Batchelar Centre Limited v Westpac New Zealand Limited

[2015] NZHC 272

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2014-454-41 [2014] NZHC 272

IN THE MATTER OF

The Fair Trading Act 1986

BETWEEN

BATCHELAR CENTRE LIMITED Plaintiff

AND

WESTPAC NEW ZEALAND LIMITED First Defendant

COAST TO COAST LIMITED Second Defendant

Hearing:	19 September 2014
Counsel:	G Mason for Plaintiff E Gellert for Defendant R J Latton for Second Defendant
Judgment:	25 February 2015

JUDGMENT OF ASSOCIATE JUDGE SMITH

Introduction

[1]      The defendants, Westpac New Zealand Limited (Westpac) and Coast to Coast Ltd (Coast), apply to strike-out the plaintiff’s (BCL’s) claims.  In the alternative, they apply for summary judgment.

Background

[2]      In 2013, Westpac held a first registered mortgage over a commercial property at 33 Broadway Avenue, Palmerston North (the property).  The mortgagor defaulted on its obligations under the mortgage, and Westpac served Property Law Act 1952

notices on it. Those notices expired unremedied on 31 July 2013.

BATCHELAR CENTRE LIMITED v WESTPAC NEW ZEALAND LIMITED [2014] NZHC 272 [25 February

2015]

[3]      Westpac  then  set  about  effecting  a  mortgagee  sale  of  the  property.    On

15 October  2013,  it  appointed  Coast  (which  is  the  Bayleys  Real  Estate  Ltd franchisee in the Manawatu and Hawkes Bay and trades as “Bayleys Real Estate”) as the real estate agent to market and sell the property. The property was marketed for a four to five week period, with an auction scheduled for 12 December 2013.

[4]      Various offers were made to purchase the property before the auction, but none resulted in agreement.  One of the offers was an offer of $750,000 (plus GST) made  by  Mr  Warren  McLaughlin  (a  director  of  BCL).    It  was  withdrawn  on

11 November 2013.

[5]      The property did not sell at the auction.  It was passed in when the bidding reached $400,000.  BCL was the only bidder.  The only other prospective buyer at the  auction  was  a  representative  of  Brian Green  Properties  (Palmerston  North) Limited.  I will refer to that company in this judgment as “Brian Green”.

[6]      Mr Cameron of Coast entered into negotiations with BCL’s directors within minutes  after the auction.    He presented  the  directors,  Mr McLaughlin  and  Mr Charles, with a form of agreement for the sale and purchase of the property at a price of $400,000, being the amount of the highest bid made (by BCL) at the auction.

[7]      The  form  of  agreement  which  Mr  Cameron  gave  Messrs  Charles  and McLaughlin was different from the terms on which the auction had just been conducted.  Specifically, it contained a “better offer” condition which had not been included in the auction terms and conditions.

[8]      The  better  offer  condition  was  contained  in  the  “Special  Conditions  of

Contract”, at clause 8.  It read:

8        BETTER OFFER

8.1If before settlement of this agreement is effected, the Vendor receives a written offer to purchase the Property on terms considered by the Vendor to be no less favourable than those specified in this agreement, the Vendor may by notice in writing to that effect, given to the Purchaser, immediately cancel this agreement.

8.2      If this agreement is cancelled by the Vendor pursuant to this clause 8.0 then:

(a)       the deposit shall be refunded to the Purchaser; (b) this agreement shall be at an end; and

(c)       neither party shall have any claim or further right against the other.

[9]      It appears that neither Mr McLaughlin nor Mr Charles appreciated that the form of agreement contained the better offer condition, although Mr Charles acknowledged in his evidence that he has seen clauses like it before.  He explained that because he and Mr McLaughlin were negotiating with Coast directly after the auction, he did not expect to be seeing any clauses in the documents which were different from the clauses which would have applied if the property had sold at the auction.

[10]     Mr Charles  and  Mr  McLaughlin  went  ahead  and  signed  the  form  of agreement, initialling each page, and left the signed offer with Coast.

[11]     Westpac did not immediately accept BCL’s offer.   It wanted the settlement date brought forward to 9 January 2014.  BCL rejected that counter-offer, saying that it could not settle earlier than 1 April 2014.  Westpac then accepted BCL’s terms, and the agreement was completed on 17 December 2013.

[12]     Mr Charles says that when Westpac completed the agreement with BCL on

17 December 2014, Mr Cameron told him that the contract was then “unconditional in all respects”.

[13]     Although  the  Agreement  required  immediate  payment  of  a  ten per cent deposit, the deposit was not paid until 4 February 2014.

[14]     By late January 2014, the delay in paying the deposit was apparently causing Westpac some concern.   On 30 January 2014, Bayleys’ regional manager, Mr Van Dyk, discussed the matter with Mr Tony Bayley, who had charge of Bayleys’ relationship with Westpac.  Mr Bayley raised the question of whether a better offer might be obtained from another party, and Mr Van Dyk then briefed three Coast agents to see if they could find anyone else who might be interested in the property.

[15]     Coast received a written offer for the purchase of the property from Brian Green.  Mr Wiseman, Westpac’s solicitor, says that this offer was received by Coast on 31 January 2014, and contained a purchase price of $405,000 and a proposed settlement date of 3 March 2014.  Mr Wiseman produced a copy of what is said to be the written offer made by Brian Green.   The document is signed on behalf of the purchaser, and each page contains one set of initials (presumably those of the person who  signed  the  agreement  for  Brian Green).    A  typewritten  purchase  price  of

$400,000 has been crossed out and replaced with a handwritten “$405,000”.

[16]     Mr  Tuck,  a  senior  associate  employed  by Westpac’s  solicitors  who  was involved in the legal aspects of the transaction with Brian Green, provided a reply affidavit confirming Mr Wiseman’s evidence on this point.  Mr Tuck’s evidence is that Westpac received the offer from Brian Green with the typed purchase price of

$400,000 crossed out and replaced with the handwritten purchase price of $405,000. Mr Tuck made some amendments to the form of offer, had it signed by Westpac, and returned it to Coast on 5 February 2014.  The amendments included two apparently minor amendments relating to the vendor’s GST status, and the addition of a special “back-up” clause  making the agreement conditional on Westpac’s agreement with BCL being cancelled by Westpac within three working days of acceptance of the Brian Green agreement.   The clause provided that Westpac would take all steps necessary to cancel the BCL agreement as soon as reasonably possible.

[17]     The  amended  terms  of  agreement,  signed  on  behalf  of  Westpac,  were apparently accepted by Brian Green, and the agreement was formally completed and dated 7 February 2014.

[18]     On  10  February  2014,  Westpac’s  solicitors  wrote  to  BCL’s  solicitors purporting to cancel the Agreement (the cancellation letter).

[19]     The critical words in the cancellation letter were these:

Westpac  has  received  an  offer  on  terms  no  less  favourable  than  those specified in the agreement.  Accordingly, in terms of special condition 8 of the agreement, we hereby give you notice of cancellation of the agreement.

[20]     Coast then returned the deposit to BCL.

[21]     BCL’s  solicitors  acknowledged  receipt  of  the  cancellation  letter  on  12

February  2014.    They  asked  for  written  evidence  that  a  better  offer  had  been received.  A day later, they advised that they were instructed to lodge a caveat over the title to the property, unless more evidence was provided to substantiate Westpac’s claim that it had received an offer which entitled it to cancel under the better offer condition.

[22]     On  14  February  2014,  Westpac’s  solicitors  responded,  stating  that  the Brian Green agreement met the criteria of the better offer condition.  They contended that BCL had no caveatable interest in the property, as BCL’s agreement had been validly cancelled under the better offer condition.

[23]     Brian  Green  and  Westpac  settled  the  transaction  the  same  day,  some seventeen days earlier than the settlement date provided for in their agreement.

[24]     BCL’s solicitors sought confirmation, by way of a solicitor’s undertaking, that the offer received from Brian Green on which Westpac had acted had been made in writing.  Westpac’s solicitors responded the same day, confirming that a written offer had been received, that the offer had been accepted, and that the sale of the property had been settled.

[25]     Mr Charles and Mr McLaughlin were surprised and annoyed by this turn of events. They thought BCL had a binding agreement to buy the property.

[26]     On 17 February 2014, Mr Charles met with Mr Van Dyk to discuss what had occured.  Mr Charles’ evidence is that Mr Van Dyk was unable to provide a response as to why BCL had been kept in the dark about Westpac’s dealings with Brian Green. Mr Van Dyk’s evidence is that Coast was working on the instructions of Westpac, but Mr Charles says that this explanation was never given to him.

[27]     BCL contends that Coast personnel conspired to ensure that BCL would not be the purchaser of the property, keeping quiet about the better offer condition and not giving BCL a chance to make a higher offer itself.   Mr Charles says that the Coast agents who were involved in late January/early February 2014 knew that BCL

would make a better offer than Brian Green if given the chance, but for their own reasons they were determined that BCL would not be given that chance.

