Tennyson Properties (2009) Limited v Resort Brokers Limited
[2014] NZHC 1700
•21 July 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-004382 [2014] NZHC 1700
UNDER Section 290 of the Companies Act 1993 AND
IN THE MATTER OF
the Statutory Demand issued by Resort
Brokers LimitedBETWEEN
TENNYSON PROPERTIES (2009) LIMITED
Applicant
AND
RESORT BROKERS LIMITED Respondent
Hearing: 9 June 2014 Appearances:
D Considine for Applicant
L G Cox for RespondentJudgment:
21 July 2014
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to setting aside of a statutory demand
[1] The Court is asked to determine whether there is a substantial dispute as to the existence and enforceability of a principal/agent relationship between the applicant (Tennyson) and the respondent (Resort).
[2] The context is Tennyson’s application to set aside a statutory demand issued
by Resort for sums Resort claims under an agency agreement for the value of property.
TENNYSON PROPERTIES (2009) LIMITED v RESORT BROKERS LIMITED [2014] NZHC 1700 [21 July
2014]
The jurisdiction to set aside a statutory demand – the principles
[3] The Court’s jurisdiction to set aside a statutory demand is contained in s 290
Companies Act 1993, and I refer specifically to the basis upon which the Court may grant an application as contained in s 290(4) which reads:
290 Court may set aside statutory demand
…
(4) The court may grant an application to set aside a statutory demand if it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or is due; or
(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
[4] For the purposes of this hearing I adopt as a general approach to the exercise of this jurisdiction these 5 principles –
As to s 290(4)(a) –
The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt.
The mere assertion that the dispute exists is not sufficient. Material short
of proof is required to support the claim that the debt is disputed.
If such material is available the dispute should normally be resolved other
than by means of proceedings in the Court’s Companies Act jurisdiction.
As to s 290(4)(b) –
An applicant must establish that any counterclaim, cross demand or set- off is reasonably arguable in all the circumstances.
As to both ss 290(4)(a) and (b) –
It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.1
[5] The residual discretion under s 290(4)(c) – whereby the court finds that the demand ought to be set aside on other grounds – is a residual discretion which enables the court to do justice between the parties. As Tipping J indicated in Commissioner of Inland Revenue v Chester Trustee Services Ltd,2 the exercise of the discretion comes down to the Court’s judgment as to whether the creditor’s prima face entitlement to liquidate the company is outweighed by some factor making it plainly unjust for liquidation to occur.
Resort’s statutory demand
[6] Resort served a statutory demand on Tennyson for $40,559.94. The sum demanded was calculated by reference to the terms of a written Real Estate Sole Agency agreement (the agreement) and comprised $34,500 for commission,
$3,299.94 for interest on the commission and $2,760 for legal costs and expenses incurred in endeavouring to enforce or obtain payment of monies due under the agreement.
The grounds of Tennyson’s application
[7] By its application, Tennyson asserts that there is a substantial dispute as to whether the debt is owing or due by Tennyson to Resort because:
(a) Tennyson is not a party to the written agreement;
(b)Resort is precluded by s 126 Real Estate Agents Act 2008 from recovering commission because its agency work was performed under
a written agreement not signed on behalf of Tennyson.
1 For this formulation of the applicable principles, I acknowledge the editors of Company and
Securities Law (looseleaf ed, Brookers) at [CA 290.02(1)].
2 Commissioner of Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 (CA).
[8] The evidence in support of Tennyson’s application was filed by Maureen Young, a director of Tennyson. In the single paragraph of her affidavit which dealt with the substance of the dispute, Ms Young deposed:
Resort Brokers Limited is aware that there is a dispute as to the quantum claimed as commission on the sale. Resort Brokers Limited has chosen to issue a statutory demand rather than resolve the dispute by other means. The agency agreement … does not refer to Tennyson.
