Crester Holdings Limited v Winn
[2015] NZHC 1154
•27 May 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-145 [2015] NZHC 1154
BETWEEN CRESTER HOLDINGS LIMITED
Plaintiff
AND
ALAN WINN AND VICKI MARGARET WINN
Defendants
Hearing: 21 May 2015 Appearances:
D M Lester for Plaintiff
J Moss for DefendantsJudgment:
27 May 2015
JUDGMENT OF WHATA J
This judgment was delivered by Justice Whata on
27 May 2015 at 3.30 p.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Saunders & Co., Christchurch
Ngaire Smith Lawyer, Christchurch
Copy to:J Moss, Christchurch
CRESTER HOLDINGS LIMITED v WINN [2015] NZHC 1154 [27 May 2015]
[1] In my judgment of 16 December 2014, I made an order for specific performance of the following condition:1
This agreement is subject to the Vendors providing documentation from AMI Insurance (Southern Response) that they agree to leave the house on the land, thus foregoing any demolition or costs associated with the demolition to the purchaser within ten W/days.
(“the special condition”)
[2] I noted that this will include if necessary:
(a) Obtaining legal advice as to the Winn’s rights under the insurance
policy.
(b)An estimate of the likely salvage value or other costs that might be incurred for the purpose of retaining the house.
(f) Giving adequate consideration to any options presented by Southern
Response.
[3] I was minded to direct that the Winns be given 25 working days to perform the agreement as directed. The parties however agreed that my judgment was prescriptive enough for the Winns to follow to remedy the breach in the further 25 working days provided and no further direction was required. The effect of this was that the 25 working days began on 22 December 2014 and expired on 5 February
2015.
[4] Since 22 December 2014 the Winns have undertaken various steps they say to comply with my order, but had failed by the end of the day on 5 February 2015, to obtain the requisite affirmation by Southern Response that the house could stay on site. Crester contends that the special condition was in fact satisfied when, in a letter
dated 7 January 2015 from the Winns to Southern Response stating that:
1 Crester Holdings Ltd v Winn [2014] NZHC 3249 at [79].
We agree to the terms and conditions of the “owner retained home” process
as stated in the letter dated 7 January 2015.
[5] I must now resolve whether or not the additional steps taken by the Winns discharged their obligations under the contract and if so, whether they remain obliged now to perform it to a conclusion.
Events since 22 December 2014
[6] Mr Moss has provided a summary of the steps taken which is not disputed. The following chronology is largely based on it:
(a) On 21 December 2014 the Winns contacted TM consultants, engineers, with a view to engage them to inspect the property and prepare a structural integrity report. The Winns were advised the following day that no one was available to assist until February or March.
(b)On 22 December 2014 the Winns solicitors wrote to Southern Response enclosing settlement election form to proceed with the home retention process, and asking what was required, and advising that the Winns had until 5 February 2015 to obtain Southern Response’s agreement to the dwelling being retained. The election form included the following notation:
We chose to proceed with option rebuild on another site as final settlement of my/our claim.
Should we chose to change to a different settlement option after this document has been signed, we agree to reimburse Southern Response any costs incurred to implement our initial option.
(c) On 23 December 2014 Southern Response e-mailed Winns’ solicitors and confirmed that they required a structural engineer’s report, and once provided, Southern Response would arrange a salvage team to inspect the property and provide a report.
(d)On 23 December 2014 the Winns contacted several demolition and salvage companies to obtain salvage estimates. Christchurch Demolition and Salvage provided a quote on 7 January and estimated the salvage at $10,000.
(e) On 24 December 2014 the Winns contacted Project Structure, engineers, who agreed to accept instructions and agreed to inspect the property on 8 January 2015.
(f) On 24 December 2014 Southern Response e-mailed the Winns’ solicitors to advise that the Winns were eligible to go through the owner retained home process.
(g)On 29 December 2014 the Winns sent house plans and other relevant information to Project Structure and noted that the report was urgent. Project Structure confirmed that the report would be available the week following their inspection on 8 January 2015.
(h)On 7 January 2015 Southern Response e-mailed an owner retained home covering letter with a basic outline of the process for customers to refer to. The letter included the following references:
Before we can consider your request to retain the house, we need your agreement on a number of points:
· There must be no outstanding dispute with EQC.
·You must have made your Southern Response settlement election and be willing to settle with Southern Response based on our most recent DRA of your property.
·You will need to obtain a structural engineer’s report providing a recommendation as to the structural integrity of the property and fitness for continued occupation. Houses intended to be offered as rentals must meet statutory obligations of landlords and property managers under the Residential Tenancies Act. If you had a structural engineer’s report carried on the property within the last three months that adequately addresses the above, we will look at this.
·You will provide evidence that any recommended long term structural integrity and/or health and safety requirements arising from this report has been done before we will agree to you retaining your house.
·We will organise a market estimate of the value of the improvements that salvage purchaser could achieve when removing the items prior to any demolition.
·The costs incurred by Southern Response of exploring and meeting your request to retain your house; and the agreed amount of salvage value and salvage report will be deducted from your claim settlement.
·You will complete the steps above within four months of notifying Southern Response of your request to retain your house.
(i) The Winns agreed to the terms and conditions of the “Owner Retained
Home” process as stated in the letter dated 7 January 2015.
(j)On 12 January 2015 the Winns’ solicitors e-mailed Southern Response asking for most recent Detailed Repair Assessment (DRA) which was dated 12 September 2014 not 2 December 2011.
(k)On 13 January 2015 Southern Response e-mailed the Winns’ solicitor noting that once the DRA was noted as correct the DRA would be escalated to reflect the up to date figure.