[28]     These allegations are denied by Coast.   Mr Cameron says there was  no conspiracy, and that any such behaviour on the part of Coast’s agents would have been unethical, in breach of Coast’s duties to Westpac as vendor and contrary to its own commercial interests.

[29]     BCL refers to a number of matters which it says support its “conspiracy” argument.  First, Mr Charles asked Coast on 5 February 2014 if he could have the keys so that he could look through the property.  The keys were given to him, but Coast asked him to return them later the same day.  Mr Charles says that this seemed off to him at the time, as he considered that BCL had an unconditional contract and the deposit had by then been paid.  There was no suggestion by Coast in the course of the 5 February 2014 interaction that there was any issue with BCL’s contract.

[30]     Secondly,   Mr   McLaughlin   spoke   to   a   staff   member    at   Coast’s Palmerston North office in late January or early February 2014 and asked why there was  no  “sold”  sign  on  the  property.    He  was  given  no  indication  that  BCL’s agreement with Westpac was other than a fully unconditional agreement, or that anything was amiss with the purchase.

[31]     When Mr Charles found out who the purchaser of the property was,  he contacted Mr Brian Green to find out who had been involved in selling the property to Brian Green.  Mr Green declined to say, citing a confidentiality agreement.

[32]     Mr  Charles  asserts  that  he  and  Mr  McLaughlin  were  never  told  by Mr Cameron that the terms of the form of agreement they signed immediately after the auction were different from the terms on which the auction had been conducted. He says that Mr Cameron did not suggest that he and Mr McLaughlin should take legal advice on the post-auction form of agreement, or even that they should read it before they signed.

[33]     That  evidence  is  denied  by Mr  Cameron.    He  says  that  he  told  Messrs McLaughlin and Charles that the post-auction agreement was different, and advised them to read it carefully.  He says that he did not do or say anything that could have caused them to think the two agreements contained the same terms.

[34]     BCL lodged a complaint to the Real Estate Agents’ Authority.  In response, Coast produced notes prepared by Mr Van Dyk and Mr Looney, the Coast agent who had been involved in negotiating the sale of the property to Brian Green.  Mr Looney said in his note that he advised Mr Green about the better offer condition in the BCL agreement, and that “Mr Green then made an offer of his own volition with better terms, so I had the contract typed up on the spot, which Mr Green signed and was forwarded to the vendors”.

[35]     In his affidavit, Mr Van Dyk confirms that he instructed Mr Looney to see if he could find an alternative purchaser for the property.  He confirms that Mr Looney contacted Brian Green, and states that Mr Looney informed Mr Green of the better offer  condition  in  the  BCL agreement  but  not  of  the  price  or  settlement  date. Mr Looney has not himself provided an affidavit.

[36]     Mr Cameron was not involved in the negotiations with Brian Green in late January and early February 2014; he was absent from work on sick leave at that time.

[37]     On 3 April 2014, BCL filed this proceeding.   Against Westpac, it alleges breach of contract, misleading or deceptive conduct in breach of the Fair Trading Act

1986 (Fair Trading Act), and breach of an equitable duty of good faith.  The claims against Coast are made under the Fair Trading Act, relying on the same alleged breaches as are pleaded against Westpac.

[38]     Westpac and Coast now apply for summary judgment.   They contend that they have complete defences to all of BCL’s claims.   Alternatively, they ask that BCL’s claims be struck out as disclosing no reasonably arguable cause of action.

Defendants’ applications for summary judgment – legal principles

[39]     Under r 12.2(2) of the High  Court Rules, the Court may give  summary 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.

[40]     The Court of Appeal considered the principles applicable on a defendant’s application for summary judgment in Westpac Banking Corporation v M M Kembla NZ Limited.1  That case is authority for the following propositions:

(a)       A defendant applying for summary judgment has the onus of proving the plaintiff cannot succeed.  Usually, summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.

(b)       The Court must be satisfied that none of the claims can succeed: it is not enough that they are shown to have weaknesses.

(c)       Summary judgment will only be suitable where all the material facts are not in dispute and can be put before the Court efficiently in affidavit form.

(d)       The  procedure  may  be  inappropriate  if  the  case  is  likely  to  turn  on  a judgment which can only be reached properly after hearing all the evidence at trial.

(e)       Developing points of law may require the added context and perspective provided by a full trial.

Strike out – legal principles

[41]    Rule 15.1 of the High Court Rules provides the basis of the strike-out jurisdiction.  The principles applicable to strike out applications are summarised in Attorney-General  v  Prince2   and  endorsed  by  the  Supreme  Court  in  Couch  v

Attorney-General:3

1      Westpac Banking Corporation v M M Kembla NZ Limited [2001] 2 NZLR 298 (CA).

2      Attorney-General v Prince [1998] 1 NZLR 262 (CA).

3      Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.

(a)       Pleaded facts, whether or not admitted, are assumed to be true.

(b)The cause of action must be clearly untenable: the Court must be certain that it cannot succeed.

(c)       The jurisdiction is to be exercised sparingly, and only in clear cases.

(d)The  jurisdiction  is  not  excluded  by  the  need  to  decide  difficult questions of law, requiring extensive argument.

(e)       The  Court  should  be  particularly slow  to  strike  out  a  claim  in  a developing area of law.

[42]     In an appropriate case, the Court may receive affidavit evidence on a strike- out application, but it will not attempt to resolve genuinely disputed issues of fact. Generally, affidavit evidence admitted on a strike-out application will be limited to a matter which is undisputed.4

The issues for determination in this case

[43]     The following issues fall to be determined:

1.       Summary judgment:

(a)       whether Westpac has shown all of the following:

(i) that it validly cancelled the Agreement in accordance with the requirements of the better offer condition, and that for that reason it has a complete defence to the plaintiff’s breach of contract cause of action; and

(ii) that it has a complete defence to BCL’s Fair Trading Act claims;

and

(iii)  that  it  has  a  complete  defence  to  BCL’s  allegations  that  it breached a duty owed to BCL to act in good faith.

4      Attorney-General v McVeagh [1995] 1 NZLR 558 at 566 (CA).

(b)       whether Coast has shown that it has a complete defence to all of the claims made against it under the Fair Trading Act.

2.        Strike-out claims:

(a)       whether Westpac has shown that BCL has no reasonably arguable case on one or more of its causes of action; and

(b)       whether Coast has shown that BCL has no reasonably arguable case on the Fair Trading Act claims made against it.

Issue 1(a)(i) – Did Westpac validly cancel the Agreement in accordance with the requirements of the better offer condition?

BCL’s Arguments

[44]     BCL contends that the following points are reasonably arguable:

(a)      the cancellation notice was not to the required effect.  It contained no reference to the offer received being written, or in writing, or documented in some  way,  and in those circumstances it  failed  to comply with the requirements of the better offer condition.

(b)Westpac was itself the offeror and cancelled the contract on the basis of its own offer or counter-offer to Brian Green.  Having rejected an offer made by Brian Green, Westpac was no longer able to cancel pursuant to the better offer condition.   By rejecting the offer and making a counter-proposal, Westpac was no longer acting on the basis of a better offer received.

(c)      waiting from 31 January 2014 (when the better offer was received from Brian Green) until 11 February 2014 before cancelling the contract was not consistent with the requirements of the better offer condition.

[45]     Addressing BCL’s point (a) above, the starting point is that the better offer condition provided Westpac with a right of cancellation only in respect of third party offers (which it judged to be on no less favourable terms) which were in writing.

[46]     On the interpretation of termination provisions in contracts, and notices given pursuant to them, both counsel referred to the decision of the House of Lords in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd (Mannai).5    In that case, a lessee was entitled under its lease to give notice to terminate the lease, to expire on the third anniversary of the commencement of the lease.  The notice had to be given not later than six months before that date.  There was no requirement in the

termination clause in the contract for the lessee to state the actual date of termination in its termination notice.

[47]     The lessee duly served a notice, in time, invoking the termination clause in the lease and making it clear that it wished to terminate.   However, the notice nominated a termination date which was the day before the third anniversary of the lease.   The question was whether or not the inclusion of the incorrect date in the notice had the effect of rendering the notice ineffective to terminate the lease.

[48]     The majority of the House of Lords determined that the error in the date was not such as to invalidate the notice.  The lessee’s intention would have been obvious to the lessor, and it was the objective meaning of the notice, read by the lessor in its context, which was important.  The House of Lords considered that the notice clearly and unambiguously communicated the required message to the lessor.

[49]     Lord Steyn said: 6

Like Lord Hoffman I would hold that the correct test for the validity of the notice is that posed by Goulding J in Carradime Properties Ltd v Aslam [1976] 1 WLR 442,444: “is the notice clear to a reasonable tenant reading it? Is it plain that he cannot be mislead by it?...The real question is a different one: does the notice construed against its contractual setting unambiguously inform a reasonable recipient how and when the notice is to operate under the right reserved?

