Carr and Brookside Farm Trust Limited v Frost and Horne
[2008] NZCA 391
•25 September 2008
IN THE COURT OF APPEAL OF NEW ZEALAND
CA91/2008
[2008] NZCA 391BETWEENEWAN ROBERT CARR
First AppellantANDBROOKSIDE FARM TRUST LIMITED
Second Appellant
ANDMURRAY NEIL FROST AND MICHAEL CRAIG HORNE
First RespondentsANDJARCEL INVESTMENTS LIMITED
Second RespondentANDAWATAIERI HOLDINGS LIMITED
Third RespondentANDANESYDS LIMITED (IN RECEIVERSHIP)
Fourth RespondentANDRODNEY JOHN HUMPHRIES
Fifth RespondentANDBIG SKY DAIRY FARMS LIMITED (IN LIQUIDATION)
Sixth RespondentANDCASCADE CAPITAL LIMITED
Seventh RespondentANDMAIN FARM LIMITED (IN RECEIVERSHIP)
Eighth RespondentANDCONSULTANT MANAGEMENT SERVICES LIMITED (IN RECEIVERSHIP)
Ninth Respondent
Hearing:27 & 28 August 2008
Court:Glazebrook, Robertson and Baragwanath JJ
Counsel:T C Weston QC and S P Rennie for Appellants
G J Toebes for Sixth, Seventh, Eighth and Ninth Respondents
A R Gilchrist and L M Nicholson for Second, Third and Fifth Respondents
No appearance for First and Fourth Respondents
Judgment:25 September 2008 at 3.30 pm
JUDGMENT OF THE COURT
A THE APPEAL IS DISMISSED.
BThe appellant must pay the sixth, seventh, eighth and ninth respondents jointly costs for a standard appeal on a Band A basis together with usual disbursements.
CThe appellant must pay the second, third and fifth respondents jointly costs for a standard appeal on a Band A basis together with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Robertson J)
Table of Contents
Para No
INTRODUCTION [1]
THE PARTIES [5]
BACKGROUND [8]
THE AMENDED SETTLEMENT AGREEMENT (“ASA”) [18]
THE STEPS TOWARDS SETTLEMENT [23]
(I) AN INITIAL PROBLEM [23]
(II) SETTLEMENT DAY: EVENTS BEFORE 4PM [24]
(III) SETTLEMENT DAY: EVENTS AFTER 4PM [29]
THE NUB OF THE APPEAL [38]
THE APPELLANTS’ CASE [39]
DISCUSSION [50]
WAIVER [66]
RESULT [82]Introduction
[1] This appeal arises out of two proceedings heard by the Chief High Court Judge at Dunedin in November 2007 (CIV 2007-412-507; 2007-412-510 29 February 2008). The first respondents made an application for directions on a failed settlement agreement for the sale and purchase of various assets and land, and the current appellants initiated a proceeding for specific performance of the settlement agreement or, alternatively, equitable relief.
[2] A substantial number of the issues which were before the High Court are no longer in contention, including equitable relief. The main issue before us is the nature and effect of a clause in the settlement agreement that made the time for settlement “of the essence”. In particular, whether the essentiality of the stipulated time meant that each party to the agreement had an independent right to cancel in the settlement deadline was not met, or whether some of the parties were entitled unilaterally to waive the essentiality of time on behalf of all the parties. In other words, were all parties to the agreement entitled to “veto” settlement if the essentiality of time condition was breached?
[3] There was a cross appeal by the second, third and fifth respondents and subsidiary issues raised relating to waiver of the essentiality of time condition, but counsel were agreed that resolution of the “veto” issue could determine the proceedings.
[4] The first respondents, who were the receivers of a group of companies which are the sixth, seventh, eighth and ninth respondents, did not personally participate in the hearing of the appeal although the companies in receivership were before the Court. The fourth respondent indicated that it would abide the decision of the Court.
The parties
[5] Big Sky Group (“Big Sky”) was a joint venture between Ewan Carr, Rodney Humphries and the late Howard Paterson, and interests associated with each of them. Big Sky owned three Maniatoto dairy farms, and one of the Big Sky companies owned dairy cows.
