Mackys Real Estate Ltd t/a Bayleys in the North v Webster
[2017] NZHC 2546
•19 October 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-802 [2017] NZHC 2546
BETWEEN MACKYS REAL ESTATE LTD
TRADING AS BAYLEYS IN THE NORTH
Plaintiff
AND
DAVID BASIL WEBSTER, FRANCES KIM WEBSTER, JAMES WILLIAM WEBSTER AND BENJAMIN WEBSTER Defendants
Hearing: 15 September 2017 Counsel:
M C Black for Plaintiff
E L Smith for DefendantsJudgment:
19 October 2017
JUDGMENT OF BREWER J
This judgment was delivered by me on 19 October 2017 at 9:30 am pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Hammonds (Dargaville) for Plaintiff
Tailored Legal Solutions Ltd (Dargaville) for Defendants
MACKYS REAL ESTATE LTD T/A BAYLEYS IN THE NORTH v WEBSTER [2017] NZHC 2546 [19 October
2017]
Introduction
[1] The plaintiff seeks summary judgment against the defendants in the sum of
$252,999.97.
Background
[2] The plaintiff is a licensed real estate agency under the Real Estate Agents Act
2008 (“the Act”). It agreed to market for sale, through a sole agency agreement (“the agreement”), three dairy farming properties in Northland.
[3] The agreement upon which the plaintiff relies is dated 11 September 2015. According to the affidavit of Tony Grindle, it was signed on that date by the first and second defendants. The signatures of the third and fourth defendants were obtained later by the first and second defendants, as agreed with Mr Grindle on 11 September
2015. They later sent Mr Grindle a copy of the fully signed agreement.
[4] The agreement (which is a standard form) begins with the heading “Parties”. Beneath the heading there is a space for the name or names of the entities contracting with the plaintiff. The names of the defendants are written there. The agreement has “(‘Owner’)” after the space for the names. Immediately beneath the space is the direction:
(Insert names of all owners where there is more than one registered proprietor of the Property)
[5] The next heading is “The Property”. Beneath it are the words:
In consideration for Bayleys listing For Sale and/or For Lease and endeavouring to effect the sale and/or lease of the real estate located at
Ridgeview Farms Ltd (David, Kim, James) (“the Property”) Beejay Stud Ltd
(David, Kim)
legal description
Clear Ridge Station Ltd
(David, Benjamin)
= legal description annexed 1.2.3
It is agreed that the Owner appoints Bayleys as the Owner’s agent to Sell and/or Lease the Property on the terms set out in the General Terms and Conditions.
[6] The words in bold above are handwritten.
[7] The first of the General Terms and Conditions prescribes a sole agency for a period which ended on 1 April 2016:
1.1This agency is a sole agency commencing on the date of this contract and expiring at midnight on 1/4/2016, provided that such expiry date shall be no later than 90 days after the date of this contract in the case of a Residential or Lifestyle Property … On the expiry of the Agency Period the sole agency shall cease and this agency shall continue as a general agency until cancelled by either party giving not less than seven days notice in writing to the other party …
The Owner warrants to Bayleys that as at the date of this contract, the Owner is not a party to any other agency contract in respect of the Property, save where previously disclosed to Bayleys …
During the Agency Period the Owner agrees to refer any enquiry or other negotiations from any Licensee or agent that is not Bayleys and all prospective purchasers direct to Bayleys and will immediately advise Bayleys of any other introductions or interest in the Property (howsoever arising) and keep Bayleys regularly informed of progress in respect of such introductions and interest.
[8] I make the following observations at this point:
(a) The defendants, although described as “Owner”, were neither the beneficial owners of the properties nor (with an exception in respect of one property) the registered proprietors.
(b)The registered proprietor of one farm was Ridgeview Farms Ltd. The directors of the company were the first, second and third defendants (David Webster, Frances Kim Webster and James Webster).
(c) The registered proprietor of another farm was Clear Ridge Station Ltd. The directors of the company were the first and fourth defendants (David Webster and Benjamin Webster).