5      Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; [1997] UKHL

19.

6      At 772.

[50]     Mannai has been applied by the Court of Appeal in New Zealand.  In Bryers v Harts Contributory Mortagages Nominee Co Ltd7, the Court of Appeal considered a case where a notice issued under s 92 of the Property Law Act 1952 on

28 January 2000 required the relevant defaults to be remedied “on or before 2 March

1999”. The March 1999 date was clearly an error; the relevant part of the wording should have been “on or before 2 March 2000”. The Court of Appeal agreed with the trial Judge that the notice sufficiently complied with s 92, notwithstanding the clerical error. The date was sufficiently “specified” for the purposes of s 92 if a reasonable recipient would have understood, notwithstanding a clerical error, what date the notice-giver intended to specify. The Court of Appeal referred to Mannai, considering that the decision in Mannai supported the approach of placing emphasis on an objective enquiry concerning how a reasonable person in the particular circumstances would understand the notice.

[51]     A similar approach was applied by the Court of Appeal in ANZ National Bank Ltd & Anor v Tower Insurance Ltd & Anor.8   In that case, the Court was concerned with a termination provision which provided for service of the termination notice under a contractual provision that provided that notices “may” be delivered by hand, pre-paid post or by facsimile to the addresses specified in the agreement. The

relevant specified address was a post office box, but the notice was served by hand

delivery to the recipient’s registered office (and not to the post office box).

[52]     The Court of Appeal considered that hand delivery to the registered office was sufficient, notwithstanding the specification of the post office box address. The Court noted that it had endorsed a common-sense approach in Bryers, asking whether, on an objective reading on the context in which the notice was given, the notice complied with the requirements by conveying the required message.9  The Court of Appeal also expressed the view that the notice provisions in the contract (as distinct from the substantive termination provision) were there for the purpose of convenience. They were to prevent either party from evading service. The Court

concluded that the trial Judge had been right to regard these machinery provisions as

7      Bryers v Harts Contributory Mortagages Nominee Co Ltd [2002] 3 NZLR 343.

8      ANZ National Bank Ltd & Anor v Teller Insurance Ltd & Anor (2010) 16 ANZ Insurance Cases

78,289.

9      Bryers v Harts Contributory Mortagages Nominee Co Ltd, above n 7 at [32].

merely “directory”.  It appears that there was no dispute in the case that the notice had actually been received.

[53]     Counsel also referred to the more recent decision of the Court of Appeal in The Party Bus Ltd v The Attorney-General.10  An arbitrator had given an award determining that four buses owned by the applicant had been “ordered off the road” by a “Vehicle Safety Officer”, and that in consequence, the Ministry of Education had been justified in terminating the contract it had with the applicant for the provision of school bus services. The High Court declined leave to appeal against

the arbitrator’s award, and the applicant appealed to the Court of Appeal. The only question which arose on the appeal was whether it could be said that the four buses had been “ordered off the road by a Vehicle Safety Officer of the New Zealand Police Commercial Inspection Unit”, when the relevant notice of the Vehicle Safety

Officer’s decision had been conveyed to the applicant by a police constable who was

not a Vehicle Safety Officer.

[54]     The Court of Appeal rejected the submission that the means of conveyance of the decision detracted from the fact that the decision had been made by a Vehicle Safety Officer.  It referred to Lewison’s The Interpretation of Contracts, and in particular the view expressed by the author of that text that it is important to distinguish between “substantive conditions” precedent to the exercise of a termination clause, for example, the occurrence of an event such as the breach of an obligation, and conditions related simply to the communication of the termination. Lewison expresses the view that the former must be fulfilled precisely while the

latter are addressed by applying the “ordinary principles of interpretation”.11

[55]     The Court of Appeal in The Party Bus noted that if that distinction were accepted, then in the case before it there had been precise fulfilment of the substantive condition.  It considered that the appellant’s submission would have required the Court to read into the contractual provision words which were not there, namely “orally or by a notice signed by a Vehicle Safety Inspection Officer”. The

Court went on to note that the authorities relied upon by the appellant to support a

10     The Party Bus Ltd v The Attorney-General [2012] NZCA 194.

11     At [11](b), citing Kim Lewison The Interpretation of Contracts (5th  ed, Sweeton & Maxwell, London, 2011) at 800-801.

strict construction of a termination clause need to be read today in light of later authorities, which support the proposition that such clauses should be interpreted in the normal way.12

[56]     As Lewison puts it, having interpreted the notice, it must be matched against the contractual requirements to see whether it meets them.13   It is the matching of the notice sent by Westpac’s solicitors on 10 February 2014 with the requirements of the better offer condition which seems to me to be the main issue in this case.

[57]     As Lord Steyn noted in Mannai, that case was not one of a contractual right to determine which prescribed, as an indispensible condition for its effective exercise, that the notice must contain specific information.  In this case, the better offer condition did contain a condition for the effective exercise of the right to cancel, but the requirement was only a requirement that the cancellation notice contain certain statements “to that effect”.

[58]     The words “to that effect” in the better offer condition can only mean that any

written notice given pursuant to the condition had to be “to the effect”:

(i)        that the vendor had received a written offer to purchase; and

(ii)that the terms of that written offer were considered by the vendor to be no less favourable than those specified in the agreement.

[59]     On the meaning of “to that effect”, Westpac referred to the New Zealand Pocket Oxford dictionary, where the expression is defined as “having that result or implication.”14   Mr Mason did not take issue with that definition in his submissions.

[60]     I think the breadth of that definition means that, although the vendor’s notice under the better offer condition had to comply with a particular contractual requirement, the requirement was not a particularly difficult one to satisfy.  I think it

required  no  more  than  that  the  vendor’s  message  would  have  been  sufficiently

12     Citing, among other authorities, Mannai and ANZ National Bank.

13     Lewison, above n 11 at 801.

14     Robert Burchfield (ed) The New Zealand Pocket Oxford Dictionary, (8th  ed, OUP, Auckland,

1986) at 239.

understood (viewed objectively, and in the particular context) by the recipient of the notice (in this case BCL).

[61]     Although the notice given by Westpac’s solicitors to BCL under the better offer condition did not state that the offer Westpac had received was a written offer, the notice did, in my view, clearly imply that the offer Westpac had received was a written one.  It was therefore a notice “to that effect”.

[62]     Critical   to   that   conclusion   are   the   use   in   the   notice   of   the   word “Accordingly”, and the express invoking of the better offer condition.   As to the latter, Lord Clyde noted in Mannai (where the tenant’s notice also made specific reference to the clause in the lease under which the notice was sent) that this was not some general reference to the agreement between the parties, but a precise reference

to the particular provision under which the notice was being given.15    In this case,

BCL could not have been in any doubt that Westpac was telling it that it was entitled to cancel, and was cancelling, because the pre-conditions for cancellation set out in the better offer condition existed.  As stated by Lord Steyn in Mannai, the test is what a reasonable recipient possessing knowledge of all the relevant facts and terms of the agreement would understand.16

[63]     It seems to me that that is in essence no different from what a reasonable recipient of the notice would consider to be the “result or implication” of the notice, and so also answers the question whether the notice was or was not a notice “to that effect”.

[64]     The use of the word “Accordingly” in the notice, followed immediately by the specific reference to the better offer condition and the cancellation itself, would have unmistakeably conveyed to any objective reader that the “offer” referred to was one which met the requirements of the better offer condition, and therefore had to have been a written offer.

[65]     Mr Mason submitted that such clauses should be construed strictly against the notice-giver, but I think the very breadth of the expression “to that effect” points to a more liberal construction of the notice.   In the end, I think it was enough that the notice should sufficiently convey to BCL the message that Westpac had received a written offer on terms which it considered no less favourable than those specified in the agreement, and that it was cancelling on that basis.  In my view, the notice did so. Applying the test adopted by Lord Hoffman in Mannai, the notice would have been clear to a reasonable recipient reading it, and it is plain that he or she would not have

been misled by it.17   I accordingly reject the submission made by Mr Mason on his

argument at subparagraph (a) of paragraph [44] of this judgment.

[66]     Nor am I persuaded by Mr Mason’s arguments listed (b) and (c) in paragraph [44] above.  First, I am not persuaded that Westpac’s entitlement to invoke the better offer condition was lost because the contract which was eventually completed between Westpac and Brian Green resulted from Brian Green’s acceptance of a counter-offer made by Westpac.   (I accept that that is what occurred: Mr Tuck’s evidence makes it clear that he made a number of amendments to Brian Green’s 31

January 2014 offer before Westpac signed the document and Mr Tuck sent it back to

Coast on 5 February 2014).

[67]     In my view, Westpac’s right to cancel under the better offer condition arose as soon as it received the written offer and formed the view that its terms were no less favourable than those specified in the BCL agreement.   I see nothing in the better offer condition which precluded subsequent negotiations between Westpac and any third party offeror.

