ST GEORGE PROPERTY TRUST LIMITED V OAKLAND FINANCE COMPANY LIMITED HC INV CIV-2008-425-000416

ST GEORGE PROPERTY TRUST LIMITED V OAKLAND FINANCE COMPANY LIMITED HC INV CIV- 2008-425-000416 11 December 2008IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY CIV-2008-425-000416BETWEEN ST GEORGE PROPERTY TRUST LIMITED Plaintiff AND OAKLAND FINANCE COMPANY LIMITED Defendant Hearing: 3 December 2008 Appearances: C S Withnall QC for Appellant H C Matthews for Respondent Judgment: 11 December 2008RESERVED JUDGMENT OF HON. JUSTICE FRENCH On Application for Order that Caveat not lapse[1] This application under s145 of the Land Transfer Act 1952 for an order that a caveat not lapse was argued before me on 3 December 2008. At the conclusion of the hearing, I made an order granting the application and stated that I would provide my reasons later in writing.Factual background[2] The plaintiff claims an interest in the defendant's land pursuant to an agreement for sale and purchase dated 14 July 2008. Although the agreement was conditional, it is well established that a conditional agreement is sufficient to sustain a caveat subject to defeasance if the agreement fails to become unconditional (Bevin v Smith [1994] 3 NZLR 648).[3] The key issue is whether the agreement for sale and purchase has lapsed, or is at an end, as claimed by the defendant. [4] The property in question is a commercial property situated in Queenstown. Under the contract, it was sold subject to existing tenancies. The front page of the contract stated that details of the tenancies were "to be provided". [5] The agreement contained a special condition, clause 15. It was in the following terms:This agreement is subject to and conditional upon the Purchaser, at his own expense in all things, undertaking an exercise in due diligence in respect of the property, and such other matters affecting the merits of the purchase as the Purchaser may deem to be relevant to him, and being satisfied that the purchase meets his investment criteria in all respects. The Purchaser will have until 4pm on the day 10 (Ten) days from the date on which the last of the parties execute this Agreement to notify the Vendor whether or not the property meets with the Purchaser's investment criteria in all respects. If the Purchaser notifies the Vendor within such time frame that the property does meet such criteria, then this Agreement will be unconditional in all respects. If the Purchaser fails to provide any notification to the Vendor that the property does not meet the Purchaser's investment criteria in all respects, then this Agreement will be at an end and all monies paid will be refunded, but without interest or deduction, and no party will have any claim upon the other. The Vendors shall promptly and diligently provide to the Purchaser all material reasonable [sic] requested of them as may be relevant to the satisfaction of this clause. Time shall be of the essence in respect of all things pertaining to this clause.[6] Under this clause, the contract having been signed on 14 July 2008, confirmation that the property met the purchaser's investment criteria was required by 4 p.m., 24 July 2008, time being of the essence. [7] On 16 July 2008, the vendor's solicitor, Mr Gould, wrote to the purchaser's solicitors claiming that no contract existed on the grounds that the person who signed as vendor did not have the necessary authority. [8] This was disputed by the purchaser's solicitor, Mr Nidd, and an exchange of correspondence ensued.[9] In letters dated 17 and 18 July 2008, the purchaser's solicitor urgently requested full details of the leases and outgoings in respect of the property. [10] On 23 July 2008, the vendor resiled from its denial of the existence of any contract. Mr Gould sent Mr Nidd the following email:Mike as discussed: 1. Our clients are prepared to proceed with the sale on the suggested following basis: a. We will proceed to provide you with the leases and related documentation by the close of business on Friday b. that the conditional date be extended to 30 July 2008 c. that prior to making the agreement unconditional you nominate the eventual purchaser which is to be GST registered and the agreement be novated on the understanding in doing so it will replace the existing agreement. We await your confirmation[11] Approximately 20 minutes later, Mr Gould dispatched another email attaching the leases and stating:Michael herewith Leases as discussed lease renewals have apparently been done by letter and we understand rent reviews for this year may have been waived[12] There was then no further communication until Friday 25 July at 9.05 a.m., when Mr Gould purported to avoid the contract on the grounds that notice of satisfaction of clause 15 had not been received by 4pm on 24 July, and neither had confirmation of the "proposed varied terms proffered in our email". [13] The purchaser's solicitors responded the same day, disputing avoidance and stating that the email of 23 July had extended the date for confirmation until 30 July. [14] On 30 July, Mr Nidd wrote confirming the contract as unconditional. [15] Since then, as well as lodging a caveat, the purchaser has filed proceedings for specific performance. The vendor has filed a statement of defence.