(d)The registered proprietors of the third farm were the first and second defendants (David Webster and Frances Kim Webster) and Nicolaas Willem Mouton. This is the farm which, under the heading “The
Property”, is referred to as “located at” Beejay Stud Ltd (David, Kim). It is common ground that the beneficial owner of this farm was the DB & FK Webster Family Trust (“the trust”) and the registered proprietors were on the title in their capacities as trustees of the trust.
(e) The second defendant, Mrs Webster, in her affidavit of 19 June 2017, deposes that she and her husband (the first defendant) were the owners of the third farm (as I have described it) as trustees of the trust. However, the certificate of title shows that at the date of the agreement (11 September 2015) Mr Mouton was also a registered proprietor. On 3 November 2015, a transfer was registered pursuant to which Mr Mouton ceased to be a registered proprietor and the first and second defendants became the only registered proprietors.
(f) In the defendants’ submissions in opposition to summary judgment, which are not, of course, evidence, it is claimed that the first and second defendants could not bind the trust because they were only two of the three trustees. Mr Mouton did not sign. The Deed of Trust is not in evidence, which is unsatisfactory.
(g)The defendants’ submissions also claim that Beejay Stud Ltd was the entity which ran the farming operation at the trust’s farm. Again, this is not evidence but it appears uncontroversial.
[9] The genesis of this proceeding is that, despite the agreement, the registered proprietors sold the properties to a third party through another agent on 21 January
2016 for a combined $11,000,000.
[10] The plaintiff’s claim for summary judgment is for commission in accordance
with clause 6 of the agreement:
6.1If the Property or any part of it is Sold and/or Leased, directly or indirectly:
(a) by Bayleys; or
…
(d) where this agency is a sole agency under clause 1.1:
(i) to any purchaser or tenant introduced to the Property (whether by Bayleys, another agent or otherwise) during the sole agency irrespective of when that purchaser or tenant entered into a binding contract; or
(ii) to a purchaser or tenant where such Sale or Lease is effected during the sole agency, irrespective of whether such purchaser or tenant was introduced to the Property during the sole agency or who introduced that purchaser or tenant to the Property;
the Owner must pay Bayleys the Commission, and any other monies payable under this contract.
6.2The Owner shall pay the Commission to Bayleys on the date set out in the Schedule of Fees.
…
[11] On 5 February 2016, the plaintiff issued a tax invoice for payment of the commission. The commission is recorded in the agreement as being at 2.25 per cent. The plaintiff later agreed to discount the commission to 2 per cent, resulting in the sought figure of $252,999.97.
[12] Instead of suing the companies as registered proprietors for the commission, the plaintiff has chosen to sue the defendants who were their directors in their personal capacities. The plaintiff’s essential argument is that by signing the agreement as “Owner”, the defendants personally acquired the obligations attributed in the agreement to the Owner, including the obligation to pay commission.
[13] I must make a distinction between the four defendants as directors and the first and second defendants as trustees. As I will explain in more detail later in this Judgment, this is because the first and second defendants are two of three registered proprietors of the Beejay property. The defendants as directors are not the registered proprietors of the Ridgeview or Clear Ridge properties. The legal position is different.
Summary judgment principles
[14] This is a plaintiff’s application for summary judgment. The test is contained
in r 12.2(1) of the High Court Rules:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[15] The onus of proof is on the plaintiff. It must prove on the balance of probabilities that the defendants have no arguable defence. As the Court of Appeal in Krukziener v Hanover Finance Ltd phrased it, there must be no real question to be tried.1 It further commented:
[26] … The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable … In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it …
Issues
[16] There are four issues I must decide:
(a) Is the agreement void for uncertainty?
(b)Did the plaintiff breach certain provisions of the Act so that commission did not in fact become due and payable?
(c) Did the defendants as directors sign the agreement in their personal capacities?
(d)What is the liability of the first and second defendants for any commission due on the Beejay property?
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
Void for uncertainty?
[17] The defendants submit that the agreement is void for uncertainty in two respects.2 First, they submit that the agreement does not make reference accurately or appropriately to the properties for sale. Second, they submit that it does not sufficiently identify the contracting parties.