[68]     Mr Mason notes that Westpac was selling as mortgagee, and as such was under a statutory duty to the mortgagor to obtain the best price reasonably obtainable at the date of sale.18    I do not see that as a factor that assists BCL’s case.  I do not think the parties could reasonably have intended that Westpac would have no ability at all to secure changes to an offer made by a third party, especially if the changes were relatively minor and the third party offer was otherwise significantly superior to

the purchase price and other terms provided in the agreement.   Westpac’s duty to secure the best price would potentially be compromised if the condition permitted it only to accept or reject a third party offer.

[69]     If the clause on its true construction does preclude the vendor from cancelling where it has rejected a third party offer and made a counter offer, it would be a relatively simple matter for the vendor to subvert that intention by refraining from making a counter-offer, but advising the third party offeror of the particular respects in which it found the offer unacceptable (including advice that it would not accept any price below a particular named figure).  It seems improbable that experienced commercial parties such as these intended to contract on the basis of such an interpretation, when the purpose of the condition, so interpreted, could be defeated as easily as that.

[70]     In the end, I think the better construction is that the right to cancel under the better  offer  condition  arose  immediately  when  Westpac  concluded  that  the  31

January offer was on terms no less favourable than those specified in the agreement. Once  Westpac  had  reached  that  conclusion,  it  was  in  my  view  entitled  to  a reasonable time to consider the matter and decide whether to cancel the agreement. During that period, it was not precluded from negotiating with the third party offeror, and those negotiations could include the making of a counter-offer or offers.

[71]     Mr Mason’s third point, set out at subparagraph [44](c) above, was that if Westpac became entitled to invoke the better offer condition and cancel on receipt of Brian Green’s 31 January offer, it was obliged in terms of the condition to do so “immediately”.    He  submits  that  Westpac  arguably  lost  the  right  to  cancel  by delaying until 11 February 2013 before communicating its cancellation decision to BCL.

[72]     I do not read the better offer condition in that way.   In my view, the word “immediately” as used in the condition was intended only to convey the meaning that the right to cancel arose as soon as the better offer had been received and the vendor  judged  its  terms  to  be  no  less  favourable  than  those  specified  in  the agreement, and that once those pre-conditions were met, no intermediate steps had to

be taken by the vendor (e.g. notifying the purchaser of the better offer and/or giving it an opportunity to amend its purchase price or other terms).   In that sense, the vendor was entitled to cancel the agreement “immediately” by giving the requisite notice.   The fact that the right to cancel arose immediately did not, in my view, deprive the vendor of a reasonable time to decide whether it would cancel.   With settlement under the BCL agreement not scheduled to take place until April 2014, I do not consider it arguable for BCL that the delay between the receipt of the offer from Brian Green on 31 January 2014 and the cancellation on 11 February 2014 was such as to deprive Westpac of its right to cancel.

[73]     I conclude that BCL’s first cause of action, in which it alleges that Westpac’s cancellation of the agreement under the better offer condition was invalid, is clearly untenable and should be struck out.  Westpac is not entitled to summary judgment on this cause of action however; under r 12.2 a defendant is not entitled to summary judgment unless it can show that it has a complete defence to all of the plaintiff’s claims.  For reasons which will appear shortly, Westpac has failed to persuade me that it has a complete defence to certain of BCL’s claims under the Fair Trading Act.

The Fair Trading Act claims – Issues 1(a)(ii) and 1(b) – Do Westpac and Coast have a complete defence to all of the claims made against them under the Fair Trading Act; and

2(a) and (b) - Should the Fair Trading Act claims against Westpac and Coast be struck out?

[74]     At  para  [73]  of  its  statement  of  claim,  BCL  alleges  that  Coast  (and, vicariously, Westpac) engaged in misleading and deceptive conduct in the following respects:

(i)        Mr  Cameron  advising  BCL’s  directors  they  had  bought  a  good building at a good price on or about 12 December 2013.

(ii)Mr  Cameron  advising  BCL’s  directors  that  the  Agreement  was unconditional in all respects on or about 17 December 2013.

(iii)      Not advising BCL of the better offer condition on 12 December 2013 in the circumstances.

(iv)Coast’s  failure to  advise what  was  happening  with  respect  to  the marketing of the property following on from Mr McLaughlin’s initial inquiry about sold signs on the property.

(v)      Coast’s failure to advise BCL what was happening with respect to the marketing   of   the   property   when   Mr Cameron   was   asked   by Mr McLaughlin about the lack of sold signs on the property after

4 February.

(vi)Coast’s failure to advise BCL what was happening with respect to the marketing of the property after its Palmerston North office manager, Ms Manning, advised Mr McLaughlin on or about 7 February 2014 that she would tell Mr Van Dyk to get sold signs on the building.

(vii)Coast’s  acceptance  of  BCL’s  deposit  on  4 February  2014  without advising BCL the property was being marketed.

(viii)     Coast    providing    keys    to    the    property     to    Mr Charles     on

5 February 2014 without advising BCL that the property was being marketed.

(ix)      Coast’s failure to advise BCL that it was marketing the property after

30 January 2014, in breach of BCL’s reasonable expectation of such advice, the reasons for this reasonable expectation being:

(a)       that BCL had an agreement to purchase the property.

(b)Mr Cameron had told BCL’s directors that the agreement was unconditional in all respects.

(c)       BCL’s  known  interest  and  holdings  in  the  strip  that  the property forms part of.

(d)       BCL’s payment, and Coast’s acceptance, of the deposit.

(e)      Coast’s failure to advise about the ongoing marketing on any of the three times BCL raised the lack of sold signs on the property.

(f)       Coast  providing  Mr Charles  with  keys  to  the  property  on

5 February 2014 without advising that the property was being marketed.

(g)       Coast’s obligation to try to get the best price for Westpac.

(h)      Coast’s duty of care as mortgagee to obtain the best price reasonably available for the property.

(i)the obligation real estate agents have to act in good faith and deal fairly with all parties engaged in a transaction.

(j)       the  obligation  real  estate  agents  have  not  to  mislead  a customer or client or provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.

(x)      Coast entering into a confidentiality agreement with Brian Green in relation to its negotiations regarding the property.

(xi)     Mr Looney advising Brian Green that there were issues with BCL’s

agreement.

(xii)     Coast’s failure in all the circumstances to advise BCL of the better offer condition after its Palmerston North office became aware of it on or about 30 January 2014.

[75]     BCL pleads that Coast failed to act in good faith and deal fairly with BCL in those respects, and that it provided false information to BCL in the respects referred

to at subparas (i), (ii) and (vi) of para [75] above.  Coast is also said to have withheld information  “that  should  in  law  or  fairness  have  been  provided  to  BCL”,  as identified in para [75] above.

[76]     BCL contends  that,  as  a  result  of  the  alleged  misleading  and  deceptive conduct, it lost the opportunity to purchase the property.  It says that it either would have struck out the better offer condition if that condition had been brought to its attention at the outset, or it would have agreed in the initial exchange of offers to the settlement  date  of  9  January 2014  then  proposed  by Westpac,  in  return  for  an unconditional contract at the price of $400,000.   Further in the alternative, it says that it would have offered the same or more favourable terms than Brian Green did, to secure an unconditional contract.

Legal principles applicable to Fair Trading Act Claims

[77]     In Red Eagle Corporation v Ellis, the Supreme Court adopted a two-stage approach in considering claims under s 9 of the Fair Trading Act:19

The question to be answered in relation to s 9 in a case of this kind is accordingly whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived.  If so, a breach of s 9 has been established.   It is not necessary under s 9 to prove that the defendant’s conduct actually misled or deceived the particular plaintiff or anyone else.   If the conduct objectively had the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9.  If it is likely to do so, it has the capacity to do so.  Of course the fact that someone was actually misled or deceived may well be enough to show that the requisite capacity existed.

…

The language of s 43 has been said to require a “common law practical or common-sense concept of causation”. The court must first ask itself whether the particular claimant was actually misled or deceived by the defendant’s conduct.   It does not follow from the fact that a reasonable person would have been misled or deceived (the capacity of the conduct) that the particular claimant  was  actually  misled  or  deceived.    If  the  court  takes  the  view, usually by drawing an inference from the evidence as a whole, that the claimant was indeed misled or deceived, it needs then to ask whether the defendant’s conduct in breach of s 9 was an operating cause of the claimant’s loss or damage. … The impugned conduct, in breach of s 9, does not have to be the sole cause, but it must be an effective cause, not merely something

19     Red Eagle Corporation Ltd v Ellis [2010] 2 NZLR 492 at [27] – [29].

which was, in the end, immaterial to the suffering of the loss or damage. The claimant may, for instance, have been materially influenced exclusively by some other matter, such as advice from a third party.