[9] Although Ms Young’s affidavit thereby refers to “a dispute as to the quantum claimed”, the actual amount of the claim was not raised as an issue in the grounds of application, nor was it pursued at the hearing. The amount claimed involves a straightforward set of calculations under the agreement.
The liability issue
The issue as framed by Ms Considine
[10] In her written synopsis, Ms Considine succinctly framed the issue –
There is no dispute that the sum claimed in the demand is due if the listing agreement is found to be a valid agreement pursuant to s 126 of the Real Estate Agents Act 2008. However it is submitted that there is a significant question mark over the validity of the real estate [agency] upon which the demand in this case was based.
The provisions of the agreement
[11] For the agreement, Resort used what appears to be its standard form of real estate sole agency agreement.
[12] The agreement in its heading identifies the Property/Business name (of the
subject matter) as “Tennyson Motor Business/Central City Inn Leasehold”.
[13] The agreement is then introduced with the following words:
This agreement is entered into by the parties listed in the Schedule. Specific details are listed in the Schedule to this agreement and in the accompanying Property/Business Description Sheet, all of which form part of this agreement.
[14] By cl 1.1.1 (as to interpretation) any capitalised term in the agreement has the meaning specified in Part A of the Schedule unless the context other requires.
[15] In Part A of the Schedule, the term Agent is defined as Resort Brokers Limited (with an address and contact details completed). In Part A of the Schedule there is neither a name alongside the term “Client” nor an address or contact details.
[16] In spaces provided for details of the Vendor’s Solicitor and the Vendor’s
Accountant, details of the names and contact points were completed in handwriting.
[17] By cl 2.1, the Client appoints the Agent as sole agent with exclusive selling rights for the sale of the Property/Business.
[18] The agreement contains 17 clauses (with many sub-clauses) in which the respective obligations of the parties, including as to the payment of commission and other expenses, are listed.
[19] Before the signature clause on page 3 of the written contract, there appears the following acknowledgement –
The Client confirms that it has read, understood and agreed to the terms of this agreement including the Schedule and the Property/Business Description Sheet, and acknowledges that they have received a copy. Where this agreement is being signed on behalf of the Client as authorised person, the Client and the signatory confirm that the signatory has the appropriate authority sign (sic) this agency agreement.
[20] Above the signature space for “Signature of Client/s or authorised person”, there is a signature which evidently reads “M Young”, with that same name printed alongside.
[21] The written agreement is signed on behalf of the Agent by Brent Hannah, a real estate agent employed by Resort, who has provided an affidavit in opposition.
Tennyson's submissions
[22] For Tennyson, Ms Considine noted that there is no reference in the agreement to the applicant, Tennyson Properties (2009) Limited. Because the space provided
for “Client” in Part A of the Schedule was not filled out, there is no express
definition of “Client”.
[23] Ms Considine observed that while the details of Vendor’s Solicitor and Vendor’s Accountant had been entered, those entries were insufficient to identify Tennyson as the client for the purposes of obligations arising under the agreement.
The legal requirements of a real estate agency contract
[24] Ms Considine indicated that there are few if any relevant cases on the application of s 126 Real Estate Agents Act. To the extent they exist they tend to be decisions in the disciplinary sphere by Committees and Tribunals.
[25] Ms Considine therefore initially focused on the statutory provision and interpretation in terms of the Act’s purposes.
[26] Section 126(1) of the Act provides:
126No entitlement to commission or expenses without agency agreement
(1) 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; 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.
[27] By s 4(1) of the Act the term “client” is defined to mean the person on whose
behalf an agent carries out real estate agency work.
[28] It is common ground that s 126 applies to items such as the commission and expenses claimed by Resort by its statutory demand. The question is whether there is a substantial dispute as to whether the agreement was signed by or on behalf of Tennyson as “the client”.