[18] The identities of both the properties and the contracting parties are essential terms of the agreement. The legal question is whether these essential terms are clear or can be ascertained.3
[19] As I have recorded at [5], the locations of the properties are given as follows:
Ridgeview Farms Ltd (David, Kim, James) (“the Property”) Beejay Stud Ltd
(David, Kim)
legal description
Clear Ridge Station Ltd
(David, Benjamin)
= legal description annexed 1.2.3
[20] I have been provided with two separate copies of the signed agreement. The appendix of one copy contains the legal description of the Ridgeview property and the other the legal description of the Clear Ridge property. The defendants appear to submit that there was no separate agreement relating to the Beejay property. The plaintiff, on the other hand, submits that there was one agreement relating to all the properties.
[21] Each appendix clearly identifies either the Ridgeview property or the Clear Ridge property. In respect of the Beejay property, if there was in fact no separate agreement, the description in the agreement quoted above and the communications of the parties make it clear that it was intended for the property owned by the registered proprietors as trustees of the trust to be included in the agreement. This is
easily ascertainable.
2 There was a third point raised, but not really pursued. It was whether the agreement was uncertain because of the way the commission percentage was specified. There is nothing in that point and I will not discuss it further other than to observe that on its natural meaning it was sufficiently certain.
3 Electricity Corp of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA).
[22] In terms of the identity of the contracting parties, Lord Millett has stated:4
[175] The identity of the parties to a contract is fundamental. It is not simply a term or condition of the contract. It goes to the very existence of the contract itself. If it is uncertain, there is no contract. Like the nature and the amount of the consideration and the intention to create legal relations it is a question of fact and may be established by the evidence. Such evidence is admissible even where the contract is in writing, at least as long as it does not contradict its express terms, and possibly even where it does …
[176] Where a contract is contained in a signed and written document, the process of ascertaining the identity of the parties and the capacity in which they entered into the contract must begin with the signatures and any accompanying statement which describes the capacity in which the persons who appended their signatures did so. This may require interpretation, and to this extent the process may without inaccuracy be described as a process of construction. But it is not of the same order as the process of construing the detailed terms and conditions of the contract. These describe the incidents of the contract and the nature and extent of the parties' obligations to each other. But the identity of the parties themselves is not an incident of the contract …
[23] Here, clause 1 of the agreement lists the names of the defendants as the contracting parties.
[24] In my view, although not clear from clause 1 itself, the fact that the companies are contracting parties is easily ascertainable from the agreement and the communications. The directors are listed in clause 1. Clause 2 uses the names of the companies when describing the location of the properties. The defendants accept, and the communications show, that the parties intended the agency agreement to apply to the companies and to Mr and Mrs Webster as trustees of the trust.
[25] However, despite the affidavit of Mrs Webster making it clear that she and Mr Webster signed the agreement as trustees with the intent that the Beejay property would be marketed and sold, there is an available argument that this intention was not given legal effect. I will address this argument later since uncertainty of contracting parties is a different point.
[26] Ultimately, the parties were clear as to which properties were to be the subject of the agreement. The parties knew the legal entities which owned two of the
4 Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12, [2004] 1 AC
715.
properties and it was made known that Mr and Mrs Webster were registered proprietors of the Beejay property as trustees of the trust. The defendants signed the agreement as registered proprietors or as directors intending to authorise the marketing for sale of all three properties. I do not see an arguable case that the agreement is void for uncertainty.
Was the Act breached?
[27] The plaintiff is subject to the Act. The agreement acknowledges that fact:
4.2In undertaking the activities set out in clause 4.1 Bayleys shall act in accordance with the Real Estate Agents Act 2008, the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 and any other relevant professional conduct rules or rulings that may be promulgated by the Real Estate Agents Authority (“REAA”) from time to time.
[28] The defendants submit that the plaintiff failed to comply with its obligations under the Act. As a result, the commission never became due and payable.
Section 126
[29] The defendants firstly rely on s 126(1), which provides:
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;5 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.
