HERON FAMILY TRUST V BARFOOT & THOMPSON HC AK CIV 2008-404-002263

HERON FAMILY TRUST V BARFOOT & THOMPSON HC AK CIV 2008-404-002263 14 August 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-002263BETWEEN HERON FAMILY TRUST LIMITED Appellant AND BARFOOT & THOMPSON LIMITED Respondent Hearing: 6 August 2008 Appearances: W A McCartney for the Appellant T D Rea for the Respondent Judgment: 14 August 2008 at 11:00amJUDGMENT OF ANDREWS JThis judgment was delivered by me on 14 August 2008 at 11:00am pursuant to r 540(4) of the High Court Rules. . Registrar / Deputy RegistrarCounsel/Solicitor: W A McCartney, P O Box 1052, Auckland 1001 Carson & Co, P O Box 37403, Parnell, Auckland 1151 Glaister Ennor, P O Box 63, Shortland St, Auckland 1140Introduction[1] In a reserved judgment delivered in the North Shore District Court on 27 March 2008, Judge M E Perkins gave judgment in favour of the respondent, Barfoot & Thompson Limited (BTL) against the appellant, Heron Family Trust Limited (the Trust) in the sum of $84,937.50, together with interest, costs and disbursements. [2] The Trust has appealed against the judgment. The grounds of appeal are that the Judge failed to apply the correct legal test as to whether the Trust had an arguable defence, that the Judge was wrong in determining that the Trust did not have an arguable defence, and that the Judge was wrong in determining that proceedings issued against the Trust by Stanaway Real Estate Limited (Stanaway) did not require issues between the parties to both proceedings to be determined at trial.Background[3] On 1 August 2005 the Trust appointed BTL sole agent to sell the Trust's property at 12 Marine Terrace, Bayswater (the property). The sole agency expired on 30 January 2006 and, pursuant to the terms of the agency agreement continued as a general agency until cancellation on the giving of seven days notice. [4] On 26 August 2008 the Trust signed a Sole Agency agreement with Stanaway, a franchisee of Bayleys Real Estate (Bayleys). [5] On or about 24 September 2006 Mr Lance Richardson, a salesperson for BTL, introduced Mr Bill Liu to the property. There was a formal viewing, then discussions between Mr Richardson and Mr Heron (on behalf of the Trust) as a result of Mr Liu's having expressed interest in purchasing the downstairs unit in addition to the property. Mr Liu was not identified as the interested purchaser. [6] Some time during October 2006 Mr Richardson told Mr and Mrs Heron that his client had "gone cold".[7] Subsequently, Mr Liu made a direct approach to Mr and Mrs Heron. On 8 November 2006 Mr Liu and the Trust entered into an Agreement for Sale and Purchase of the property. They entered into a second agreement on 8 December 2006, in substitution for the November agreement. No real estate agent was identified in the agreement as having effected the sale.Issues on appeal[8] The appeal raises the following issues: a) Whether, and if so when, the Trust cancelled BTL's general agency; b) If the general agency had not been validly cancelled as at the date of Mr Liu's introduction to the property, whether there was a break in the chain of causation from introduction to eventual sale; c) Whether the Judge should have declined summary judgment by reason of the Trust's being sued by Stanaway for commission on the same sale.Notice of cancellation[9] In the District Court Mr McCartney, for the Trust, argued that BTL received notice of cancellation of its general agency before Mr Liu was introduced to the property by Mr Richardson. [10] In evidence before the District Court was a "Cancellation of Agency" notice, addressed to BTL. It was signed by both Mr and Mrs Heron and dated 26 August 2006. It recorded the new sole agent as Bayleys. The operative part of the notice read:Please take notice as from the date of delivery of this notice to you I give you 7 days notice, effective at midnight on 5th October 2006 that I am cancelling your agency for the sale/lease of my property. If you are currently working with any prospective purchasers, please advise me of their names and the current state of any negotiations you are conducting on mybehalf. All further dealings on the property after the termination of your agency must be conducted through Bayleys Real Estate Limited.[11] Mr Heron's evidence was that at the same time as they signed the Sole Agency agreement with Bayleys, he and Mrs Heron signed cancellation of agency notices for BTL and another firm, Prestige Real Estate Limited (Prestige). He exhibited a copy of the cancellation sent to Prestige. He did not have a copy of the BTL cancellation. [12] For their part, the evidence for BTL was that they had checked their records and had not been able to locate any cancellation notice sent by the Trust, or by anyone else. However, it appears from Mr Richardson's affidavit that BTL did become aware of the cancellation: he exhibited a letter from Prestige to Bayleys dated 2 October 2006, noting receipt of a cancellation notice dated 26 August 2006 and received by Prestige on 28 September 2006, and a letter from Mr and Mrs Heron to BTL and Prestige dated "31 September 2006" noting certain exceptions to the cancellation. [13] In his