[6] Two companies outside the Big Sky Group, Jarcel Investments Limited (“Jarcel”) and Awataieri Holdings Limited (“Awataieri”), were Mr Humphries’ interests. Jarcel and Awataieri owned dairy cows, and bailed them to the Big Sky Group for use in its dairying operation.
[7] The Carr and Humphries interests also controlled the land, buildings and business of the Danseys Pass Coach Inn, which was owned by a company called Anesyds Limited (“Anesyds”). Mr Humphries’ interests controlled the Styx Hotel, which was owned by a company called Brookside Properties Limited (“Brookside”).
Background
[8] Big Sky was formed in 2000. In 2003 Mr Paterson died. The relationship between Mr Carr and Mr Humphries soon deteriorated, and the joint ownership and management of the venture companies became problematic. Mr Carr and Mr Humphries sought to effect a ‘clean break’ between their interests.
[9] In March 2005, Mr Carr was granted an option to purchase the Big Sky assets. The purchase price under the option was the sum of Big Sky’s total indebtedness, which included substantial sums owed to Mr Humphries’ interests. The option was to be exercised by 1 November 2006.
[10] Mr Carr exercised the option on 27 October 2006. Mr Humphries’ lawyers (Dyer Whitechurch, of Auckland) supplied a preliminary statement of loans and creditors. This totalled over $30 million. Approximately half of that sum was owed to the Bank of New Zealand, one-third to Mr Humphries’ interests, and the balance to other creditors.
[11] The sums owed to Mr Humphries’ interests and to other creditors were disputed by Mr Carr. The antagonism between Mr Carr and Mr Humphries escalated, and interim liquidators were appointed by the High Court on 5 March 2007 to maintain the Big Sky assets, calculate the settlement sum and facilitate settlement.
[12] On 12 March 2007 Murray Frost and Michael Horne were appointed by the Bank of New Zealand as receivers of Big Sky. Mr Frost calculated the purchase price under the option to be $25.38 million.
[13] The receivers issued Mr Carr with a settlement notice dated 12 April 2007, requiring settlement within 12 working days (time being of the essence). Mediation before the Hon Robert Fisher QC followed over Mr Frost’s calculated purchase price, but failed.
[14] There was a hearing scheduled for 3 May 2007 in the High Court to set aside the appointment of the interim liquidators. It was adjourned while Mr Carr and Mr Humphries (both with counsel) engaged in negotiation over both the purchase price under the option and over other separate transactions between the two interests.
[15] These negotiations culminated in an initial settlement agreement signed about 2 May 2007, which stipulated the purchase price for the assets of Big Sky, as well as for 2,500 cows (from companies owned by Mr Humphries’ interests, and for the assets of Anesyds (ie the Danseys Pass Coach Inn).
[16] This initial settlement agreement provided for settlement no later than 31 May 2007. The agreement was conditional upon the consent of the Big Sky receivers.
[17] Mr Toebes, Big Sky’s legal representative, gave conditional consent to the agreement. Mr Carr was obliged to confirm satisfaction of the agreement’s finance condition by 4pm on 18 May 2007, time being of the essence. The time for settlement was extended to 4pm on 31 May 2007, and again, time was stated to be of the essence.
The Amended Settlement Agreement (“ASA”)
[18] The terms of the total deal were finalised and incorporated into the ASA about 16 May 2007.
[19] The ASA covered four transactions. The Carr interests were to purchase:
(a) the dairy farms;
(b)the herd of 2,500 milking cows (some from one of the Big Sky companies and some from Jarcel and Awataieri);
(c)shares in Anesyds (the Danseys Pass Coach Inn); and
(d)shares in Brookside (which owned the Styx Hotel).
Mr Carr nominated Brookside as purchaser, and arranged for finance for all transactions from Hanover Finance Ltd (“Hanover”).
[20] Mr Carr confirmed satisfaction of the finance condition on 18 May 2007.