[30] There was a written agency agreement signed by both the plaintiff and the first and second defendants on 11 September 2015. As of that date, at least one
5 I was not directed to any issues regarding s 156.
director of each company had signed the agreement. Mr and Mrs Webster had also signed as registered proprietors of the Beejay property.
[31] The defendants submit that the plaintiff cannot receive commission in relation to the work it performed from 11 September 2015 to 7 October 2015 because the third and fourth defendants had not signed the agreement until the later date.
[32] However, clause 9.1(h) provides:
… Where the person signing this contract is not the sole owner of the Property, that person has the written authority of all persons named as the registered proprietor of the Property to enter into this contract on their behalf
…
[33] Clause 9.1(k) further reiterates that point:
The person signing this form on behalf of the Client confirms that if not the sole owner of the Property, he or she has the authority of all owners to sign this agreement on their behalf.
[34] The signatures, in combination with these clauses,6 are therefore sufficient to establish the existence of a properly-executed agency agreement on 11 September
2015.
[35] The plaintiff was authorised to carry out real estate agency work from the date of the agreement. Clause 4.1 comprehensively details the actions and activities that the plaintiff was authorised to undertake, including advertising the properties and arranging for inspections. The defendants were provided with a copy of the agency agreement at the time of signing.
[36] I am satisfied, therefore, that any potential defence under s 126 cannot succeed.
6 See Companies Act 1993, s 18(1).
Section 128
[37] The defendants further submit that the plaintiff failed to comply with s 128(1)
of the Act, which provides:
An agent is not entitled to any expenses from a client for or in connection with any real estate agency work carried out by the agent for the client in connection with a transaction unless the agency agreement under which the agent performs that work contains a statement that—
(a) identifies the source of all rebates, discounts, or commissions that the agent will or is eligible to receive in respect of those expenses; and
(b) specifies the estimated amount of those rebates, discounts, or commissions (to the extent that the amount can reasonably be estimated).
[38] The defendants submit that the plaintiff failed to provide a completed statement in accordance with this section.
[39] This section is concerned with expenses. Section 4(1) of the Act defines “expenses” as meaning any sum or reimbursement for expenses or charges incurred in connection with services provided by an agent in the capacity of agent. It defines “commission” separately as meaning remuneration by way of commission, fee, gain, or reward for services provided by an agent in respect of a transaction.
[40] The plaintiff is seeking commission, not expenses. I do not see this section as having any application to this situation.
Sections 141 and 143
[41] The defendants initially voiced concern over Mr Grindle’s authority under these sections. This was not pursued in the submissions before me.
[42] Regardless, there was no offence committed under ss 141 and 143. Mr Grindle was a licensed real estate salesperson at the time of the agreement.
Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012
[43] The defendants lastly submit that the plaintiff breached the Real Estate
Agents Act (Professional Conduct and Client Care) Rules 2012 (“the Rules”).
[44] In their submissions, the defendants rely on r 9.6. I have already established that there was a properly-executed agreement at the date of signing. Accordingly, there is no breach of this rule.
[45] I assume the defendants also rely on r 10.6(a):
Before a prospective client signs an agency agreement, a licensee must explain to the prospective client and set out in writing—
(a) the conditions under which commission must be paid and how commission is calculated, including an estimated cost (actual $ amount) of commission payable by the client, based on the appraisal provided under rule 10.2:
[46] Clause 6 and the schedule of fees satisfy me that there was no breach of this rule.
[47] I conclude that there was no operative breach of the Act or the Rules.
Executed in personal capacities?
[48] I have held there was a valid agreement and that commission was due and payable. But whether the defendants as directors are personally liable to pay that commission is a separate issue.
[49] Mrs Webster, in her affidavit, deposes that all of the defendants signed the agreement in their capacities as directors. It was clear to the plaintiff that the companies were the owners of two of the properties and so the directors were signing on behalf of the owners.
[50] The plaintiff’s case is that by signing as “Owner”, the defendants as directors took on personally the obligations of the Owner. This includes liability to pay any commission due.
[51] A company is a legal entity in its own right.7 But, as a company is not a natural person, it can only operate through the acts of its agents (such as its directors).
