GOLDLINE PROPERTIES LIMITED v MARSH [2023] NZCA 285

GOLDLINE PROPERTIES LIMITED v MARSH [2023] NZCA 285 [7 July 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA146/2023[2023] NZCA 285BETWEEN GOLDLINE PROPERTIES LIMITEDAppellantAND MAREE DAWN MARSHRespondentHearing: 10 May 2023Court: Mallon, Moore and Fitzgerald JJCounsel: D R Bigio KC and H P Short for AppellantT D Rea for RespondentJudgment: 7 July 2023 at 4 pmJUDGMENT OF THE COURTA The appeal is allowed.B Caveats 126191304.1, 12619253.1, 12619312.1 and 12619325.1 are deemed tohave lapsed.C Ms Marsh must pay Goldline's costs for a standard appeal on a band A basisand usual disbursements.D If an order for costs in the High Court was made in Ms Marsh's favour, it isquashed and is to be reconsidered by that Court in light of this judgment.____________________________________________________________________REASONS OF THE COURT(Given by Fitzgerald J)Table of contentsIntroduction [1]Factual background [10]The High Court decision [17]Submissions on the appeal [26]Appellant's submissions [26]Respondent's submissions [34]Analysis [42]Result [74]Introduction[1] This appeal concerns the circumstances in which a vendor may cancel acontract to sell property when the real estate agent acting for the vendor is to acquirean interest in the property.[2] Cancellation in these circumstances is governed by s 134 of the Real EstateAgents Act 2008 (the Act). The full text of s 134 is set out at [8] below. In broadterms, however, s 134(1) prohibits a real estate agent, without the consent of theirclient, from acquiring the land or business that the agent is commissioned to sell.Similarly, s 134(2) prohibits a real estate agent from carrying out or continuing to carryout any agency work in respect of a transaction if he or she knows that the transactionwill result in a person related to the agent acquiring the land or business to which thetransaction relates. Section 134(3) sets out certain steps to be taken by the agent beforea client's consent for the purposes of s 134(1) will be effective. Section 134(4)provides that the client may cancel any contract "made" in contravention of subs (1)or "brought about" in contravention of subs (2). It is this last provision that is in issuein this case.[3] By way of background, Goldline Properties Ltd (Goldline) agreed to sell fourvacant lots to Ms Maree Marsh, by way of four separate contracts (the Contracts).Goldline's real estate agent acting on the transaction was Mr Ian Croft, the director ofOne Agency Counties Realty Ltd (Counties Realty). At the time Goldline andMs Marsh entered into the Contracts, neither Counties Realty nor Mr Croft hadacquired any interest in the properties. However, prior to settlement of the Contracts,Mr Croft entered into a joint venture agreement with Ms Marsh by which he wouldacquire a 30 per cent interest in the properties at settlement.1 There is a dispute aboutwhether Mr Croft told Goldline of his arrangements with Ms Marsh, however there isno dispute that the requirements of s 134(3) were not met.[4] Upon becoming aware of Mr Croft's joint venture with Ms Marsh, Goldlinepurported to cancel the Contracts pursuant to s 134(4) of the Act. Ms Marsh respondedby lodging a caveat over each of the properties on the basis of her equitable interest aspurchaser. Ms Marsh's ability to sustain her caveats turns on whether Goldline'scancellation of the Contracts was valid.[5] In the High Court, Associate Judge Lester held that the right under s 134(4) ofthe Act to cancel a contract "made" in contravention of s 134(1) or "brought about" incontravention of s 134(2) does not arise when the agent acquires an interest in theproperty after the contract is entered into.2 Noting that in such circumstances the clientwould still have a claim against the agent for breach of fiduciary duty, the Judge didnot see any need to take what he considered to be an overly broad approach to theinterpretation of s 134(4). He accordingly held that it was reasonably arguable thatGoldline's cancellation of the Contracts was invalid and granted Ms Marsh'sapplication to sustain the caveats.[6] Goldline now appeals against the Judge's decision. The parties agree that thesole issue for determination is whether the High Court was correct in finding that acontract is "made" or "brought about" for the purposes of s 134(4) only when thecontract is entered into.3[7] Before going any further and in order to put what follows in context, it ishelpful to first set out the text of the statutory provisions in issue, namely ss 134 and135 of the Act.1 The joint venture agreement was amended at a later date to be between Ms Marsh andOne Property & Co Ltd, another company associated with Mr Croft.2 Marsh v Goldline Properties Ltd [2023] NZHC 281, (2023) 23 NZCPR 893 [High Courtjudgment].3 Agreed List of Issues dated 4 May 2023.[8] Section 134 of the Act relevantly provides:Contracts for acquisition by licensee or related person may be cancelled(1) No licensee may, without the consent of the client for whom he or shecarries out real estate agency work in respect of a transaction, directlyor indirectly, whether by himself or herself or through any partner,sub-agent, or nominee, acquire the land or business to which thetransaction relates or any legal or beneficial interest in that land orbusiness.(2) No licensee may, without the consent of the client, carry out or continueto carry out any agency work in respect of a transaction if the licenseeknows or should know that the transaction will, or is likely to, result ina person related to the licensee acquiring the land or business to whichthe transaction relates or any legal or beneficial interest in that land orbusiness.(3) The client's consent is effective only if—(a) given in the prescribed form; and(b) the client is provided with a valuation in accordance withsection 135.(4) The client may cancel any contract—(a) made in contravention of subsection (1); or(b) brought about by agency work carried out in contravention ofsubsection (2).(5) No commission is payable in respect of any contract of the kinddescribed in subsection (4), regardless of whether the client cancels thecontract.[9] Section 135 provides:Client to be provided with valuation(1) For the purposes of section 134(3), the licensee must give the client avaluation made at the licensee's expense.(2) The valuation must have been made by—(a) an independent registered valuer; or(b) in the case of a business, by an independent qualified statutoryaccountant (within the meaning of section 5(1) of the FinancialReporting Act 2013).(3) The licensee must give the client the valuation either—(a) before seeking the consent of the client; or(b) with the agreement of the client, within 14 days after obtainingthat consent.