oral submissions on appeal Mr Rea for BTL advised that it had been conceded in the District Court that it was arguable that the cancellation notice had been sent to BTL. [14] The real issue, Mr Rea submitted, was whether the cancellation notice had been received by BTL before Mr Richardson's introduction of Mr Liu. Mr Rea submitted that not only did the cancellation notice have to have been received by BTL before the introduction on 24 September 2006, it had to be effective by that date. Accordingly, it had to have been received by BTL before 16 September 2006 to allow for the seven-day notice period. [15] Mr Rea submitted that on the evidence of the cancellation notice itself, and the evidence as to when Prestige received its identical notice, it could not be argued that the notice was received by BTL as early as 16 September 2006. [16] Mr McCartney's submission in the District Court was that it was arguable that the cancellation notice was effective before 24 September 2006. Thissubmission rested on his argument that the specified effective date of "5 October 2006" must have been an error. In support of this submission he noted that the cancellation notice was signed on 26 August 2006. He submitted that there was no explanation why either the Trust or Bayleys would allow Bayleys' sole agency to run in parallel with the Prestige and BTL general agencies for a period of almost six weeks, to 5 October 2006. [17] The more likely and logical explanation, Mr McCartney submitted, was that the effective date should have been recorded as 5 September 2006. A notice signed on 26 August 2006 (a Sunday) could have been delivered on 29 August, giving an effective date seven days later of 5 September 2006. [18] Mr McCartney's submission was rejected in the District Court, at [16]. The Judge found the sequence of dates surrounding Mr McCartney's proposition to be "speculative and unconvincing", particularly in the light of the evidence as to the cancellation notice sent to Prestige. [19] I am not satisfied that the Judge was wrong to reject the Trust's submission. On the face of the cancellation notice itself, it was to take effect from 5 October 2006. The evidence that the Prestige cancellation notice, in identical terms, was received by Prestige on 28 September, exactly seven days before 5 October 2006, supports the Judge's acceptance of Mr Rea's submission that BTL was not given notice of cancellation of its Agency agreement before Mr Richardson introduced Mr Liu to the property on 24 September 2006. [20] The onus of proving that the Trust has no defence was on BTL. 1 Here, BTL has met that evidential onus by exhibiting the agency agreement with the Trust (pursuant to which the agreement remained in effect until the Trust had given seven days notice of cancellation) and the Notice of Cancellation which clearly states its effective date to be 5 October 2006. That evidence was supported by the evidence that the identical Prestige cancellation notice was given on 28 September 2006.1 Rule 152(1) District Courts Rules; Pemberton v Chappell [1987] 1 NZLR 1[21] Against that evidence, there was no evidence put forward to support Mr McCartney's contention that the specified effective date was an error. Neither Mr nor Mrs Heron gave any evidence to support the contention. In the circumstances, the argument that BTL received notice of cancellation of the agency agreement before 24 September 2006 falls into the category of a "hypothetical possibility in vague terms unsupported by any positive assertions or corroborative documentation". 2[22] As observed by Hillyer J in Pemberton v Chappell, the summary judgment procedure is not intended to allow hypothetical defences to be raised. I am satisfied that the District Court Judge applied the correct legal test in finding that it was not reasonably arguable that the effective date of the cancellation of BTL's general agency preceded Mr Richardson's introduction of Mr Liu to the property.Was the "chain of causation broken"?[23] Mr Richardson's having introduced Mr Liu, and Mr Liu's having eventually bought the property, would not themselves have ensured summary judgment in favour of BTL. It was necessary that BTL's introduction was causative of the ultimate sale. [24] The agency agreement between BTL and the Trust included the following provision:GENERAL AUTHORITYIn consideration of you endeavouring to effect a sale I appoint you a general agent for the sale of my property. If a sale is effected by you or through your instrumentality, or to anyone introduced by you at the listed price, or at such other price as I agree to accept, I will pay commission calculated as below upon the sale becoming unconditional. [25] The District Court Judge cited the following passage from A Handbook on Agreements for Sale and Purchase of Land: 32 S H Lock (NZ) Ltd v Oremland HC AK CP641/86, 19 August 1986, Wylie J3 Blanchard, P A Handbook on Agreements for Sale and Purchase of Land, Handbook Press Ltd (4 th ed) para 1411It is not enough to qualify a real estate agent for a commission that he introduced to the property or the vendor a person who later purchased the property. The question is whether the agent was the