Colcroft Holdings Limited v Meadows
[2024] NZHC 173
•14 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2162
[2024] NZHC 173
BETWEEN COLCROFT HOLDINGS LIMITED
Plaintiff
AND
JASON JOSEPH MEADOWS
Defendant
Hearing: 12 February 2024 Appearances:
H G Holmes for the Plaintiff Defendant in person
Judgment:
14 February 2024
JUDGMENT OF WHATA J
This judgment was delivered by me on 14 February 2024 at 4.00pm,
pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors:
Keegan Alexander, Auckland Copy to: J Meadows
COLCROFT HOLDINGS LIMITED v MEADOWS [2024] NZHC 173 [14 February 2024]
[1] Mr Meadows did not settle the purchase of a Waiheke property on time. Colcroft Holdings Limited (CHL), the vendor, cancelled. Mr Meadows claims evidence of major damage to the property only came to light at the time of settlement, derailing his ability to obtain finance and settle. He lodged a caveat to protect his position. The matter came before me for the removal of Mr Meadows’ caveat. I did not remove it, finding that:1
[43]In summary whether on the facts of this case:
(a)there was a proper basis for the claim of major weathertightness damage (and misrepresentation, among other claims);
(b)invasive inspection was reasonably necessary to enable Mr Meadows to meet the informational requirements of cl 10.3; and if so,
(c)CHL was obliged to allow invasive testing, is not a question readily resolved without regard to established facts.
[2] CHL now applies for a hearing of preliminary question comprising issues (b) and (c) above. It says, in short, that the answer to these questions in the negative will resolve Mr Meadows claim to specific performance. Mr Meadows claims that a multitude of issues must be addressed in order for his claim to be properly and fully resolved.
[3] I am satisfied that resolution of issues (b) and (c) will, together with further discrete questions relating to the vendor’s disclosure and access obligations, if answered in the negative, resolve Mr Meadows’ claim. I list those questions in draft form below – see paragraph [21].
[4]These are my reasons.
Background
[5] The background to the present matter has already been thoroughly addressed in my first judgment. I repeat it here for ease of reference:2
1 Meadows v Colcroft Holdings Limited [2023] NZHC 2464.
2 Above n 1.
[4] The contract, executed on 29 July 2022, was on the 11th edition of the form approved by the Real Estate Institution of New Zealand and Auckland District Law Society. The agreement was conditional on due diligence to be completed by 24 August 2022, which was extended to 7 September 2022. Settlement date was 20 working days after that. Mr Meadows inspected the property in August 2022 and identified some matters that needed fixing. He was given assurances by CHL’s director, Mr Anderson, who was well known to Mr Meadows, that these matters would be fixed. Mr Anderson had already told him on 14 July 2022, that the “house is sound, does not leak and was built and signed off by the council in 1997”. With these assurances in mind, Mr Meadows was happy to proceed with the purchase, subject to an extended settlement period and obtaining a tenancy prior to settlement. CHL agreed to these matters. The settlement date was extended to 23 January 2023. Mr Meadows’ tenant moved into the Property in October.
[5] Two weeks prior to settlement Mr Meadows realised that his bank would not finance the purchase. He set about identifying potential funders and ultimately found an alternative funder, Loraine Reinsfield. She expressed interest in funding the project, especially given an in-principle agreement he had with an existing tenant of the building yard on the property to buy that yard. Nevertheless, he was not in a position to settle on 23 January 2023.
[6] On 26 January 2023, Mr Meadows became aware of water damage to the house. Mr Meadows visited the site with a licenced building practitioner who advised that to repair structural damage across three floors could cost as much as $1m. Through his then lawyers, Duncan Cotterill, sent photos of the water damage to CHL’s solicitors Martelli McKegg. Martelli McKegg responded on the same day noting the terms of the tenancy required that “no modifications, alterations, or building works to the property prior to settlement” and that there appear to have been unauthorised works breaching this term. Clarification was also sought as to the timing of the works and who did them.
[7] Duncan Cotterill responded on 27 January 2023 with detailed answers provided by Mr Meadows and sought clarification from CHL as to what was proposed “in respect of an investigation into the leaks and the extent of necessary repairs” and the various unconsented works. Martelli McKegg responded on that same day noting that it was consulting with its insurers and would be seeking instructions as to the unconsented work. They also reminded Mr Meadows of his obligation not to undertake further work on the property.