[21] There are four clauses in the ASA which, all counsel agree, are of critical importance:
7.Settlement of the option shall occur in accordance with the terms of the option deed (except as modified by this agreement, which is made pursuant to the mediation provision in the deed conferring the option to purchase). The vendors of the Big Sky assets agree to extend the time (time being of the essence) for settlement of the purchase by Carr pursuant to the Settlement Notice issued to 4 p.m. on 18 May 2007 (time being of the essence) and agree to the price and assets to be transferred being as varied by this agreement. If Carr confirms in writing the satisfaction of the condition as to finance set out in paragraph 8 of the settlement agreement by 4 p.m. on 18 May 2007 (time being of the essence) then the time for settlement as set out in the Settlement Notice shall be extended to 4 p.m. on 31 May 2007 (time being of the essence). The covenants contained in this settlement agreement in relation to Carr and the Big Sky companies are acknowledged to be a necessary variation to the terms of the sale and purchase contract arising from the option Deed and the notice of exercise of Option and the Settlement Notice.
15.Mr Carr acknowledges that if he does not confirm the Option Sale Contract as unconditional by 4 pm 18 May 2007 (time being of the essence) or does not settle the purchase from the companies by 4 pm 31 May 2007 (time being of the essence) that the companies will cancel the option sale contract and may re-sell (within such time as they consider reasonable) the relevant properties whether by public auction or tender or private contract, as a whole or in lots, at such a price or prices and on such terms and conditions in all respects whether as to time or mode of payment of purchase money or otherwise as the vendor thinks fit, and the deficiency or loss (if any) arising after such resale, including all outgoings relating to the said property and interest hereunder to the date of the completion of such resale and all charges attending such resale and every attempted resale, shall immediately after such resale be recoverable by the companies from Carr as liquidated damages. Any surplus monies arising from a resale as aforesaid shall be retained by the vendors.
19.Settlement of the transactions arising out of this agreement shall occur no later than 31 May 2007. Prior to the settlement the parties shall co-operate in seeking the approval of the IRD to the transfer of the purchasers GST refunds to the GST accounts of the various vendor companies within IRD with a view to avoiding the necessity for GST to be paid on settlement. It is agreed that the three transactions covered by this settlement (Big Sky, Anesyds and Styx) are interdependent and that the settlement of all three is intended to be simultaneous. However, in the event that an impediment outside of Mr Carr’s making or control arises in relation to the settlement of either of the Styx or Anesyds transactions the Big Sky transaction shall settle together with such of the Styx and Anesyds transactions as is able to settle and the parties shall co-operate in good faith in settling the outstanding transaction or transactions.
20.Upon payment of the full purchase price without set-off or deduction by the specific time (time being of the essence) to the companies, the companies, and the interest of Mr Humphries shall have no further claims against Mr Carr or his interests, and Mr Carr and his interests shall have no further claims against the companies, or Mr Humphries interests.
[22] At [34], Randerson J summarised his view of the key features of the ASA thus:
(a)Settlement of the sale and purchase of the assets of the Big Sky Group was to be completed by 4 pm on 31 May 2007, time being of the essence;
(b)Settlement of the sale and purchase of the cows, the Danseys Pass assets and the Styx was to be simultaneous with the settlement of the Big Sky Group sale;
(c) Transactions were to be interdependent;
(d)The vendors of Danseys Pass and the Styx were not obliged to proceed unless the Big Sky sale proceeded; and
(e)Under the proviso to clause 19, the Big Sky sale could proceed independently of the others only if events outside Mr Carr’s making or control arose which were an impediment to the settlement of the Danseys Pass and Styx transactions.
The steps towards settlement
(i) An initial problem
[23] Steps in preparation for settlement were put in train, but there was a substantial problem when the receivers indicated that the settlement figure was meant to include GST, and did not. It had been hoped that this could, with the IRD’s agreement, be avoided. Mr Frost was not however prepared to risk an objection by the IRD, and was adamant that the GST be paid upon settlement. The purchasers would later have to obtain a credit from the IRD.
(ii) Settlement day: events before 4pm
[24] Over the course of 31 May 2007, Mr Grant (the Carr solicitor) worked through the finance conditions and the other outstanding issues necessary for settlement to proceed.
[25] At around 1.30pm, one of the lawyers for the Humphries’ interests, Ms Nicholson of Dyer Whitchurch, informed Mr Grant that the mortgage release instruments for the Danseys Pass Coach Inn had been mislaid. Mr Humphries had various securities over the Danseys Pass Hotel and without their release the sale could not proceed. Mr Humphries drove to Dunedin to execute replacement documents, which were available from around 3pm.
