HOKITIKA PROPERTY LIMITED v HURT [2014] NZHC 1536

HOKITIKA PROPERTY LIMITED v HURT [2014] NZHC 1536 [3 July 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-00899[2014] NZHC 1536IN THE MATTER Of the Land Transfer Act 1952IN THE MATTER A Notice of Lapse of Caveat Dealing ID9685495BETWEEN HOKITIKA PROPERTY LIMITEDApplicantAND MARIA HURT in her personal capacityand as Executor of the Estate of DavidHurt and Ulata Wendy Hurt, 32 O'NeilStreet, Ponsonby, Auckland, occupationsunknownRespondentHearing: 17 June 2014Appearances: Mr A Speed for the ApplicantMr E St John for the RespondentJudgment: 3 July 2014JUDGMENT OF ASSOCIATE JUDGE J P DOOGUEThis judgment was delivered by me on03.07.14 at 3 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateBackground[1] The applicant, Hokitika Property Limited ("Hokitika") has filed anoriginating application seeking an order under s 145A of the Land Transfer Act 1952 that caveat number 9678894.1 not lapse.[2] On or about 21 March 2014, the applicant lodged a caveat against the title ofa residential property at 32 O'Neil Street, Ponsonby. The registered proprietors areMaria Hurt, in her personal capacity and as executor of the estate of her late husband, David Hurt, together with their daughter, Ulata Wendy Hurt (to whom Ishall refer to as "Wendy Hurt"). The ownership interest was split into thirds.Maria Hurt was registered as the proprietor for a one third share as executor and owned a one third share in her own right as did Wendy Hurt.[3] The estate or interest claimed under the caveat states that it was filed on thefollowing grounds:The Caveator as purchaser pursuant to an agreement for sale and purchase ofthe property dated 17 March 2014 with the Registered Proprietor as vendor.[4] On 2 April 2014, Land Information New Zealand wrote to the applicant, care of its solicitors advising that an application had been made by the respondents to lapse the caveat. Thereafter the applicant filed an application pursuant to s 145A ofthe Land Transfer Act which is now before the Court.[5] The primary ground of opposition to the application is that there is no bindingsale and purchase agreement. Alternatively the respondents say that:a) damages would be an adequate remedy; andb) the applicant has no particular interest in the respondents' propertyother than for profit.[6] The brief background is that the respondents lived in the property at 32O'Neil Street together with Wendy Hurt's four children. Wendy is separated and issaid to be the primary breadwinner for the family. She is 36 years old and the children are aged eight, six, four and two. Maria Hurt is on a benefit.[7] At the material time, the evidence is that the government capital valuation of the property was approximately $900,000. The applicant had also instructed a valuerwho estimated the market value of the property to be $872,000.[8] The property was subject to a mortgage to Westpac with the amount owed at the relevant time in March 2014 being approximately $217,000. The mortgage was in arrears to an amount of about $3,000 in February 2014. This was a cause for concern for the Hurt family.[9] Because Wendy Hurt had taken out a loan with GE Finance to pay the mortgage and had defaulted once on the repayments, she considered that she would no longer have a good credit rating. It was her view that one of the options might be to sell the property and acquire an alternative home without the need for a mortgage.[10] Maria Hurt had heard about an accountant of Samoan background, aMr Toilolo who presented a radio programme in which he discussed financialmatters. Mr Toilolo used the program to publicise his business as an accountant andfinancial advisor. Although she had not met him previously, Maria Hurt decided togo and see him at his office in Manurewa. She discovered that she was related toMr Toilolo. Thereafter Mr Toilolo made arrangements to meet the respondents on13 March 2014. Wendy Hurt says she had to leave for work by 8.45 am thatmorning and asked him to arrive at 8 am so that they had time to discuss the optionsand to ask him questions about some papers that he was bringing.[11] Mr Toilolo was late to the meeting and arrived at the property shortly before 9 am. He presented the respondents with a contract for the sale and purchase of theproperty under which the applicant was the purchaser ("the Agreement"). It iscommon ground that Maria and Wendy Hurt had had no previous contact with the applicant or with the two men who were directors of Hokitika, Mr Matthew Gilligan and Mr Salesh Chand. They both practise as chartered accountants at Gilligan Rowe & Associates.[12] Mr Toilolo expressed the view that arranging a quick sale of the property was the best way out of the difficulties in which the respondents found themselves in. For that reason he had made arrangements for the applicant to make an offer for the property.