Mathews v CD Realty (PN) Limited HC Palmerston North CIV 2010-454-276
[2010] NZHC 1881
•15 September 2010
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV 2010-454-276
BETWEEN BRENT ADAIR MATHEWS Appellant
ANDCP REALTY (PN) LIMITED Respondent
Hearing: 26 August 2010 (Heard at Wellington)
Counsel: G A Paine for Appellant
A Isac for Respondent
Judgment: 15 September 2010
JUDGMENT OF MILLER J
[1] Their marriage having failed and negotiations over their property settlement having proved troublesome, Susan Capenerhurst and Brent Mathews agreed to sell their farm at Mangaweka. They appointed Peter Stratton of CB Realty (PN) Limited, a Bayleys franchise, to conduct the sale. The authority to sell the property was signed by Mr Mathews alone, he asserting that he had the authority of Ms Capenerhurst to do so.
[2] Mr Stratton introduced a purchaser whose offer was acceptable to Ms Capenerhurst but not to Mr Mathews, who instead proposed to purchase Ms Capenerhurst’s interest at a price based on that offer.
[3] Mr Stratton prepared two agreements for sale and purchase between the couple and their company, which owned part of the land, as vendors, and
BRENT ADAIR MATHEWS V CP REALTY (PN) LIMITED HC PMN CIV 2010-454-276 15 September 2010
Mr Mathews as purchaser. They included not only the farm but also stock and chattels. He says he did so on Mr Mathews’ instructions; Mr Mathews denies it.
[4] The property was duly transferred to Mr Mathews, but it was done, by arrangement between their lawyers, pursuant to a relationship property agreement under s 21 of the Property (Relationships) Act 1976. The couple say they negotiated this agreement themselves.
[5] CD Realty sued the couple for its commission, and the District Court granted summary judgment against Mr Mathews. It did not pursue summary judgment against Ms Capenerhurst, because she had not signed the agency agreement. Mr Mathews now appeals.
The agency agreement
[6] The agreement stated that it was an agreement between Mr Mathews and
Ms Capenerhurst and CD Realty. It provided:
IN CONSIDERATION for the Agent listing for sale/lease and endeavouring to effect the sale/lease (which includes exchange or trade) of the real estate located at Kawera Road, Mangaweka (described as the ‘property’)
IT IS AGREED
1. The agent is appointed an agent for the sale/lease of the property.
[7] The agreement further prescribed when the commission was payable.
4. If the property or any part of it is sold, directly or indirectly
(a) by the agent; or
(b) through the instrumentality of the agent; or
(c) To anyone introduced to the property by the agent. ...
We agree to pay the agent commission and/or other payments specified below.
[8] Commission was calculated on the basis of “consideration”, which was defined as:
3.Consideration means the total value of money, property, compensation, or money’s worth excluding GST passing from the purchaser to the vendor including without limitation in relation to stock, plant, fixtures, fittings, goodwill and key money.
[9] Commission was calculated, for rural properties, on the basis that it:
1.Applies to all property sold including freehold, leasehold and company shares/loan accounts.
2.Sale includes private agreement, auction, exchange and multiple sales.
[10] The agency agreement was signed by Mr Mathews and dated 27 October
2007. It provided:
We warrant that if not the sole owner/s of the property we have the authority of all the vendor(s)/Lessor(s) to enter into this contract.
Makoura Estate
[11] The farm comprises 342 hectares held in three certificates of title and carrying 3,500 stock units. Mr Mathews and Ms Capenerhurst were registered proprietors of two of the titles as joint tenants. The third was held by Mathurst Limited, a company owned by the couple. It is not in dispute that Mr Stratton was instructed to sell the entire farm. Nor is it in dispute that Ms Capenerhurst knew and approved of the sale through Bayleys.
[12] The property carried stock which was subsequently valued at $107,876. In addition there were working dogs, horses, and sundry farm equipment, including shearing plant, a weighing crate, a horse float, a trailer, and a 4WD bike.
The Cripps offer
[13] Mr Stratton’s efforts resulted in an offer of 13 December 2007 from Graeme and Jane Cripps at a price of $1.4M. It included a right to purchase capital stock at the valuation and certain items of farm equipment, essentially comprising the shearing plant and a weighing crate.