[26] Problems emerged with the settlement cheques. First, the schedule of cheques attached to the settlement documentation was incomplete. In respect of the Danseys Pass purchase, the schedule understated the amount of the cheque by $321,000, and it did not list any cheque for the purchase of the cows from Jarcel and Awataieri. No cheque was even drawn for the cows. Mr Grant considered that the purchase of the cows could be effected by electronic funds transfer, but that method of payment had not been agreed upon as legal tender with Mr Humphries.
[27] Despite these problems, sufficient funds to cover all the transactions (including the GST and the cows) had been arranged and approved by Hanover.
[28] Cheques were drawn at the Bank of New Zealand just after 3.30pm. One of Mr Grant’s employees collected them from the Bank and delivered them to the offices at the law firm Anderson Lloyd Caldwell where Mr Grant had gone to effect the settlement. Mr Moore, a principal of that firm, was acting as agent on the settlement for the receivers and for the Big Sky companies.
(iii) Settlement day: events after 4pm
[29] Mr Grant arrived at Anderson Lloyd Caldwell around 4pm, and met with Mr Moore shortly after. Mr Grant was presented with some settlement documentation for the Big Sky transaction. He checked through the documents and handed them back to Mr Moore.
[30] The electronic transfer of the funds from Hanover to Mr Grant’s trust account was effected about 4.12pm. The cheques arrived at Anderson Lloyd Caldwell offices around 4.15pm. When they arrived, Mr Moore noticed that the Danseys Pass cheque was short by $321,000 and that there was an error in the payee name on the cheque for the Big Sky purchase. He also told Mr Grant that he was instructed to act for the Big Sky and Anesyds receivers, but had no instructions to act for Mr Humphries’ interests.
[31] Attempting to remedy the problems with the cheques, Mr Grant arranged with Anesyds’ lawyer, Ms Judd, to make up the $321,000 shortfall for the Danseys Pass purchase by electronic funds transfer subject to the other transactions proceeding. The payee name on the Big Sky cheque was resolved to the satisfaction of all relevant parties.
[32] No direct steps were taken in respect of the missing cheque for the cows purchase.
[33] Mr Grant was informed that although he was holding bank cheques they could not be tendered, but at 5.02pm he was advised that the Hanover funds had been cleared.
[34] By this time, business hours were drawing to a close, and at 5.50pm Mr Grant was informed by a Bank of New Zealand employee that the cheques could not be accepted that day.
[35] At 6.05pm Mr Toebes informed Mr Moore that the Big Sky transaction was cancelled because the 4pm deadline had passed and time had been of the essence.
[36] Mr Humphries had made plain, on several occasions prior to that time, his position that he would not settle after 4pm. Ms Nicholson reported this firm position both to Mr Toebes and to Ms Judd. At 4.10pm, Ms Nicholson emailed Mr Toebes, stating that:
We have just spoken to Mr Humphries by phone. It is now after 4pm and his strict instructions are that if settlement has not been completed then the agreement is cancelled. You have no authority to settle on behalf of Jarcel or Awataieri, and the terms on which he signed the agreement were accepted by all parties –time (4pm today) was of the essence. Please advise Anderson Lloyd immediately and confirm same to us.
Morgan Coakle have been given the same instruction.
[37] For reasons which were not explained, Ms Nicholson did not communicate the substance of this email to Mr Grant or otherwise to the Carr interests.
The nub of the appeal
[38] From these circumstances, the following issues arise for resolution:
(a)Could Mr Humphries cancel the ASA any time after 4pm when settlement had not been completed?;
(b)If not, were the Big Sky receivers entitled, as a matter of contractual interpretation, unilaterally to waive the essentiality of time and complete settlement after 4pm, thereby obliging the other vendors to complete settlement of their transactions as well?;
(b)If the Big Sky receivers were so entitled, did they, by their conduct, in fact waive the essentiality of time?; and
(c)If the Big Sky receivers were entitled to waive the essentiality of time on behalf of the other vendors, and did in fact so waive, were they obliged to stipulate a new (reasonable) essential time for settlement?