(4) Every consent given under section 134 without the valuation beingsupplied to the client in accordance with subsection (3) is ineffective.(5) Any contract to which the client is a party and to which the consentrelates is voidable at the option of the client if—(a) the client gives his or her consent in accordance with subsection(3)(b); and(b) the valuation, when supplied, is greater than the valuationspecified in the prescribed form of consent as the provisionalvaluation.Factual background[10] The key factual background was summarised in the Judge's decision, whichwe gratefully adopt:4[2] Goldline had engaged a real estate agency called "CountiesRealty Limited", of which a Mr Ian Croft was the director and licensee.Ms Marsh intended to relocate houses on to the lots and on-sell the lots for aprofit. However, within a relatively short period of time after entering into thecontracts, Ms Marsh realised she would not be able to organise the finance tocomplete the project.[3] Ms Marsh explains in her affidavit that she had known Mr Croft for anumber of years. Mr Croft had previously acted as Ms Marsh's real estateagent on the sale of properties and she had previously purchased propertieswhere Mr Croft had acted for the vendor. Ms Marsh explains she knewMr Croft also had experience in property development. At the time Ms Marshentered into the four contracts, she said she expected Mr Croft would havesome involvement in her planned property development but only to the extentthat he would advise her as a consultant on developing the properties and thathe may well act for her when she came to re-sell the properties. If that wasthe case, Mr Croft would be paid by way of commission in the usual way.[4] However, when Ms Marsh realised she was unable to arrangesufficient finance for the project, she contacted Mr Croft some weeks after thecontracts were signed. From that contact, a joint venture agreement betweenthem was entered, recorded in a one page document dated 29 July 2020.[5] Ms Marsh is adamant that at the time of her purchase, there was nointention that Mr Croft or his company would have any legal or beneficialinterest in the properties. She maintains that there had been no discussionprior to the contracts with Mr Croft about him being involved in the purchase.4 High Court judgment, above n 2.[6] I note here that the joint venture agreement, in its original form, isbetween Ms Marsh and Mr Croft, but that was later amended to refer toMr Croft's company, One Property & Co Ltd. The amendment seems to havebeen initialled. Mr Croft's company was not incorporated until 30 March2021. Neither counsel saw the amendment as being material to the presentapplication.[7] The issue of titles to the land took some time which resulted insettlement not being due in respect of the four properties until November2022. Ms Marsh's solicitor called for settlement statements and repeated thatcall shortly after, but then received from Goldline's conveyancer, a noticepurporting to cancel the four contracts for breach of s 134 of the Real EstateAgents Act 2008 (the Act). Ms Marsh had caveated the four titles and on13 December 2022 Goldline applied to lapse the caveats. Ms Marsh'sapplication to sustain the caveats was heard on 14 February 2023.[8] While Ms Marsh purchased four properties, it seems the applicationto lapse the caveats only applied to the caveats over three of the properties.From an abundance of caution, the application to sustain the caveats was madein respect of all four properties. Neither counsel suggested that differentresults would apply to individual properties, with the issue for determinationbeing a general one applying to all four properties.[11] To the above summary, we would add the following.[12] First, at the time the Contracts were entered into, each contract was subject toa number of conditions and did not become unconditional until after the joint ventureagreement was entered into.[13] Second, there is a factual dispute as to whether Mr Croft told Goldline'sdirector, Mr Cooper, about the joint venture between himself and Ms Marsh prior tosettlement. Mr Croft says in his affidavit that he made "full disclosure" to Mr Cooperabout his intended involvement in the transaction, and that Mr Cooper encouraged thatstate of affairs. In his affidavit, Mr Cooper says that given his understanding thatwhether Mr Croft orally disclosed his interest in the properties to him cannot bedetermined in these proceedings, he has "not gone into detail in relation to that issue".Instead, he simply confirms that consent was not given in the prescribed form requiredby s 134(3) of the Act. As noted, that is not in dispute.[14] Third, following the execution of the Contracts and Ms Marsh and Mr Croftentering into their joint venture agreement, Goldline and Ms Marsh agreed to severalvariations to the Contracts (on 30 September 2020, 19 October 2020, and24 September 2021 respectively). The variations included:(a) a deletion of the sunset clause in two of the Contracts;(b) an extension of the sunset clause in the other two Contracts;(c) a reduction of the purchase price in three of the Contracts (reflectingGoldline being relieved of its obligation to provide telephone andpower services to the properties); and(d) the imposition of further obligations on Goldline to carry out andcomplete the subdivision and development of the properties.[15] It is not in dispute that Mr Croft continued to act as Goldline's real estate agentthroughout this period, and indeed some of the variation agreements are onCounties Realty's letterhead.[16] Finally, Ms Marsh says that following entry into the Contracts and withGoldline's agreement, she made a number of improvements to the properties,including relocating houses onto two of the properties, carrying out fencing work atall of the properties, and some landscaping works. Ms Marsh estimates the value ofthe improvements to be approximately $500,000. Mr Cooper does not dispute thatMs Marsh has undertaken work on the properties, but disputes that it will haveimproved their value by $500,000, if at all. At the hearing in this Court, Mr Bigio KC,counsel for Goldline, confirmed that if Goldline's cancellation of the Contracts wereheld to be valid, there would need to be appropriate restitution from Goldline toMs Marsh in respect of any improvements made by her to the properties.The High Court decision[17] Having set out the factual background and the relevant statutory provisions,the Judge first addressed what s 134 does not seek to achieve. With reference to thisCourt's decision in Barfoot & Thompson Ltd v Real Estate