Trustees Executors Limited v Eden Holdings 2010 Limited (in liq) HC Wanganui

[2011] NZHC 2088

IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY

CIV-2010-483-406

BETWEEN  TRUSTEES EXECUTORS LIMITED First Plaintiffs

ANDEDEN HOLDINGS 2010 LIMITED (IN LIQUIDATION)

First Defendant

ANDMALKEV PROPERTIES LIMITED Second Defendant

Judgment:      2 December 2011 at 12:15 PM

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment of Associate Judge Gendall is delivered on 2 December 2012 at

12.15 pm under r 11.5 of the High Court Rules.

Solicitors:           Kevin McDonald & Associates, Solicitors, PO Box 331 065, Takapuna

Wackrow Williams & Davies Ltd, Barristers & Solicitors, PO Box 461, Shortland
Street, Auckland 1140

Martelli McKegg, Solicitors, PO Box 5745, Wellesley Street, Auckland 1141

Minter Ellison Rudd Watts, Lawyers, PO Box 2793, Wellington

TRUSTEES EXECUTORS LIMITED V EDEN HOLDINGS 2010 LIMITED (IN LIQ) HC WANG CIV-2010-

483-406 2 December 2011

Introduction

[1]      Following  a  Judicial  Settlement  Conference  held  in  this  matter  on  16

November 2011, and at the request of the parties, consent orders of this Court were made for payment of certain monies held by Martelli McKegg, Solicitors, Auckland as stakeholders, following settlement of the sale of a property at Mt Eden (the property).  Considerable disputes had occurred as to sale proceeds of this property between the parties to this proceeding.

[2]      Subsequent to that date, counsel have advised that this order of the Court has not been carried into effect because the stakeholders Martelli McKegg have been refusing to pay out the retained fund in accordance with the terms of the Court order. The reasons for this are set out below.

[3]      As  a  result,  an  urgent  telephone  conference  of  all  affected  parties  was convened.   Following this, opportunities were given to those parties to provide memoranda to the Court on the issue and it was agreed I would then make a decision regarding the retained funds.

[4]      Various memoranda have now been filed by counsel for the affected parties which I have had an opportunity to consider.  I now give my decision regarding this matter.

Background

[5]      The property in question previously had as its registered proprietor the first defendant (Eden Holdings).  It was subject to a first mortgage to Martelli McKadam Solicitors Nominee Company Limited and a second mortgage to the second defendant (Malkev Properties).  The title to the property was also subject to two caveats registered by the plaintiff (Trustees Executors) who, as I understand it, claimed an interest as constructive trustee in the property.  This was on the basis that monies used for its purchase by Eden Holdings were said to be fraudulently obtained from loan arrangements entered into with Trustees Executors.

[6]      Defaults had occurred under the mortgages and the property was finally sold to an outside third party earlier this year with settlement being completed around May 2011.

[7]      A dispute between the various parties over what was to happen to the sale proceeds  had  arisen  then.    Finally,  to  enable  a  settlement  of  the  sale  to  be concluded, an arrangement was reached between Trustees Executors, Malkev Properties and Eden Holdings.  This arrangement was for the net proceeds of sale after repayment of the first mortgage to Martelli McKadam Solicitors Nominee Company Limited to be held by the solicitors Martelli McKegg as stakeholders for the three concerned parties.

[8]      As to the position of the stakeholder Martelli McKegg this was broadly outlined in an email from that firm dated 27 May 2011 which stated in part:

What is being proposed by Buddle Findlay and the first mortgagee is that the net proceeds (after deduction of the first mortgagee’s debt) are held by us as stakeholder so that those parties claiming an interest in those funds (Eden Holdings, the caveator and the second mortgagee) can take whatever steps are necessary to resolve their claims.

[9]      In effect as I understand the position the undertaking given by Martelli McKegg to hold the final net sale proceeds (which seemed to be a figure in the order of about $280,000.00) followed terms set out by Mr Richard Gordon counsel for Trustees Executors as follows:

“... 1.   The full net sale proceeds of sale to be held on an IBD in Martelli

McKegg’s trust account.

2.... Martelli McKegg undertaking that no distribution of the net sale proceeds will be made without either:

(a)       the consent of all three parties to the extant litigation before the Court (i.e. TEL, EHL and Malkev); or

(b)       a Court order.

3.With it being agreed that these three parties (TEL, EHL and Malkev) otherwise  reserving  in  all  respects  all  of  the  rights  and  claims existing prior to this sale.”

[10]     The terms of the consent order of this Court dated 16 November 2011 following the Judicial Settlement Conference required that Martelli McKegg solicitors would distribute the retained funds in the following way.   The sum of

$102,500.00 to be paid to Malkev Properties and the balance to be paid to Trustees

Executors Limited.

