Armstrong v Mitchell
[2018] NZHC 3431
•20 December 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-3005
[2018] NZHC 3431
BETWEEN ANTHONY JOHN RICHARD ARMSTRONG
AppellantAND
MICHAEL WILLIAM MITCHELL and EMMA MARIE MITCHELL
Respondents
Hearing: 18 July 2018 with further submissions on 16 and 29 October 2018 Appearances:
K D Puddle and P Shanahan-Pinker for the Appellant H K Gladwell for the Respondents
Judgment:
20 December 2018
JUDGMENT OF PALMER J
(Reissued after being recalled)
This judgment is delivered by me on 20 December 2018 at 2.00 pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Solicitors:
K3 Legal Limited, Auckland Insight Legal Limited, Auckland
ARMSTRONG v MITCHELL [2018] NZHC 3431 [20 December 2018]
Summary
[1] In 2017, Mr Michael Mitchell and Mrs Emma Mitchell bought a property in Mangawhai, Northland, from Mr Anthony Armstrong. Before settlement, they discovered two bays of the four-car garage, a water-tank and a fence may encroach onto a neighbour’s property. They sought compensation and $25,000 was withheld at settlement. They subsequently sued for pre-contractual misrepresentation and Mr Armstrong counterclaimed for the $25,000. Mr Armstrong sought summary judgment on the basis the Mitchells elected not to requisition the defect in title and are deemed to have accepted title under the standard form sale and purchase agreement (the Agreement). He was unsuccessful in the District Court and appealed.
[2] I consider it is arguable that the Mitchells objected to a defect in title under the Agreement and that, irrespective of that, the Mitchells can pursue their claim for pre- contractual misrepresentation in any case. The case should be examined in the full factual context of evidence at trial. I am not satisfied the Mitchells’ claims cannot succeed or that Mr Armstrong’s counterclaim must succeed. I decline the appeal.
What happened?
Negotiation for sale and purchase
[3] Mr Armstrong, a builder, bought a two-acre property at 56 Atkin Road, Mangawhai, in 2013. He bought it when it was being subdivided and without surveying its boundaries. It had a house and four-car garage on it and a concrete water tank used for garden irrigation. Mr Armstrong replaced a wire fence, on what he says he thought was the boundary, with a wooden fence.
[4] In October 2016, Mr Armstrong listed the property for sale on TradeMe. The description included the four-car garage. Mr and Mrs Mitchell inquired about the listing through text exchanges. They viewed the property, by themselves. The garage was attractive to them as Mr Mitchell is a mechanic. By 16 December 2017, by text exchange, the Mitchells had agreed they would make a formal offer at $585,000.
[5] Over December 2017 and January 2018, there were continued texts. Mr Armstrong’s lawyers prepared a draft sale and purchase agreement in the ninth edition 2012 (5) of the Real Estate Institute of New Zealand (REINZ) Auckland District Law Society (ADLS) standard form contract. The Mitchells’ lawyers amended it. The purchase price was to be $585,000 with settlement on 10 March 2017 or earlier by agreement. Settlement was subsequently agreed to be 27 February 2017.
The Agreement
[6] On Friday 20 January 2017, the parties signed the Agreement. It was declared unconditional on 31 January 2017. The Agreement includes cl 6, governing titles, boundaries and requisitions, and cl 8, governing disputes, as reproduced in the annex to this judgment which, in particular:
(a)deem the purchaser to have “accepted the vendor’s title except as to objections or requisitions which the purchaser is entitled to make” in respect of which notice is given by the tenth working day after the date of the agreement (cl 6.2);1
(b)prevents the purchaser from cancelling the Agreement for “error, omission or misdescription” except as provided by s 7 of the Contractual Remedies Act 1979 (cl 6.4) but provides compensation may be required if correctly claimed before settlement; and
(c)provides an experienced property lawyer appointed by the President of the New Zealand Law Society must determine an interim amount to be deducted on settlement until the amount of disputed compensation is determined, if the parties cannot agree (cl 8.4(3)).
[7]Clause 1.3 of the Agreement provides:
1.3Notices
1 In cl 1.1(32) “working day” is defined to include provincial holidays. In Northland, that included 30 January 2017.
The following apply to all notices between the parties relevant to this agreement, whether authorised by this agreement or by the general law:
(1)All notices must be served in writing.