[52] The general rule is that an agent is not personally liable for the debts of his or her principal. But, as Wright J stated, “[i]n all cases the parties can by the express contract provide that the agent shall be the person liable either concurrently with or to the exclusion of the principal”.8 One such way a contract can provide for that is through a guarantee:9
The question whether the agent is to be deemed to have contracted personally, in the case of a contract in writing other than a deed, bill of exchange, promissory note or cheque, depends upon the intention of the parties, as appearing from the terms of the written agreement as a whole, the construction of which is a matter of law. The party concerned may act as agent in some respects and as principal (including as a trustee) in others.
[53] The plaintiff submits that the agreement unequivocally and unambiguously prescribes the liability of the defendants as directors to pay the commission fee in the event of a default by the registered proprietors.
Dual capacity
[54] An agent may, with one signature, sign a contract both on behalf of his or her principal and as a guarantor.10 There is a presumption that a single signature, without more, is ineffective to show an intention to sign in a dual capacity.11
However, the Court of Appeal confirmed in Vuletic v Contributory Mortgage
Nominees Ltd:12
[13] … Such presumption may be displaced by clear words within the contract or by extrinsic evidence from which may be inferred the signer’s intention when affixing his or her signature …
7 Companies Act, s 15.
8 Montgomerie v United Kingdom Mutual Steamship Assoc [1891] 1 QB 370 at 372.
9 Peter Watts (ed) and FMB Reynolds Bowstead & Reynolds on Agency (20th ed, Sweet & Maxwell, London, 2014) at [9-036]. Footnotes omitted.
10 Vuletic v Contributory Mortgage Nominees Ltd (2006) 7 NZCPR 552 (CA) at [13].
11 Vuletic v Contributory Mortgage Nominees Ltd, above n 10, at [13].
12 Vuletic v Contributory Mortgage Nominees Ltd, above n 10.
[55] In Vuletic, the Court held that the addition of the word “director” after a signature placed under the words “signature of purchaser(s)” meant that the signatory was indicating the capacity in which she was authorised to sign for the purchaser company.13 Although a clause in the agreement stated that she, “a director and shareholder”, personally guaranteed the agreement, she had not signed the agreement in that capacity. In the absence of any extrinsic evidence to the contrary,
her signature was ineffective to bind her to the stated guarantee.
[56] In Trotter v Avonmore Holdings Ltd, the licensor in a licence agreement argued that the directors of the licensee signed the agreement in their dual capacity as directors and shareholders.14 The agreement contained the following clause:
Shareholders Covenants
38.1 The Shareholders jointly and severally:
a)guarantee to the Licensor the due and punctual payment by the Licensee to the Licensor of all moneys from time to time payable by the Licensee to the Licensor and all due and punctual performance by the Licensee of all the obligations, duties, liabilities and covenants of the Licensee under this agreement.
b)agree to indemnify and hold harmless the Licensor from any default by the Licensee in making such due and punctual payment or in such due and punctual performance.
…
[57] The directors had signed the agreement in the place designated for directors. But they did not sign in the place included for shareholders.
[58] As a result, the Court of Appeal held that there was nothing in the agreement to suggest the directors had signed it in a dual capacity.15 It added:
[29] … it has never been suggested that [the directors] represented to [the licensor] in any way that they had signed the documents in a dual capacity. The fact that the shareholder guarantee clause had not been deleted, in our view, cannot be taken as a representation of signing in a dual capacity …
13 At [28].
14 Trotter v Avonmore Holdings Ltd (2005) 8 NZBLC 101,646 (CA).
[30] … we cannot see that the initialling of each page of the document by [a director] changes the position. Documents are initialled merely as a verification of the document that has been executed. Execution is by signature at the end of the agreement. Even without any initialling, that signature relates to the whole agreement …
[59] By way of contrast, the case of Doughty-Pratt Group Ltd v Perry Castle involved extrinsic evidence.16 In that case, two directors signed a lease agreement on behalf of the lessee company. The agreement contained a clause naming the directors as guarantors:
15.1The Directors of Associated Sharebrokers Ltd namely Dennis Peter Lennan and David Craig Wylie agree to guarantee the covenants of Associated Sharebrokers Ltd under this agreement and any sublease or assignment arising herefrom.