Agents Authority, the Judgenoted that ss 134–137 of the Act are not a substitute for a real estate agent complyingwith their fiduciary obligations to their vendor.5 The Judge noted that if s 134(4)applies, a vendor's right to cancel is not qualified, and is unaffected by whether anagent nevertheless made full disclosure to their principal if that does not satisfys 134(3).6 Conversely, the Judge noted that conduct that does not involve acontravention of s 134 may nevertheless involve an agent breaching their fiduciaryduty, which may give rise to a remedy of cancellation. In that context, the Judge saidthat the fact s 134 is not the only remedy available to a vendor when their agent hasfailed to disclose their involvement in the transaction is relevant to how s 134 shouldbe interpreted.7[18] The Judge then turned to the proper interpretation of s 134, noting that subs (4)entitles the client to cancel a contract if it was "made" in contravention of subs (1), or"brought about" by agency work carried out in contravention of subs (2). Having setout the competing approaches to s 134(4)'s interpretation, the Judge concluded thats 134(4)(a) did not provide a right of cancellation to Goldline, reasoning that:8 "made" in s 134(4)(a) requires Mr Croft's involvement to be assessed atthe time when the contracts were entered. If Mr Croft had an interest in theland at that time, s 134(4)(a) would apply. If he did not, then cancellationunder s 134(4)(a) was not available.[19] The Judge did not consider that the joint venture agreement retrospectivelymeant the Contracts were "made" in contravention of s 134(1).9 He noted that whetherthe fact Mr Croft entered into the joint venture agreement amounted to a breach offiduciary duty was an entirely separate matter on which he did not express a view.10[20] The Judge reached a similar conclusion in relation to the right of cancellationunder s 134(4)(b) of the Act. He held that s 134(4)(b)'s reference to a contract being"brought about" in contravention of s 134(2) was limited to a contravention that "ledto that contract being made".11 The Judge concluded that s 134(4)(b) could not be5 At [13] citing Barfoot & Thompson Ltd v Real Estate Agents Authority [2016] NZCA 105, [2016]NZAR 648 at [42]–[48].6 High Court judgment, above n 2, at [13].7 At [16].8 At [25].9 At [27].10 At [27].11 At [38].read as applying to a contract that was not in breach of s 134(2) when it was enteredinto, but where an agent acquired an interest in the land only after the contract wasexecuted.12 In support of that view, the Judge referred to observations of Eichelbaum J(as he then was) in Were Real Estate Ltd v Keenan, a case concerning s 134'spredecessor under the Real Estate Agents Act 1976 (the 1976 Act).13 Eichelbaum Jsaid:14The mischief under consideration in ss 63 and 64, and the intent of thelegislation, are I think clear enough. Real estate agents who seek to purchaseproperty on their own account are to be prevented, as far as possible, fromtaking advantage (innocently or otherwise) of their own clients.[21] The Judge reasoned on this basis that the risks inherent in real estate agentspurchasing from their clients do not arise if the agent only acquires an interest in theproperty concerned after the contract is entered into, given the price and terms struckin the contract will have been negotiated and agreed on an arm's length basis by thevendor and original purchaser.[22] The Judge also referred to Miller J's observations in Maclennan Realty Ltd vCourt, in which Miller J said:15It will be a rare case in which the acquisition of an interest on completion ofthe very transaction in respect of which the agent is taking a commission doesnot reflect a conflict of interest that existed at the time the contract wasexecuted.[23] Associate Judge Lester stated:16[41] If Ms Marsh is correct, then at the time the contracts were broughtabout by Mr Croft, there was no prospect of him having an interest in the landat that time. If that is the case, then this may be one of the rare cases noted byMiller J.12 At [38].13 At [39] referring to Were Real Estate Ltd v Keenan [1984] 2 NZLR 650 (HC).14 Were Real Estate Ltd v Keenan, above n 13, at 652.15 High Court judgment, above n 2, at [40] referring to Maclennan Realty Ltd v Court (2004)5 NZCPR 256 (HC) at [25]. We discuss this decision later in this judgment at [51]–[55] below.16 High Court judgment, above n 2.[24] The Judge also considered his approach to be consistent with s 134(1) and (2)of the Act, which both prohibit an agent's involvement in a "transaction", and thenarrower language employed in s 134(4) which permits cancellation of a "contract".17[25] Finally, the Judge acknowledged that the variations to the Contracts may wellhave been "brought about" by agency work carried out by Mr Croft in contraventionof s 134(2). However, the Judge observed that to the extent the variations involved abreach of fiduciary duty by Mr Croft, Goldline retained its legal rights in relation tohis involvement in them.18 The Judge also rejected Goldline's submission that hisinterpretation of s 134(4) would leave a loophole with illogical results — for example,the inability of a vendor to cancel an agreement where a property was initially sold onfavourable terms, the purchaser then deciding it was going to exit the agreement, theagent stepping in to obtain a hidden beneficial interest in the property, and the agentthen persuading the vendor to further vary the agreement to the benefit of the"purchaser".19 The Judge said that the suggested "loophole" was based on an incorrectassumption that the vendor's only source of relief was under s 134 of the Act.Submissions on the appealAppellant's submissions[26] Mr Bigio submits that the Judge took an unduly narrow approach to theinterpretation of s 134(4), which is inconsistent with both the purpose and overallframework of the statutory provision, as well as earlier authorities concerning s 63 ofthe 1976 Act (the predecessor of s 134).[27] Mr Bigio first emphasises what he describes as an intended "alignment"between s 134(1) and (2) on the one hand and s 134(4)(a) and (b) on the other.Mr Bigio notes that s 134(1) and (2) place an absolute prohibition on agents (or relatedpersons) from "acquiring" an interest in the land or business the agent is commissionedto sell, being in the nature of strict liability. He submits that Parliament's choice ofthe word "acquire" in both s 134(1) and (2) indicates a focus on the outcome of the17 At [44].18 At [46].19 At [47]–[49].transaction, not on the position that existed at the time the contract was entered into.This point was accepted by Miller J in Maclennan Realty Ltd v Court.20 Mr Bigiosubmits that consistent with this approach to what will amount to a contravention ofs 134(1) and (2), the right of cancellation under s 134(4)(a) and (b) must have beenintended to respond to all contraventions of s 134(1) and (2), not only those where theagent acquired an interest in the land or business from the outset.