[13] The Agreement stated a purchase price of $790,000. Wendy Hurt says thatshe was under very considerable time pressures because Mr Toilolo arrived late andshe was due to be at work. She claims that she eventually, at his urgings, signed theAgreement. She says she told Mr Toilolo that the offer of $790,000 was notsufficient and that she would only sign the papers on the basis that he had to promisethat he would not do anything with them until they had time to consider thedocument. Mr Toilolo made the promise and Wendy Hurt left for work. Mr Toilolostayed and talked to Maria Hurt and eventually she signed the agreement as well.Maria Hurt says that Mr Toilolo then discussed his fee in the matter saying that heproposed to charge them only $4,000 to $5,000.[14] Maria Hurt says that during the course of the meeting, Mr Toilolo received a phone call and went out of the house. He returned shortly later to say that there was good news and that the purchaser, Hokitika, had offered $795,000. This was approximately $5,000 more than the original figure in the Agreement. She says that Mr Toilolo changed the figure from $790,000 to $795,000 on the Agreement. She says that she did not sign the Agreement after the price had been changed. WendyHurt's evidence is to the same effect that she did not sign the Agreement with thevaried purchase price of $795,000.[15] Mr Toilolo's account of the matters is that he indeed put the Agreement to the respondents and that the Agreement was for $790,000. He said the respondentswere pleased with this figure but that if he could do anything to get the price up, theywould be grateful. He says that Wendy Hurt asked him to promise to try andincrease the price with the understanding that he was not to tell the vendor they hadaccepted the $790,000 offer until he had tried one more time for an increase in thepurchase price.[16] Mr Toilolo says that after they signed the Agreement, he called Mr Chand about the possibility of an increase and was authorised to increase the amount by $5,000. He says that after he showed Maria Hurt the increased purchase price of $795,000, she said to him:I am sure [Wendy] would be happy with the additional amount.[17] After these events, Mr Toilolo took the Agreement to Mr Chand who initialled the increased purchase price. Attempts were later made to have Maria Hurt initial the increased purchase price on the Agreement but she declined to do so.[18] Subsequently, the directors of Hokitika arranged for the house to be inspectedby a builder and a valuer purportedly in satisfaction of a "due diligence" clause inthe contract.[19] The essential feature of the evidence in summary is that the only persons who had first-hand knowledge of what actually occurred in regards to the Agreementwere Maria and Wendy Hurt, on the one hand, and Mr Toilolo on the other.[20] It is significant that while Mr Toilolo does not agree that the respondents were unhappy with the purchase price of $790,000, he does not dispute the dealings between the parties and the circumstances around the signing of the Agreement that the respondents put forward and which is described in the foregoing paragraphs. The sequence of events which I have described above is central to the key issue in this case which is whether a binding contract ever came into existence.[21] Subsequently, although further attempts were made to get the respondents to sign the agreement at $795,000, including by Mr Chand calling at the house, they would not budge. Mr Toilolo also sought to persuade the respondents and/or their solicitor to proceed with the contract but to no avail. The applicant was prepared to offer an immediate $10,000 deposit but this did not persuade the respondents to proceed either.[22] Thereafter, the respondents instructed a solicitor to act for them. Thesolicitor, Ms Sandi Anderson, wrote to the applicant's solicitor on 18 March 2014expressing the view that there was no binding agreement in existence. Subsequently the respondents obtained an appraisal from a registered valuer whose opinion was that the property was worth $1,050,000 with the effective date of valuation being 31 March 2014. That valuation indicates, therefore, that this estimated value of the property was $260,000 more than the amount contained in the Agreement that the respondents signed.Relevant Principles[23] Mr Speed, counsel for the applicant, submitted to me that the principles which govern the exercise of the statutory power contained in s 145A of the Land Transfer Act were encapsulated in a recent decision in the High Court, Olo Ltd v K No.3 Trustee Ltd.1 I accept this submission made for the applicants.[24] Lang J in Olo Ltd stated that:2[4] The principles to be applied in applications such as this are well established through decision of the Court of Appeal in cases such asSims v Lowe and Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd.[5] I propose to apply the following principles in reaching my decision.(a) The onus is on Olo to demonstrate that it holds an interest inKA 3's land that is sufficient to support the caveat.