Messenger v Stanaway Real Estate Limited

[2013] NZHC 3096

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-007205 [2013] NZHC 3096

BETWEEN

JAMES MESSENGER and JUNE MARY

MESSENGER Plaintiffs

AND

STANAWAY REAL ESTATE LIMITED Defendant

Hearing:	22 November 2013
Appearances:	G Blanchard for the Plaintiff/Respondent J Keating for the Defendant/Applicant
Judgment:	22 November 2013

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

22.11.13 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

J MESSENGER and J M MESSENGER v STANAWAY REAL ESTATE LIMITED [2013] NZHC 3096 [22

November 2013]

Background

[1]      There  is  a  complex  background  to  this  proceeding.    It  arises  out  of  an agreement for sale and purchase of the plaintiffs’ property.   The defendant was engaged as the sale agent.  It procured the listing by a referral from the plaintiff’s son Gary,  a  licensed  real  estate  sales  person  who  with  his  wife  and  through  their company Realty NZ Limited operated an L J Hooker franchise in Albany.

[2]      The plaintiffs are English nationals and reside in Guernsey in the Channel

Islands.

[3]      At all relevant times their son Gary has been their New Zealand attorney.  It was Gary who recommended that their property be listed for sale with the defendant which operated a Bayleys Real Estate franchise.  The decision to use Bayleys was made by the plaintiffs’ son Gary because it was a well known brand name in the luxury property market.  In consideration of the referral Realty NZ Limited was to receive a 20 per cent fee on any commission payable.

[4]      The plaintiffs’ property was their New Zealand base.   It was a valuable property.   It was marketed for resale in 2006.   Due to health considerations the plaintiff James Messenger could not make travel commitments.  He asked his son to assist a sale of the property.  The law firm of Simpson Western was engaged for legal services in connection with any sale.

[5]      There were two offers for purchase.   One was a cash offer, the other for a significantly greater sum required a payment of $2.75M on 18 December 2006, subsequent quarterly instalments and the balance of $2.75M two years later.

[6]      The evidence indicates contact and communication by the defendant’s real estate agent and the plaintiffs’ son Gary regarding consideration of the competing offers.  Because the offer for a sum payable over two years was significantly greater than the cash offer that was made, it was preferred.   An agreement for sale and purchase was drawn.   Simpson Western’s services were engaged on behalf of the plaintiffs.  Issues arose with respect to an identification of the settlement date which

was not defined in the agreement for sale and purchase.   The date for giving possession was that same date on which the initial $2.75M was payable.  Uncertainty surrounded that date upon which the contract was to be settled, whether on the possession date or two years later when the balance payment of $2.75M was agreed to be paid.

[7]      No payment at all was made on 18 December 2006.

[8]      The purchasers issued a High Court proceeding against the plaintiffs seeking rectification of their sale and purchase agreement to provide for settlement date of 18

December 2006.   In May 2008 that proceeding was discontinued and because the purchasers failed to complete settlement on 18 December 2008 the plaintiffs effected a  cancellation  of  the  sale  and  purchase  agreement  and  they  arranged  for  their property to be resold.

[9]      On 9 April 2009 the property was resold for about $1.6M less than the earlier sale.    The  plaintiffs  then  issued  proceedings  to  recover  the  shortfall,  including interest and costs.   That claim failed in the High Court.   The Court held that the settlement date was 18 December 2006 and said the plaintiffs were in breach of the agreement because they had failed to provide title to the property at that time.  On appeal to the Court of Appeal the High Court judgment was reversed and judgment was entered against the purchasers in the sum of about $2.88M.     The Court of Appeal considered the plaintiffs were justified by their decision not to insist upon settlement on 18 December 2006.

[10]   In this proceeding the plaintiffs claim to recover interest they paid on borrowings secured against the property from December 2006 until the property was resold in May 2009.  They also claim for legal costs of $415,000 throughout.  As well, the plaintiffs sue to recover the loss of $1.57M incurred on the resale of the property.   They allege that the defendant breached a duty of care and fiduciary obligations owed to them prior to and during the course of their agreeing to sell the property  to  the  original  purchasers.    They  allege  there  was  an  ambiguity  in agreement terms; that it was unclear to whom the right of caveat was provided i.e. to the vendor or the purchaser; that it was unclear whether the settlement date was

meant to be 18 December 2006 or 18 December 2008 and if upon those respective dates there was a requirement to provide title.