[28] Mr Bigio further submits that a broad interpretation of s 134(4) is alsosupported by Parliament's use of the words "carrying out or continuing to carry out"agency work in s 134(2). He argues that there would be no logical reason whyParliament would prohibit an agent from "continuing" to carry out real estate agentwork if the client's corresponding right to cancel "disappeared" on the signing of thecontract. Mr Bigio says that the narrow interpretation adopted by the Judge also drawsan artificial distinction between the words "contract" and "transaction".[29] Mr Bigio submits that the Judge's approach to the interpretation of s 134(4) isalso inconsistent with its statutory purpose as set out in s 3(1) of the Act, namelyconsumer protection. He argues that it would be inconsistent with that purpose if thesummary right of cancellation under s 134(4) arose in response to some contraventionsof s 134(1) and/or (2) but not others. Mr Bigio gave a number of examples that hesubmits, on the Judge's interpretation, would fall outside the scope of s 134(4). Theseinclude:(a) a real estate agent forming the intention to acquire a legal or beneficialinterest in the relevant land prior to the contract being signed, but onlybecoming interested in the land after the contract was entered into;(b) an agent acquiring an interest in the land the day after the contract wasentered into; and(c) an agent acquiring an undisclosed interest in the land after the contractwas entered into, but then continuing to carry out real estate agency20 Maclennan Realty Ltd v Court, above n 15.work to substantively vary the contract — the scenario said to exist inthe present case.[30] Mr Bigio submits that in all these examples the risk of the agent takingadvantage of their client is obvious, despite the agent not becoming interested in thepurchase until after the contract was entered into.[31] Mr Bigio also places some reliance on the reference to "nominee" in s 134(1),given a named purchaser to a sale and purchase agreement will only nominate anotherparty as "nominee" purchaser at some point after the contract has been entered into.Mr Bigio therefore says that s 134 envisages an agent, through a nominee, acquiringan interest in the property concerned after the contract was entered into, and therebeing no logical reason why this scenario ought not to trigger the s 134(4) cancellationright.[32] Finally, Mr Bigio submits that Goldline's approach to the interpretation ofs 134 is consistent with case law on the interpretation of s 63(3) of the 1976 Act.Section 63 provided:63 Purchase or lease by agent voidable(1) No real estate agent shall, without the consent on the prescribed formof his or her principal, directly or indirectly and whether by himself orherself or by any partner or sub-agent,—(a) Purchase or take on lease, or be in any way concerned orinterested, legally or beneficially, in the purchase or taking onlease of any land or business which he or she is commissioned(at the instigation of the principal or otherwise) by any principalto sell or lease; or(b) Sell or lease to his or her spouse, civil union partner, de factopartner, or child any such land or business.(2) No partner or employee of a real estate agent and no officer of acompany that is a real estate agent shall, without the consent on theprescribed form of the principal of the real estate agent, directly orindirectly,—(a) Purchase or take on lease, or be in any way concerned orinterested, legally or beneficially, in the purchase or taking onlease of any land or business which the real estate agent of whomhe or she is a partner or by whom he or she is employed, or ofwhich he or she is an officer, is commissioned (at the instigationof the principal or otherwise) by any principal to sell or lease; or(b) Sell or lease to his or her spouse, civil union partner, de factopartner, or child any such land or business.(3) Any contract made in contravention of this section shall be voidable atthe option of the principal. No commission shall be payable in respectof any such contract, whether the principal has avoided it or not; andany commission paid in respect of the contract shall be repayable by thereal estate agent to his or her principal and shall be recoverable by theprincipal as a debt.(Emphasis added)[33] Noting that the language of s 63(3) is very similar to s 134(4), Mr Bigio refersto Eichelbaum J's observation in Were, that "[u]nless certain prerequisites are fulfilledsuch a transaction is voidable at the option of the vendor ".21 Mr Bigio also referredus to Miller J's decision in Maclennan,22 and to this Court's decisions in Gathergoodv Blundell & Brown Ltd23 and Gu v Du,24 submitting that each is consistent with theinterpretation of s 134 advocated for by Goldline.Respondent's submissions[34] Mr Rea, counsel for Ms Marsh, supports the Judge's reasoning and conclusionon the interpretation of s 134(4). In particular, he submits that the text and purpose ofthe statutory provision support the Judge's approach.[35] Turning first to the text of s 134(4), Mr Rea says that the plain and ordinarymeaning of a contract "made in" or "brought about by" a contravention of s 134(1)or (2) relates only to the point at which the contract was entered into. If the agent'sinterest in the property arises after the contract was entered into, then that contract willnot have been "made" or "brought about" in contravention of the statutory provisions.[36] Turning to s 134's purpose of consumer protection, Mr Rea submits thatMs Marsh is also a consumer of real estate agency services, and therefore purchasers'interests must also be reflected in s 134(4)'s interpretation. To support this submission,21 Were Real Estate Ltd v Keenan, above n 13, at 652 (emphasis added).22 Maclennan Realty Ltd v Court, above n 15.23 Gathergood v Blundell & Brown Ltd [1991] 1 NZLR 405 (CA).24 Gu v Du [2011] NZCA 577.Mr Rea refers to a number of provisions of the Act which are for the benefit of bothvendors and purchasers. He emphasises Ms Marsh's evidence that there was nointention at the outset of the transactions that Mr Croft would acquire an interest in theproperties, such that the Contracts were freely negotiated between her and Goldlineon an arm's length basis. Mr Rea argues that if Goldline is permitted to cancel theContracts in those circumstances, Ms Marsh, as an "innocent purchaser" would beunfairly prejudiced, particularly when Mr Croft has arguably failed her and was at thetime acting as an agent of Goldline. Conversely, if the s 134(4) cancellation right doesnot extend to the current circumstances, Ms Marsh's position is preserved, andGoldline also remains fully protected given its ability to bring a claim against Mr Croftfor breach of fiduciary duty. In this way, Mr Rea submits that limiting the absoluteright of cancellation provided by s 134(4) to contraventions of s 134(1) and/or (2) thatexisted at the time the contract was entered into strikes the appropriate balancebetween the interests of vendors and innocent purchasers.