But the window for concluding a transaction with him was narrow because of
Mr Faulkner’s requirement (in the event a purchase was not completed) to confirm alternative share milking arrangements the following day.
(c) There was no compelling reason for the plaintiffs to sell. They had been on the market for some time and their willingness to let a previous agreement with Mr Faulkner lapse because they had been unable to identify a replacement property indicated that they were willing to bide their time for the right price and/or the right opportunity.
(d)Although a general listing had only been in place for three working days (following lapse of Mr Faulkner’s previous agreement) interest had, to the knowledge of the plaintiffs, already been shown by another prospective purchaser.
(e) Mr Tunzelmann’s business was in difficulty and he needed the money.
(f) Mr Tunzelmann’s diary note of 7 March confirmed that the plaintiff’s required $5.95 million in [their] hand and all parties were agreed in the telephone discussion at 3.58 pm Mr MacFarlane identified three options to achieve that, being either:
(i)Mr Faulkner’s current offer of $6 million be increased to a level that met the MacFarlane’s requirements after deduction of the previously agreed commission;
(ii)if the offer remained at $6 million Mr Tunzelmann reduced his commission to $50,000; or
(iii) Mr Tunzelmann identified an alternative purchaser.
(g)There was no evidence of the appellants ever abandoning that position.
(h)Later on the evening of 7 March they signed an offer to sell at the level of $6 million. Capitulation by Mr Tunzelmann on the issue of commission was, said Mr Gudsell, the only logical explanation.
[16] Against that background he submitted that the Court could safely come to the conclusion that, on the balance of probabilities, Mr Tunzelmann was lying when he said he at no stage agreed to reduce his commission to $50,000.
Respondents’ submissions
[17] For the respondent, Mr O’Neill submitted the District Court Judge was correct to focus on the events of 7 March 2014 and in particular on the absence of any documentary record to support the proposition that Mr Tunzelmann had phoned back in the window between the call at 3.58 pm identifying the MacFarlane’s so called “bottom line” and the commencement of milking that evening. He submitted that each of Mr and Mrs MacFarlane and their daughter had “pinned their colours
firmly to the mast” of a conversation in that period,5 that they were obliged to do so
because each claimed to be in the other’s presence in the MacFarlane’s home when the call was made and that the last opportunity for that, within the context of other recorded events, was before milking started at approximately 5 pm (described by Mrs MacFarlane as a delayed start on account of the intervening conversations). He emphasised that when challenged under cross-examination about the absence of any record of such a conversation from any of Mr Tunzelmann’s home, office or mobile numbers the appellants at no stage suggested any later call. Rather they postulated that the call must have been made from some other phone. Mr O’Neill submitted that the District Court Judge quite rightly rejected such a theory having regard to the clear pattern of calls between Mr Tunzelmann’s mobile phone and Mr MacFarlane’s mobile phone during the course of 7 March 2014.
[18] He submitted that it was for the appellants to prove a variation on the balance of probabilities and that, having regard to the fact that there was simply no evidence of a conversation in the period alleged, they had failed to. He submitted that while
not distinctly stated, the Judge did not believe the appellants and their witness.
5 Referring to the cross-examination NOE 35/63-66 and 88-89.
[19] In response to Mr Gudsell’s invocation to consider the wider context Mr O’Neill submitted that this was far from decisive in the appellants’ favour. He emphasised that:
(a) Less than six weeks earlier the MacFarlanes had been prepared to enter into an agreement for sale and purchase, albeit conditional on their identification of a suitable substitute property, at the level of
$5,800,000 with Mr Tunzelmann’s full commission payable on that price. Such transaction would have netted them $5.67 million or approximately $195,000 less (excluding GST) than their net recovery under the subsequent agreement, again assuming full commission. While acknowledging the condition in the agreement meant that the MacFarlanes had not committed themselves irrevocably to a sale at that price, he submitted that it was nevertheless indicative of potential flexibility in terms of the expressed “bottom line”. He emphasised the appellants had previously owned, developed and sold a number of other farms. They were sophisticated vendors with a good sense of farm values.