[29] Ms Considine submitted that the purpose of the Real Estate Agents Act might assist the correct interpretation application of s 126(1) of the Act. Section 3(1) of the Act provides:
3 Purpose of Act
(1) The purpose of this Act is to promote and protect the interests of consumers in respect of transactions that relate to real estate and to promote public confidence in the performance of real estate agency work.
[30] Ms Considine identified the consumer protection purpose of the Act as being important to the application of s 126 in this case. She drew upon observations of the Real Estate Agents Disciplinary Tribunal in Summit Real Estate Limited v Real Estate Agents Authority3 and the following particular observations of the Tribunal:4
[18] … those provisions provide substantial consumer protections; and it is important that a consumer is clearly advised when potentially incurring significant financial liability; and an agency agreement is the foundation upon which transactions involving the sale and purchase of a property rest and, as such, is the cornerstone of the current Act and its regulatory regime.
The Tribunal then referred to the further regulation under rules of the Real Estate
Agents Act (Professional Conduct and Client Care) Rules 2009, before adding:5
[19] … these provisions together cannot be categorised as merely technical; they are important substantive provisions to promote and protect the interests of consumers in relation to real estate transactions.
3 Summit Real Estate Limited v Real Estate Agents Authority [2011] NZREADT 38.
4 At [18].
5 At [19].
Resort’s submissions
[31] Mr Cox submitted in opposition that the requirements of s 126(1)(a) of the
Act have been met. He noted in particular that:
(a) There was a written agency agreement.
(b)The agreement had been signed by or on behalf of the client in that Ms Young’s signature appeared immediately above the words “signature of Client/s or authorised person.
(c) Resort’s work was performed under the written agreement.
Discussion
[32] I find that Resort has complied with the express requirements of s 126(1) of the Act.
[33] I have assumed for the purposes of this immediate discussion that there may be an uncertainty within the agreement as to who the client was. On the basis of the signature clause alone there are two possibilities, namely either Ms Young personally or Ms Young on behalf of Tennyson (the vendor). Whichever (if either) as a matter of contractual requirements of certainty is the correct client will be the person contractually liable as intended.
[34] I have considered Ms Considine’s submissions as to the purpose of the Act and find nothing in those provisions which, on a purposive approach to the interpretation of s 126, would lead to a different construction than that which is conveyed by the express terms of s 126.
[35] The potential uncertainty in the agreement as to the identity of the client does not cut across the consumer protection which is achieved through s 126 of the Act. The consumer protection purpose as described by the Real Estate Agents
Disciplinary Tribunal in the Summit Real Estate case6 – “that a consumer is clearly
6 See above [31] at [18].
advised when potentially incurring a significant financial liability” – has been achieved through the comprehensive documenting of the agreement in this case. The client (be it Tennyson through its director Ms Young or Ms Young in her personal capacity), has been party to a fully documented, clear set of obligations.
[36] Ultimately, the identity of the client is a matter of fact. Nothing in s 126(1) requires the identity of the client to be considered as anything other than a factual matter. If the actual client has signed (even without its name being expressly entered in the contract) there is a compliance with s 126(1) of the Act.
[37] This conclusion I have therefore reached above as to the satisfaction in this case of the requirements of s 126(1) of the Act may also be tested by reference to a hypothetical written contract in which the “Client” details are also left blank but there is evidence of a resolution of directors of the vendor company authorising the signatory to the contract to sign on behalf of the vendor. The mere fact that the “Client” details in the form of contract have not been completed could not in that situation be said to alter the fact that the agreement was signed on behalf of the client. Nor does it do so in the present circumstances. At most a situation has arisen in which the authorising client may have room for an argument under fundamental principles of contract law as to uncertainty of parties. I now turn to that issue.
Uncertainty of parties as a matter of general contractual law
The principles
[38] In his text “The Construction of Contracts, Interpretation, Implication and Rectification7 Gerard McMeel under a heading “The Importance of Identity” states correctly that –
One of the most basic questions in respect of a contract is: who are the parties to this contract? Interpretative techniques are deployed to resolve this issue.
