NZ Realties Limited v Geerligs HC Auckland AP 37/01

[2001] NZHC 583

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY AP 37/01

BETWEEN NZ REALTIES LIMITED
Appellant

AND BARNABY EELCO PRINSEN GEERLIGS, BRETT PRINSEN GEERLIGS and JAMES PETER MARTIN
Respondent

Hearing: 14 June 2001
Counsel: M C Bhanabhai for appellant
F P Divich for respondent

Judgment: 29 June 2001

JUDGMENT OF NICHOLSON J

Solicitors:
Dyer Whitechurch & Bhanabhai, DX CP24016, Auckland for Appellant
McVeagh Fleming Kennedy Tudehope, DX CP21506, Auckland for Respondent
APPEAL
[1] New Zealand Realties Ltd (“the real estate agent”) appeals against the summary judgment given in the District Court in favour of B Geerligs and others (“the prospective purchaser”) for $25,000 plus costs.
CIRCUMSTANCES
[2] In 1992 B Ballan and others (“the vendor”) were selling a commercial property at 2 Bath Street, Parnell. The real estate agent was acting for the vendor in the sale. By a conditional agreement for sale and purchase dated 1 October 1992 the prospective purchaser agreed to buy the property for $775,000. The agreement provided for a deposit of $75,000 with $25,000 of this payable to the real estate agent’s trust account on signing the agreement and the balance of $50,000 “payable on acceptance”. The $25,000 was duly paid.
[3] On 10 November 1992 the prospective purchaser’s solicitor advised the vendor’s solicitors that he did not approve the agreement in terms of a special condition in the agreement and asked the vendor’s solicitors to instruct the real estate agent to refund the $25,000.
[4] The vendor’s solicitors advised the real estate agent that the vendor considered that the prospective purchaser had wrongly repudiated the contract and must forfeit the deposit. They required the real estate agent to continue holding the $25,000 as stakeholder and said that the proper person to whom it should be paid after deduction of commission was the vendor.
[5] On 22 January 1993 the vendor’s solicitors gave written notice to the prospective purchaser’s solicitors cancelling the contract. On 12 February 1993 the real estate agent wrote to the prospective purchaser’s solicitors with a copy to the vendor’s solicitors, stating “We reiterate that we have conflicting and emphatic claims to these funds by both sides. We see our duty as stakeholder to retain this deposit until the parties resolve these issues”.
[6] There then followed considerable correspondence between the prospective purchaser’s solicitors and the vendor’s solicitors about entitlement to the $25,000.
[7] On 21 February 1997 the vendor wrote to the real estate agent advising that it could not sustain a legal challenge for the money from the prospective purchaser and accordingly directed the real estate agent to release the money to the prospective purchaser’s solicitors. The real estate agent did not pay the $25,000 to either the vendor or the prospective purchaser.
[8] In July 2000 the prospective purchaser issued summary judgment proceedings against the real estate agent for the $25,000. Those proceedings were heard in March 2001 and summary judgment was given.
SUMMARY JUDGMENT REASONS
[9] In his oral judgment, His Honour Judge B N Morris found that there was no defence to the claim as the agreement did not become unconditional and the real estate agent’s position as stakeholder of the $25,000 required it to pay that money to the proposed purchaser when directed to do this by the vendor.
APPEAL HEARING
[10] At the hearing of the appeal it became clear that the issue of entitlement to $25,000 existed between the real estate agent and the vendor and not between the real estate agent and the proposed purchaser. The position is governed by s 56 of the Real Estate Agents Act 1976 which provides:
“56 Duty of real estate agent with respect to money received in course of business
(1) Subject to subsection (4) of this section, all money received by a real estate agent in respect of any transaction in his [or her] capacity as a real estate agent shall be paid to the person lawfully entitled thereto or as that person may in writing direct:
Provided that where the real estate agent is in doubt on reasonable grounds as to the person who is lawfully entitled to any such money, he [or she] may retain that money in his [or her] trust account until the person lawfully entitled has been ascertained, but shall take all reasonable steps to ascertain as soon as practicable the person so entitled.
(2) Pending the payment of any such money, it shall be paid by the real estate agent into a general or separate trust account at any bank carrying on business in New Zealand under the authority of any Act, and, subject to subsection (4) of this section, shall not be drawn upon except for the purpose of paying it to the person entitled or as that person may in writing direct.
(3) No money to which this section applies shall be available for payment of the real estate agent’s debts, nor shall it be liable to be attached or taken in execution under the order or process of any Court at the instance of any of the real estate agent’s creditors.
(4) Nothing in this section shall be construed as to take away or affect any just lien or claim which the real estate agent may have on or in respect of any money received by him [or her], being money to which this section applies.”
[11] In accordance with that duty, the real estate agent was obliged to hold the $25,000 in trust until the person lawfully entitled to it in the dispute between the vendor and the prospective purchaser had been ascertained. When that had been done and the vendor directed the real estate agent to pay the stake of $25,000 to the purchaser’s solicitor, the real estate agent was then under a legal obligation to do this. If, as it claims, the real estate agent was entitled to $25,000 as commission then this could only have been the vendor’s liability and the real estate agent should have pursued such claim against the vendor. It was not entitled to retain the stake money of $25,000.
DECISION
[12] For the reasons just stated, I consider that the District Court Judge was correct in holding that the real estate agent had no defence to the prospective purchaser’s claim for payment of the stake money of $25,000. The appeal therefore fails and is dismissed.
COSTS
[13] It is just and appropriate for the unsuccessful appellant to pay costs of $2,000 plus disbursements to the respondent and I so order.