[60] The directors argued that the clause could not be enforced because they did not sign the agreement in a personal capacity. There was no separate provision in the agreement for the guarantors to sign in that capacity. However, the Court found that the evidence established that the directors themselves had written their names into the guarantee clause, which they had initialled, and that they had orally advised that
they accepted they were guarantors.17 These factors sufficed to show that their
signatures were intended to have two purposes.
[61] Similarly, in All Metals Trading Co Ltd v Eagle Wire Products Ltd, the sole director of a lessee company signed a lease agreement containing a guarantee.18 The guarantee listed the guarantors as the sole director and two other companies of which he was also the sole director. Justice Woolford held that “any presumption that [the director] signed as guarantor in his personal capacity only is displaced”.19 The director had led the lessor to believe he was able to bind the lessee company, he had signed other related documents which were intended to bind the companies and he had stipulated that one of the companies could be named as a party to the lease only
if a guarantee were given by the others.20
16 Doughty-Pratt Group Ltd v Perry Castle [1995] 2 NZLR 398 (CA). The Court of Appeal endorsed the reasoning in Vuletic v Contributory Mortgage Nominees Ltd, above n 10, at [32].
17 At 404.
18 All Metals Trading Co Ltd v Eagle Wire Products Ltd [2013] NZHC 2198.
19 At [34].
Application
[62] In my view, it is clearly arguable that the defendants, as directors, signed the agreement only on behalf of the companies which were the owners of the properties and did not by their signatures guarantee the performance of the agreement by the companies as owners.
[63] If the defendants did not sign the agreement on behalf of the owners, then the agreement has no legal validity. The defendants could not, in their personal capacities, appoint the plaintiff as their agent to sell the properties. Therefore, all references in the agreement to “the Owner” are references to the defendants in their capacities as agents of the registered proprietors.
[64] This interpretation is consistent with clause 13.1(b) of the General Terms and
Conditions:
… the term “Owner” shall include each registered proprietor of the Property and where there is more than one registered proprietor of the Property, the obligations of the Owner under this contract shall bind each of those registered proprietors jointly and severally.
[65] It is clear that the agreement intends “the Owner” to be the registered
proprietor/s.
[66] This interpretation is consistent also with s 4(1) of the Act which defines “client” as meaning “the person on whose behalf an agent carries out real estate agency work”. Section 126 links entitlement to commission from “a client” to work performed under a written agency agreement “signed by or on behalf of … the client”.
[67] The only provision in the agreement which might import personal liability is clause 9.1(h) of the General Terms and Conditions. This provides:
9.1The Owner warrants to Bayleys (except as the Owner shall have disclosed in writing to Bayleys prior to the date of this contract) that:
…
(h) the signatory/ies personally guarantee the performance of
this contract of agency …
[68] As is apparent, this is a warranty by the Owner. It is not a separate guarantee by the defendants in their personal capacities.
[69] The affidavit of Mrs Webster is to the effect that it was agreed or understood between the plaintiff and the defendants that the defendants would sign the agreement in their capacities as agents of the owners of the properties, namely the companies. Clause 9.1(h) is on its face a warranty of the Owner and not of the defendants personally. In my view, it is clearly arguable the agreement does not bind the defendants as directors to pay the plaintiff’s commission personally.
[70] It is correct that the defendants did not add “director” after their signatures. But the agreement does not have a separate space for a guarantor to sign, nor does it name the defendants as guarantors.
[71] I do not find the presumption expressed in Vuletic that a single signature, without more, is ineffective to show an intention to sign in a dual capacity, to be displaced. There is no extrinsic evidence before me to suggest the defendants as directors were signing in that capacity. Nor are there clear words in the agreement. The Owner has given the warranty, not the defendants in their personal capacities.
Liability for commission on sale of Beejay property?
[72] A trust is not a legal entity. Although it is usual shorthand to refer to a trust owning assets, the legal position is that the trustees own the assets and are restricted in how they can deal with them by the terms of their trust.