The appellants’ case
[39] Mr Weston QC recognised that the crux of the Judge’s decision was his interpretation of the ASA (noted above, at [22]). Counsel submitted that Randerson J was wrong in his view that the ASA represented an “all or nothing situation” and that he was in error when he said at [54]:
I am not persuaded that the Humphries interests had an independent right of cancellation but they (and the Anysyds receivers) had a right of veto if the Big Sky receivers wished to proceed despite the passing of the 4 pm deadline. This would effectively achieve the same result. It is possible that the Anesyds receivers had an independent right of veto and a right to cancel arising from the interdependency provision in the separate agreements signed in relation to the Danseys Pas. However, the Anesyds receiver did not seek to exercise any such rights and the point is not material for present purposes.
[40] Mr Weston summarised the Judge’s approach thus:
(a)the Big Sky receivers “could not act unilaterally” with regard to settlement and could not settle after 4pm without the agreement of the other parties;
(b)the Big Sky receivers could not “extend the time for settlement under the ASA without the consent of the Humphries interest and the Anesyds receiver”;
(c)“settlement could not lawfully have been extended beyond 4pm by the actions of one of the vendors alone”; and
(d)the “4pm deadline for settlement was not validly waived”.
[41] Mr Weston submitted that the Judge had simply misinterpreted the ASA, particularly cl 19.
[42] First, Mr Weston noted that under cl 19 the settlement of all transactions “shall occur not later than 31 May 2007”. He compared this with cl 15, which makes time of the essence and which provides that failure to settle by 4pm enables “the companies” to cancel the option sale contract.
[43] Secondly, he argued that the reference to “companies” throughout the ASA was a reference only to the Big Sky companies and therefore that only the Big Sky receivers had a right to cancel for breach of the 4pm deadline. If Big Sky chose to proceed despite the breach, Mr Weston contended, the other parties had to fall into line and settle as well.
[44] He submitted that cl 16 merely made the Anesyds transactions conditional on the Big Sky settlement having taken place, but did not make them interdependent. He stressed that there was no such clause in relation to the Humphries’ transactions.
[45] Against that background, Mr Weston undertook a detailed analysis of cl 19. He submitted that, although the settlements of the four transactions were interdependent, and the settlements of the Anesyds, Styx and cows transactions were contingent upon the Big Sky settlement, the transactions were not themselves interdependent. He submitted that the first half of the first sentence of cl 19 addresses only the question of settlement, and does not denote transactional interdependence.
[46] Counsel submitted that the final sentence of cl 19, which Randerson J referred to as the clause’s ‘proviso’, is critical. On the Judge’s view of matters, Mr Humphries gained a right of ‘veto’ to any contrary position the Big Sky receivers might wish to advance once 4pm on 31 May 2007 had passed. But Mr Weston contended that this was unsustainable, especially as Mr Humphries did not get a mention of any sort in either cls 7 or 15.
[47] Therefore, Mr Weston argued, when the ASA is read as a whole the only proper interpretation is that Big Sky is the lead transaction. This is supported by the value of the respective transactions, of which Big Sky was the largest.
[48] Mr Weston accepted that there was some tension between the third and fourth sentences in cl 19, but that this was resolved if cls 7 and 15 were read to make Big Sky the lead transaction with the others to settle simultaneously with, or immediately following, the Big Sky settlement.
[49] It was contended that any other interpretation, particularly one which gave Mr Humphries a right of ‘veto’ would mean that “the tail would wag the dog” because it would give parties with proportionately small stakes in the ASA disproportionate control. This could lead to absurdity within the ASA as a whole. This, he submitted, could be avoided if the ASA were interpreted to make the Big Sky settlement a precondition to settlement of the other transactions.
Discussion
[50] Although the ASA must be read in its terms, it must be assessed against the background from which it arose.
[51] The ASA had its genesis in the original option signed in March 2005, which was the means adopted by Mr Carr and Mr Humphries to extricate themselves from their joint business arrangements. It is true that as a matter of law the various companies covered by the ASA were separate legal entities, but they were linked by common interests and ownership. To gain a proper appreciation of the deal which was eventually completed, it is important to note that the unwinding of the intermingled business activities was the rationale for the option granted to Mr Carr, and for the agreements that followed.