[8] On 2 February 2023, Martelli McKegg sent a settlement notice to Duncan Cotterill. It records that the settlement date was 23 January 2023 and identifies a settlement amount of about $2.7m to be paid within 12 working days of the notice. No mention is made of the issues with the house.
[9] Duncan Cotterill responded on 3 February 2023, requesting an opportunity to undertake an invasive investigation of the house to determine the nature and extent of the damage, non-compliance with the building code, and the cost of any repair. A detailed summary of the damage already identified is attached to the letter. The letter noted that the damage may be so extensive as to give rise to the right to cancel. It further records that given the breach of warranties and extent of building damage, CHL was not in a position to call upon Mr Meadows to settle nor to serve a settlement notice.
[10] Martelli McKegg replied to this correspondence the same day, repeating their demand that Mr Meadows not undertake any work on the property, investigative or otherwise. The letter records their understanding that Mr Meadows had not secured finance. It also states:
Moreover, we refer you to clause 10 of the Agreement, which provides. “if the purchaser has not purported to cancel this agreement, a breach by the vendor of any terms of this agreement does not defer the purchaser’s obligation to settle, but that obligation is subject to the provisions of this clause 10.0”. As I mentioned to you in previous correspondence, a breach of warranty does not allow the purchaser not to settle. The Agreement confirms this, but so too does a long line of case law.
…
If your client has a claim for damages or breach of warranty (which we do not consider he does), this can be dealt with in the usual way and in accordance with the Agreement – not by damaging our client’s property as though it is his own.
[11] On Friday 17 February 2023, Duncan Cotterill provided copies of assessments obtained from a builder and a plumber and noted that those reports record:
·Black mould.
·Extent of damage unknown but likely to be beyond shower and bathroom.
·Leak likely to have been occurring over a long period of time.
·Non-compliant wastewater and septic tank systems.
·Compromised framing.
·Extensive water damage.
·Potential water damage to power board.
·Potential subsidence as a result of long term leak.
[12] Duncan Cotterill also claimed that Mr Anderson misrepresented the state of the house and had breached its warranties at cl 7 and in particular, cl 7.3(5). Given this, it maintained CHL was not in a position to settle or insist on performance by Mr Meadows. They state that:
In the absence of the full picture of the extent of the damage and the extent of any breach of warranty, Mr Meadows is unable to determine whether it should proceed with compensation or exercise its rights of cancellation. By denying our client an invasive investigation, your client has put our client in the position where it is unable to fully particularise and quantify the compensation needed.
[13] They then state that the settlement notice is invalid and request access to conduct invasive investigations in the presence of Mr Meadows’ experts so that the extent of the damage and remediation costs can be assessed. The letter concludes that:
Our client has indicated it will make its election within 10 working days of the reports of its experts completing their reports.
[14] Duncan Cotterill wrote again on 21 February 2023, noting that Mr Meadows needed to satisfy its lender that there is adequate security, and that without an understanding of the costs of remediation, it is not possible to make an accurate assessment of the value of the security offered by the Property. The email concludes:
This communication is not sent as an affirmation of the contract and is sent without prejudice to our client’s rights of cancellation which our client reserves.
[15] Martelli McKegg’s response of the same date is fulsome. Most relevantly it records their view that Mr Meadows did not have and never had finance and has manufactured the issues now raised. The letter repeats reference to cl 10 of the agreement and the point that a breach of warranty does not deter the purchaser’s obligation to settle, that any claim must be made on or before the last day prior to settlement date together with a genuine pre- estimate of Mr Meadow’s losses, and that the settlement sum must be paid into a stakeholder’s account pending resolution of the claims.
[16] The letter further notes that it remains possible for Mr Meadows to comply with cl 10 and that he is in an “unusually well-informed position, having had access to the property for some 5 months prior [to] settlement.” The letter further records:
[Mr Meadows] is required to settle and, in circumstances where he clearly does not have the financing sufficient to settle (or to comply with clause 10), time being of the essence, he is in fundamental breach. If he considers compensation is claimable for the breaches he claims (which we repeat, are denied), then he ought to have followed clause 10 of the Agreement). He has elected not to do so, and we infer that this is because he does not have the funding to do so.