[78]     In the specific situation where the allegedly misleading or deceptive conduct lies in the defendant’s silence, counsel referred to the decision of Elias J, as she then was, in Des Forges v Wright, where the learned Judge said:20

Silence may constitute misleading or deceptive conduct, but whether it does is to be objectively assessed in all the circumstances: Gregory v Rangitikei District Council [1995] 2 NZLR 208 … conduct not misleading or deceptive may become so by an omission to inform arising out of altered circumstances: Gregory  v Rangitikei  District  Council.   Conduct  may be misleading or deceptive within the meaning of s 9 of the Fair Trading Act

1986 by an omission to provide information even if no obligation to provide such information exists as a matter of general law, outside the standards of

conduct required by the Fair Trading Act.

[79]     Counsel for the defendants submitted that the Courts of New Zealand have adopted a “reasonable expectation” test in deciding whether a defendant’s continuing silence is to be regarded as a breach of s 9.   In support, counsel referred to the Court of Appeal decision in Hanover Group Holdings Ltd v AIG Insurance New

Zealand  Ltd,21   and  to  the  decision  of  the  High  Court  in  Hieber  v  Barfoot  &

Thompson. 22   In Hieber, Kerr J followed Australian authority, including Demagogue Pty Ltd v Ramensky & Anor23 in holding that silence can amount to misleading and deceptive conduct, the test being whether there was a reasonable expectation that the information would be disclosed.

[80]     Counsel for Westpac also referred to the Court of Appeal decision in Janus Nominees Ltd v Fairhall,24 in which the Court considered whether, in the context of a share sale and purchase agreement, the purchasers had a reasonable expectation that the vendor would disclose to them the GST implications of the transaction.  The Court of Appeal considered that, in the particular circumstances of the case, no such reasonable expectation existed.  Their Honours noted that to impose liability [upon

the vendors] under s 9 would be to “cut deeply into the principle of caveat emptor”.25

20     Des Forges v Wright [1996] 2 NZLR 758 at 764.

21     Hanover Group Holdings Ltd v AIG Insurance New Zealand Ltd [2013] NZCA 442 at[40].

22     Hieber v Barfoot & Thompson (1996) 5 NZBLC 104,179.

23     Demagogue Pty Ltd v Ramensky & Anor (1992) 110 ALR 608.

24     Janus Nominees Ltd v Fairhall [2009] NZCA 280, [2009] 3 NZLR 757 (CA).

25 At [58].

The Court of Appeal took the view that s 9 of the Fair Trading Act “does not provide

a guarantee to purchasers who failed to look after their own interest”.26

[81]     Both Westpac and Coast also rely on the decision of the High Court of Australia  in  Miller  &  Associates  Insurance  Broking  Pty  Ltd  v  BMW  Australia Finance Ltd27 in support of the proposition that s 9 does not create an obligation to volunteer information in relation to a written contract.  A party cannot complain it has not had the terms of an agreement disclosed when a written agreement has been provided to it.

[82]     In Miller, BMW was in the business of financing insurance premiums.  Miller secured from BMW a loan of $3.975 million to fund insurance premiums for a client. The policy for which the loan was sought was non-cancellable.  Had the policy been cancellable, it could have provided BMW a form of security for the premium loan, because as lender it could have required the borrower to assign its rights, including the right of cancellation, under the policy.  In the event of default, the lender could have cancelled the policy and recovered the unused premium.

[83]     It turned out that the policy financed by BMW was non-cancellable.  Miller had provided BMW with a copy of the policy that made it clear that the policy was non-cancellable,  but  it  did  not  specifically  advise  BMW  of  that  fact.    BMW contended that it had been misled and/or deceived by Miller’s failure to disclose that the policy was non-cancellable.

[84]     The High Court of Australia unanimously dismissed BMW’s claim.   The High Court took into account particularly that the parties were commercially sophisticated and experienced in their respective fields, and that the policy was not a lengthy document.   It was apparent from the terms of the policy that it did not contain a cancellation clause.  The court considered that Miller’s failure to draw to BMW’s  attention  a  circumstance  that  the  document  itself  disclosed,  was  not

misleading or deceptive.28

26     At 766, citing Des Forges v Wright above n 20.

27     Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 16 ANZ Insurance Cases 16-862.

28     Miller & Associates Insurance above n 27 at [91] and [96].

[85]     The  Court  in  Miller  also  observed  that,  as  a  general  proposition,  [the Australian equivalent of] s 9 does not impose on a party the obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence.29

Discussion and conclusions on Fair Trading Act issues

The summary judgment applications

[86]     For  the  purposes  of  its  summary  judgment  and  strike-out  applications, Westpac did not rely on any contention that it was not vicariously responsible for any misleading or deceptive conduct for which Coast might be found liable.   The applications of both defendants can accordingly be considered together.

[87]     There are aspects of BCL’s Fair Trading Act pleadings on which I do not believe the defendants have shown that they have a complete defence.   Primarily, they relate to Mr McLaughlin’s requests for an explanation as to why no “sold” signs had been put up at the property.

[88]     In its statement of defence dated 23 May 2014, Coast admits the following

allegations in BCL’s statement of claim:

[31]     In late January or early February 2014 Mr McLaughlin spoke to a staff member at Coast’s Palmerston North office asking why there was no sold sign on the property.

[31.1]   Mr McLaughlin received no indication as a result of this contact with Coast which suggested the agreement was other than a fully unconditional sale and purchase contract or that anything was amiss with the purchase.

…

[42]     After   the   deposit   was   paid   by   BCL   on    4 February 2014

Mr McLaughlin contacted Mr Cameron to ask why no sold sign had been placed on the property.

[42.1]   Mr McLaughlin received no indication as a result of this contact with the Coast that the Agreement was other than a fully unconditional Sale and Purchase Agreement or that anything was amiss with the purchase.

29 At [22].

[89]     Coast also admits the following allegation:

[44]      On 7 February 2014 Mr McLaughlin asked Ms Manning, the Office Manager at Coast’s Palmerston North office, why a sold sign had not been placed on the building.  She advised that she would speak to Mr Van Dyk about this and would get him to put a sold sign up.

…

[44.2]   Mr McLaughlin received no indication as a result of this contact with Coast that the agreement was other than a fully unconditional sale and purchase agreement or that anything was amiss with the purchase.

[90]     In respect of the pleaded events which occurred on 7 February 2014, I think it is arguable that a reasonable person in Mr McLaughlin’s position would have assumed that Coast’s stated willingness to put a “sold” sign on the property meant that Coast was not marketing the property to other prospective purchasers, and that, subject only to settlement, BCL had secured the property.  To tell Mr McLaughlin that Coast would arrange to have a “sold” sign put up when Coast was aware that the property had been sold (or was on the point of sale) to Brian Green, was to give Mr McLaughlin only part of the full story, and arguably misled or deceived him (and therefore BCL).

[91]     I think it  is also clearly arguable on the evidence produced  at summary judgment stage that Mr McLaughlin was in fact misled.

[92]     Westpac and Coast may argue that the statement made to Mr McLaughlin on

7 February 2014 came too late to have been an operating, or effective, cause of any loss suffered by BCL: on the same day, it appears that Brian Green accepted Westpac’s counter-offer to sell the property.   But it is not clear precisely when on

7 February 2014 Brian Green accepted  Westpac’s counter-offer, and on the evidence provided I cannot say with the required degree of certainty to justify the entry of summary judgment for the defendants that BCL, if informed on 7 February 2014 that Westpac was marketing the property to other parties, might not have made a significantly higher offer on the spot, causing Westpac to withdraw its counter-offer to Brian Green and re-open negotiation with BCL.  In saying that, I bear in mind that Mr McLaughlin had previously offered $750,000 for the property.

[93]     Nor do I think it appropriate to enter summary judgment for the defendants on the Fair Trading Act allegations which arise out of Mr McLaughlin’s two earlier requests for an explanation why no “sold” signs had been placed on the property, or to strike those claims out.  The absence of “sold” signs on the property is relevant to the question of whether or not Westpac was or was not marketing the property, and I do not believe it is possible to safely conclude on a summary judgment or strike-out application that silence (if that is what it was) in the face of Mr McLaughlin’s questions was not capable of conveying the impression to him that the property was not  being  marketed.    I  do  not  consider  that  issue,  and  the  issue  of  whether Mr McLaughlin and BCL were in fact misled, suitable for resolution on a summary judgment or strike-out application.

[94]     A further aspect of the Fair Trading Act allegations which appears to me to be at least arguable for BCL is the pleading that Coast (and, vicariously, Westpac) misled or deceived BCL by providing keys to the property to Mr Charles on 5

February 2014, without advising him that the property was being marketed.   Mr Mason submits for BCL that the impression deliberately created by Coast was that there were no issues with BCL’s contract, and that BCL could expect to settle in due course.