[52] As the terms of the initial settlement agreement make clear:
Background
1The parties are engaged in litigation relating to the assets of the Big Sky Group, Anesyds Limited and a property known as the Styx, and have, through mediation agreed to resolve the disputes between them.
2The parties wish to record the heads of agreement under which they agree to settle the disputes.
Agreement
…
15Immediately following settlement, the parties shall immediately withdraw all proceedings files, with costs lying where they fall.
16This agreement shall be in full and final settlement of all issues between the parties.
[53] The ASA is not inconsistent with this initial agreement. Rather, the ASA expanded the settlement, providing for:
(a)Mr Humphries’ obligation to pay certain creditors of Big Sky;
(b)Mr Carr’s obligation to pay certain creditors (UDC Finance and McSkimmings);
(c)an indemnity given by Mr Humphries;
(d)payment of the interim liquidators’ costs by Mr Carr;
(e)abandonment of an earlier appeal by Mr Humphries; and
(f)discontinuance of all existing proceedings.
[54] As between Mr Humphries and Mr Carr, all of these matters were necessary to achieve full and final settlement of their disputes .
[55] Although Mr Humphries’ direct interest in the ASA amounted to only a few hundred thousand dollars, the disposal of Big Sky under the ASA had flow-on consequences of over $8 million for his interests. It is important not to lose sight of this, as it is indicative of the large stake Mr Humphries has in the deal as a whole.
[56] We consider that the ‘proviso’ to cl 19 of the ASA meant that, if the Styx and Anesyds transactions could not settle because of an impediment outside of Mr Carr’s making, then the Big Sky transactions could still settle. But, once the impediment was dissolved, the remaining transactions were to be pursued in good faith, so as to achieve ultimate settlement between the parties. The proviso simply expressed the parties’ intention that settlement of the Big Sky transaction should not be thwarted by administrative problems with the other transactions. But, there was an onus on the parties to co-operate in good faith to resolve any such problems, with a view to a comprehensive settlement.
[57] We are satisfied that Randerson J was correct when he treated the ASA as an “all or nothing” agreement. All settlements under the agreement were intended to be interdependent.
[58] The ASA was the culmination of a chain of documents, including the option, the exercise of the option and the original settlement agreement. It cannot be concluded that the sale of the land under the control of the Big Sky receivers was a “lead” transaction. All the transactions were interwoven, including the sale of the Awataieri and Jarcel cows.
[59] The original option deed had not covered assets owned by Jarcel and Awataieri, or the Danseys Pass Inn, or the Styx. But those assets were included in the ASA. By the time the ASA was signed, everything in respect of which there were joint activities by the Humphries and Carr interests was provided for in the agreement so as to effect a total separation of the business ventures of the two men.
[60] It follows that the essentiality of time criterion constrained and empowered all parties to the ASA. All parties were bound to observe the condition, and all parties were entitled to insist upon its performance, and to cancel for non-performance. There is no doubt that this was understood by all parties to the ASA. The matter could not have been more clearly stressed or underlined. By an email of 15 May 2007, Ms Nicholson informed Mr Grant that Mr Humphries had signed the ASA:
Strictly on the basis that the times for confirmation and settlement in clause 15 are of the essence, ie, unless Mr Humphries agrees to an express extension before the stipulated times the agreement will automatically be at and end.
[61] In a reply email, Mr Grant acknowledged this “e-mail clarification” to the ASA. (In its cross-appeal, Big Sky submitted that this email exchange fortified the 4pm deadline and in the High Court argued that the agreement simply “dropped dead” at 4pm when Mr Carr failed to settle. Randerson J did not accept this and the matter was not pursued before us.)
[62] We conclude, in agreement with Randerson J, that as at 4pm on 31 May 2007, any of the parties was entitled to cancel the deal if settlement had not been completed. Mr Weston’s conjectures about mistakes by others preventing the settlement or the spectacle of a courier coming across the street as the clock struck 4pm are fascinating titillations but are not part of what in fact happened and do not require resolution.
[63] However, notwithstanding that Mr Humphries, as a party to the ASA, had the right to cancel the agreement once the 4pm deadline passed, he did not take effective action to exercise that right. He initially communicated with those representing Big Sky interests, but did not communicate cancellation to the Carr interests.