(2)Any notice under section 28 of the Property Law Act 2007, where the purchaser is in possession of the property, must be served in accordance with section 353 of that Act.
(3)All other notices, unless otherwise required by the Property Law Act 2007, must be served by one of the following means:
(a)on the party as authorised by sections 354 to 361 of the Property Law Act 2007, or
(b)on the party or on the party’s lawyer:
(i)by personal delivery; or
(ii)by posting by ordinary mail;
(iii)by facsimile; or
(iv)by email; or
(v)in the case of the party’s lawyer only, by sending by document exchange or, if both parties’ lawyers have agreed to subscribe to the same secure web document exchange for this agreement, by secure web document exchange.
(4)In respect of the means of service specified in subclause 1.3(3)(b), a notice is deemed to have been served:
(a)in the case of personal delivery, when received by the party or at the lawyer’s office;
(b)in the case of posting by ordinary mail, on the third working day following the date of posting to the address for service notified in writing by the party or to the postal address of the lawyer’s office;
(c)in the case of facsimile transmission, when sent to the facsimile number notified in writing by the party or to the facsimile number of the lawyer’s office;
(d)in the case of email, when acknowledged by the party or by the lawyer orally or by return email or otherwise in writing, except that return emails generated automatically shall not constitute an acknowledgement;
(e)in the case of sending by document exchange, on the second working day following the date of sending to the document exchange number of the lawyer’s office;
(f)in the case of sending by secure web document exchange, at the time when in the ordinary course of operation of that secure web document exchange, a notice posted by one party is accessible for viewing or downloading by the other party.
…
(6) In accordance with section 20(1) of the Electronic Transactions Act 2002, the parties agree that any notice or document that must be given in writing by one party to the other may be given in electronic form and by means of an electronic communication, subject to the rules regarding service set out above.
Dispute over encroachment
[8] After the Agreement became unconditional, Mr Armstrong allowed the Mitchells to move some things into the property before settlement. 2 February 2017 was eight working days after the Agreement was signed. On that day, while the Mitchells were visiting the property, a neighbour told them part of the garage, the old water tank and a line of trees encroached onto his property. They immediately raised this with Mr Armstrong by text, which led to this text exchange that day (with smiley faces in the originals):
Mrs Mitchell: Hi, can you please call me asap. The neighbour has
told us that part of the garage, the water tank and the line of trees along the drive are not ours…
My email is [address] the neighbour reckons he could park in the garage if he wanted to
Mr Armstrong: He definitely can not do that the buildings are as I
brought the place well b4 he moved in that’s ridiculous it’s just the rear corner anyways and it’s considered an existing building in those situations so nothing [evidence of text cuts off]
MrsMitchell: Ok cool well just send me any info you have, really not up for another headache!
He said that the fence shouldn’t be there and we will have to take it down when he wants to get his 40ft container out…
Mr Armstrong The fence is on the shared driveway and that’s all that
idiot can complain about he has no right saying he could park in the garage
Mrs Mitchell: Ok will get my lawyer to have a look and might have
to get a surveyor out but i know that aint cheap
Mr Armstrong: Yeah that’s fine you don’t need a survivor [sic] as you
can get the info from the council and it show the a little bit of the garage onto the shared driveway but like I said I bought the place as is and it’s an existing building so nothing can be done about it
Just the fence he can have an issue with but if you talk to him he would let you fence up there anyways ???
I was going to build that fence all the way up to the letter box and he knew that and had no issue with it
??? Very strange he is being like that
Mrs Mitchell: Do you know if that row of trees is on your property
or not?
He said to my hubby it shouldnt be there… just worried if he did say it was ok then new owners brought it they might want it taken down etc and by the sounds of it he wants it down to get his container out
Mr Armstrong: I can take it down if you want then he can’t say
anything
Those trees sit right on boundary line I think
Mrs Mitchell Ill see what my lawyer says tomorrow, i just want to
get it fenced so my dogs dont get out & harass stock etc but if we put the fence back then surely it would block the garage!