[17] On 22 February 2023, Duncan Cotterill write again, most relevantly recording that one of the backers is very concerned about the uncertainty as to the cost of the remediation of the dwelling and this has created real headwinds for Mr Meadows in obtaining finance. It also notes that it was unable to secure a lease with Brian Building Limited (“BBL”), noting that Martelli McKegg also acted for them. The letter concludes:
While our client does not have the funds to settle this is largely because of these issues. If the contract is not cancelled by your client then my client will continue to work to get the funding needed.
[18] Coinciding with this, Ms Reinsfield wrote to Mr Meadows stating that she would like to provide funding to the purchasing entity of the Property subject to the following conditions:
1. A Quantity Surveyors report on the scope of work and the cost of repairs from the leak in the upstairs bathroom of the main dwelling.
2. A visual inspection completed by my Builder and structural engineer.
3. An executed agreement to Lease the Builders Yard by Brian Building Limited.
4. An executed conditional Sale & Purchase Agreement for the Builders Yard to Brian Building Limited.
5.A Personal Guarantee from Jason Meadows.
6. A right to register a caveat against 64b Ocean Road, Waiheke Island.
7. A copy of the Deed of Nomination for the Sale and Purchase Agreement dated 29th July 2022 with Colcroft Holdings Limited for 115 Wilma Rd, Waiheke.
[19]Martelli McKegg issued a notice of cancellation the same day.
The caveat proceedings
[6] The central question in the caveat proceedings was whether Mr Meadows had a reasonably arguable case that he was not obliged by clause 10 of the sale and purchase agreement. As I noted in the caveat judgment:3
[26] Clause 10, dealing with claims to compensation by purchasers, is key to the resolution of the present dispute. Most relevantly, cls 10.1 to 10.4 states:
10.1 If the purchaser has not purported to cancel this agreement, the breach by the vendor of any term of this agreement does not defer the purchaser’s obligation to settle, but that obligation is subject to the provisions of this clause 10.0.
10.2The provisions of this clause apply if:
(1) the purchaser (acting reasonably) claims a right to compensation for:
(a)a breach of any term of this agreement;
(b)a misrepresentation;
(c)a breach of section 9 or section 14 of the Fair Trading Act 1986;
(d)an equitable set-off, or
3 Above n 1.
(2) there is a dispute between the parties regarding any amounts payable:
(a)under clause 3.12 or clause 3.13; or
(b)under clause 5.2.
10.3To make a claim under this clause 10.0:
(1)the claimant must serve notice of the claim on the other party on or before the last working day prior to the settlement date, time being of the essence (except for claims made after the settlement date for amounts payable under clause 3.12 or clause 3.13, in respect of which the claimant may serve notice of the claim on the other party at any time after a dispute arises over those amounts); and
(2)the notice must:
(a)state the particular breach of the terms of this agreement, or the claim under clause 3.12, clause 3.13 or clause 5.2, or for misrepresentation, or for breach of section 9 or section 14 of the Fair Trading Act 1986, or for an equitable set-off; and
(b)state a genuine pre-estimate of the loss suffered by the claimant; and
(c)be particularised and quantified to the extent reasonably
(3)the claimant must not have made a prior claim under this clause 10.0 (to the intent that a claimant may make a claim under this clause 10.0 on only one occasion, though such claim may address one or more of the elements in clause 10.2).
[27]Clause 10.6 provides a process for dispute resolution. It says:
10.6 If the purchaser makes a claim for compensation under clause 10.2(1) but the vendor disputes that the purchaser has a valid or reasonably arguable claim, then:
(1) the vendor must give notice to the purchaser within three working days after service of the purchaser’s notice under clause 10.3, time being of the essence; and
(2) the purchaser’s right to make the claim (on the basis that such claim is valid and reasonably arguable) shall be determined by an experienced property lawyer or an experienced litigator appointed by the parties. If the parties cannot agree on the appointee, the appointment shall be made on the application of either party by the president for the time being of the Auckland District Law Society. The
appointee’s costs shall be met by the party against whom the determination is made or otherwise as determined by the appointee.