(b) Olo must put forward a reasonably arguable case to support the interest that it claims.(c) An order for the removal of the caveat will only be made if it is clear that there was either no valid ground for lodging it in the first place or, alternatively, that such ground as then existed has now ceased to exist.(d) The present proceeding is wholly unsuitable for the determination of disputed questions of fact.Issues[25] The principal issue that needs to be determined in this case is whether the parties entered into a binding contract following the signing of the Agreement for1 Olo Ltd v K No.3 Trustee Ltd [2014] NZHC 1075.2 At [4]-[5] per Lang J (footnotes omitted).$790,000. It is now accepted for the applicant that the subsequent increase in the price to $795,000 was not accepted in writing by the respondents. However, the position which the applicant takes is that if there was a binding agreement increasing the price to $795,000, this was in the nature of a variation to the underlying agreement of $790,000.[26] The main issue can only be determined one way or the other in the context of the caveat application, if it can safely be said that there are no questions of disputed facts which need to be determined as a preliminary concern. If there are such factual issues that need to be determined, then it would not be appropriate to decide the main issue. An application under s 145A is not an appropriate proceeding within which the Court can resolve substantial disputes of fact.[27] However, it is legitimate to take the position that if the assumption is made concerning disputed factual issues which represents the most positive view from the perspective of the applicant, the Court should decide the application if it can.[28] I consider that it is possible to come to an affirmative view as to the outcome in the circumstances of this case but first, it will be necessary to say something about the factual issues.Was there a Binding contract?[29] Mr Speed made the following submission:The arguments against the interest [in the respondents' land] appear to bethat there was a change to the price inserted by arguably the respondent'sagent Mr. Toilolo. On his evidence this was at the insistence of the respondents. In any event the applicant takes no issue with the price and their response can only be that the only issue is an increase in price which is not disputed.[30] It was therefore Mr Speed's submission that there was a binding agreement.[31] There is no dispute that this case is one that is governed by the principle inCarruthers v Whitaker.3 As a result, the parties are presumed to have intended that they should not be bound contractually unless a binding contract in the standard Auckland District Law Society form had been executed by both parties.[32] The evidence of the respondents and of Mr Toilolo is the primary evidence concerning what actually happened in relation to the execution of the Agreement and the sequence of events.Communication of acceptance[33] The position of the applicant is that at the moment when the respondents signed the agreement for sale and purchase at $790,000, an enforceable and binding contract came into existence. This would seem to be an oversimplification of the position because it ignores the requirement that the acceptance must be communicated to the offeror. The following statement which is to be found in Law of Contract in New Zealand4 correctly states the law;3.4 Communication of acceptanceEven if the offeree has made up his or her mind to a final acceptance, the agreement is not yet complete. The normal position is that there must be an external manifestation of assent, some word spoken or act done by the offeree or by his or her authorised agent which the law can regard as the communication of the acceptance of the offeror. An insufficiently communicated assent is not effective as an acceptance.[34] Neither of the respondents communicated directly with the applicant about whether they accepted the offer to purchase.[35] Given the expectation that the parties would contract by entering into a formal agreement, it follows that the parties common assumption was that communication of the acceptance of any offer would take place by way of the offeree returning to the offeror the signed agreement for a copy of it. That did not happen in this case.3 Carruthers v Whitaker [1975] 2 NZLR 667 (CA).4 John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th ed, LexisNexis NZ, Wellington, 2012) at [3.4] (footnotes omitted).[36] The remaining question is whether there is some basis upon which the applicant can contend that it is reasonably arguable that acceptance of the $790,000 offer can be deemed to have been communicated to the applicant.