[11]     The complication which has arisen now is a claim by CB Richard Ellis Limited (CBRE) who were the real estate agents involved in the May 2011 sale of the property for their commission on this sale amounting to $35,024.06.

[12]     CBRE have advised Martelli McKegg solicitors that they are claiming this commission sum from the retained funds. Martelli McKegg accordingly have approached the Court for some direction faced with what appears to be two competing claims in relation to a portion of the stakeholder monies they hold.

[13]     As to CBRE’s position as agents, there is before the Court a copy of an Agency Agreement dated 8 February 2011 appointing CBRE as agents to sell the property on a sole agency basis with the agency expiring on 7 June 2011.  Rather confusingly, this Agency Agreement on page 1 states that it is between “Lance Gilbertson” as vendor and CBRE as agent, whereas in the reference schedule the name of the listing party is given as “Eden Holdings (2010) Limited”.

[14]     Leaving this aspect on one side, it does not appear to be disputed here that the eventual sale of the property to the third party was negotiated pursuant to CBRE’s agency and they are therefore contractually entitled to a commission on the sale.   There may be an issue as to whether this commission is payable by the notional vendor, Eden Holdings Limited (which is now a company in liquidation) or by Mr Lance Gilbertson as the named vendor party in the Agency Agreement or indeed by some other party on some basis not yet disclosed (such as the first

mortgagee,  Martelli  McKadam  Solicitors  Nominee  Company  Limited,  Martelli

McKegg solicitors or indeed Trustees Executors).

[15]     The position of Malkev Properties would seem to be clear, however.   As registered second mortgagee of the property it had a prior secured charge and also it appears it was not involved in the instruction of CBRE.   Its mortgage therefore would under normal circumstances be required to be repaid prior to any sale commission.

[16]     The  contractual  or  other  entitlement  CBRE  may  have  to  claim  its commission on the sale, however, in my view does not impact  here upon the requirement under the 16 November 2011 order of this Court for Martelli McKegg to pay the fund held as stakeholder to Malkev Properties and to Trustees Executors.

[17]     Martelli McKegg clearly held this fund as stakeholder on strict terms and for the benefit of the three named parties, Eden Holdings, Malkev Properties and Trustees Executors which was acknowledged.   The stakeholding fund was held solely for the benefit of these three parties and not for any other party such as CBRE.

[18]     The only possible claim which CBRE might have to the stakeholding fund could arise in the sense that it might argue the expression “net sale proceeds” to provide  the  fund  meant  that  the  fund  would  be  arrived  at  only  after  their commission as agents on the sale was first paid.  The evidence before me clearly however does not suggest that this was the case.  All the correspondence from Mr Gordon for Trustees Executors and others and the effective undertaking from Martelli McKegg was to the effect that the stakeholding fund would be held only for the three named parties Eden Holdings, Malkev Properties and Trustees Executors.

[19]     This  being  the  case,  there  is  no  option  now  but  for  Martelli  McKegg solicitors to honour the terms of the Court’s 16 November 2011 order and make payment of the fund as directed to Malkev Properties and Trustees Executors only.

[20]     For all these reasons I reject any claim by CBRE that it is entitled as of right to be first paid its commission claim of $35,024.06 before the stakeholders’ fund is paid out to Malkev Properties and Trustees Executors.

Result

[21]     I direct therefore that Martelli McKegg solicitors are to carry out the terms of the consent order of this Court dated 16 November 2011 and thereby to deal with the fund it  holds  as stakeholder here by paying first,  the sum  of $102,500.00 forthwith to Malkev Properties Limited and secondly by paying the balance of the stakeholding fund including all interest without deduction forthwith to Trustees Executors Limited.

[22]     The effect of this decision does not mean that CBRE is left without remedy. It can bring an action in the normal way to recover its commission on the sale of the property from any party or parties who may have a responsibility for payment of this sum.  If such a claim might be brought, for example, against Trustees Executors (or even Malkev Properties) to whom the proceeds of the stakeholding fund are to be  paid,  there  is  nothing  before  me  to  suggest  that  in  any way the  monetary proceeds from the orders made herein are likely to be so dissipated that CBRE would be left without any effective remedy against either of those parties if indeed one might lie in the first place.

[23]     Necessarily and at the parties’ request I have given this decision in some haste.  As a result I have not had an opportunity to address in detail the substantial submissions advanced to me in particular by Mr Stewart QC for CBRE in his detailed memoranda.  For the reasons outlined above, however, in my view many of those submissions relate solely to a possible claim CBRE may have against parties to be considered on another day.  The issue before me concerned the payment out of the stakeholders fund held by Martelli McKegg for the three named parties, Eden Holdings, Malkev Properties and Trustee Executors.  The position on this is clear as I have outlined above.

[24]     Costs on the question before me are reserved.  If they are in issue between the parties and they are unable to resolve the question between themselves, this may be the subject of memoranda to this Court (filed sequentially).

‘Associate Judge D.I. Gendall’