[28] If a claim is accepted or determined in accordance with cl 10.6, but the quantum is challenged, then cl 10.8 lays down a process for resolution of such challenges. That process includes the payment of an interim amount to a stakeholder until the amount of the claim is determined. Clause 10.8(4) states:
(4) if the parties cannot agree on the interim amount, the interim amount shall be determined by an experienced property lawyer, an experienced litigator, or, where the claim for compensation is made under clause 5.2, an experienced registered valuer or quantity surveyor appointed by the parties. The appointee’s costs shall be met equally by the parties, or otherwise as determined by the appointee. If the parties cannot agree on the appointee, the appointment shall be made on the application of either party by the president for the time being of the Auckland District Law Society;
[29] Clause 10.9 defers settlement date to the second working day after the determinations at either cls 10.6 or 10.8(4). Clause 10.10 then provides that the procedures prescribed in cls 10.1 to 10.9 do not affect the right to bring proceedings for specific performance, and a determination under cl 10.6 that the purchaser does not have a reasonable claim does not prevent the purchaser from pursuing their claim after settlement. Clause 10.10 then preserves the right to seek specific performance as follows:
10.10 The procedures prescribed in clauses 10.1 to 10.9 shall not prevent either party from taking proceedings for specific performance of this agreement.
[30] Notice to complete and remedies on default are stated at cl 11. In this regard, cl 11.1(2) states:
11.1(2) The settlement notice shall be effective only if the party serving it is at the time of service in all material respects ready, able, and willing to proceed to settle in accordance with this agreement, or is not so ready, willing, and able to settle only by reason of the default or omission of the other party.
[7] The effect of clause 10 was explained as follows:4
[31] Clause 10 is a mechanism enabling the speedy resolution of bona fide and reasonable purchaser claims listed at cl 10.1. The starting point under cl 10 is that claims to compensation by a purchaser or disputes about amounts owning do not permit the purchaser to refuse to proceed to settlement until these matters are remedied.5 In short, a purchaser must give notice of claim
4 Above n 1,
5 Property Ventures Investments Ltd v Regalwood Holdings Ltd [2010] NZSC 47, [2010] 3 NZLR 231 at [72]; and see also Mao v Singh [2022] NZCA 390, (2022) 23 NZCPR 477 at [66].
under cls 10.1 or 10.3 and where the claim is disputed, follow the process laid out at cl 10.4 and following.6
[32] However, there are two important qualifications to the strict operation of cl 10. First, cl 11.1(2) provides that a settlement notice shall be effective only if the party serving it is at the time of the service either; in all material respects ready, able and willing to proceed to settle in accordance with the agreement or is not so ready, able and willing to settle only by reason of default or omission of the other party. So, relevantly here, a vendor that does not allow the purchaser to inspect the property in order to be able to particularise its cl 10 claim runs the risk of an adverse finding that it was not, in fact, ready, able or willing to settle.7
[33] Second, as the Court of Appeal in Mao v Singh observed, the purchaser’s right to seek specific performance is expressly preserved by cl 10.10, irrespective of whether the purchaser provides notice of claim, in circumstances where the proper tender of the settlement sum would have been futile because the vendor was never ready, willing, and able in all material respects to perform its settlement obligations.8 The facts in Mao are illustrative. The vendor refused to deliver vacant possession, so the purchaser was not precluded from pursuing his claim to specific performance even though he did not trigger the cl 10 process.9
[8] Mr Meadows’ central claim is that he was never at the point where he could invoke clause 10 or advance any claim to compensation. CHL claimed that he was obliged to trigger the clause 10 process and did not.
[9]I found:10
[40] At its core, Mr Meadows’ claim turns on whether, in the circumstances of this case, it is reasonably arguable CHL was obliged to allow Mr Meadows to undertake invasive testing of the house so that he could make an election to settle in accordance with cl 10 or to cancel. If the answer is yes, then the matter must go to trial for determination.