[64] It is plain that the Big Sky interests were keen for settlement of the whole ASA to proceed. An email was sent by Ms Nicholson at 5.12pm asserting that the ASA was at and end if settlement had not been completed by 4pm. In cross-examination, Mr Frost accepted that “my preference was always to settle because the bank would be paid.” Settlement was, in the assessment of the Big Sky parties, desirable. However, in cross-examination Mr Frost emphasised that he was at all material times “trying to determine what the proper course of action was.” That is, he was aware that “without the continued agreement of Mr Carr and Mr Humphries I should cancel.”
[65] For reasons not articulated or addressed, at 6.05pm Big Sky exercised its right of cancellation. As settlement had not been effected at that stage and time had been of the essence, the deal came to an end. The only caveat is whether Big Sky had by its conduct between 4pm and 6.05pm waived its right of cancellation.
Waiver
[66] This issue is now very limited in its scope. We have concluded that all parties to the ASA held a right of ‘veto’ in respect of the essentiality of time criterion. That is, once Mr Carr failed to settle by 4pm, it was open to all or any of the parties to the ASA to cancel the deal.
[67] There is no evidence that Mr Humphries or his interests sought independently to cancel, despite their right to do so.
[68] Under the ASA, Big Sky was the primary transaction, to the extent that its settlement was not to be thwarted or stymied by problems with the other transactions (see our discussion of the ‘proviso’ at [56], above). But, that does not mean that Big Sky, by waiver or toleration of Mr Carr’s contractual breach, could commit the other parties to waiving their rights to cancel for breach of the essentiality of time condition. If Big Sky waived, then that affected its position, but not the position of the other parties who continued to have rights of ‘veto’.
[69] Because no parties other than Big Sky engaged in any transactional conduct after 4pm, the issue of any of them having waived the essentiality of time criterion does not arise for consideration. On the issue of waiver, only the acts or omissions of Big Sky require consideration.
[70] If a party to a contract voluntarily tolerates a breach of a time condition by another party and encourages the belief that the condition will not be insisted upon, then they are estopped from later insisting on their rights in respect of the condition: Buckland v Farmer and Moody [1978] 3 All ER 929 (CA); Charles Rickards v Oppenheim [1950] 1 KB 616. In New Zealand Railways Corporation v Fletcher Development and Construction Ltd (1990) 1 NZ ConvC 190,464 at 190,467, this Court said:
Waiver… occurs where the party entitled to insist on strict compliance with provisions as to time leads the other party to understand or assume that such provisions will not be insisted upon. This may occur when the party otherwise entitled to insist on adherence to stipulations as to time does some act inconsistent with his continued insistence on strict compliance.
[71] For Big Sky to have waived the essentiality of the 4pm settlement deadline in respect of its transaction, its conduct must have been inconsistent with continued insistence on the condition, or encouraged the belief that the condition was no longer essential. In addition, if time was to be “of the essence” again, at some later time, that time must have been notified to Mr Carr, and it must have been reasonable (Charles Rickards v Oppenheim).
[72] Before Randerson J, Mr Rennie for the Carr interests submitted that in an email sent by Mr Toebes to Mr Grant at 3.54pm, the essentiality of time condition was extended to 5pm. Mr Toebes had stated in the email that the vendors undertook to hold GST “in consideration of settlement of the purchase in business hours today” [emphasis added]. The Judge considered that this email varied the essential time under the ASA from 4pm to 5pm (5pm being the orthodox close of business). But, since the Judge found that the Carr interests were unable to settle even by 5pm, his finding on the varied essential time was of no moment to the disposition of the case before him. The appellants initially submitted that Randerson J erred in deeming 5pm to be the new essential time denoted by the words “business hours today”, but before us, Mr Weston abandoned this point of appeal.
[73] Rather, Mr Weston focussed his argument on events between 4pm and 6.05pm. He acknowledged that once the 4pm deadline passed, the ASA was voidable. All parties, including Big Sky, had the right to cancel the agreement for breach of an essential condition. But, Mr Weston argued, that right was not exercised, and when Mr Moore engaged with Mr Grant by presenting him with settlement documents (without reserving Big Sky’s rights), Big Sky waived the essentiality of time. If Big Sky did waive the 4pm deadline, it was required to provide reasonable notice of a new essential time, which it did not do. Thus, it was submitted, Big Sky was not entitled, at 6.05pm, suddenly to cancel as it purported to do.