[95]     There was no evidence produced as to the circumstances in which agents provide keys to sold premises prior to settlement, and it is not possible to say on the evidence that making the key available to Mr Lincoln immediately after the payment of the deposit by BCL was not capable of conveying the impression to him that the property would be BCL’s, subject only to settlement.  Nor does the evidence make clear what Mr Charles wanted the keys for – if, for example, he wished to put some furniture or other goods in the property ahead of settlement, the fact that Coast allowed him to do so may well have conveyed the misleading impression that it was certain that BCL would secure the property (subject only to settlement).

[96]     In that context, I note that Mr Looney’s note produced for the Real Estate Agents Authority stated “Mr Townshend [the Coast agent who gave Mr Charles the key on 5 February 2014] and myself were quite distressed to find after the sale – that fixtures  and  partitions  had  been  removed  from  the  building”.     Mr  Charles’

explanation of this is that there were some glazed partitions on the property, and the tenant BCL had signed up to lease the property wanted these partitions stored until a new layout was complete.   Mr Charles says that BCL’s contracted builder moved them to another building owned by him.

[97]     Coast did not address this issue in its reply affidavit, and on the face of it, it appears that BCL was permitted at some time to install and later remove partitions from the property.  On the evidence, I do not believe I can reasonably rule out the possibility that allowing BCL access to the premises, both on 5 February 2014 and (apparently) at some earlier time, may have conveyed the misleading impression that Westpac was not looking for any other purchaser.  Nor can I say on the evidence that it is clear that BCL was not misled by being allowed access to the property in advance of settlement.

[98]     There  remains  the  question  of  whether  it  is  arguable  for  BCL that  any misleading or deceptive conduct associated with either the responses to Mr McLaughlin in respect of the absence of “sold” signs on the property, or allowing BCL access to the property ahead of settlement, has caused BCL any loss.   Mr Mason submits that the causation analysis which the issue of loss requires is not appropriate for determination on a summary hearing such as this.  He refers to the

following statement in the judgment of Elias CJ and Anderson J in Couch:30

The plaintiff may well face difficulties in establishing causation in fact.  But we cannot agree with William Young P that the claim can be properly struck out on that basis.   Causation is a “matter for investigation”.   It is “quintessentially a question of fact”. [citations omitted]

[99]     Mr Mason relies on Gregory v Rangitikei, in which McGechan J accepted that there could be damages for loss of a chance in Fair Trading Act cases.   He submits that BCL lost the chance to try to purchase the property when it was put back on the market at the end of January 2014, and that there is little doubt that it would have done so if it had been given the chance.

[100]   I think there is some merit in that argument.  As noted, Mr McLaughlin had made a written offer of $750,000 for the property before the auction, and it seems at

30     Couch v Attorney-General above n 3 at [39].

least possible in those circumstances that BCL would have made a significantly higher offer for the property if it had known that Westpac was looking elsewhere. On the evidence that has been produced, I do not believe it can be said with any confidence that any misleading or deceptive conduct on the part of Coast in respect of the “sold” sign, and/or the provision of advance access, has not caused BCL loss.

[101]   I accordingly conclude that the defendants have not shown that they have a complete defence to all of BCL’s allegations against them.   In accordance with r 12.2, their summary judgment applications must be dismissed, and there will be orders accordingly.

Strike-out applications

[102]   I turn to deal with the applications by Westpac and Coast to strike out BCL’s claims under the Fair Trading Act.  In considering the strike-out applications, I take into account the non-contentious documents that were produced in evidence, including the agreement for sale and purchase between BCL and Westpac, and the form of particulars and conditions of sale for the unsuccessful attempt to sell the property at auction (the same form used by Mr McLaughlin in making his offer some weeks before the auction).   Beyond considering non-contentious evidence such as those documents, I proceed on the basis that the various matters pleaded by BCL are capable of being proved at trial.

[103]   I start with the allegation at para [73](iii) of the Statement of Claim that Coast (and vicariously Westpac) engaged in misleading and deceptive conduct by not advising BCL of the better offer condition on 12 December 2013.  I do not regard this claim as being arguable.   First, there is no suggestion that Mr Cameron told Mr Charles and Mr McLaughlin that the offer form that they signed was in the same terms as the particulars and conditions of sale that applied to the auction.  Secondly, the two forms do not look remotely like each other.  The particulars and conditions of sale form was a Simpson Grierson document, in what appears to be fairly standard form for an auction sale.  It had the law firm’s name prominently displayed on the cover page, and the first page commenced “IN THE MATTER OF THE PROPERTY LAW   ACT   2007”   and   “IN   THE   MATTER   OF   MEMORANDUM   OF

MORTGAGE…”  It contained provisions that were obviously intended to be specific to an auction sale, such as cls 3 and 4 headed “Reserve Price” and “Conduct of Auction”.  There was a form of memorandum of contract attached, which would be completed by the successful bidder.

[104]   The   agreement   for   sale   and   purchase   form   which   Mr   Charles   and Mr McLaughlin signed after the auction looked nothing like it.  It was in the form approved by the Real Estate Institute of New Zealand Inc and the Auckland District Law Society (9th  ed), and, in addition to that printed form, contained a number of special conditions which were typewritten under a heading “Special Conditions of Contract”.   The better offer clause appeared at the top of one of the “Special Condition” pages, under the prominent heading: “8 BETTER OFFER”.  Each page,

including the page with the prominent heading “8 BETTER OFFER”, was initialled by Mr Charles and Mr McLaughlin.

[105]   It is trite law that in the absence of fraud or misrepresentation, a party is bound by a contract which it has signed, regardless of whether it has read the terms of the contract.31    The directors of BCL are very experienced commercial property investors who own a number of other properties in the city.   They had experience with mortgagee sales; indeed, Mr Charles acknowledges in his affidavit that he has seen clauses like the better offer condition before in relation to mortgagee sales.

[106]   I  accept  the  defendants’  submission  (based  on  cases  such  as  Miller  & Associates and Janus Nominees Ltd) that the Fair Trading Act does not provide a guarantee to purchasers who fail to look after their own interests, and that s 9 did not create any obligation on Mr Cameron to volunteer information about this written contract.

[107]   The allegation of failure to disclose the better offer condition does not, in my view, pass the first of the tests in Red Eagle Corporation Ltd. A reasonable person in the position of Messrs McLaughin and Charles when they signed the agreement on

12 December 2013 (that person being a sophisticated and experienced commercial

31     See John Burrows, Jeremy Finn, and Stephen Todd Law of Contract in New Zealand (4th  ed, LexiNexis, Wellington, 2012) at 239; L’Estrange v Graucob [1934] All ER 16 (KB).

property investor) would not be likely to have been misled or deceived by Mr

Cameron’s failure to draw the better offer condition to their attention.

[108]   For similar reasons, I consider that the Fair Trading Act pleadings relating to

Mr Cameron’s statements allegedly made on 12 December 2013 and 17 December

2013 are not reasonably arguable for BCL.32  As for the first of those allegations, that Mr Cameron advised BCL’s directors that they had “bought a good building at a good price”, BCL’s directors well knew that all BCL had done at that point was make an offer.   I do not apprehend anyone to be suggesting that the price was not aptly described by Mr Cameron as a good one, and if (as I have found) Mr Cameron had no duty under the Fair Trading Act to specifically draw the better offer condition to the attention of BCL’s directors at their meeting on 12 December 2013, there is nothing left in the allegation that the statement about a “good building at a good price” was likely to mislead or deceive them.  A reasonably experienced commercial property investor  in  their  position  would  not  have  been  likely to  be  misled  or deceived by the statement – he or she would have understood the statement as being subject to the possible application of the better offer condition.

[109]   Similarly, Mr Cameron was entitled on 17 December 2013 to assume that

BCL’s directors had read the contract, and were aware of the better offer condition.

[110]   The defendants refer to authorities which have held that contracts for the sale and purchase of land that contain better offer clauses such as the one in this case have  been  regarded  by  the  courts  as  “unconditional”  contracts.    Mr  Mason’s rejoinder is that there would be relatively few lawyers, and almost no lay people, who would fail to find Mr Cameron’s statement that the contract was unconditional in all respects misleading in the circumstances.

[111]   I accept Mr Mason’s submission that the issue is not a technical legal one as to whether the contract is regarded as “unconditional” for some legal purpose – the issue is simply whether the statement was or was not likely to mislead or deceive BCL’s directors.   But in the end there is nothing in the point.   Mr Cameron was

entitled  by 17 December 2013  to  assume  that  BCL’s  experienced  directors  were

32     Subparagraphs i and ii of para [73] of the statement of claim.

aware of the better offer condition.  An experienced commercial property investor who was aware of the better offer condition would not be likely to have been misled by the statement allegedly made by Mr Cameron on 17 December 2013.

[112]   For the same reasons as are set out in the section of this judgment dealing with the Fair Trading Act issues arising on the defendants’ applications for summary judgment, I am not prepared to strike out the allegations at subparagraphs iv – vi of paragraph [73] of the statement of claim (which relate to Mr McLaughlin’s questions about why there were no “sold” signs on the property).  These allegations are not so clearly untenable that they should be struck out in a summary hearing such as a strike-out application.