Mr Armstrong: Yeah that’s fine
[9] That day Mr Armstrong also emailed the Mitchells a diagram by the neighbour showing the encroachment. Because he has not had a survey done, he does not know if it is correct. He agrees this proceeding can proceed on the assumption there is an encroachment.
[10] The next morning, on 3 February 2018, Mrs Mitchell contacted Mr Armstrong by text again. She said she had spoken to the Council and her lawyer, who would be contacting Mr Armstrong’s lawyer about the situation. She said:
[…] if we had [known about the boundary/garage situation] there is a high chance we would not have purchased the property as my husband is a mechanic & the 4 car garage was a big factor, to now find out that half of it is not even on the property and there is issues regarding the fencing has been a real let down. I hope this can all be sorted out fairly :)
[11] Mr Armstrong asked by text in response if they would rather not purchase the place anymore, to which Mrs Mitchell said “no we have to” as their home was now sold and they still liked it, but that they wouldn’t have offered what they had, as putting up a new garage would “cost us at least 20g worst case scenario”.
[12] The Mitchells did not provide a notice of requisition under cl 6.2 of the Agreement. They say their lawyers’ advice was they did not need to. Mr Armstrong says, if they had, he would have cancelled the Agreement and, as a builder, could have resolved the encroachment issue at minimal expense before selling the property.
[13] On 10 February 2017, the Mitchells’ lawyer sent a letter seeking a reduction in purchase price to take account of the cost of remedying the encroachment, though that communication is not in evidence. By that time, the Mitchells had sold their previous house. Mr Armstrong says this and other communications are privileged because they were marked “without prejudice”. I do not need to determine that point.
[14] The Mitchells applied under cl 8.4 for appointment of a third party to determine the quantity of a deduction to be retained from settlement. On 24 February 2017, the President of the New Zealand Law Society appointed Mr Ian Haynes to do so. Mr Armstrong’s lawyers challenged Mr Haynes’ jurisdiction on the basis there was no valid claim under cl 6.4 of the Agreement.
[15] On 28 February 2017, Mr Ian Haynes found the encroachment was an error that related to the nature of the property, rather than the title, and came within cl 6.4 of the Agreement. He directed $25,000 be deducted on settlement, noting the Mitchells were making a claim for compensation under cl 6.4. Settlement occurred that day, with the $25,000 being withheld. It is still withheld.
Proceedings
[16] In May 2017, the Mitchells commenced proceedings in the District Court against Mr Armstrong, seeking $88,000 for remedying the encroachment by moving the garage and water tank, and general damages, on the basis of misrepresentation under the Contractual Remedies Act 1979. They no longer pursue a claim under cl 6.4 of the Agreement. Mr Armstrong counterclaimed for the $25,000, interest and indemnity costs.
[17] In July 2017, Mr Armstrong applied for summary judgment as defendant to the Mitchells’ claim and as plaintiff in his counterclaim. His position was any encroachment is a defect in title under cl 6.2 which the Mitchells are deemed to have accepted in the absence of service a notice of objection or requisition.
[18] In an oral judgment on 20 November 2017, Judge N R Dawson in the District Court declined Mr Armstrong’s application for summary judgment.2 Judge Dawson considered Mr Armstrong had not distinguished King v Wilkinson, where a claim based on misrepresentation of a boundary succeeded.3 He had not discharged the onus on him to prove on the balance of probabilities the Mitchells cannot succeed.4 Mr Armstrong appeals to the High Court.
[19] I issued judgment in this proceeding on 7 September 2018.5 But on 25 September 2018, in response to an application by Mr Armstrong, I recalled the judgment in order to consider further submissions on the issue of whether a notice of objection can be served by text and whether notice was given here.