essential or effective cause of the sale. It has been said that in order to qualify the agent for a commission on the sale the introduction, which he made, must have been the foundation upon which the negotiation proceeded and without which it would not have proceeded. It must have been more than a merely incidental element. In order to establish this it must be shown that there was no break in the chain of causation i.e. that the chain led unbroken from the introduction to the execution of a binding contract. When an unbroken chain of causation exists it is immaterial that the agent did not participate throughout the negotiations but absence of participation may be an indication that a chain of causation did not exist. It is important to examine both the exact terms of the agent's appointment and the sequence of events leading up to the sale. The question will turn very much on the true construction of the appointment and upon the facts of each individual case.[26] The Judge also cited the judgment of Tipping J in Harcourts Group Ltd v McKenzie4 at 7:In my judgment questions of causation, for present purposes, must be approached on the basis that the primary contractual stipulation is that commission will be payable if the property is sold to anyone introduced to the property through Harcourts' agency. If the agent can show that the ultimate purchaser was introduced to the property through his agency then prima facie as a matter of construction commission is payable. The prima facie obligation to pay commission ceases only when the agent's introduction ceases to have a material bearing on the sale. By that I mean that the agent's introduction was no longer instrumental in any material way in bringing about the sale. That, in my judgment, is the only way to harmonise the words of the contract with the proposition established by the authorities that there must be some causal connection between the introduction and the sale. In an ordinary case the connection will be self- evident. In a case where the point is in dispute it will ultimately be a matter of fact and degree whether the introduction remained instrumental.[27] In the District Court, Mr McCartney submitted that there was a break in the chain of causation. He submitted that this occurred when Mr Richardson told Mr Heron that his client had "gone cold". Further, he submitted that without evidence from Mr Liu, it was impossible for the Court to determine whether the chain had been broken and, accordingly, summary judgment would not be appropriate. [28] The District Court Judge rejected that submission. He observed, at [19], that Mr Liu's evidence on its own would not necessarily be sufficient to break the chain of causation. Further, he noted Mr Richardson's evidence that he was continuing to4 Harcourts Group Ltd v McKenzie HC CH AP129/93 9 September 1993deal with inquiries from Mr Liu which were, he said, "plainly consistent with a continuing interest in the property." [29] At [22] the Judge recorded that Mr Liu's making personal contact with Mr and Mrs Heron came within a month of his introduction to the property by Mr Richardson, and the Agreement for Sale and Purchase was concluded on 8 November 2006. He concluded:As a matter of fact, upon the affidavit evidence in its entirety, the original introduction of Mr Liu to the property by Mr Richardson led surely to the concluded contract between Mr Liu and the defendant. Applying the principles discussed in the authorities in the context of the contractual provisions, it is clear that such introduction provides an entitlement to commission.[30] On appeal Mr McCartney again argued that without evidence from Mr Liu, the Court could not have concluded that it was not arguable that there had been a break in the chain of causation. He submitted there was an absence of facts from which that could be conclusively determined. When asked what would have been sufficient to conclude there was no break in the chain, he gave as an example evidence of Mr Liu constantly talking with Mr Richardson, giving no indication of "going cold." [31] Mr Rea submitted that in the light of the very short time period between Mr Liu's introduction by Mr Richardson and the Agreement for Sale and Purchase, it was implausible that any intervening event could have broken the chain. He pointed out that there were only six weeks from the initial introduction and the Agreement for Sale and Purchase on 8 November 2006. [32] I am not satisfied that the District Court Judge was wrong in concluding that there was no break in the chain of causation. He had before him Mr Richardson's evidence of first showing Mr Liu the property on 24 September 2006, and then taking Mr Liu through it, twice, on 27 September 2006. Mr Richardson then had telephone discussions with Mr Heron about Mr Liu's interest in the property on 28 September, and on a "later" (but unspecified) date.