[14] Mr Stratton sent the Cripps’ offer to the parties, and on 4 January Ms Capenerhurst emailed Mr Stratton saying that she had decided to accept it. On the same day Mr Mathews told Mr Stratton that he had decided not to do so. At the price offered by the Cripps, he wanted to buy the property himself.
The Capenerhurst/Mathews negotiations
[15] Mr Stratton’s account was that Mr Mathews instructed him to prepare an offer of $1.42M which he signed and which Mr Stratton presented to Ms Capenerhurst on 8 January. It was at a price of $1.42M, for all three titles. It named Mr Mathews, Ms Capenerhurst and Mathurst Limited as vendors, and Mr Mathews or nominee as purchaser. Mr Mathews signed it as both purchaser and
vendor. I interpolate at this point that it was in the REINZ/ADLS form (8th ed), and
Bayleys were named as the real estate agent on the back of the form. Unfortunately the entire agreements were never put in evidence, so the provisions of the standard form relating to payment of commission are not before me. What is inescapable is that Mr Mathews made an offer to purchase from the existing proprietors through Bayleys and signed the offer as vendor. It is also indisputable that the price that he eventually paid, although subsequently adjusted, was based on the offer that had been made by the Cripps, who had been introduced by Mr Stratton.
[16] Ms Capenerhurst did not accept the offer. She responded to Mr Stratton by email, stating that when Mr Mathews spoke to her he said his offer was $1.45M; further, she was not interested in an offer of $1.42M which was dependent on finance, as Mr Mathews’ was.
[17] Mr Stratton subsequently emailed the offer to Mr Mathews’ solicitor stating that Mr Mathews had asked him to do so and advising that he was waiting for Ms Capenerhurst to countersign the contract at $1.45M. The solicitor responded on 23
January, asking whether Mr Stratton could tell him by about 3.30pm whether Ms Capenerhurst had signed the agreement, since he was seeing Mr Mathews that day.
[18] About this time the parties’ accounts begin to differ markedly. Mr Mathews maintains that when he began negotiating directly with Ms Capenerhurst he discussed matters with Mr Stratton and told him that he would not pay commission to buy his own farm. Mr Stratton denies that. Mr Mathews and Ms Capenerhurst both say that they negotiated the eventual settlement themselves. Consistent with that, Mr Paine pointed to the absence of further emails from Mr Stratton until 10
April 2008, when he emailed Ms Capenerhurst, attaching a new agreement for sale and purchase. He stated that Mr Mathews had asked him to prepare the agreement to represent his understanding of the agreement that they had reached. It included the horses, dogs and equipment. Mr Mathews denies that this was done on his instructions. He says that Mr Stratton was attempting to insert himself into the process, no doubt trying to secure his commission. In contrast to the January offer, this document was not signed by Mr Mathews.
[19] Mr Stratton sent a further agreement in April 2008. The price was $1.45M and the agreement provided that Mr Mathews or nominee, as purchaser, would buy all the sheep and cattle at valuation. The proceeds from 35 mixed aged Angus cows and 50 per cent of their calves would be paid directly to Ms Capenerhurst’s father. The offer valued working dogs and farm equipment (the horse float, Honda Quad bike) and provided that each party would retain certain horses while a farm trailer would be sold before settlement. This agreement too was not signed by either party, although Mr Stratton maintains that he prepared and sent it on Mr Mathews’ instructions and he did send it to Ms Capenerhurst.
[20] It is not in dispute that at about this time Mr Stratton did prepare a “valuation agreement,” effectively a submission to arbitration, providing for a valuation of the stock by two nominated valuers and an umpire. It was signed by both parties, and it resulted in the valuation, prepared on Bayleys letterhead, of $107,876.
[21] Mr Mathews’ explanation is that while Mr Stratton did become involved in the negotiations nobody asked him to. On the contrary, once the respective legal advisers received what purported to be an agreement they ignored Mr Stratton completely, preparing a comprehensive relationship property instead.