[41] There is no express requirement in the contract for a vendor to allow invasive testing. At most cl 3.2 envisages a pre-settlement inspection “for the purposes of examining the property”. That has been interpreted to extend to allowing a valuer to attend the inspection alongside a purchaser.11 It seems highly unlikely that an intention to allow invasive testing could be grafted onto this right of inspection, given that it ordinarily involves destructive testing. But on the available evidence, this case has some very unusual features, including most relevantly evidence of major weathertightness defects only
6 The same point was made by the Court of Appeal in Yu v Bradley [2022] NZCA 378, (2022) 23 NZCPR 902 in respect of ninth edition of the agreement approved by the Real Estate Institute of New Zealand and the Auckland District law Society at [99].
7 Regalwood, above n 5 at [78]—[83]; and see Yu v Bradley, above n 6 at [106]—[107].
8 Mao, above n 5 at [59] and [68].
9 At [66]-[68].
10 Above n 1.
11 Yu, above n 6 at [71].
coming to light at about the time settlement was due. A purchaser confronted with such information, at the eleventh hour, is arguably entitled to require such level of inspection as is reasonably necessary to enable it to provide, as required by cl 10.3, “a genuine pre-estimate” of the loss suffered and to particularise and quantify any claim “to the extent reasonably possible”. Put another way, it is arguable that cl 10.3 should not be construed in such a way as to unreasonably preclude a purchaser in the present situation from being able to meet these informational requirements and otherwise from proceeding to settlement on a properly informed basis.
[42]Mr Holmes’ contention that Mr Meadows had ample information is
[a] question begging — how do we know without testing the facts?
[10] I also observed, most relevantly for present purposes, that Mr Meadows’ failure to make any sort of election or specifically trigger clause 10 is highly problematic for him; that this is not a case of a vendor refusing to engage with a compensation claim
– rather this is a case of a purchaser apparently refusing to make an election or trigger a compensation claim pursuant to clause 10. But this brought into focus whether CHL was wrong to refuse any consideration of invasive testing altogether and whether that fact precluded Mr Meadows from being able to trigger the claims process.12
Threshold for preliminary question
[11]Rule 10.15 states:
The court may, whether or not the decision will dispose of the proceeding, make orders for—
(a) the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and
(b) the formulation of the question for decision and, if thought necessary, the statement of a case.
[12] It is common ground that this Court in Karam usefully provided a template of five questions for addressing whether a hearing on a preliminary issue was justified, namely:13
(a)Whether there will be difficult demarcation questions between those issues to be addressed in the first trial and those left for the second?
12 At [45].
13 Karam v Fairfax New Zealand Limited [2012] NZHC 1331 at [60]-[89].
(b) Whether the proceeding would be brought to an end by hearing and determining a preliminary issue separately from the rest of the proceedings?
(c)What potential time saving the separate questions offers?
(d)How will the determination of the preliminary question affect appeals?
(e)Are there any other practical considerations?
CHLs case
[13] CHL contends that Mr Meadows is wrongfully seeking to specifically enforce the contract in the face of his refusal to make an election pursuant to clause 10. His claim thus turns on whether invasive inspection was necessary, and if so, whether in any event CHL was obliged under the sale and purchase agreement to allow invasive inspection. If the answer to either question is no, then any claim to specific performance must fail because Mr Meadows would then have been obliged to trigger clause 10 and did not.
Mr Meadows case
[14]Mr Meadows contends that the issues to be determined are:
(a)Was the Settlement notice and subsequent cancelation valid?
(b)Was the vendor ready willing and able to settle as defined in clause 11.2 of the contract?
(c)Had the vendor met its obligations under the contract to be able to call for settlement?
(d)Whether the property was tenantable;
(e)Whether the crossroads had been reached where the purchaser could make an informed decision whether to proceed with diminution of value as described in clause 10 or cancel with compensation;
(f)Whether the purchaser was entitled to make an inspection of the property prior to settlement as described in clause 3.2 & 3.2[2];
(g)Whether the vendor was required to allow access to the purchaser, his experts or Quantity Surveyor to gather the information to make an informed decision to cancel, or to proceed with deduction for diminution in value;
(h)Whether CHL was obliged to share the outcome of the Insurance claim to enable Meadows to make an adequate assessment of clause 5; specifically, cl 5.2(1)[a];
(i)Whether invasive inspection was reasonably necessary to enable Mr. Meadows to meet the informational requirements of clause 10.3;
(j)Whether CHL was obliged to allow invasive testing;
(k)Was the Vendor and/or his solicitors [at the time] causative of the Purchasers default.