Relevant law of summary judgment, misrepresentation and requisition
Summary judgment principles
[20] There is no dispute over the legal principles governing summary judgment applied by the District Court. Under r 12.2 of the District Court Rules 2014:
2 Mitchell v Armstrong [2017] NZDC 29739.
3 At [9] citing King v Wilkinson HC Christchurch, CP 134/92, 1 June 1994.
4 At [9].
5 Armstrong v Mitchell [2018] NZHC 2353.
12.2 Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[21] Paraphrasing the Court of Appeal’s summary of the legal principles in Krukziener v Hanover Finance Ltd:6
(a)The question is whether there is no real question to be tried. The court must be left without any real doubt or uncertainty.7
(b)The onus is on the applicant but where its evidence is sufficient, the respondent will have to respond to defeat the application.8
(c)The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence inherently lacking in credibility, for example evidence that is inconsistent with undisputed contemporary documents or other statements by the same deponent or that is inherently improbable.9
(d)The court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it.10
[22] Issues of law can be determined on an application for summary judgment, even when difficult.11 The question for me on appeal is whether the District Court’s decision was wrong.12
6 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]; Deng v Ye [2018] NZHC 391 at [29].
7 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
8 MacLean v Stewart (1997) 11 PRNZ 66 (CA) at 69.
9 Eng Mee Young v Letchumanan [1980] AC 331 (PC) at 341.
10 Bilbie Dymock CorpLtd v Patel (1987) 1 PRNZ 84 (CA).
11 International Ore & Fertilizer Corp v East Coast Fertiliser Co Ltd [1987] 1 NZLR 9 (CA) at 16.
12 Austin, Nichols & Co Ltd v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
Pre-contractual misrepresentation
[23] Under the Contract and Commercial Law Act 2017 (C&CL Act), which consolidates the predecessor Contractual Remedies Act 1979:
(a)liability for pre-contractual misrepresentation requires there to be a misrepresentation which induced the plaintiff to enter the contract (s 35);
(b)the parties to a contract can expressly provide for a remedy for misrepresentation or breach of contract which overrides that (s 34);
(c)a court is not precluded from determining reliance on a pre-contractual representation by a contractual provision unless it considers it is fair and reasonable that the provision should be conclusive (s 50).
Objections and requisitions regarding defects in title
[24] A person who sells a property impliedly undertakes they can provide good title to it.13 If they do not, at common law, a purchaser is able to object to a defect in the title, which preserves the purchaser’s remedies for it.14 Alternatively, such a purchaser can requisition the defect in title; that is, request the defect be remedied. Importantly, the Court of Appeal found in Holmes v Booth a purchaser does not need to use a particular form of words explicitly to object or requisition; they may be construed to have done so by their words and conduct.15 If that is not explicit enough in the Court’s judgment, I consider it is the logical implication of their approach.
[25] Under s 37 of the C&CL Act, a purchaser of a property with a defect in title can cancel the sale and purchase agreement if the statutory pre-conditions are satisfied. However, the vendor cannot. If a purchaser objects to, or requisitions, a defect in title without cancelling the agreement the vendor will be required to perform the agreement
13 Hayes v Ross (No 2) [1919] NZLR 777 (SC) at 780; Lawson v Tupe (2009) 11 NZCPR 119 (HC) at [42]–[43].
14 DW McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) [McMorland] at 380–381.
15 Holmes v Booth (1993) 2 NZ ConvC 191,633 (CA) at 191,636 per Casey J, at 191,642 per Gault J and at 191,646 per Tipping J.
and either compensate the purchaser for the defect or remedy it. Since its inception, the REINZ ADLS sale and purchase standard form contract has softened the impact of this legal situation on a vendor by:16
(a)imposing a time limit on a purchaser to object or requisition a defect in title; and
(b)empowering the vendor to cancel the Agreement if the vendor is unable or unwilling to remove or comply with the objection or requisition.
[26] McMorland on Sale of Land states “[t]he purpose of the requisitions clause was to prevent the purchaser from being able to acquire the property at a lesser figure than the purchase price by compelling the vendor to pay compensation for the defect in the title”.17 The vendor cannot rely on that clause if they entered the agreement recklessly or in bad faith.18
[27] Since its sixth edition in 1995, the REINZ ADLS contract has also empowered the purchaser to cancel the contract, even though the purchaser had contractual remedies anyway, in order to deal with complications with cross-leases.19
[28] There are defects in title and there are defects in title. A defect in title that is material and substantial, going “to the root” of the title, entitled the purchaser, under the common law rule in Flight v Booth, to cancel the contract independently of the requisition clause for a defect so extreme the purchaser might never have entered the contract at all.20 A defect that is a “misdescription”, which is comparatively trivial in the circumstances, gives rise only to a right of compensation, rather than a right of cancellation.21 This is reflected in cl 6.4 of the version of the contract used here which