[39] Continuing, under a heading “Evidence” Mr McMeel states:8
7 Gerard McMeel The Construction of Contracts (2nd ed, Oxford University Press, Oxford, 2011)
at [16.02].
8 At [16.03].
In the vast majority of cases involving written contracts there will be no issue as to the identity of the parties. Where there is, the inquiry is necessarily factual and on the modern approach all relevant evidence is admissible. In The Starsin9 Lord Millett commented on the process for identifying the parties: ‘it is a question of fact and may be established by evidence. Such evidence is admissible even where the contract is in writing, at least so long as it does not contradict its express terms and possibly even where it does’.
[40] The Courts’ ability to determine the identity of a party is illustrated by the decision of the House of Lords in The Starsin.10 In that case different provisions in a bill of lading indicated either that the charterer was the carrier or that the shipowner was the carrier. The House of Lords unanimously found on the facts that the carrier was the party.
The submissions
[41] Ms Considine submits that the agreement can be read either as the contract of Ms Young or of Tennyson. That proposition is at least arguable if not unanswerable. Mr Cox deployed a number of arguments to overcome the ambiguity as to the party who was to be the Client.
[42] I now summarise and consider Mr Cox’s submissions:
(a) There is a “standard position” whereby the a real estate agent acts on behalf of the vendor itself, and clear evidence is required of a mutual intention between real estate agent and “the parties” if someone other than the vendor is to be found to be the party entering into a contract with a real estate agent: Mr Cox cited no authority for these propositions. At most they are arguments and not complete answers as to which person, if any, is properly identifiable as the client.
(b)Ms Young acting in her personal capacity would not have had authority to sell property belonging to Tennyson. Therefore she would not be authorised to engage Resort to market the property
9 Hombourg Houtimport BV v Agrosin Private Ltd, (The Starsin) [2003] UKHL 12, [2004] 1 AC
715.
10 See above n 6.
under the agency agreement: there is no evidence as to the general or specific authority of Ms Young to deal with Tennyson’s property. It remains possible (in the absence of trial evidence) that Ms Young was intending to enter a contract in her personal capacity although it would be her company Tennyson (through her subsequent signature as director) which effected any sale.
(c) When the property was sold and Resort issued its invoice in December 2012, Resort addressed the invoice to Tennyson. Tennyson did not then protest that the invoice should have been issued to another person (Ms Young): such post-contract conduct by Resort (in the way it issued the invoice) is unlikely to be the strongest evidence in relation to the correct interpretation of the contract. Although Resort’s invoice and the non-challenge by Tennyson at the time might be of some relevance to interpretation, it cannot be decisive.
(d)Mr Hannah of Resort has deposed that when Resort issued its invoice Ms Young made sure that the invoice was issued to Tennyson: while this request by Ms Young might be taken as some evidence as to the liable party, the request may also be explicable by the fact that the purchaser under the agreement for sale and purchase of the property (entered into some three months after the written agency agreement) agreed to pay in addition to the purchase price the $30,000.00 plus GST, being Resort’s fee which the Vendor undertakes to pay on to Resort.
(e) Resort in its earliest correspondence pursuing payment of the invoice repeatedly referred to the commission being payable by Tennyson: such unilateral post contract conduct on the part of Resort is unlikely to assist Resort’s arguments as to the identity of the parties under the contract.
Discussion
The Morgan Coakle letter of 25 February 2014
[43] Resort’s solicitors are and have been Morgan Coakle. Correspondence which they initially wrote – in which they record that Ms Young was the client under the agreement – is at odds with the case now advanced for Resort.
[44] The arguments advanced by Mr Cox in support of the identity of Tennyson as client are neither individually nor collectively conclusive.
[45] There had been an earlier exchange of information concerning financial constraints which Tennyson was experiencing.