[37] Mr Rea also refers to the standard form consent notice which, pursuant tos 134(3) of the Act, must be used by an agent when seeking his or her client's consentto the agent acquiring an interest in the property. Mr Rea relies in particular on thefollowing extract from the form:25The licensee must give you this form before you agree to grant, sell, orotherwise dispose of your land or business, or an interest in your land orbusiness, to the licensee or related person. If the licensee gives you this formafter that, do not sign it.[38] Mr Rea says this is consistent with the Judge's interpretation of s 134(4), inthat the form only reflects the scenario in which an agent, or a related person of theagent, acquires an interest in the property at the time the contract is entered into.[39] Mr Rea further submits that the obligations in ss 134(3) and 135 of the Act forthe agent to provide his or her client with a registered valuation is also consistent withthe Judge's interpretation. Mr Rea says that it is logical that a valuation is providedbefore the client enters into the relevant contract so the client is able to considerwhether they are being disadvantaged by agreeing to enter into a contract that will25 Real Estate Agents (Duties of Licensees) Regulations 2009, Form 2 of the Schedule (emphasis inoriginal).result in their agent, or a person related to the agent, acquiring an interest in theproperty. Mr Rea submits that it makes sense that a contract in those circumstancesshould be able to be cancelled where the agent fails to comply with s 134. Mr Reaargues that conversely, it does not make sense for a vendor to be able to cancel acontract where the failure to give a valuation arises at a later stage, when the marketmay have shifted since the contract was entered into, and despite the client havingagreed to sell at a price determined by an arm's length negotiation.[40] Mr Rea also says that s 134(2) supports the interpretation adopted by the Judge.Mr Rea says that this section also focuses on the agent's state of knowledge before thecontract was entered into. He submits that the prohibition in s 134(2) of an agent"continuing to carry out" real estate agency work is most important before a contracthas been executed.[41] Finally, Mr Rea says that the authorities relied on by Goldline do not addmaterially to the analysis and, if anything, they support the approach adopted by theJudge given their focus on the circumstances existing at the time the relevant contractswere entered into. Mr Rea accepts that a right of cancellation would have arisen if, atthe time Goldline entered into the Contracts with Ms Marsh, Mr Croft intended orknew that he would later enter into an arrangement by which he would acquire aninterest in the properties at settlement, being an "indirect" acquisition in contraventionof s 134(1).26 Mr Rea says that this addresses the first two examples given by Mr Bigioand set out at [29] above. In relation to the third example, Mr Rea reiterates that thevendor retains its right to claim against the agent for breach of fiduciary duty.Analysis[42] Before turning to our discussion of s 134(4), it is helpful to first address theauthorities to which we have been referred, and whether they shed any light on theinterpretation issue arising for determination.26 Christie v Harcourt & Co [1973] 2 NZLR 139 (SC) at 142; a decision under s 78 of the Real EstateAgents Act 1963. See [46]–[47] below.[43] The earliest decision is that of the (then) Supreme Court in 1973 in Christie vHarcourt & Co.27 In that case, the appellant had commissioned Mr Reeves to sell aproperty on his behalf. Mr Reeves arranged for Mr Hellyer to purchase the propertyfrom the appellant. Mr Reeves was aware at the time Mr Hellyer's offer was madeand accepted by the appellant that Mr Reeve's daughter was engaged to marryMr Hellyer within a few months' time.[44] After the contract between the appellant and Mr Hellyer had been entered into,Ms Reeves agreed to contribute to the purchase price and, on her solicitor's advice,was added to the contract as a named purchaser. It appears the appellant was unhappyabout the relationship but elected to complete the transaction. On settlement, however,he sought a refund of the commission on the sale pursuant to s 78(3) of the Real EstateAgents Act 1963 (the 1963 Act). That relevantly provided:28(3) Any contract made in contravention of the provisions of this sectionshall be voidable at the option of the principal. No commission shallbe payable in respect of any such contract, whether the principal hasavoided it or not; and any commission paid in respect thereof shall berepayable by the real estate agent to his principal and be recoverableby the principal as a debt.(Emphasis added)[45] Section 78(1)(b) of the 1963 Act prohibited a real estate agent from "directlyor indirectly" selling a property they were commissioned to sell to their spouse orchild.[46] The issue for determination in Christie was whether Mr Reeves hadcontravened s 78(1)(b) by "indirectly" selling the property to his daughter. White Jframed the key factual issue as being "[w]hat were the circumstances at the time theoffer was signed by Mr Hellyer?".29 The Judge found that Mr Reeves was awarebefore any offer was signed that Mr Hellyer was likely to marry his daughter, and thathis daughter had a "fiancee's interest" in the purchase of the property as a matrimonial27 Above.28 The judgment considered the version of s 78 as amended by s 26 of the Real Estate AgentsAmendment Act 1968 which is reproduced here.29 At 142.home.30 In those circumstances, the Judge concluded that there was a contraventionof s 78(1) of the 1963 Act and that commission was not payable as a result.