[113]   I would not normally consider that the pleading at para [73] vii that Coast’s acceptance of BCL’s deposit on 4 February 2014 without advising that the property was being marketed could, on its own, raise any arguable claim under s 9 of the Fair Trading Act.  By 4 February 2014, Coast was entitled to assume that BCL was well aware of the better offer condition, and the deposit was payable in terms of the contract regardless of whether Coast was marketing the property to other prospective buyers. Without more, acceptance of the deposit in those circumstances would not in my view convey any misrepresentation to BCL, or create any obligation on Coast to advise BCL of its activities marketing the property to others.   But it may be that when all the evidence is heard, and Coast’s acceptance of the deposit is considered along with the evidence of Mr McLaughlin’s question about ‘sold’ signs and the fact of BCL apparently being allowed early access to the property, Coast’s acceptance of the deposit without saying anything about Westpac’s marketing of the property will assume some Fair Trading Act significance. At least, I cannot at this stage say that it will not.   In those circumstances, I think it would be premature to strike out the allegation based on acceptance of the deposit, and I decline to do so.

[114]   The same considerations apply in respect of the allegations at paragraph [73] ix and xii of the statement of claim, which relate to Coast’s failure to advise BCL that it was marketing the property after 30 January 2014.  I decline to strike out those subparagraphs of the statement of claim.

[115]   I am not persuaded that the pleading at para [73] x, that it was misleading or deceptive for Coast to  enter into a confidentiality agreement with  Brian Green, provides a tenable basis for a claim of misleading or deceptive conduct under s 9 of the  Fair  Trading Act.    If  any such  confidentiality agreement  with  Brian  Green existed,  it  could  not  have  conveyed  any  misrepresentation  to  BCL,  who  at  all material times was unaware of it.   And clearly it could not have conveyed any misrepresentation  to  Brian  Green.    BCL may  argue  that  any  such  confidential agreement which may have existed supports its “intention to conceal” argument, but s 9 is not directly concerned with a defendants’ intentions – it is the likely and actual impact of the conduct on the plaintiff which is primarily relevant.  But the main point is that BCL could not have been misled or deceived by the existence of an agreement of which it was completely unaware.

[116]   The remaining allegation of misleading or deceptive conduct pleaded in para [73] is that Mr Looney of Coast advised Brian Green that “there were issues with [BCL’s] agreement” (statement of claim para [73] xi).  Again, I cannot see how any such statement could have conveyed any misrepresentation to BCL, who at material times was unaware of it.  And, as with the alleged confidentiality agreement with Brian Green, there is insufficient particularity in the pleading to show how any such statement, if it was made, is alleged to have caused loss to BCL.  There will be an order striking out this subparagraph.

[117] Paragraph [74] of the statement of claim alleges that Coast “failed to act in good faith and deal fairly with [BCL] as identified in paragraph 73 above”. The Fair Trading Act does not expressly oblige a commercial party dealing at arm’s length with another commercial party to “act in good faith”, or to “deal fairly” with that other commercial party. The only relevant obligation is not to engage in conduct which is likely to be misleading or deceptive, and that is already pleaded at para [73]. Paragraph [74] adds nothing, and there will be an order striking that paragraph out. Similarly, para [75], which simply pleads that Coast misled BCL in the respects pleaded at para [73], adds nothing. It too will be struck out.

[118]   Paragraph [76] of the statement of claim alleges that Coast provided false information to BCL.  The particulars pleaded refer to the statements allegedly made

by Mr Cameron to Messrs Charles and McLaughlin on 12 and 17 December 2013, and  the  statement  about  the  “sold”  signs  allegedly made  to  Mr McLaughlin  on

7 February 2014.    I  have  already  held  that  the  statements  allegedly  made  by Mr Cameron  on  12  and  17  December  2013  were  not  capable  of  misleading  or deceiving  a  reasonably  experienced  commercial  investor  such  as  Mr Charles  or Mr McLaughlin.   It follows that it is not arguable for BCL that those statements constituted “false information”. As far as the 7 February 2014 advice is concerned, I doubt that there is any significant difference between the making of misleading or deceptive statements on the one hand, and the “providing of false information” on the other, at least as far as BCL’s entitlement (or otherwise) to damages is concerned. But the distinction was not the subject of submissions by the parties, and it may be that there is some relevant distinction.  In those circumstances, it is not appropriate to strike out  the pleading at para [76] iii of the statement of claim.

[119] Paragraph [77] of the statement of claim alleges that Coast withheld information that should in law or fairness have been provided to [BCL] as identified in paragraph [73]. It is difficult to see that this pleading adds anything to para [73], especially as the only “law” identified in the relevant section of the statement of claim is the Fair Trading Act. That statute does not impose any general obligation on commercial parties to act “fairly”. This paragraph will also be struck out.

[120]   In summary, I conclude that BCL has no tenable cause of action on the following allegations in paras [73] – [77] of its statement of claim:

Subparagraphs i, ii, iii, x and xi of para [73], all of paras [74], [75], and [77], and subparagraphs i and ii of para [76].

There will be orders striking out those pleadings.

[121]   I am not satisfied that the defendants have shown that BCL has no tenable argument on the allegations of misleading and deceptive conduct at subparagraphs iv, v, vi, vii, viii, ix, and xii of para [73], or on the allegation at para [76] iii.   I decline to make striking-out orders in respect of those pleadings.

Issue 2(b): Westpac’s claim to strike out BCL’s claim that Westpac owed a duty

to it to act in good faith

[122]   The relevant pleading in BCL’s statement of claim is fairly short.  It alleges that BCL had an equitable interest in the property under its agreement with Westpac, and that Westpac owed it equitable duties under that agreement, including a duty to act in good faith.  BCL says that Westpac is liable for all relevant actions of its agent, Coast.

[123]   BCL  says  that  Westpac  breached  the  alleged  duty  of  good  faith  in  the following respects:

(a)      selling the property to Brian Green without BCL being advised that marketing of the property was ongoing; and

(b)entering  into  the  confidentiality  agreement  with  Brian  Green  in respect of its dealings with the property; and

(c)      Coast’s failure to raise the ongoing marketing of the property with BCL after Coast’s Palmerston North office became aware of the better offer condition on or about 30 January 2014; and

(d)      not advising BCL about the better offer condition; and

(e)      Coast not raising the ongoing marketing of the property with BCL on any of the three times Mr McLaughlin raised the question of the lack of “sold” signs on the property; and

(f)       Coast not raising the ongoing marketing of the property with BCL

when BCL paid the deposit; and

(g)      Coast not raising the ongoing marketing of the property with BCL

when it gave Mr Charles the keys to the property on 5 February 2014.

[124]   BCL says that, as a result of the alleged breaches of the claimed duty of good faith, it lost the opportunity to purchase the property.

[125]   On the facts, Westpac submits that there can be no allegation that it owed a duty to disclose the better offer condition as a consequence of BCL’s equitable interest in the property.   It says that any equitable interest only arose after the agreement had become unconditional, and by that stage BCL was bound by the better offer condition.  As for the other specific alleged breaches, Westpac submits that they are no more than a complaint that Westpac and its agent were acting in accordance with the terms of the agreement.   Those actions were consistent with BCL’s equitable interest.  It denies that there was any confidentiality agreement with Brian Green.

[126]   Both counsel referred to the Court of Appeal decision in Bevin v Smith.33

Westpac relied on the case as authority for the proposition that a purchaser under an unconditional contract for the sale of land (being a contract which is capable of specific performance) has an equitable interest in the land, capable of supporting a caveat.  It submits that the equitable interest will cease if the contract under which it is created comes to an end, such as upon cancellation.

[127]   For  BCL,  Mr  Mason  submits  that  Bevin  v  Smith  is  authority  for  the proposition  that  a  purchaser  under  a  conditional  contract  also  has  an  equitable interest. The Court of Appeal said:34

We consider that purchasers in the position of the Smiths should in equity have  sufficient  interest  in  the  land  to  support  a  caveat  and  to  impose fiduciary duties on the vendor continuing in possession.

[128]   Mr Mason submits that, on the authority of Bevin v Smith, there exists an institutional constructive trust in favour of a purchaser pending completion of the sale and purchase transaction.  He submits that a consequence of that trusteeship is that Westpac owed BCL fiduciary duties.

[129]   Mr Mason also referred to the decision of the High Court of Australia in

Hospital Products Ltd v United States Surgical Corporation, and in particular to the following statement in the judgment of Mason J:35

33     Bevin v Smith [1994] 3 NZLR 648 (CA).

34     At 664.

35     Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (HCA) at 97.

The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

[130]   Mr  Mason  submits  that  Westpac’s  actions,  including  the  selling  of  the property to another purchaser without advising that the property was being marketed, were neither consistent nor inconsistent with the contract, but would be inconsistent with good faith.  He points to Westpac’s actions in bringing forward the settlement date under the Brian Green agreement as an additional indicator of lack of good faith.