(l)On 14 January 2015 the Winns’ solicitors e-mailed Southern Response noting that the DRA was missing certain items, seeking clarification of whether or not the DRA was for a purchase of another existing house or a rebuild elsewhere and a breakdown on how this sum was calculated.
(m)On 14 January 2015 Southern Response confirms that it would escalate the DRA and provide figures on completion of that.
(n) On 3 February 2015 Project Structure provided engineer’s report.
This report indicates that bracing needed to be carried out.
(o)On 4 February 2015 the Winns’ solicitor e-mailed Southern Response providing Project Structure engineer’s report, and requesting urgent response to that report and the escalated DRA report and advised again of the 5 February deadline.
(p)On 5 February 2015 Southern Response e-mailed the Winn’s solicitors. The solicitor noted that Southern Response had concerns with the Project Structure engineer’s report in that the management approval was required.
(q)On 5 February 2015 Southern Response e-mails Winns’ solicitors again to say that the bracing which was identified by Project Structure had to be carried out by the Winns at the Winns’ expense and once the works were complete they would then arrange for a salvage team to complete the next step in the process.
(r) The Winns notified Crester that the agreement was cancelled on 9
February 2015.
[7] Updated DRA figures were later obtained on 15 February 2015, but these had not been reviewed on behalf of the Winns.
Submissions for Crester
[8] Mr Lester submits that with the Winns’ agreement to the terms and conditions of the “Owner Retained Home” process on 7 January 2015, and there being no matters of substance outstanding in terms of Southern Response’s requirements, the condition of the agreement was satisfied and the Winns were obliged to confirm that the agreement was now unconditional.
[9] In this regard, Mr Lester emphasised the following matters:
(a) The Winns were not bound by their settlement election option, namely rebuild on another site, as the settlement election form contemplates that they may pursue a different option. The implication of this is that if the Winns are not satisfied with the settlement sum they may pursue an alternative option.
(b)The Owner Retained Home process identifies the matters that must be satisfied for the purpose of retention of a house by an owner. All of those matters have been addressed in substance including:
(i)The most recent DRA for the property should be acceptable to the Winns, with Southern Response’s confirmation that it would include items identified by the Winns as missing in the DRA and that the DRA would be escalated to reflect most up to date pricing.
(ii)With the plaintiff’s assurance that it will satisfy any habitation requirements, including structural requirements, Southern Response’s concerns about structural integrity can be assumed to have been satisfied.
(iii)The only remaining substantive issue concerns salvage and that is a cost in the order of $10,000 to $12,000 which is not a material issue.
Argument for Winns
[10] Mr Moss responds by reference to the three matters identified in my judgment that needed to be attended to namely:
(a) Obtaining legal advice as to their rights under the insurance policy;
(b)An estimate of the likely salvage policy or other costs incurred for the purpose of retaining the house; and
(c) Giving adequate consideration to any options presented by Southern
Response.
[11] Mr Moss submits that all of these steps have been taken and that despite their best efforts the Winns were not able to provide written confirmation by 5 February
2015 that Southern Response was prepared to leave the house on the site on terms that would not materially reduce their insurance payout, change the fundamental basis of the agreement or require a protracted commercial negotiation.
[12] More specifically, Mr Moss submits:
(a) A final DRA figure was not obtained from Southern Response within
25 working days so they were not in a position to understand whether or not acceptance of Southern Response’s terms would have a substantial impact on the insurance payout.
(b)The exact cost of bracing work was unknown and therefore there was no surety that an “as is” sale could be delivered as required by the agreement.
(c) That until the above matters were concluded, the negotiations could be protracted and this was not contemplated by the agreement.
[13] Given those considerations, it is said that the Winns did all they could do to achieve the contractual object and were still not in a position to confirm that the remaining condition was satisfied.
Assessment
[14] I am satisfied that the Winns have taken all reasonable steps to secure Southern Response’s confirmation that the house could be retained on site. The chain of correspondence between the Winns and Southern Response, together with associated information, displays a genuine and reasonable attempt at securing Southern Response’s confirmation that the house could be retained on site. Mr Lester did not seriously argue otherwise.
[15] I am also satisfied that the Winns were unable to obtain written confirmation within the requisite timeframe and that it is speculative to suggest that Southern Response would ultimately provide that confirmation within a reasonable period. I accept Mr Lester’s argument that it appears at least that only relatively minor issues are in play, namely confirmation of the salvage costs together with what should be only minor adjustments to the DRA (being the proxy for the settlement payout). But I do not accept that the Winns are required to affirm that the special condition was complied with when they do not have Southern Response’s agreement to leave the house on site. For whatever reason Southern Response continues to place barriers in the way of allowing the Winns to retain their home on site. It should have been a relatively straightforward matter for Southern Response to confirm in writing that having regard to the relatively minor aspects remaining to be resolved, the house could be retained on site. Nevertheless it has not done this and it is not fair for the Winns to assume the risk that they might not do so.
[16] Mr Lester has submitted that the purchasers are now prepared to take that risk, but that was not the basis upon which the agreement was concluded. I need only be satisfied that the Winns have taken all reasonable steps, but failed to secure Southern Response’s agreement.
[17] On the foregoing basis, I find that the Winns have discharged their obligations under the special condition. Accordingly, they are no longer obliged to conclude the sale and purchase agreement.
Costs
[18] Crester is entitled to its costs in relation to the primary proceedings. I am minded to grant the Winns their costs on this aspect of the proceedings. I have in mind costs according to 2B. If the parties cannot agree, they may file submissions on costs within five working days of the date of this judgment.
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