16 This is reflected in cls 6.2(1) and 6.2(3) of the 2012 (5) version of the contract used here.
17 McMorland, above n 14 at 406.
18 Peter Blanchard “The Requisitions Clause” (1968) 1 AULR 1 at 11, citing Nelthorpe v Holgate (1844) 1 Coll 203, (1844) 63 ER 384; Sivewright v Casey (1949) 49 SR (NSW) 294; Orchard v Taylor (1909) 10 SR (NSW) 93; Re Jackson and Haden’s Contract [1906] 1 Ch 412; Re Des Reaux and Setchfield’s Contract [1926] 1 Ch 178 and Baines v Tweddle [1959] 1 Ch 679.
19 At 406. This is reflected in 6.2(3)(c) of the 2012 (5) version of the contract.
20 Flight v Booth (1834) 131 ER 1160 at 1162–1163
21 Gardiner v Orchard (1910) 10 CLR 722 (HCA). See Peter Blanchard “The Requisitions Clause” (1968) 1 AULR 1 at 6 and JF Burrows “Rescission for Defect in Title Under the Torrens System” (1971) 4 Adel L Rev 130 at 131–133.
provides an error, omission or misdescription may entitle the purchaser to compensation, but not to cancel the contract except under the right to cancel the contract under (what is now) ss 36 and 37 the C&CL Act.
[29] So, in Property Ventures Investments Ltd v Regalwood Holdings Ltd, the Supreme Court said: 22
A court will generally order a land sale contract to be performed notwithstanding some deficiency in the property as compared with the way it was described in the contract, for example when the area able to be conveyed is less than stated in the contract. That is subject to two important qualifications. First, such an order will not be made against an unwilling purchaser if the deficiency in the description of the property is so substantial that the purchaser will receive a property entirely different from that contracted for. Secondly, the purchaser is entitled to be compensated by the vendor for the deficiency by way of an abatement of the price otherwise due on settlement.
[30] There is potential overlap between the availability of cancellation for objections and requisitions under cl 6.2 and the availability of compensation but not (unless the C&CL Act applies) cancellation under cl 6.4, because misdescriptions may also disclose defects in title. If such a defect is requisitionable, the purchaser must object or requisition within the set period to avoid losing the right to compensation by dint of cl 6.2. 23
Electronic service
[31] Clause 1.3(6) of the standard form sale and purchase agreement quoted above refers to s 20 of the Electronic Transactions Act 2002. That Act has now been replaced by pt 4 of the C&CL Act, which has the purpose, according to s 207:
… to facilitate the use of electronic technology by—
(a)reducing uncertainty regarding—
(i)the legal effect of information that is in electronic form or that is communicated by electronic means; and
22 Property Ventures Investments Ltd v Regalwood Holdings Ltd [2010] NZSC 47, [2010] 3 NZLR 231 at [55] (footnotes omitted).
23 McMorland, above n 14, at 331.
(ii)the time and place of dispatch and receipt of electronic communications; and
(b)providing that certain paper-based legal requirements may be met by using electronic technology that is functionally equivalent to those legal requirements.
[32]Section 224, which replaces s 20 of the previous Act, states, relevantly:
224 Legal requirement to give information in writing
(1)A legal requirement to give information in writing is met by giving the information in electronic form, whether by means of an electronic communication or otherwise, if—
(a)the information is readily accessible so as to be usable for subsequent reference; and
(b)the person to whom the information is required to be given consents to the information being given in electronic form and by means of an electronic communication, if applicable.
…
(3)Subsection (1) applies to a legal requirement to give information even if that information is required to be given in a specified manner, for example, by filing, sending, serving, delivering, lodging, or posting that information.
(4)A legal requirement to give information includes, for example,—
…
(c)giving, sending, or serving a notification:
…
(i) lodging an objection:
…
Should I grant summary judgment to Mr Armstrong?