The s 21 agreement
[22] The agreement was executed on 11 July 2008. In it the parties recorded that
Mr Mathews would take over the farming operation. Mathurst Limited would pay
$1.45M being the agreed value of two pieces of farmland held by the two parties together with the arbitrated value of the stock. Ms Capenerhurst would also transfer all her shares in Mathurst Limited to Mr Mathews. From the total sum paid by Mathurst there would be deducted and paid certain sums required owed to family members and amounts required to settle bank debt. From Mr Mathews’ resulting half-share in the net balance he would pay certain sums for half of the value of dogs and the farm equipment, and she would pay to him half of a tax refund due to her.
[23] The effect of that agreement was that Mathurst Limited acquired the two titles that had been held by the parties as joint tenants and Ms Capenerhurst transferred her shares in the company to Mr Mathews, all for a price derived from the Cripps’ offer.
The District Court decision
[24] After reminding himself of the test for summary judgment, the Judge rejected a submission that the agency was confined to a sale to any third party; neither the signed agency nor the commission provision contained any exceptional qualification which limited commission to a third party purchase. He found incredible Mr Mathews’ claim that he told Mr Stratton that he would not be paying commission to buy his own farm, for the exchange of documentary evidence, including emails, established that the point was not reasonably arguable. The property was “sold” in terms of the agency agreement, in the sense that one property-owning entity transferred its interest to another for consideration. It mattered not that the vehicle was a property relationship agreement. The agreement happened to be in very much the same form as the draft agreement last prepared by Mr Stratton. It was not inconsistent with a “sale” for present purposes that the agreement also settled matrimonial property issues. Lastly, the Judge rejected the defence that Mr Stratton was not instrumental in effecting the sale. Mr Stratton had elicited the Cripps offer,
which was a “circuit breaker” in the parties’ negotiations. Mr Stratton was the effective and efficient cause of their agreement.
[25] Lastly, the Judge noted that summary judgment was also sought in respect of commission for sale of livestock. It was abundantly clear that Mr Stratton pulled together the livestock agreement. The claim followed the result of the principal claim for commission on the sale of the land and buildings.
[26] The Judge did not understand that, liability having been resolved, the quantum was in issue. The commission payable was $44,250 plus GST for the land and $2,696.90 and GST for the stock. Judgment was given accordingly.
Sale of the real estate?
[27] On appeal, Mr Paine submitted that the agency agreement did not contemplate that the settlement of relationship properties would amount to a sale by one party to the other that could result in commission being payable.
[28] I accept that the agency agreement was entered with a view to selling the property to a third party. There is no suggestion that Mr Mathews was simply testing the market or using the sale as an exercise to commit Ms Capenerhurst to a price. The object of contract interpretation is to ascertain the meaning the parties intended their language to bear.1 I accept Mr Paine’s submission that standing alone the agency agreement contemplated a sale of the land or part of it, rather than the transfer of the interest of one existing owner to another.
[29] However, the agency agreement must be read with the offer that Mr Mathews made through Bayleys in January 2007 to acquire the entire property from the existing owners. He signed that agreement as both vendor and purchaser. There can be no doubt that he was at that time employing Mr Stratton as agent for the acquisition of his former wife’s interest. Both he and Ms Capenerhurst behaved accordingly until about 23 January. Although the full document is not in evidence, that which is before me sufficiently establishes for summary judgment purposes that
Mr Mathews intended to effect this transaction through Bayleys. It matters not that he may have resiled from that appointment once he had secured his wife’s agreement to the price; the agent is entitled to commission if he was instrumental in the sale.
[30] It is not necessary to consider Mr Isac’s alternative argument that there was a sale because the joint tenants together transferred their entire interest to Mathurst Limited. I observe that the argument suffers from the obvious weakness that Mathurst Limited did not transfer its interest in the third title to anyone.
Instrumentality
[31] Under the agency agreement commission was payable on any sale through the instrumentality of the agent.
[32] I conclude without hesitation that the Judge was right to find that Mr Stratton was instrumental in the transaction. Whether or not Mr Mathews intended to use the external sale process to commit Ms Capenerhurst to a price for the land, that is what happened. The Cripps’ offer formed the basis of the agreement that was subsequently negotiated. Until then the parties had been unable to reach agreement. After the Cripps’ offer they agreed on a price of $1.45M. With adjustments which reflected the additional components of a relationship property agreement, such as the settlement of debts and disposition of other relationship property, that is the agreement which was ultimately reached.