[11]     The defendant has applied to join the plaintiffs’ son Gary, Gary’s real estate agency Realty NZ Limited and Simpson Western the law firm engaged on behalf of the plaintiffs when the property was sold, as third parties.

[12]     The plaintiffs have alleged that the defendant breached its duty of care to them by failing to advise them that the settlement date potentially disadvantaged the plaintiffs and as a result there are those losses which had occurred by the time it was resold in 2009.

[13]     The defendants seek to join Gary, the plaintiffs’ son because it was he and his real estate agency that referred the plaintiffs to the defendant.  It is claimed that Gary provided advice to his parents throughout the sale of the property.

[14]     Realty  NZ  Limited  is  Gary’s  company.    It  referred  the  plaintiffs  to  the defendant and for which it was agreed a referral fee would be paid.  The defendants say that company provided advice to the plaintiffs in respect of various clauses in issue in the sale and purchase agreement but did not advise the plaintiffs of the potential disadvantage to them of a settlement date of 18 December 2006 being two years before the final purchase instalment was due.

[15]     The defendants say that Simpson Western received a copy of the plaintiffs’ sale and purchase agreement on or before 4 December 2006 when it was not at that time unconditional; that Simpson Western negligently failed to notice that the purchase price in instalments gave rise to an issue as to the passing of title which disadvantaged the plaintiffs, and that they failed to take all necessary steps to prevent loss to the plaintiffs.

[16]     The application for joinder of third parties has been opposed.  The plaintiffs oppose the application of the defendant to join their son and his real estate agent as a third party.  They oppose also the joinder of their solicitors as a third party.  They say that none owed a duty of care nor breached any such claim of a duty to be owed.

They say there was no agency agreement with their son or his company; that those were only party to a referral agreement and their son was only engaged by virtue of a power of attorney.

[17]     Regarding the application to join Simpson Western the plaintiffs claim that “when the facts are properly understood” it is clear that they did not breach their duty.

[18]     Both plaintiffs and the defendant have filed evidence from experts.  Mr Jones on behalf of the defendants and Mr Nolan on behalf of the plaintiffs have provided legal expert opinion on Simpson Western’s conduct on receipt of the sale and purchase  agreement.    Mr  Jones  concluded  that  any  reasonable  and  competent solicitor reading the sale and purchase agreement would have come to the conclusion that the agreement for sale and purchase was to settle on 18 September 2006, that because the purchasers failed to make the payment of $2.75M by that date Simpson Grierson ought to have advised the vendors to serve a settlement notice with the view to cancelling the agreement.  On behalf of Simpson Grierson Mr Nolan offered expert evidence suggesting the sale and purchase agreement was ambiguous about whether settlement occurred in 2006 or in 2008 and that it was commercially acceptable for the solicitors to have taken the position that settlement would not occur until 18 December 2008 because that view favoured the interests of the plaintiffs.

[19]     The experts disagree.  Mr Blanchard addressed the Court in detail regarding perceived deficiencies with the expert opinion of Mr Jones provided on behalf of the defendants.  He said that Mr Jones was wrong.  He submits the strategy adopted by Simpson Western provided the best available outcome for the plaintiffs.   He was critical of the brevity of Mr Jones’ report but acknowledged in part this may be due to limited access available to Simpson Western’s file, the full contents of which have only recently been discovered.

[20]     Mr Blanchard is critical of the changing nature of the claims against third parties.   The most recent draft of an amended statement of claim raises different

causes of action than an earlier draft did.  However, this too may be explained by the fact that full discovery has only recently been provided.

[21]     Mr Blanchard is forceful in his submissions that Gary Messenger did not owe any duty of care to his parents.  On the other hand there is evidence to suggest that as well as being his parent’s spokesman he may have assumed responsibility for providing advice in relation to the contract they signed and in discussions about strategies to be adopted when the contract fell into default.

[22]     It is not the purpose of the Court at this stage to resolve those differences or to offer a view about who is correct.  That is a matter to be left for consideration of a trial in due course.  The position is not necessarily resolved by the decisions of the High Court or on appeal by the Court of Appeal.  In the High Court it was held the settlement  date  was  18  December  2006,  that  the  plaintiffs  were  in  breach  of agreement because they had failed to provide title to the property at that time.  The Court  of Appeal  reversed  that  decision  and  entered  judgment  in  favour  of  the purchasers.  The Court of Appeal held that the purchasers had a legal obligation to tender the payment that was due under the contract on 18 December 2006 and that their failure to do so constituted a breach of contract.