Submissions
[33] Mr Puddle, for Mr Armstrong, relies on Li v Forde for the proposition an encroachment of an improvement onto a neighbouring property is a defect in title
which can be requisitioned under cl 6.2.24 He submits the Mitchells did not requisition and so must be deemed to have accepted Mr Armstrong’s title under cl 6.2(1). He submits, under s 35, ss 35 to 49 of the C&CL Act must be read subject to the Agreement. He distinguishes King v Wilkinson on the basis it did not concern an encroachment. On the authority of McMorland’s commentary on the effect of cl 6.2,25 he submits the Mitchells have no ability to claim compensation for a defect in title where the defect has been accepted. Due to their failure to requisition, Mr Armstrong was denied his right to cancel the contract and the Mitchells are asking the Court to enforce an agreement neither party agreed to. He therefore submits the District Court erred in declining Mr Armstrong’s application for summary judgment.
[34] Mr Puddle also submits a notice of objection cannot be served by text under the standard terms of the Agreement here. He submits s 224(b) requires a person to consent, the consent in cl 1.3(6) is subject to the rules regarding service set out in cl
1.3 and cl 1.3(3) is an exhaustive list of means of service which does not include service by text. He also submits the texts here were not sufficient to comprise notices under cl 6.2 because of their terms and context. And he submits that, in any case, the Mitchells do not argue notice of objection or requisition was given here,
[35] Mr Gladwell, for the Mitchells, submits a text message is an email message and can therefore be a mode of service under cl 1.3(4)(d) of the Agreement. He submits the Mitchell’s case is they did not give notice under the requisition clause but that is irrelevant to their claim for pre-contractual misrepresentation under s 35 of the C&CL Act. On the authority of McMorland he submits, where a purchaser has a right to cancel for a defect going to the root of the title, the vendor has no right to insist on recourse to the requisitions clause. For the purposes of the misrepresentation claim, he submits the Mitchells did not accept the defect in title but objected to it and maintained their objection. He submits they did not waive their rights in respect of misrepresentation under the C&CL Act, the Agreement does not offer a remedy for misrepresentation and they claimed compensation prior to settlement. He submits King v Wilkinson is on point and it will frequently be the case a defect in title will not be apparent until after settlement. He submits cl 6.2 applies to matters registered
24 Li v Forde [2017] NZCA 426.
25 McMorland, above n 14, at [9.07].
against the title which are readily discoverable by search. He submits the Mitchells are simply asking to receive what Mr Armstrong represented he was selling them.
Decision
[36] The parties have agreed to proceed for the purposes of this application on the assumption the garage did encroach on the neighbouring property. An encroachment is a requisitionable defect in title.26 On the basis of the evidence before me, which has not been tested at trial, there seems to be no doubt the parties agreed to sell and purchase the garage as part of the property. But Mr Armstrong could not transfer title to all of the property he contracted to sell, because he did not have title to part of it. The defect did not have to be on the title, as made clear by O’Regan J in Walton Mountain Ltd v Apple New Zealand Ltd.27 The defect did not go to the root of the title. But it was more than trivial. The garage was an important reason for the Mitchells’ offer.
[37] Although the defect was not readily discoverable by search, it was discovered in fact by the Mitchells on 2 February 2018. The Mitchells did not requisition the defect and did not cancel the Agreement. But, on the basis of the facts before me, I consider there is an argument that, by their words and conduct, they objected to the defect in title within the period specified in cl 6.2(1). Their immediate and continuing texts on 2 and 3 February 2017 may be capable of constituting an objection to the defect in title. Mr Puddle’s arguments that a notice of objection cannot be served by text under cl 1.3 have force. There are counterarguments, including:
(a)Mr Gladwell’s submission that a text message is an email;
(b)the argument that the purported qualification on the consent to information being given in electronic form in cl 1.3(6) does not limit the effect of s 224(1) of the C&CL Act, purposively interpreted; and
26 Li v Forde, above n 24.
27 Walton Mountain Ltd v Apple New Zealand Ltd (2004) 5 NZ ConvC 193, 853.
(c)the argument Mr Armstrong, through his course of dealing with the Mitchells, effectively consented by his conduct to information being given in electronic form under s 224(1)(b).