[46] Morgan Coakle wrote to Tennyson’s accountant on 25 February 2014. After stating that the firm acted for Resort and had received a copy of previous correspondence from Tennyson’s accountant, Morgan Coakle stated –
The unfortunate position of Tennyson Properties (2009) Limited as you have set out in your letter gives no reassurance to our client.
We attach a copy of the Agency Agreement with our client.
You will see the contract with our client is with Ms Young personally. We are instructed that Ms Young asked that our client invoice Tennyson Properties (2009) Limited as that company had an arrangement with the Lessee for the Lessee to reimburse Tennyson for the amount of our client’s commission.
None of those arrangements varied the terms of the agency agreement under which Ms Young remains personally liable.
Our client is not prepared to undertake further work for your client until she pays the moneys owing to them for the sale of the Tennyson Motor Inn.
Demand is now made for immediate payment of the sum of $34,500 including GST which is outstanding to our client.
[47] The Morgan Coakle statement as to the parties to the written contract may be starkly contrasted with the position now taken by Resort in its opposition to the present application. The basis of the statements made in the Morgan Coakle letter is not explained in the evidence of the deponents for Resort in this proceeding. In his
written submissions, Mr Cox for Resort sought to minimise the significance of the
Morgan Coakle letter by submitting –
This was an initial letter sent upon Morgan Coakle first receiving instructions in this matter.
[48] The letter must nevertheless be taken in this context to represent a conclusion Resort’s solicitors reached on the evidence of the written contract itself and on instructions. It opened up the very argument which Tennyson now asserts.
[49] Resort’s subsequent decision to resume the pursuit of Tennyson for the commission is explained by subsequent correspondence from Tennyson’s solicitors in which there appear relatively clear acknowledgments of Tennyson’s liability for the commission. At that late point Tennyson was embarking on a restructuring of its funding arrangements and was seeking time in order to meet the debt to Resort.
[50] The Court is able to understand the chagrin on the part of Resort when Tennyson later reverted, through this application, to the argument that Tennyson was not a party to the agency agreement.
[51] I recognise some strength in Mr Cox’s submissions that through the correspondence in which Tennyson appeared to acknowledge liability it appears that Tennyson was wanting to buy time while it tried to get itself back into a solvent position. I recognise that there is at least potential for an estoppel argument upon the
basis of the correspondence produced.11 But, again, this is not the context for a
conclusion in relation to relief (by way of estoppel) which is so fact-dependent.
[52] The determination of an application for an order setting aside a statutory demand is not the context in which to determine whether the arguments pursued by Tennyson as applicant will succeed. Provided Tennyson has a substantial argument as to (in this case) the identity of the client who was party to the agreement, the
statutory demand ought to be set aside.
11 A party to a contract may be determined by estoppel: see N C Seddon and others, Cheshire & Fifoot Law of Contract (10th Australian ed, LexisNexis Butterworths, Australia, 2012) at 288, fn
21, and the cases cited.
Conclusion
[53] I am satisfied, albeit with some reluctance, that Tennyson has established a substantial dispute as to whether it was the “Client” in terms of the agreement and, therefore, as to whether it owes the debt claimed by Resort. Tennyson’s case on this application effectively suggests that any contractual liability should fall on Ms Young personally, but Ms Young has studiously avoided accepting such personal liability. This may appear to do no credit to the persons involved in Tennyson but the door to that argument was left open by Resort itself through first failing to complete “Client” details on its own standard form and secondly having its solicitors make demand upon Ms Young as the liable party to the contract.
[54] The application to set aside the statutory demand must accordingly succeed.
Costs
[55] Costs must follow the event. This is appropriately a Category 2 matter and
Band B should apply.
Orders
[56] I order –
(a) The statutory demand issued by the respondent to the applicant is set aside.
(b)The respondent is to pay the costs of the application on a 2B basis, together with disbursements to be fixed by the Registrar.
Associate Judge Osborne
Solicitors:
Morrison Kent, Wellington
Morgan Coakle, Auckland
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