Cases
July 17, 2023
On 7 July 2023, the Court of Appeal (Mallon, Moore and Fitzgerald JJ) released its judgment in Goldline Properties Limited v Marsh [2023] NZCA 285. Member David Bigio KC, together with junior barrister Hannah Short, acted for the successful appellant.
The case concerned a transaction whereby the appellant vendor (Goldline) entered into sale and purchase agreements (the Agreements) to sell four vacant lots (the Properties) to the respondent purchaser (Ms Marsh). In marketing the Properties, the vendor had engaged a real estate agent, who was previously known to the purchaser.
After both parties had signed the Agreements, but before the transaction had settled, the agent and the purchaser entered into a joint venture agreement pursuant to which the agent acquired a 30% beneficial interest in the Properties. It was not in dispute that the agent failed to seek formal consent from the vendor prior to his acquisition of that interest as required under s 134(1) of the Real Estate Agents Act 2008 (the Act), nor that he continued to carry out work for the vendor after acquiring an interest in the Properties.
Upon learning of the joint venture agreement, the vendor purported to cancel the Agreements. The purchaser responded by lodging a caveat over each of the Properties on the basis of her equitable interest under the Agreements. The direct question before the Court was whether the vendor was entitled to cancel the Agreements under s 134(4) of the Act, such that there was no lawful basis upon which the caveats could be sustained.
Section 134(4) of the Act permits a client of a real estate agent to cancel a sale and purchase agreement if the agreement was either (i) “made in contravention of” section 134(1), which prohibits an agent from acquiring land in a client’s transaction without the client’s formal consent; or (ii) “brought about by” a contravention of section 134(2), which prohibits an agent from carrying out work for a client on a transaction he or she knows will result in a person related to the agent acquiring a legal or beneficial interest in the land subject to that transaction.
The High Court held that the word “made” in s 134(4)(a) required the agent’s involvement to be assessed at the time when the contracts were entered into, with the right of cancellation under s 134(4)(a) only arising if the agent had an interest in the property at that point in time. As the agent acquired his beneficial interest in the Properties after the Agreements were entered into, the Agreement were not found to have been “made” under s 134(4)(a).
The Court of Appeal allowed the vendor’s appeal, finding that the High Court’s reading of the relevant provisions was unduly narrow and inconsistent with the statutory purpose of consumer protection. It held that a contract “made” in or “brought about” by a contravention of s 134(1) and (2) refers to the outcome of the transaction, and thus covers the period from entry into the contract to its completion. This interpretation, the Court reasoned, was also consistent with the policy reasons behind s 134 to protect against agents acting in their own interests and against the interests of their clients. This policy remained important throughout the life of the transaction and up until settlement and did not cease upon the client entering into the agreement. It was important, the Court held, to uphold the public interest in agents continuing to act in their clients’ interests throughout a sale process, and not to permit an agent to act in their own interests once an agreement had been signed.
On this basis, the Court allowed Goldline’s appeal and ordered that Ms Marsh’s caveats over the Properties had lapsed.