[47] It will be apparent that Christie does not directly address the interpretationissue arising in this case. We accept Mr Rea's submission that White J's focus was onthe circumstances existing at the time the contract was entered into — at least whendetermining whether there had been a contravention of s 78(1). As we shall come tolater, this is a different approach to that taken more recently by Miller J inMaclennan.31 For present purposes, however, Christie does not suggest that eventsthat occurred after the relevant contract was entered could not give rise to acontravention of the statutory provisions; nor does it address the circumstances inwhich the right of cancellation arises. We are not bound by that decision in any event.[48] In Were, a decision under the 1976 Act, the agent, Mr Kent (employed by theappellant), was commissioned to sell a property on behalf of the respondents.32Mr Kent and one of his colleagues decided they wanted to purchase the propertythemselves, and approached the respondents with the requisite standard form in orderto obtain their consent, which the respondents duly provided. The issue in that casewas whether Mr Kent had complied with the obligation to provide the respondentswith a valuation. The decision is not relevant to the issue arising in this case.[49] This Court briefly addressed the statutory provisions in Gathergood,33however, that decision is also not relevant for present purposes. The issue inGathergood was whether the agent, who had purchased the property from therespondent, remained under a fiduciary duty to the respondent when he on-sold theproperty to a third party at a considerable profit. This Court held that Mr Gathergoodcontinued to owe a fiduciary duty to the respondent and upheld the High Court'sdecision that required Mr Gathergood to account to the respondent for the profit fromthe on-sale.30 At 142.31 Maclennan Realty Ltd v Court, above n 15. See [51]–[55] below.32 Were Real Estate Ltd v Keenan, above n 13.33 Gathergood v Blundell & Brown Ltd, above n 23, at 407.[50] This Court also considered the relevant statutory provisions in Gu,34 but againthe decision is not relevant to the interpretation issue in this case. The issue fordetermination in Gu was whether the listing agreement between the respondent'semployer and the appellant remained in place at the time the appellant and respondententered into a joint venture agreement by which the respondent was granted an optionto acquire a 50 per cent interest in the property. It was not in dispute that s 63 of the1976 Act (set out at [32] above) would have been contravened in those circumstances.[51] The only decision of any real relevance to the present appeal is that of Miller Jin Maclennan, in which the Judge addressed the proper interpretation of s 63 of the1976 Act.35 Mr Maclennan acted as the agent for the respondents in selling threetownhouses to a couple who were his longstanding friends. He did not disclose hisfriendship with the purchasers to the respondents. After the contracts becameunconditional but prior to settlement, the purchasers formed a family trust andappointed Mr Maclennan as one of its trustees. They then nominated the trustees asthe purchasers of the townhouses. Upon becoming aware of these developments, therespondents elected to complete the sale, but challenged the appellant's right to recoverhis commission. Mr Maclennan's right to commission turned on whether the events,which had occurred after the contract had been entered into, meant s 63(2) of the 1976Act had been contravened.[52] The appellant submitted that in order to determine whether there was acontravention of s 63(2), the Court should look only at the factual position existing atthe time the contract was entered into or, at the latest, at the time the contract becameunconditional. Miller J rejected that submission, stating:[22] I consider that the prohibition on being in any way interested in thepurchase of a legal interest in the property contemplates the outcome of thetransaction, in the sense that it looks forward to the identity of the person whowill take the legal interest. 34 Gu v Du, above n 24.35 Maclennan Realty Ltd v Court, above n 15.[53] Miller J considered this approach to be consistent with the policy of the section,stating:[25] Undisclosed conflicts pose a significant risk to the client. It isappropriate that the agent, who is best placed to identify and avoid conflicts,should take the risk that s 63 will be breached unless conflicts that may leadto the agent taking an interest in the property are disclosed at the outset. Itwill be a rare case in which the acquisition of an interest on completion of thevery transaction in which the agent is taking a commission does not reflect aconflict of interest that existed at the time the contract was executed.[54] Miller J nevertheless accepted that the possibility of Mr Maclennan acquiringan interest in the property did not arise until after the contract had becomeunconditional.36 This did not, however, absolve him from contravening s 63(2).Miller J stated that it had been open to Mr Maclennan to avoid a breach of s 63 bydeclining to act as a trustee, and further observed that the fact he was asked to becomea trustee suggested his friendship with the original purchasers was sufficiently closeto raise a conflict of interest from the outset in any event.37[55] Miller J's judgment did not focus on s 63's equivalent of s 134(4), and theproper interpretation of a contract being "made" in contravention of the statutoryprovision. However, it is implicit in his judgment that the respondent's right unders 63(3) to avoid the contract of sale was triggered, given s 63(3) also provided that nocommission was payable in respect of any contract "made in" contravention of s 63.We nevertheless accept Mr Rea's submission that the decision in Maclennan did notdirectly consider the issue arising in this case and, even if it had, we would not havebeen bound by it in any event.[56] We therefore turn to determine the proper interpretation of s 134(4) of the Act.[57] We accept that the plain and ordinary meaning of a contract "made" incontravention of s 134(1) or "brought about" by a contravention of s 134(2) arguablysupports the interpretation adopted by the Judge. However, for the following reasons,we do not consider that the overall scheme of s 134, or its purpose, limits the right ofcancellation (or the prohibition on recovery of commission) to circumstances in which36 At [26].37 At [26].a real estate agent either acquired or intended to acquire an interest in the land orbusiness concerned at the time the contract was entered into.