[73] Mr and Mrs Webster signed the agreement in respect of the Beejay property because they were registered proprietors. They were registered proprietors not beneficially but because they were trustees of the trust.
[74] At the date Mr and Mrs Webster signed the agreement there was a third registered proprietor, Mr Mouton. There is an inference to be drawn that Mr Mouton was registered as a proprietor because he was also a trustee of the trust. There is no evidence as to why Mr Mouton did not sign the agreement, there is only
Mrs Webster’s deposed belief that she and Mr Webster were able to sign the agreement and bind the trust. It might be that Mr Mouton had already resigned as a trustee prior to Mr and Mrs Webster signing the agreement. But there is no evidence of that. It might be that the trust’s deed provides for a majority of trustees to sell trust assets. But, again, there is no evidence of that.
[75] I have concluded that the underlying position does not matter so far as the plaintiff is concerned.
[76] If Mr Mouton was a trustee, then the general principle would be that Mr and Mrs Webster could not contract with the plaintiff. This is because, subject to the trust deed, trustees must act unanimously in the execution of their powers.21 But that
does not necessarily mean the contract with the third party will be undone.22
[77] When trustees sign documents as trustees then, generally speaking, they are personally liable for any adverse legal consequences. They may or may not be able to claim indemnity from the assets of the trust. That depends on the trust deed. But, if two trustees enter into a contract without the consent of the third trustee, the trustees will be in breach of trust and will be personally liable to the beneficiaries for any loss incurred.23
[78] So, Mr and Mrs Webster are either in breach of trust or signed the agreement validly. But their liability to the plaintiff rests upon the agreement itself, not upon whether Mr and Mrs Webster were acting in conformity with the terms of their trust.
[79] As mentioned earlier, the plaintiff’s case is that by signing as “Owner”, the defendants as trustees took on personally the obligations of the Owner. This includes liability to pay any commission due.
[80] In contrast to the position of the defendants as directors, Mr and Mrs Webster
were registered proprietors of the Beejay property. They were “Owner[s]” of the
21 Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 (HC) at 195.
22 Subject to the statutory exceptions in the Land Transfer Act 1952.
23 The trustees have the option of applying to the court under s 73 of the Trustee Act 1956 to relieve them from personal liability.
property. They therefore breached clause 6: “… the Owner must pay Bayleys the Commission, and any other monies payable under this contract”. Although Mr Mouton was also a registered proprietor of the Beejay property, Mr and Mrs Webster warranted in clauses 9.1(h) and (k) of the agreement that they had authority to enter the agreement on his behalf.
[81] If it is the case that not all the trustees signed the agreement, then that affects Mr and Mrs Webster’s liability to the beneficiaries of the trust. It does not affect their liability to the plaintiff for signing the agreement, especially given the warranties in clause 9 of the agreement.
[82] Trustees contracting with third parties cannot usually limit their liability to such third parties to the assets of the trust without specific agreement to that effect. Mr and Mrs Webster were entitled to limit their liability in the agreement. They did not.
[83] I am satisfied that Mr and Mrs Webster have no arguable defence to this part of the claim. They signed the agreement as “Owner[s]” of the Beejay property and they personally guaranteed the performance of the agreement. They warranted they had the written authority of all the registered proprietors of the Beejay property to enter into the agreement.
Decision
[84] The application for summary judgment is allowed in part and declined in part as follows:
(a) I enter summary judgment for liability against the first and second defendants as registered proprietors of the Beejay property for the commission due on the sale of that property. If quantum is in dispute, then the dispute will be decided at trial.
(b)I decline summary judgment against the defendants in their capacities as directors of the companies that were the registered proprietors of the Ridgeview and Clear Ridge properties.
[85] As the application has been partially successful, the parties are invited to file
memoranda as to costs. The plaintiff’s submissions are to be filed and served by
10 November 2017 and the defendants’ submissions by 24 November 2017.
[86] The proceeding is to be called in the list on 22 November 2017 for the purpose of setting a timetable for its progression to trial. The parties are to advise
the Judge presiding whether quantum of commission due under [84](a) is in dispute.
Brewer J
1
3
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