[131]   Generally, Mr Mason submits that the content of the alleged duty of good faith  included  a  duty to  deal  candidly  and  straightforwardly  with  BCL,  by not engaging in a course of concealment.

[132]   Mr Mason does acknowledge in his submissions that the situation is to some extent a novel one, in that the parties were in a situation where there would generally have been a clear fiduciary duty owed to BCL, but Westpac had a contractual right to unilaterally terminate the  agreement.    He submits that  the question  of  how the fiduciary duty is modified by that contractual right is a new question, and that novel questions should not be resolved summarily on a strike-out application.  A detailed factual enquiry is appropriate.

Discussion and conclusion on the duty of good faith issue

[133]   In Walton Mountain Ltd v Apple New Zealand Ltd36, O’Regan J dealt with a case involving an agreement for sale and purchase of land.  Prior to settlement, the parties became aware that an application had been made to the Maori Land Court to declare the land to be Maori customary land.  The purchaser purported to requisition the vendor’s title with respect to the Maori land claim, and the requisition was rejected by the vendor, who served a settlement notice.  The defendant did not waive the requisition or settle the purchase, and the vendor then proceeded to cancel the

contract.

36     Walton Mountain Ltd v Apple New Zealand Ltd [2004] BCL 170; (2004) 5 NZ ConvC 193,853.

[134]   O’Regan J rejected the purchaser’s arguments that the vendor owed it a duty to act in good faith in considering the purchaser’s requisition, and could not act arbitrarily and unreasonably in proceeding to cancel the agreement.  The Judge dealt with the duty of good faith argument in the following terms:37

The last argument made on behalf of the purchaser was that the Court should imply into the contract a duty of good faith.  This submission was said to be based on Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (2002) 10 TCLR 257 and JB Stanley v Fuji Xerox (New Zealand) Ltd (High Court Auckland, CP 479/96, 5 November 1997, Elias J).   However,

,those cases relate to a franchise agreement and an agency agreement respectively, which places them in [sic] quote a different category from a

transactional contract such as agreement for sale and purchase of land, even where the transaction takes a long time to complete, as this one did.  I can

see no need to apply a duty of good faith into a contract which has no “relational” character such as is before the Court in Dymocks and Stanley.  I would not therefore have accepted that a duty of good faith applied in this

case.

[135]   An argument that a duty of good faith should be implied into a contract for the sale and purchase of land was also rejected by Doogue AJ in Chan v Ng & Ors. 38

On the particular facts of the case, his Honour did not see that it was necessary to imply any such term.

[136]   Pausing there, I see nothing in the circumstances of this case which might have justified the implication of a term in the contract that Westpac owed a duty of good faith to BCL.

[137]   But BCL has not put its case on the basis of an implied term.   Instead, it argues that on the signing of its agreement with Westpac, BCL acquired an equitable interest in the property, and that equitable interest carried with it fiduciary duties owed to it by Westpac as vendor, including a duty to act towards BCL with good faith.

[138]  I accept (as did Westpac in its submissions) that a purchaser under an unconditional contract for the sale of land has an equitable interest in the land, which is capable of supporting a caveat.  In Bevin v Smith, the Court of Appeal expressed

its agreement with recent Australian authorities to the effect that the equitable estate

37     Walton Mountain Ltd v Apple New Zealand Ltd above n 36 at [67].

38     Chan v Ng & Ors HC Auckland CIV-2007-404-6226, 28 March 2008.

passes when equity will, by injunction or otherwise, prevent the vendor from dealing with the property inconsistently with the contract of sale, i.e. inconsistently with the purchaser’s contingent ownership rights.39     However the Court of Appeal stressed that whether the equitable interest has passed must always depend on the terms of the contract itself.40

[139]   I also accept that it is arguable for BCL that a purchaser’s equitable interest in land it has agreed to buy exists regardless of the existence of a better offer condition in the contract, such as the better offer condition in this case.  But the fact that BCL might have held  an equitable interest in the property for a period of time says nothing about the content of any fiduciary duties which might have been owed by Westpac as vendor as a result of that equitable interest.

[140]   In Gosper & Ors v Relicensing NZ & Ors, McGechan J observed that the imposition of fiduciary obligations tends to occur in situations – some situations only

– where one party is vulnerable to the other, and conscience requires that the other should not take advantage of the situation.41   McGechan J went on to note that there are pragmatic limits to the contractual relationships into which equity will impose fiduciary obligations.   His Honour referred to such obligations being imposed on professionals, in whom utter confidence must be placed, and in situations involving trusted agents, or close and trusted family members. A frequent characteristic within such instances was said to be where the party on whom fiduciary obligations were imposed was “acting in the affairs” of another.

[141]   But his Honour went on to note that lines are drawn, and that the law steers away from such interference in routine commercial situations. 42   The law leaves the relationship governed by the standard rules of contract, misrepresentation and deceit, or  by  any  relevant  consumer  protection  legislation.    Mere  vulnerability  is  not enough.  McGechan J stated that the reason for the distinction is pragmatic: ordinary

commerce should be dealt with in the ordinary way.  It is not in the public interest to

39     Bevin v Smith above n 33 at 665.

40     At 665.

41     Gosper & Ors v Relicensing NZ & Ors CP 225/96, Wellington, 17 August 1998 (HC), at 95-96.

42     At 95, citing DHL International (NZ) Ltd v Richmond Ltd (1993) 3 NZLR 1022, Bowkett v Action Finance Ltd (1992) 1 NZLR 449, 462, and Hospital Products v US Surgical Corporation (1984) 156 CLR, 73.

be constrained by the more extreme requirements which follow fiduciary duties. The latter are for exceptional relationships, where conscience will so demand.43

[142]   The observations of McGechan J in Gosper seem to me to be particularly apt in this case.   The parties were experienced commercial operators, contracting at arm’s length for the sale and purchase of a commercial property.   There was no question of “vulnerability” on the part of BCL – its difficulties have substantially arisen because its directors failed to read properly the contract that they signed.  On the other hand, Westpac was entitled to pursue its interests – it was not in any sense “acting  in  the  affairs”  of  BCL.    As  McGechan  J  noted  in  Gosper,  “ordinary

commerce should be dealt with in the ordinary way”.44

[143]   The Hospital Products case cited by Mr Mason points in the same direction: a fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract, so that it is consistent with them, and conforms to them.45

[144]   I do not read Bevin as suggesting any different approach.  The case was not concerned with any alleged duty by a vendor to keep its purchaser apprised of activities the vendor was undertaking with a view to sale to another party under a better offer clause.  It was concerned with the purchaser’s entitlement to take action to prevent the vendor from dealing with the property in a manner inconsistently with the contract of sale.

[145]   In this case, the contract expressly entitled Westpac to sell the property to a third party if it received an offer the terms of which it considered to be at least as good as those set out in its agreement with BCL.  Having regard to authorities such as Walton Mountain and Chan v Ng, and to the commercial nature of what was a single transaction between two substantial commercial parties, there was nothing in the circumstances which in my view could have created a “good faith” obligation on Westpac to advise BCL of its marketing steps taken under the better offer condition, or to advise BCL that it had entered into a confidentiality agreement with Brian

Green (if any such agreement is proved to have been made).

43     Gosper & Ors v Relicensing NZ & Ors, above n 41 at 96.

44     At 96.

45     Hospital Products Ltd v United States Surgical Corporation, above n 35 at [100].

[146]   As I have held, I consider it arguable for BCL that, in some respects, Coast may have acted in breach of the Fair Trading Act.   Any such breaches arguably bound Westpac as Coast’s principal, but any such breaches were breaches of specific consumer protection legislation (the Fair Trading Act) which do not provide any basis for grafting additional obligations onto the contract, or into the parties’ relationship, for which they have not bargained.

[147]   I conclude that BCL’s third cause of action, alleging breach of a duty of good faith owed by Westpac to BCL under the agreement, is clearly untenable and should be struck out.

Summary of orders

[148]   I make the following orders:

(a)      The applications for summary judgment by Westpac and Coast are dismissed.

(b)BCL’s first and third causes of action (alleged invalidity of Westpac’s cancellation notice, and alleged breach of duty to act in good faith) are struck out.

(c)      The  defendants’ applications  to  strike  out  BCL’s  second  cause  of action, alleging breaches of the Fair Trading Act, succeed in part.  The following paragraphs in the Statement of Claim dated 27 March 2014 are struck out:

Subparagraphs i, ii, iii, x and xi of paragraph [73], all of paragraphs

[74], [75], and [77], and subparagraphs i and ii of paragraph [76].

(d)      Costs are reserved.

Solicitors:

Powell Lyall Lawyers, Palmerston North for plaintiff

Simpson Grierson, Auckland for first defendant

Kennedys, Auckland for second defendant

Associate Judge Smith