[38] Mr Puddle’s submission that, on the facts, the texts here were not sufficient to comprise notices under cl 6.2, because of their terms and context, also has force. But I consider that submission, like those immediately above, needs to be considered in the context of the evidence tested at trial, rather than on a summary judgment application. I am not satisfied the Mitchells’ side of these arguments, if they are pursued, cannot succeed.
[39] If a notice of objection is found to have been given, there may be further argument on the facts about whether Mr Armstrong notified the Mitchells of his inability to remove or comply with an objection under cl 6.2(3)(b) by his words and conduct. If he did, the Mitchells appear to have maintained, rather than waived, their objection. If he did not, under cl 6.2(3)(b), Mr Armstrong would be deemed to have accepted the Mitchells’ objection. Either way, the Mitchells would be entitled to pursue their remedies because, as affirmed by cl 6.4, they would not be deemed to have accepted title under cl 6.2. The interim amount of compensation of $25,000 was deducted accordingly under cl 8.4, at the direction of Mr Haynes. It is not clear to me that Mr Armstrong’s counterclaim for that must necessarily succeed.
[40] Finally, I also consider there is force in Mr Gladwell’s submission that, irrespective of whether the Mitchells objected to title under the Agreement, they are able to pursue their claim for pre-contractual misrepresentation and the vendor has no right to insist on recourse to the requisitions clause. Again, while that may theoretically be able to be treated as an abstract legal issue, I consider it should be examined in the full factual context of evidence at trial. I am not satisfied that the Mitchells’ claim in this respect cannot succeed.
[41] Accordingly, I am not satisfied, under r 12.2(2), that none of the Mitchells’ causes of action can succeed or that they have no defence to Mr Armstrong’s counterclaim.
Costs
[42] I have considered the memoranda filed by the parties on costs in respect of the recalled judgment, in light of this judgment. I consider costs should be awarded to the Mitchells on a 2B basis for the appeal, as well as reasonable disbursements, and costs should lie where they fell in respect of the recall application.
[43] Given the amounts involved, no doubt counsel will discuss settlement of this case. Counsel should also be able to sort out between themselves what the amount of costs should reasonably be. If they cannot, I grant leave for Mr Armstrong to file a memorandum of no more than five pages by 5.00 pm Monday 4 February 2019 and the Mitchells to file a memorandum in response by 5.00 pm Monday 11 February 2019. Because I consider counsel should be able to sort costs out between themselves, I will consider granting further costs against the party who loses from filing memoranda on costs.
Result
[44]I decline the appeal.
Palmer J
Annex: Clauses 6 and 8 of REINZ ADLS Standard Form Ninth Edition 2012 (5)
6.0Title, boundaries and requisitions
6.1The vendor shall not be bound to point out the boundaries of the property except that on the sale of a vacant residential lot which is not limited as to parcels the vendor shall ensure that all boundary markers required by the Cadastral Survey Act 2002 and any related rules and regulations to identify the boundaries of the property are present in their correct positions at the settlement date.
6.2(1) The purchaser is deemed to have accepted the vendor’s title except as to objections or requisitions which the purchaser is entitled to make and notice of which the purchaser serves on the vendor on or before the earlier of:
(a)the tenth working day after the date of this agreement; or
(b)the settlement date.
(2)Where the transfer of the property is to be registered against a new title yet to be issued, the purchaser is deemed to have accepted the title except as to such objections or requisitions which the purchaser is entitled to make and notice of which the purchaser serves on the vendor on or before the fifth working day following the date the vendor has given the purchaser notice that the title has been issued and a search copy of it as defined in section 172A of the Land Transfer Act 1952 is obtainable.
(3)If the vendor is unable or unwilling to remove or comply with any objection or requisition as to title, notice of which has been served on the vendor by the purchaser, then the following provisions will apply:
(a) the vendor shall notify the purchaser (“a vendor’s notice”) of such inability or unwillingness on or before the fifth working day after the date of service of the purchaser’s notice.
(b) if the vendor does not give a vendor’s notice the vendor shall be deemed to have accepted the objection or requisition and it shall be a requirement of settlement that such objection or requisition shall be complied with before settlement.
(c) if the purchaser does not on or before the fifth working day after service of a vendor’s notice notify the vendor that the purchaser waives the objection or requisition, either the vendor or the purchaser may (notwithstanding any intermediate negotiations) by notice to the other, cancel this agreement.