(b)The property had been on the market for three years and Mr Faulkner was the only serious purchaser at the time. Insofar as other interest had been shown after commencement of the general listing, he emphasised that it was clearly “soft” given the potential purchasers had already placed a tender on another dairy unit and could take their interest no further until that process was concluded. He referred to the evidence of the real estate agent Mr Kenny, who introduced the other prospective purchaser, in terms that no figures had even been discussed and that although he may have listed the property at $6.4 million that was “certainly not within my potential purchaser’s contemplation”.
(c) Mr Tunzelmann was not under the financial pressure suggested. He had personally received over $300,000 in commissions in the one year that the business had been operating and, assuming the full
commission on the Faulkner transaction had not been paid, the first respondent’s overdraft would have been $16,000 only. He was in contemporaneous discussion with L J Hooker in terms of the merger of his business and his evidence was he was happy with the way the business had been operating. Accordingly, there was no compelling reason why he would, after three years of effort in relation to the property have accepted a commission at the level of 37 per cent only of his contractual entitlements.
[20] Mr O’Neill postulated three scenarios to explain why, against an expressed bottom line of $5.95 million at 3.58 pm the MacFarlanes were later that evening prepared to sign an agreement for sale and purchase which, having regard to Mr Tunzelmann’s contractual entitlements, would not deliver them that bottom line. These were:
(a) that Mr Tunzelmann did indeed offer to reduce his commission to a level which would deliver the bottom line.
(b)That the MacFarlanes stepped away from their bottom line having been told, by Mr Tunzelmann (as he said in his evidence occurred at the conclusion of the 3.58 call), “it is your call Joe, you make the decision”.
(c) Adopting a proposition raised by me in argument, that when Mr Tunzelmann faxed through the proposed agreement for sale and purchase, specifying in it a sale price of $6 million the MacFarlanes made an assumption that Mr Tunzelmann must have accepted a reduced commission, that being the only way their “bottom line” was delivered.
[21] Mr O’Neill submitted the first of these alternatives could be excluded having regard to the fact there was simply no evidence of a phone call within the period that the appellants stated (and were effectively obliged to have stated), it had occurred. He submitted, therefore, that the case fell within either category 2 or 3 neither of
which would support the appeal being allowed. He submitted that the third alternative was supported by the context previously referred to and, in particular, the duration the property had been on the market, the willingness only six weeks earlier to sign an agreement for sale and purchase at a significantly lesser sum, the clean and unconditional nature of the Faulkner interest and the “softness of any other interest”.
Discussion
[22] I accept Mr O’Neill’s submission that, although the absence of any documentary evidence of a telephone call from Mr Tunzelmann within the “window” identified by the MacFarlanes cannot be considered “absolutely determinative”, it is “highly persuasive” in the context of plaintiffs who bore the onus of proving the relevant variation.
[23] All of the MacFarlane witnesses were agreed that Mr Tunzelmann’s alleged capitulation did not occur during the 3.58 pm conversation. That accords with Ms Needham’s evidence that Mr Tunzelmann was implacable about his commission entitlements during the part of the conversation she overheard, and indeed that he repeated his rejection of the reduced commission suggestion “several times”.
[24] Each of the MacFarlanes were adamant that the alleged return call during which Mr Tunzelmann is said to have accepted the reduced commission occurred between the discussion at 3.58 pm and the commencement of milking at or about
5.00 pm. It could not have been the call logged at 6.28 pm because, as Mrs MacFarlane said she was, by that time, “well and truly into the cowshed”. Likewise Andrea MacFarlane agreed in cross-examination that “it certainly didn’t take place at
6.30”. The MacFarlane evidence, that each had been party or privy to a telephone call on mobile loudspeaker in the MacFarlanes’ house, effectively compelled identification of a time slot prior to milking and that was how the evidence unfolded. Significantly, when cross-examined about the absence of any documentary record of a call during the period, none of the MacFarlanes suggested a later time. Instead they endeavoured to meet the point by suggesting that Mr Tunzelmann must have used a phone other than his business or private landlines, or mobile. To have
suggested a later time would, in any event, have created obvious difficulties within the context of their other evidence.
[25] I agree with the District Court Judge that the “other phone” scenario would involve, as he termed it, “an illogical inferential leap” given the clear pattern of calls between Mr Tunzelmann’s and Mr MacFarlane’s mobile phones. The plaintiffs could never be expected to discharge their onus on the basis of such a theory.