[16] An interim order that the caveat not lapse pending the determination of this application was made by consent on 7 October 2008.The competing arguments The vendor defendant[17] Counsel for the vendor, Mr Matthews, submitted that Mr Gould's email of 23 July was an offer to vary the contract. It was an offer that was never accepted. Accordingly, the existing contract, with its deadline for confirmation by 4 p.m., 24 July 2008, remained in full force. The deadline of 4 p.m., 24 July having come and gone without any confirmation from the purchaser, the agreement automatically and immediately came to an end. The purported confirmation on 30 July was thus too late, and of no effect. [18] Mr Matthews accepted for the purposes of the s145 application that the vendor may have been in breach of its obligations to provide the necessary information about the tenancies in a timely fashion. However, he submitted the vendor's default did not relieve the purchaser of its obligations under clause 15. What the purchaser should have done was confirm under protest and without prejudice to any remedy it might have in respect of the vendor's failure. In support of this submission, Mr Matthews referred me to the Australian decision of Kelly v Desnoe [1985] 2 Qd R 477. [19] Mr Matthews also relied on the fact the purchaser had confirmed on 30 July without protest, despite being in possession of no additional material other than that received on 23 July.The purchaser plaintiff[20] Counsel for the purchaser, Mr Withnall, submitted the email of 23 July was not a variation. It did not purport to effect any structural change to the contract but was only concerned with an extension of time.[21] Secondly, that in any event, even if it was a variation, that fact would not entitle the vendor to insist on the time limits in clause 15, because that would be to allow the vendor to take advantage of its own wrong. By its conduct, the vendor had waived compliance with the time limit. [22] Mr Withnall pointed out that the vendor did not provide copies of the leases until 23 July, and despite Mr Gould representing that it would forward other "related documentation", had still not done so as at the date it purported to avoid the contract on 25 July at 9.05 a.m. [23] In Mr Withnall's submissions, the vendor was in default. Its default resulted in the purchaser being unable to even begin the due diligence process until the morning of 23 July, and the delay continued up until, and after, the vendor's purported avoidance of the contract.Legal principles to be applied in determining application[24] The principles to apply when considering an application under s145 are well settled. [25] The onus is on the plaintiff to satisfy me it has a reasonably arguable case for the interest claimed:The caveator seeks to clog or fetter the proprietary interest of another as a matter of principle. It seems right that he must justify the continued existence of his caveat. He will do that if he can show he has a reasonably arguable case for the interest he claims. The issue is the same as that which arises under s145.Sims v Lowe [1988] 1 NZLR 656 at 660 per Somers J.[26] Even if a caveatable interest is established, the Court still has a residual discretion not to grant the order. The discretion is to be exercised judicially. An order will normally be made in the absence of compelling reasons not to do so.The Court's findings[27] Based on the information provided to the Court, I am of the view that the case for the applicant is a strong one. It is clearly arguable. [28] I accept, as submitted by Mr Matthews, that the mere fact one party is in breach does not, of itself, mean the other is exonerated from complying with time limits for fulfilment of conditions. [29] However, the Australian case which is cited as authority for that proposition, concerned an unrelated breach. That is to say, it was not a situation where the breach related to the condition at issue. In this case however, it is reasonably arguable that the vendor's breach did directly prevent the purchaser from fulfilling its obligations. [30] Mr Gould's email is undoubtedly capable of being construed as amounting to a waiver of time. I also accept this is a case where the principles of estoppel could be brought into play to argue that the vendor is estopped from asserting the condition was never satisfied in time. To similar effect is the principle that a party should not be able to take advantage of its own wrong. [31] In my view, it would be an extraordinary result if a party already in default could represent it will be sending more information, yet never send it and then suddenly claim that the contract has come to an end. The missing information did bear on the purchaser's ability to satisfy itself in terms of clause 15. It is true that the confirmation on 30 July came without the purchaser having received the missing information, but the 30 July letter confirming the contract expressly states that it is based on the information received. That the purchaser was still seeking the additional information after 23 July is evidenced in a letter Mr Nidd wrote on 25 July 2008.Outcome of application.[32] I find it is reasonably arguable that the agreement did not come to an end, and that the vendor was not entitled to avoid the contract.[33] At this stage, the Court is not yet of course in full possession of all the facts. However, based on the information that was before me, the purchaser's case would seem to be a strong one. Certainly, there is no reason the Court would exercise its residual discretion against the applicant. [34] The interim order is to remain in force. [35] A statement of claim and statement of defence have already been filed. [36] There will be the following timetabling orders: i) Discovery to be undertaken and completed on or before 19 December 2008. ii) Inspection of documents to be undertaken by 30 January 2009. iii) Thereafter, the Registrar is to convene a conference call with the Associate Judge to ascertain whether there are any outstanding interlocutories, and to allocate a fixture date. Estimate of hearing time is two days. [37] The costs of the application are fixed on a 2B basis, together with disbursements, and are to be payable in the cause.Solicitors: Farry & Co, Christchurch White Fox & Jones, Christchurch