[33] It is incontrovertible that Mr Stratton was also involved in the parties’ agreement relating to stock. An agreement that they would be purchased at valuation was included in the offer that Mr Mathews made to Ms Capenerhurst through Mr Stratton, and Mr Stratton prepared the submission to arbitration. The valuation was prepared on his letterhead and adopted by the parties in their s 21 agreement
[34] Mr Paine argued that because the Property (Relationships) Act is a code applying in place of the rules of law and equity, the s 21 agreement could not amount to a sale for present purposes. He cited no authority for that proposition, and I am
unable to accept it. A property settlement may result in property being “sold”; that is, transferred from one entity to another, for consideration paid. Here the land was sold together with shares in the company. There is no reason in principle why a couple should not engage an agent to negotiate their property settlement, triggering liability to pay commission.
What is the commission payable on?
[35] Summary judgment was granted in respect of stock as well as land and buildings. I accept Mr Isac’s submission that although commission was payable on the sale of real estate, such sale having been effected the commission was calculated on the basis of “consideration” which included monies paid for stock, plant, fixtures, fittings and the like.
Should summary judgment have been granted against Mr Mathews alone?
[36] Mr Mathews was the only party to sign the agency agreement and Ms Capenerhurst never signed any agreement prepared by Bayleys. She denies that she ever agreed to pay commission or that she authorised Mr Mathews to enter a listing agreement on her behalf. She never saw the listing authority. Further, she does not recall Mr Stratton having any involvement in her affairs after her email to him on 10 January 2008, subsequent negotiations being driven entirely by the parties and their lawyers. She was not aware that Mr Stratton played any part in the stock valuation.
[37] I understand it to be common ground that the transaction was governed by s
62 of the Real Estate Agents Act 1976.2 It provided:
62 Real estate agent to have written contract of agency
No person shall be entitled to sue for or recover any commission, reward, or other valuable consideration in respect of any service or work performed by him [or her] as a real estate agent, unless—
(a) He [or she] was the holder of a licence as a real estate agent under this Act or the holder, or the partner of a holder, of a licence as a real estate agent under the Real Estate Agents Act 1963 at the time of the performing of the service or work; and
(b) His [or her] appointment to act as agent or perform that service or work is in writing signed either before or after the performance of that service or work by the person to be charged with the commission, reward, or consideration or by some person on his [or her] behalf lawfully authorised to sign the appointment.
[38] Ms Capenerhurst is a defendant in this proceeding, but because she did not sign the agency agreement the plaintiff elected not to seek summary judgment against her. Her position is not only that she is not liable as between herself and Bayleys but also that, if commission is payable, it is payable by Mr Mathews alone. She relies on the s 21 agreement, which is said to have the effect of fully and finally settling the parties’ liabilities as between one another. She anticipates, no doubt, that she will be able to resist any claim to contribution. As to that, I express no view. For his part, Mr Mathews accepts that something is probably payable to Bayleys on a quantum meruit basis, but he does not want to pay Ms Capenerhurst’s share. I observe that the difficulty the combination of s 62 and the s 21 agreement cause in this regard apparently motivates the present litigation.
[39] Mr Isac accepted that the absence of the other vendors’ signatures means that this is not a straightforward claim in debt. To recover its full commission Bayleys must rely upon Mr Mathews’ warranty that he had the authority of all vendors to enter into the agency agreement. Damages payable for breach of that condition, if indeed he did lack the authority of the other vendors, comprise the commission. I accept that submission. As a matter of first principle, the plaintiff is entitled to expectation damages, which involve payment of the commission. There is no offsetting deduction for expenses saved, since the agent completed his role in the transaction.
Conclusion
[40] For summary judgment purposes the question, as the District Court Judge correctly identified, is whether the plaintiff has shown that Mr Mathews has no reasonably arguable defence to the claim. The District Court Judge was satisfied of that. So am I.
[41] The appeal is dismissed. The respondent is entitled to costs on a 2B basis. Counsel may file memoranda if costs cannot be agreed.
Miller J
Solicitors:
B Andrew, Palmerston North for Appellant
Fitzherbert Rowe, Palmerston North for Respondent
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