[26] In the result, within the window which the MacFarlanes stated the call occurred based, inter alia on their other commitments that day, the documentary evidence was to the contrary. As the District Court Judge said:
[99] Unfortunately this is a case where an oral variation of a contract in writing is alleged but there is no independent documentary evidence to support such a variation. In fact the only documentary evidence that exists is in the form of data from telephone records that, rather than support the plaintiff’s case, detracts from it.
[27] I agree with the District Court Judge that against the background the plaintiffs cannot be considered to have discharged their onus.
[28] I reach that conclusion mindful of the full context which Mr Gudsell invited me to consider. But I do not consider that context points with sufficient certainty to the reliability of the MacFarlane’s evidence that I could ignore the very significant evidential problems which they otherwise faced.
[29] It is correct that they were not under any pressure to sell, but they had been in the market for some time and, as at 7 March had been presented with an offer significantly better than one they had been prepared to accept (albeit conditionally) only six weeks earlier. I cannot accept Mr Gudsell’s submission that this earlier contract can be effectively ignored. While it did not bind the MacFarlanes to sell unless they found another property to their liking, they were sophisticated vendors and most unlikely, in my view, to have signed at the level of the January contract if they had at that stage thought a higher price was possible, whatever flexibilities they may have retained. The March offer was significantly better and it was a firm offer against what could only be described as very preliminary interest from other quarters. Mr O’Neill’s scenario that, against this background and having been told
by Mr Tunzelmann that “it’s your decision” the MacFarlanes decided to drop their previously articulated “bottom line” is, in my view, plausible.
[30] Looking then at Mr Tunzelmann’s position I see nothing about his financial circumstances which would have compelled so significant a concession on his contractual entitlements. He had derived substantial remuneration from the business over the previous year. The business’ overdraft was modest and there is no suggestion that either the business or Mr Tunzelmann personally were under any pressure from their bankers. Mr Tunzelmann was in active merger discussions. He had invested very considerable energies over an extended period in his representation of the MacFarlanes. Although he had lost his sole listing there was nothing to suggest an imminent offer from any other source. I accept that he was aware Mr Falconer would be withdrawing from negotiation if no contract was secured that day (or very soon thereafter) and that he did not have any other purchaser interest. But that fact alone is not sufficiently compelling to meet the MacFarlane’s evidential problems. Indeed, the overall contextual position seems to me to be quite evenly balanced. Anyone in the MacFarlanes’ position would have been conscious of the proverbial “bird in the hand”.
[31] I do not agree with Mr Gudsell that the evidence demanded the District Court Judge make adverse credibility findings against one or other of the MacFarlanes or Mr Tunzelmann. In fact the Judge found, at least in respect of the significant errors made by all parties in their information capsules, that they were “genuine mistakes and not any attempt to mislead the Court or misrepresent the true position”. He regarded the witnesses (with the exception of Ms Needham), as all equally confused but none as untruthful. It was in my view open to him to do so. He could find the variation not proved on the balance of probabilities without concluding the MacFarlanes had lied about the relevant conversation. Although it is plausible that, the MacFarlanes stepped away from their bottom line it is equally, if not more plausible, that when the agreement was sent to them later on the evening of 7 March, with an identified sale price of $6 million they simply assumed, based on their previously articulated bottom line and the absence of movement from Mr Falconer, that Mr Tunzelmann must have capitulated on his commission. As the District Court Judge observed:
Events can and do become muddled and misconstrued on occasions when attempts are made later to reconstruct those events.
[32] The MacFarlanes’ evidence could therefore have been honestly given. In such context the District Court’s reluctance to make adverse credibility findings against them was unremarkable.
Result
[33] I decline the appeal.
[34] I award costs to the respondents on a 2B basis. In the unlikely event quantum cannot be agreed, memoranda may be filed but should be exchanged in advance so as to limit areas of difference.
[35] In relation to the appellants’ August 2015 application for particular discovery against Spark New Zealand Ltd, Mr O’Neill requests that I reserve costs. I do so accordingly. If unable to be resolved they may similarly be the subject of
memoranda.
Muir J
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