[58] First, we agree with Miller J's conclusion in Maclennan that conduct thatoccurs after the relevant contract has been entered into can give rise to a contraventionof s 134(1) or (2). There is nothing on the face of s 134(1) or (2) to limit thoseprovisions to conflicts that exist prior to or at the time the contract is entered into.Rather, the concept of "acquiring" an interest in the land or business the agent iscommissioned to sell plainly looks forward to the outcome of the transaction and theidentity of the person or persons who will take a legal or beneficial interest in the landor business at settlement. Indeed, the use of the term "acquire" in s 134, rather thanthe term "purchase" in s 63 of the 1976 Act, arguably makes that conclusion morecompelling.38 The text of s 134(2) of the Act further supports this conclusion, givenit also looks to the outcome of the transaction, rather than only the circumstancesexisting at the time the contract is entered into. There is nothing to suggest a materiallydifferent approach was intended as between s 134(1) and (2), in terms of the timing ofthe events giving rise to a contravention.[59] We also agree with Miller J that this approach is consistent with the section'sstatutory purpose of consumer protection. The risk of a conflict of interest between areal estate agent and his or her client when the agent is to take an interest in the landor business they are commissioned to sell is no less real when the arrangements bywhich the agent will acquire that interest come about after the contract has beenentered into. This is particularly so given the prospect of substantive variations laterbeing made to the contract's terms and conditions, which occurred in the present case.It is also relevant that the Act's statutory purpose extends beyond consumer protection,and also includes promoting "public confidence in the performance of real estateagency work".39 It would be inconsistent with this purpose if s 134(1) did not prohibit38 There is nothing in the legislative history commenting on the particular form of words adopted ins 134 compared to s 63 of the 1976 Act. The Ministry of Justice Real Estate Agents Bill:Departmental Report Part One (14 April 2008) at 290 simply observed that "this clause carriesover, in redrafted form, section 63 of the 1976 Act. Its effect is that if a licensee (or any partner,sub-agent or nominee) wishes to purchase the land or business of a client for whom they are acting,the seller must consent to the licensee purchasing the land or business". The Justice and ElectoralCommittee did not comment on s 134 (then s 132) when recommending the Real Estate AgentsBill 2008 (185-2) be passed.39 Real Estate Agents Act, s 3(1).real estate agents, without their clients' informed consent, from entering intoundisclosed arrangements by which they will acquire a legal or beneficial interest inthe land or business to be sold, simply because those arrangements came about afterthe contract was entered into.[60] Second, in the Court below, the argument and therefore the Judge's focus wason the words of s 134(4). However, those words must be read in the context of thesection as a whole and in light of its purpose.40 The structure of s 134 is that subss (1)and (2) set out what is prohibited without consent. In other words, they set out thescope of the section. Subsection (3) sets out how consent is obtained to avoid fallingwithin the prohibition. Subsection (4) sets one of the consequences of acting incontravention of the prohibition. Subsection (5) sets out the other consequence.Subsections (6) and (7) are ancillary provisions.[61] The sole purpose of s 134(4), in light of the section's purpose of consumerprotection, is to respond in a summary way to contraventions of s 134(1) and (2) (atthe client's option), with the clear aim of deterring real estate agents from engaging inconduct that puts their interests and their client's interests in conflict. It would be anodd result if the cancellation rights arising under s 134(4), or for that matter s 135(5)'sprohibition on recovery of commission, responded to some contraventions of s 134(1)and (2) but not others.[62] Section 134(1) and (2) are broadly framed and there is no doubt that Mr Crofthas contravened them. He was carrying out real estate agency work in respect of thetransaction (the sale of Goldline's properties to Ms Marsh). He directly or indirectlyacquired an interest in the properties that were the subject of the transaction. He didnot obtain the consent of Ms Marsh in the manner required by subs (3). Interpretings 134(4) in light of its purpose and the section as a whole, "contract made incontravention of s 134(1)" must mean the contract in respect of which the real estateagent has acquired or will acquire an interest contrary to the prohibition in s 134(1).In other words, Goldline may cancel the contract (for the sale of the property toMs Marsh under which Mr Croft will acquire an interest) because it was made in40 Legislation Act 2019, s 10(1).contravention of s 134(1). The "made" in this context refers to a concluded contractthat Goldline would otherwise be bound by.[63] Third, we consider that for much of the same reasons discussed in relation tos 134(1) and (2), interpreting s 134(4) as also applying to circumstances arising afterthe contract is entered into is consistent with the section's statutory purpose. Whilewe accept Mr Rea's submission that if the agent acquires an interest in the land orbusiness after the contract is entered into, the contract is not necessarily "tainted" bythe agent's subsequent conduct, we agree with Miller J's observation in Maclennanthat it would be relatively rare that the acquisition of an interest on completion of thetransaction did not reflect a conflict of interest that existed at the time the contract wasexecuted.41[64] Further, and in any event, and as touched on earlier in relation s 134(1) and (2)of the Act, in circumstances where the agent acquires his or her interest in the land orbusiness after execution of the contract, the agent may continue to be engaged in realestate agent work up until the contract settles — as occurred in this case. In thosecircumstances the agent may be involved in or assisting with the negotiation ofvariations to the contract, such as changes to the sale price, settlement dates and theconditions of sale. The mischief to which the prohibitions in s 134(1) and (2) aredirected is no less apparent and of concern in that scenario than when an agent acquiresan interest in the land or business from the outset. We do not ascribe to Parliament anintention that a materially different and ultimately lesser remedy is available to theclient in the former case. We also do not consider it instructive to look at the natureof the variations involved, which party first proposed them, or whether they were forthe benefit of the agent's client or otherwise, as Mr Rea urged us to do. The relevantpoint is that the contractual terms are being negotiated and altered in circumstanceswhere the agent continues to provide real estate agency services to their client, yet atthe same time has an undisclosed interest in the land or business being sold.41 In the present case, Ms Marsh accepts that at the time she entered into the Contracts with Goldline,she expected and intended that Mr Croft would assist her, on a consultancy basis, in developingthe properties, and would act as her agent on their later sale. (Mr Croft agreed with the contentsof Ms Marsh's affidavit.) It is not necessary for us to form a view on whether those circumstancesgave rise to a conflict between Mr Croft and Goldline from the outset.