(4)In the event of cancellation under subclause 6.2(3), the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid under this agreement by the purchaser and neither party shall have any right or claim against the other arising from this agreement or its cancellation. In particular, the purchaser shall not be entitled to any interest or to the expense of investigating the title or to any compensation whatsoever.
6.3(1) If the title to the property being sold is a cross lease or a unit title and there are:
(a)in the case of a cross lease title:
(i)alterations to the external dimensions of any leased structure; or
(ii)buildings or structures not intended for common use which are situated on any part of the land that is not subject to a restricted user covenant;
(b)in the case of a unit title, encroachments out of the principal unit or accessory unit title space (as the case may be):
then the purchaser may requisition the title under subclause 6.2 requiring the vendor:
(c)in the case of a cross lease title, to deposit a new plan depicting the buildings or structures and register a new cross lease or cross leases (as the case may be) and any other ancillary dealings in order to convey good title; or
(d)in the case of a unit title, to deposit an amendment to the unit plan, a redevelopment plan or new unit plan (as the case may be) depicting the principal and/or accessory units and register such transfers and any other ancillary dealings in order to convey good title.
(2)The words “alterations to the external dimensions of any leased structure” shall only mean alterations which are attached to the leased structure and enclosed.
6.4Except as provided by section 7 of the Contractual Remedies Act 1979, no error, omission or misdescription of the property or the title shall enable the purchaser to cancel this agreement but compensation, if claimed by notice before settlement in accordance with subclause
8.1 but not otherwise, shall be made or given as the case may require.
6.5The vendor shall not be liable to pay for or contribute towards the expense of erection or maintenance of any fence between the property and any contiguous land of the vendor but this proviso shall not enure for the benefit of any subsequent purchaser of the contiguous land;
and the vendor shall be entitled to require the inclusion of a fencing covenant to this effect in any transfer of the property.
[…]
8.0Claims for compensation
8.1If the purchaser claims a right to compensation either under subclause
6.4 or for an equitable set-off:
(1)the purchaser must serve notice of the claim on the vendor on or before the last working day prior to settlement; and
(2)the notice must:
(a)in the case of a claim for compensation under subclause 6.4, state the particular error, omission or misdescription of the property or title in respect of which compensation is claimed;
(b)in the case of a claim to an equitable set-off, state the particular matters in respect of which compensation is claimed;
(c)comprise a genuine pre-estimate of the loss suffered by the purchaser; and
(d)be particularised and quantified to the extent reasonably possible at the date of the notice.
8.2For the purposes of subclause 8.1(1), “settlement” means the date for settlement fixed by this agreement unless, by reason of the conduct or omission of the vendor, the purchaser is unable to give notice by that date, in which case notice may be given on or before the last working day prior to the date for settlement fixed by a valid settlement notice served by either party pursuant to subclause 11.1.
8.3If the amount of compensation is agreed, it shall be deducted on settlement.
8.4If the amount of compensation is disputed:
(1)an interim amount shall be deducted on settlement and paid by the purchaser to a stakeholder until the amount of the compensation is determined;
(2)the interim amount must be a reasonable sum having regard to all of the circumstances;
(3)if the parties cannot agree on the interim amount, the interim amount shall be determined by an experienced property lawyer appointed by the parties. The appointee’s costs shall be met equally by the parties. If the parties cannot agree on the appointee, the appointment shall be made on the application of
either party by the president for the time being of the New Zealand Law Society;
(4)the stakeholder shall lodge the interim amount on interest- bearing call deposit with a bank registered under the Reserve Bank of New Zealand Act 1989 in the joint names of the vendor and the purchaser;
(5)the interest earned on the interim amount net of any withholding tax and any bank or legal administration fees and commission charges shall follow the destination of the interim amount;
(6)the amount of compensation determined to be payable shall not be limited by the interim amount; and
(7)if the parties cannot agree on a stakeholder, the interim amount shall be paid to a stakeholder nominated on the application of either party by the president for the time being of the New Zealand Law Society.
8.5The procedures prescribed in subclauses 8.1 to 8.4 shall not prevent either party taking proceedings for the specific performance of the contract.
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