[74] Randerson J considered that Mr Moore’s conduct did not amount to waiver because the steps taken after 4pm were only in preparation for settlement, and not part of the settlement process itself. The Judge noted Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 at 518 (PC), where the opening of a settlement envelope by a vendor solicitor who later cancelled the agreement, was held not to constitute a waiver.
[75] In Union Eagle, the House of Lords found that all conduct by the vendor solicitors “made it clear that the tender [by the purchaser] was being rejected” (at 218). Mr Weston submitted that the circumstances of this case fell well short of this kind of clear, unequivocal acceptance of Mr Carr’s repudiatory breach. Rather, Mr Moore’s failure either to make plain that he would engage with Mr Grant while reserving Big Sky’s right to cancel, or simply not to engage even in ‘preparatory’ steps, compels the conclusion that Big Sky waived the condition.
[76] Mr Toebes submitted that waiver cannot be inferred simply because Big Sky did not expressly cancel the contract until 6.05pm.
[77] We agree. There is no dispute that Big Sky did not expressly cancel the agreement until 6.05pm when Mr Toebes informed Mr Moore that the agreement was at an end. But, the conduct of Mr Moore from the time Mr Grant arrived at the Anderson Lloyd office until 6.05pm, and the comprehensive inability of the Carr interests actually to settle on 31 May, do not permit the conclusion that the essentiality of the 4pm deadline was waived.
[78] Mr Grant arrived at Anderson Lloyd just after 4pm, and met with Mr Moore at around 4.10pm. The Big Sky documents were checked through between 4pm and 4.30. Also in this timeframe the cheques arrived at the office, and the finance was cleared for transfer. It was, however, clear that Mr Grant was not ready for settlement, certainly not within the stipulated time and, as it turned out, not even in the hours that followed.
[79] Most glaringly indicative of the Carr interests’ inability to pursue timely to completion were the (erroneous and incomplete) cheques and the notification to Mr Moore at 5.50pm from the Bank of New Zealand that the cheques could not be accepted that day, even if settlement on the documents proceeded. Even the most elementary of conditions precedent to settlement, the clearance of Mr Carr’s finance from Hanover, did not occur until 4.12pm. The release by Mr Humphries of the mortgage documents that were mislaid and had to be re-executed (see above at [25]) was not confirmed until 5.04pm, and Mr Grant did not receive the confirmatory email until after 6pm. Without knowledge of such basic details, it cannot be said that Mr Grant apprehended that settlement was possible, and given the circumstances of the ASA, he did not take steps to avail the Carr interests of an extended deadline.
[80] This is not a case where an otherwise smooth settlement process was thwarted by a rogue incident or circumstance out of the control of the purchaser. Rather, the Carr interests came to settlement unprepared. As Randerson J found, the inability of the Carr interests to settle was due to their errors and omissions. The vendors were at all material times, ready, willing and able to settle.
[81] All parties to the ASA were cognisant of Mr Humphries’ categorical insistence that 4pm was the essential time for settlement. The email sent to Mr Grant by Ms Nicholson on 15 May made that plain. There cannot have been any doubt in Mr Grant’s mind that the deadline was an essential term of the contract, and Mr Moore’s few, peripheral acts upon Mr Grant’s arrival at the Anderson Lloyd office were insufficient to undermine that clear understanding. It cannot be said that Mr Grant was led to the understanding that the 4pm deadline would not be insisted upon. In light of the clear correspondence that preceded 31 May, and in light of the antagonistic relationship between Messrs Carr and Humphries, much more than a couple of stuttering steps towards settlement would have been required to constitute a waiver by Big Sky. In this regard, the facts of this case are similar to those in Union Eagle.
Result
[82] It accordingly follows that we are satisfied that Randerson J was correct in his assessment of the matter and that the contract came to an end at 6.05pm on 31 May 2006.
[83] The appeal must accordingly be dismissed. The appellant must pay costs for a standard appeal on a Band A basis together with usual disbursements for each of the two groupings of respondents before us.
Solicitors:
Rhodes & Co, Christchurch, for Appellants
Dyer Whitchurch, Auckland, for Respondents
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