[15] Mr Meadows submits that although the heart of this matter revolves around the question of whether CHL was entitled to cancel the Agreement, the most critical matters for him and his financier was the tenantability of the home, the cost of repair and of compliance. He also submits that CHL’s refusal to allow reasonable access to the property as well as access to insurance information made it impossible for him to elect whether to proceed or cancel the agreement. CHL’s failure to engage in the process envisaged by clauses 5 and 10 is a breach of its obligations, and accordingly it was in breach at the time it cancelled the agreement.
[16]In terms of the Karam questions, Mr Meadows submits:
(a)The second trial would risk relitigating the preliminary issues;
(b)The proceedings would not end – it would only dispose of the rights and obligations stipulated by the Agreement and the remedies available to the purchaser.
(c)There are no real time savings as specific performance is not the only remedy.
(d)He will appeal any decision that purports to resolve his claim.
(e)He is concerned about threats of mortgagee sale, and he is committed to resolving the matter.
Assessment
[17] The pivotal issue raised by Mr Meadows’ case on the removal of the caveat was whether invasive testing was necessary and if so whether CHL was obliged to allow Mr Meadows to undertake invasive testing at the property so that he could make a properly informed clause 10 election. I was not prepared to resolve that issue summarily, especially given the claimed misrepresentations. While Mr Meadows has expanded the issues he now seeks to litigate, these remain the central issues for consideration. CHL is now prepared, for the sake of a preliminary question hearing, to have the Court answer these issues, assuming material misrepresentation. This avoids the need to examine whether there were misrepresentations and whether they were material. It instead focuses attention on the nature of CHL’s informational and access obligations specifically at the time of the purported cancellation.
[18] Mr Meadows however emphasised in argument that two additional issues need consideration, namely:
(a)Whether CHL was obliged to provide access to the property for the purpose of assessing whether the property was tenantable.
(b)Whether CHL was obliged under clause 5 of the agreement to provide information relating to any insurance claim and cover relating to the bathroom leak.
[19] Mr Meadows maintains that since CHL failed to discharge these informational and access obligations, he was not obliged to make an election pursuant to clause 10 of the Agreement.
[20] For my part, the additional matters raised by Mr Meadows by themselves would not be sufficient to save Mr Meadows caveat from removal. It seems most unlikely on the available record that Mr Meadows could reasonably complain about inadequate access when he produced two reports on the property referred to in the letter of Duncan Cotterill to CHL’s lawyer shortly before the purported cancellation – see [11] of my first judgment. Furthermore, at first blush, clause 5 does not require a vendor to produce a copy of the insurance claim or related information. Rather that clause enables a purchaser to apply the insurance payment to the purchase price. In any event, responsibly, Mr Holmes was content for these matters to be addressed as part of a preliminary question exercise.
[21] In the result, I am satisfied that the following questions (or similar) should go to a preliminary hearing:
(a)Assuming material misrepresentation (defined below) about the property:
(i)Was invasive inspection necessary to enable Mr Meadows to meet the informational requirements of clause 10.3?
And if so;
(ii)Was CHL obliged to allow invasive testing of the property?
(iii)Was CHL obliged and failed to provide access to the property for the purpose of assessing whether the property was tenantable?
(iv)Was CHL obliged and failed to provide information relating to any insurance claim and cover relating to the shower leak?
[22]Material misrepresentation means a misrepresentation about:
(a)The tentability of the property;
(b)Completion of specified works;14 and
(c)Water damage.
[23] I note that CHL does not accept that the weathertightness condition of the property is an issue, contrary to my assumption in the first judgment. I will leave this issue to the parties to resolve in terms of the framing of material misrepresentation.
[24] In terms of the Karam framework, I am satisfied that the answer to these questions in the negative will dispose of Mr Meadows claim to specific performance and vindicate CHL’s claim that it validly cancelled the agreement. In short, if there was no breach of any obligation to provide information or otherwise provide access, Mr Meadows was obliged to trigger the clause 10 process and did not. Cancellation would have then been valid. Conversely, if the answer to any of the questions is yes, the second trial will then focus on the substantive merits of any alleged claim for specific performance that CHL was not ready willing or able to settle and any claim for damages. In reality, Mr Meadows should be in a position to elect whether to specifically enforce or seek damages.