[33] The Judge also had Mr Heron's affidavit evidence that Mr Richardson had told him "in October" that the client had gone cold. Mr Heron went on to say, at para 17 of his affidavit:Then, one Sunday night, a person I now know as Bill Liu knocked on our door saying he wanted to buy the house. Mr Heron then said at para 18:Mr Liu looked through the house and confirmed he was interested in buying it, and over a period of time we negotiated a contract with him. The terms of the contract were negotiated by Angela and I, and the contract was then prepared by our solicitor. [34] On the basis of that evidence it is not, in my judgment, arguable that Mr Liu's direct approach to Mr and Mrs Heron was anything other than as a result of his having been introduced to the property by Mr Richardson. I am satisfied that in the terms of the agency agreement between the Trust and BTL, the sale to Mr Liu was effected through BTL's instrumentality, to a person introduced by BTL. [35] Accordingly, the District Court Judge was not wrong to conclude that the Trust did not have an arguable defence on the point of "chain of causation".The Stanaway proceeding[36] This matter was raised in a supplementary memorandum following the conclusion of the District Court hearing. It was submitted on behalf of the Trust that the issuing of Stanaway's proceeding on 15 February 2008, claiming commission on the sale to Mr Liu, made it inappropriate to give summary judgment in BTL's proceeding, as the issue could only be resolved in a single trial involving all three parties. Mr McCartney submitted that if there were not a single trial, the situation could arise where it was proved that BTL received notice of cancellation of their agency prior to the introduction of Mr Liu. [37] The District Court Judge rejected this submission accepting, at [23], Mr Rea's submission that the Trust's submission that evidence would be given that the notice of cancellation had been given to BTL prior to 24 September 2006, and that the stated effective date of 5 October 2006 was an error, was "purely speculative."[38] The Judge also noted that it was possible that the Trust could become liable for more than one commission on the sale, as a result of the prevailing contractual provisions. However, he was not persuaded that he should withhold judgment from BTL. [39] The entry of summary judgment is an exercise of the presiding Judge's discretion. It is well established that to succeed on appeal it must be shown that the Judge made an error of principle, took into account irrelevant factors, failed to take into account relevant factors, or was plainly wrong. Mr McCartney submitted on appeal that the Judge had failed to take account of relevant factors, namely the Stanaway proceeding, and the possibility of there being inconsistent findings of fact as to BTL's notice of cancellation of the Agency agreement. [40] Mr Rea again submitted on appeal that the Trust's argument was purely speculative. He also noted that, notwithstanding that as at the appeal hearing the Stanaway proceeding had been in train for six months, there was no indication that the Trust had flushed out any detail of Stanaway's case. He submitted that if there was evidence in relation to the Stanaway proceeding which was relevant to the present matter, the Trust could have sought leave to adduce it on appeal. [41] Mr Rea also submitted that, whether or not the BTL agency (as to which Mr McCartney had submitted there could be inconsistent findings of fact) had been cancelled, Stanaway could argue that the Trust was in breach of the sole agency with Stanaway (and therefore liable for commission), simply by entering into the agreement to sell the property to Mr Liu. [42] As to the District Court Judge's discretion to enter summary judgment, Mr Rea referred me to the comment of Casey J in Pemberton v Chappell: 5While the word 'may' suggests a general discretion, I agree with the views of Robert Goff LJ in European Asian Bank AG v Punjab & Sind Bank[1983] 2 All ER 508, 515, on the corresponding provisions of Ord 14, r3 (1) – once the plaintiff has complied with the requisite formalities and has satisfied the Court that there is no defence, 'it is very difficult indeed to conceive of circumstances where the Court should not give judgment for the plaintiff it can only be a discretion of the most residual kind'.5 See fn 1, at p 5[43] I am not satisfied that the Judge was in error in the exercise of his discretion. He did not fail to take the Stanaway proceeding into account: it is evident that the proceeding was referred to him, and he considered it. He was not persuaded that the proceeding was grounds for not entering summary judgment. Further, I can see no error, whether of principle or otherwise, in the exercise of his discretion. The Judge's conclusion was clearly one that was open to him, and there are no grounds to interfere with it. [44] Accordingly, this ground of appeal also fails.Result[45] The Trust has not succeeded on any of its grounds of appeal. Accordingly, the appeal is dismissed. [46] As to costs, I note from the Minute of Winkelmann J dated 10 June 2008 that the appeal is categorised as "category 2". I also note that in his memorandum dated 6 June 2008 counsel for the Trust submitted that category 2B was appropriate. [47] On that basis, and having succeeded on the appeal, BTL is entitled to costs on a 2B basis, together with disbursements as fixed by the Registrar. ______________________ Andrews J