[65] Fourth, while we accept that if s 134(4) is interpreted in the manner adoptedby the Judge, the agent's client retains the ability to bring a claim against the agent forbreach of fiduciary duty, we do not see that as controlling the statutory interpretationexercise. The client's ability to claim against their agent for breach of fiduciary dutyalso exists when the agent's acquisition of an interest in the land or business being soldcame about at the time the contract was entered into, yet Parliament nevertheless choseto confer on the client a statutory right of cancellation, as well as prohibiting the agentrecovering commission on the sale. There is no logical reason why those additionalstatutory remedies should be unavailable simply because of a happenstance of timing.[66] Fifth, we note the terms of the prescribed form for obtaining a client's consentfor the purposes of s 134(3) of the Act.42 This was not a matter raised before theHigh Court and accordingly the Judge did not address it. We do not accept Mr Rea'ssubmission that the terms of the form43 support the interpretation that s 134(4)responds only to the scenario where the agent acquires an interest before or at the timean agreement for sale and purchase is entered into. That form refers to the form beinggiven "before" the client agrees to grant, sell or otherwise dispose of their land orbusiness, or an interest in their land or business "to the licensee or related person". Inother words, it pre-supposes that the client is informed that the real estate agent is theintended grantee or purchaser or a person obtaining the interest in the land or businessand has been given the form before the grant, sale or interest has occurred. If that hasnot occurred, and the real estate agent is asking the client to sign the form, the clientis advised "not" to sign it. In this case, Mr Croft did not give the form to Goldline"before" it agreed to give Mr Croft an interest because Goldline did not know ofMr Croft's interest. The advice therefore did not apply. Goldine was entitled to cancelthe contract and was relieved of paying the commission as a result.[67] Finally, we acknowledge that "innocent purchasers" may on some occasionsbe adversely affected by the interpretation of s 134(4) we adopt, when the agent'sclient elects to cancel the contract of sale. However, as noted, Miller J in Maclennanwas of the view that it would be a rare case where that agent's later acquisition of aninterest in the land or business does not involve some form of conflict arising at the42 Real Estate Agents (Duties of Licensees) Regulations, reg 5; and Form 2 of the Schedule.43 See [37] above.outset of the transaction.44 We agree that is the most likely scenario. In this case,although the interest was not acquired at the outset of the transaction, it neverthelessgave rise to a potential conflict when Mr Croft was involved in the three variationsthat were agreed after he had entered into the joint venture with Ms Marsh.45[68] Further, in practice the client/vendor will not always take steps to cancel thecontract. Rather, an alternative outcome is that the client elects to complete thetransaction but will resist the agent's claim for commission. That was the case inChristie, Were and Maclennan. The statutory directive that commission is not payablein respect of any contract made or brought about in contravention of s 134(1) or (2) ofthe Act has no adverse impact on the named purchaser.[69] In a rare case where an agent's later acquisition of an interest in the land orbusiness being sold does not also involve a conflict at the outset of the transaction, weconsider that it is appropriate that the "burden" of the conflict arising, and the resultingability of the vendor to cancel the contract, falls on an innocent purchaser rather thanan innocent vendor. For the agent to be in contravention of s 134(1) or (2) of the Actin the first place, the named purchaser must have been involved in some way in theagent acquiring an interest in the land or business after the contract was entered into.The innocent purchaser is accordingly closer to and more involved in the agent'scontravention than the innocent vendor. In this case, Ms Marsh was not able tocomplete her intended development of the properties without Mr Croft becominginvolved. Further, and as Mr Bigio accepted, a cancelling client/vendor may berequired to make restitution to the purchaser for any benefits conferred on the vendorby the purchaser prior to the contract's cancellation.[70] For these reasons, we are of the view that a contract "made" in or "broughtabout" by a contravention of s 134(1) and (2) refers to the outcome of the transactionin question, and thus covers the period from entry into the contract to its completion.44 Maclennan Realty Ltd v Court, above n 15, at [25].45 See also n 41.[71] On this basis, given it is not in dispute that Mr Croft would acquire a beneficialinterest in the properties on settlement of the Contracts, and that the requirements ofs 134(3) were not met, Goldline was entitled to cancel the Contracts.[72] The appeal will therefore be allowed.[73] Associate Judge Lester made an order that unless submissions on costs werefiled within five working days of his judgment, Ms Marsh was entitled to costs in theHigh Court on a scale 2B basis, plus disbursements as fixed. We are not aware if costssubmissions were filed in the timeframe directed by the Judge, or whether the Judge'scosts order took effect. To the extent that it did, it will need to be set aside and costsin the High Court reviewed in accordance with this judgment.Result[74] The appeal is allowed.[75] Caveats 126191304.1, 12619253.1, 12619312.1 and 12619325.1 are deemedto have lapsed.[76] Ms Marsh must pay Goldline's costs for a standard appeal on a band A basisand usual disbursements.[77] If an order for costs in the High Court was made in Ms Marsh's favour, it isquashed and is to be reconsidered by that Court in light of this judgment.Solicitors:Peter Broad, Auckland for AppellantWebb Morice Ltd, Auckland for Respondent