[37] It is necessary to look in some detail at the evidence concerning the involvement of Mr Toilolo. The evidence of Mr Chand for the applicant is also relevant.The evidence[38] Mr Chand in his affidavits does not refer to a communication of acceptance. He deposed that:5 There were further oral and text discussions which resulted in anagreement at $790,000. A signed contract was prepared by [Hokitika] on the 12th of March and emailed to Mr Toilolo Therewere some verbal offers and counter offer on the morning of the 13thof March.6. That day the signed counter offer at $795,000 was delivered to us around lunch time on the 13th of March. [39] Mr Toilolo's evidence was to the following effect:I showed Maria and Ulata the sales and purchase agreement with the offer of$790,000 and they were very thankful. Ulata said to me "We will take the offer but if you can try to push it up further we would be grateful". Theyboth signed the contract at $790,000, and accepted it. But Ulata asked me to promise to try to increase the price, with the understanding that I was not to tell the vendor they had accepted until I tried one more time for an increase. But this was on the basis that they took the $790,000 because they did not want to lose that. They just asked me to try one more time for an increase which seemed OK to me. After they signed the contract accepting the$790,000, I called [Mr Chand] from Maria's house about the possibility ofincreasing the offer and he agreed to a final increase of $5K to make it $795K. On that basis I changed the amount on the contract to $795,000 which was more than the $790,000 accepted by the Hurts. I took the contract to [Mr Chand] and requested that he initial the $795,000, which he did. He took the contract from me to take to the lawyers and have one delivered back to the Hurts which I understand he did.Delivery of acceptance to offerors?[40] Even though the agreement had been signed at $790,000 by the offerees, that does not amount to acceptance being sufficiently notified to the offeror for the reason only that the agreement had been handed to Mr Toilolo.[41] It follows that the acceptance of the $790,000 was never communicated to the applicant. What was communicated to the applicant was that Mr Chand was advised that the respondents would be willing to sign a contract at $795,000. When he was told this, Mr Chand initialled the Agreement at $795,000. I interpolate that Mr Chand apparently understood that the respondents had signed the agreement after the $795,000 offer had been inserted into it. That was not in fact the case and the applicant apparently now accepts this fact. Consistent with that understanding were Mr Toilolo and Mr Chand's later attempts to get Maria Hurt to initial or sign theagreement with the changed price in it.[42] It is not surprising that, Mr Chand and Mr Toilolo attempted to obtain signature of the offer had $795,000. That is because in the overall context of the case it is clear that they both appreciated that until the respondents had signed the Agreement of $795,000, they would not be bound by it.Knowledge of signature of contract on part of Mr Toilolo as agent of offeror?[43] The next possibility is that communication to Mr Toilolo himself of acceptance of the offer might have been sufficient. It is to say, Mr Toilolo was aware that the parties had signed the contract. They did so in his presence. The question is whether his knowledge that that had happened can be reasonably construed as communication to the applicant that the offer was accepted. Resolution of this issue requires, amongst other things, examination of the legal status of Mr Toilolo in the context of the evidence. The key question is whether it is reasonably arguable that Mr Toilolo was the agent of the offeror.[44] In my view such a possibility is not reasonably arguable. Mr Chand's affidavit supports the view that Mr Toilolo was not the applicant's agent: I was introduced [by Mr Toilolo] to the respondents Maria Hurt and Ulata Wendy Hurt. We were told they were his relatives. We entered into negotiations with Mr Toilolo, who we understand to be acting for the respondents, to purchase the property No real estate agent was involved.(emphasis added)[45] There is therefore no evidence that he was the agent of the vendor or a common agent, he having been retained to advise and assist the respondents alone.Authority of Mr Toilolo to communicate acceptance of offer[46] I have already concluded that there was no evidence that Mr Toilolo communicated acceptance of the offer at $790,000 to Mr Chand during the period when that offer was open.[47] Even had there been evidence that Mr Toilolo advised the offeror that the respondents had signed the agreement at $790,000, and there is no such evidence, there is an alternative reason why that would not have amounted to sufficient communication of acceptance. That reason has to do with the scope of Mr Toilolo'sauthority.[48] In this case, the fact that Mr Toilolo was instructed to ask for a higher price without disclosing that the respondents had signed the Agreement containing the $790,000 can only be reasonably construed as meaning that he was not actually authorised to communicate acceptance of the $790,000 offer.