[25] Approaching the matter in this way will bring significant time and cost savings. The preliminary hearing should be capable of resolution in one day15 on the basis that the misrepresentations will be agreed for the purpose of the preliminary hearing, a chronology of key events should be capable of agreement (especially in light of my first judgment) and the evidence should be focused on discrete issues dealing with the
14 These should be specified for the purpose of any agreed facts prior to the preliminary hearing.
15 I initially considered one half day to be sufficient but given the potential need for expert evidence as to the adequacy of the information supplied and access given the time available may need to be extended.
sufficiency of access afforded to the property and the information in fact supplied. The legal issues are also reasonably confined to the interpretation of clauses 5 and 10 of the Agreement. In contrast a full substantive hearing on all matters, including the alleged misrepresentation and quantification of damages could take several weeks.
[26] As to appeals, as the issues are discrete, I envisage they could be resolved reasonably quickly and certainly well before a substantive hearing. Further, the likelihood of a substantive hearing any time this year is low. This is important because the entire purpose of clause 10 of the Agreement is to enable the issues of the present kind to be disposed of efficiently (indeed at the time of settlement). With Mr Meadows’ expanding list of substantive issues, and request for discovery, that has little or no prospect of occurring, the preliminary question procedure enables a focused approach. It provides a much needed vehicle for efficient disposition in this case.
[27] Finally, delay is significantly harming CHL’s interests. CHL’s position appears precarious. The property is currently subject to mortgage and the loan is currently in default and incurring default interest cost. A third party offer that could otherwise discharge the debt cannot be accepted because of the caveat. By comparison, based on the information available to me, even if Mr Meadows’ specific performance claim fails, it remains open to him to claim damages in the event CHL can be shown to have caused him loss. In my view, fairness clearly favours the resolution of this matter as early as possible.
[28] I therefore direct that this matter be set down for a preliminary hearing for one day as soon as possible on the matters set out at [21]. As foreshadowed to the parties I grant leave for the parties to reach agreement on the precise terms of the questions and the material misrepresentation. They will have 15 working days for that purpose.
Scope of hearing and evidence
[29] The preliminary hearing will focus on the extent of the information Mr Meadows had at the time of the purported cancellation, his informational needs, the access and information actually provided and the interpretation of clauses 5 and 10, having regard to the agreed factual matrix, including the assumed misrepresentations. Bearing in mind that the agreement has much wider application,
the scope of a vendor’s informational obligations (including the provision of access to the property), the parties will need to assist the Court on the implications of the interpretation they prefer for vendors and purchasers generally.
[30] In terms of evidence, I have had the benefit of reviewing the evidence to date. I refer to key parts in my first judgment. The timeline of events is not contentious and Mr Meadows and his financier, Ms Reinsfield, have already given substantive briefs (and in Mr Meadows’ case lengthy submissions) concerning their respective positions. Accordingly, subject to updated evidence relating specifically to the condition of the property, requirements for and provision of access, and other information, I do not anticipate any further substantive evidence should be required. To the extent there is any expert evidence as to these matters, they should confer prior to trial and isolate the main matters in dispute and associated reasons. Furthermore, my expectation is that any expert reports will be made available as soon as is practicable to avoid delay. For completeness, expert includes a qualified or experienced builder or other trades person.
[31] With this in mind I am confident the matter should be able to be dealt with speedily, requiring no more than one half day to one day for hearing. The key here is to ensure as efficient disposition of this matter as possible. The timetable is necessarily tight. Accordingly, I direct that a further case management conference be set down before me as soon as practicable to finalise timetabling in light of available hearing dates.
Costs
[32] CHL has been successful in its application. It is entitled to costs on a 2B basis and ordinarily I would make such an order. However, I reserve costs to the trial judge who will be better placed to assess the extent to which there has been adequate cooperation in the speedy and efficient disposal of this matter and in light of the overall merits.
Whata J
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