[23]     The claim against the defendant is based upon allegations of a failure to advise  the  plaintiffs  that  the  contract  was  unclear  about  when  settlement  was required be it in 2006 or 2008; also that if it was 2006 the plaintiffs would be giving title but would be left unsecured or inadequately secured for payment of the balance two years later.

Joinder principles

[24]     These are set out in Rule 4.4 of the High Court Rules and are premised on the grounds that the defendant is entitled to a contribution or an indemnity from a third party.  Rule 4.8 provides that, as here on an application seeking leave to issue a third party notice, the Court must have regard to all of the relevant circumstances.

[25]     Pursuant to s 17(1)(c) of the Law Reform Act 1936 any relief or remedy claimed against a third party must be related to or connected with the subject of the original proceeding and to be substantially the same as that claimed by a plaintiff against a defendant.   Interests of justice are paramount in those considerations of whether third parties ought to be joined.

[26]     This Court’s approach to such applications for joinder is traditionally liberal. According any jurisdiction available to the Court to set aside third party notices is exercised sparingly.  The Court will assume that allegations of fact in a cross claim can be proved and should only be struck out where they are so clearly untenable that they cannot possibly succeed.

Considerations

[27]     Not  uncommonly  there  is  a  conflict  of  opposing  views  regarding  the reliability of evidence suggesting the proprietary of joinder.   It is not common on these applications to endeavour to resolve those differences.   There is no obvious reason for preferring the expert evidence of Mr Nolan on behalf of Simpson Western to that of Mr Jones on behalf of the defendant.  Both lawyers are well known to this Court for their opinions on matters of legal proprietary.  It is not the purpose on this application to decide whose opinion is the better.

[28]     The evidence of Gary Messenger is that he was simply a referral agent on behalf of his parents. Against this is the fact that his agency was to receive a referral fee.   Also he held power of attorney on behalf of his parents.   The defendant's evidence is that Gary provided advice about the offers presented to his parents, had separate contact with the purchasers and was involved in all negotiations concerning the purchasers.  It is alleged he was clearly acting in advising in his capacity as a real estate agent at all material times.

[29]     Again, it is not the purpose of this Court at this time to make a decision regarding the accuracy or otherwise of those positions.

[30]     It is not disputed that Simpson Western owed a duty of care to the plaintiffs to exercise reasonable skill and care in advising them on the terms of the agreement and of the remedies under the agreement.  Whether that advice fell short of the standard of a reasonable and competent solicitor, and as a result caused or contributed to the losses that the plaintiffs now claim, is a matter for further inquiry.

[31]     Extensive review had been provided by counsel on both sides regarding the proprietary of Simpson Westerns advice and strategy adopted in connection with the settlement of the plaintiffs’ original agreement for sale and purchase.  This Court’s view is that it is immediately obvious that the very different and distinct opposing views are not a matter requiring conclusion upon the third party joinder application. Indeed, it is clear that short of a trial hearing that it would be improper to draw any conclusion much less to resolve the conflict of expert opinions on the affidavits that they have filed.

[32]     The defendant claims an entitlement to contribution from three parties.  The process of considering that application involves the balancing of principles of justice and expedience.

[33]     Draft statements of claim have been provided by the defendants.  The Court should adopt the presumption that allegations of fact can be proved.

[34]     The plaintiffs say their son Gary and Gary’s real estate agency owed no duty of care to them but, the evidence of Gary’s professional connection with the abortive sale appears to be greater than has been conceded.

[35]     Quite clearly Simpson Western carried obligations of care as the plaintiffs’ legal advisors.  Much has been said about their actions in the situation where options required consideration.  Two expert witnesses could not agree whether the solicitors were negligent.   Notwithstanding compelling criticism offered by Mr Blanchard regarding Mr Jones’ opinion the Court is firm that it is a matter which ought to be left for trial.

Judgment

[36]     The applications for joinder are granted.

[37]     Costs upon the application shall be paid by the plaintiffs and are calculated on a 2B basis together with disbursements approved.

Associate Judge Christiansen