[49] I was not addressed on the question of what, if any, apparent authority Mr Toilolo might have had to communicate acceptance of the offer at $790,000 to the applicant.[50] The aspects of apparent authority which would come into focus and any such argument would be what actions or omissions on the part of the respondents could have been reasonably construed by the applicant as a representation that Mr Toilolo had authority to pass information to the applicant.[51] Given that what was proposed was a standard purchase of a residential house, any suggestion that an agent such as Mr Toilolo might reasonably be supposed tohave had authority to accept an offer orally on behalf of the respondents can be ruled out.Conclusion on offer and acceptance[52] Thereafter, the failure on the part of the respondents to sign the $795,000Agreement meant that the "ordinary and customary method of obtaining an agreement signed by both parties" in the case of a sale of land was never completedand therefore the Agreement was of no legal effect: See Carruthers v Whitaker.5[53] The position therefore in summary was that:a) The respondents signed an agreement containing an offer at $790,000 but that was not communicated to the applicant and accordingly did not give rise to a binding agreement;b) The applicant offered $795,000 but that was never signed by the respondents and therefore in terms of the Carruthers principle, no agreement thereby came into existence.[54] Mr Speed submitted that what occurred in this case was that an agreement was entered into which was later varied by increasing the price. Such an argument begs the question of whether in truth there was a binding agreement entered into in the first place and on the analysis which I prefer, that did not happen in this case. Arguments about variation therefore do not assist. Accordingly there is no Agreement which the applicant is able to enforce against the respondent.Part performance[55] The submission is made for the applicant that an alternative ground for supporting the existence of a contract is the doctrine of part performance:3. Alternatively that the doctrine of part performance applies because of actions taken by the applicant to obtain a building report and a valuation with the consent of the respondents subsequent to and infulfilment of the "due diligence" clause of the contract.5 Carruthers v Whitaker, above n 3, at 673 per Richmond J.[56] In order to understand the submission, brief reference is to be made to the evidence.[57] The Agreement in this case contained what the parties for convenience described as a "due diligence" clause pursuant to which the applicant was to haveaccess to the property in order to carry out a building inspection and to provide for access for a registered valuer. The Agreement was conditional upon the applicant approving all matters that the applicant considered to be relevant concerning the property or the commercial viability of the transaction. In fact, the respondents did permit for nominated persons to come and inspect the property.[58] However, the invocation of the doctrine of part performance does not assist the applicant. Mr St John submitted on behalf of the respondents that:The applicant's submissions make reference to part performance. But thatcannot be a ground to sustain the caveat because the caveat asserts a bindingagreement as at 17 March 2014. The applicant's submissions acknowledgethis at 4.3 where again it cites McMorland that acts of part performance cannot support a contract which did not exist. But the simple point is thatthe applicant's case is that it accepted a counter offer of $795,000.[59] The problem which the applicant faces in this case is not surmounting the non-existence of a contract in writing sufficient to satisfy the requirements of s 24 of the Property Law Act 2007. The issue is whether a contract ever came into existence through the communication to the offeror that its offer was accepted. As I have concluded, no contract actually came into existence. In any case, the acts of part performance which can be relied upon in appropriate cases are those which were performed at the time that a contract was in existence.6 This is not the case here.Result[60] Because there is no enforceable agreement in existence which the applicant is able to enforce against the respondents, it cannot be said that the applicant has a legal or equitable interest in the property which will support a caveat.[61] The application for an order under s 145A to sustain the caveat is dismissed.6 D W McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [4.22].[62] The parties should confer on the question of costs and if they are unable to agree, they are to file memoranda not exceeding four pages on each side within 10 working days of the date of this judgment._____________J.P. DoogueAssociate Judge