Cribb v Austin Chalk Company Ltd HC Christchurch M150/02

[2002] NZHC 911

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY M150/02

BETWEEN BRIAN PHILLIP CRIBB AND BERNICE LESLEY CRIBB
Applicant

AND AUSTIN CHALK COMPANY LTD
Respondent

Hearing: 19 August 2002

Appearances: S N McKenzie for Applicants
K G Reid for Respondent

Judgment: 22 August 2002

JUDGMENT OF MASTER VENNING
On Application For Order That Caveat Not Lapse

Solicitors: Preston Russell Law, Invercargill for Applicants

Goodman Steven Tavendale, Christchurch for Respondent

APPLICATION

[1] This is an application for an order that a caveat registered by the Applicants against land owned by the Respondent not lapse.

BACKGROUND

[2] The Respondent owns a farm property at Oxford. The farm property is known as “Chalk Hill”. The Applicants are trustees of the Cribb Family Trust. Mr Brian Cribb, one of the trustees, owns a property adjacent to Chalk Hill. In April 2002 Mr Cribb learned that Chalk Hill may be on the market for sale.

[3] The directors of the Respondent are Mrs Jan McPherson of Invercargill; Mr Euan Hilson, a chartered accountant and director of HFK Ltd, chartered accountants of Christchurch; and Margaret Austin.

[4] Mr Cribb spoke to Mr David Home of HFK Ltd regarding the sale of Chalk Hill. Mr Cribb considered that over a series of conversations with Mr Home they had settled and agreed the purchase price, settlement date and other principal terms for the sale of the property by the Respondent to the Applicants. The terms of the agreement included:

a) The agreement had 21 days to become unconditional;

b) The purchase price was $250,000 plus GST;

c) A deposit of $50,000 plus GST on the agreement becoming unconditional;

d) The balance purchase price to be paid in five years;

e) The Respondent was to have eight years to mill the trees on the property;

f) Two quarries on the property were to be fenced off by the Respondent. The Respondent was to have access to the quarries and was to be permitted to move the quarries from time to time, reinstating the former quarry sites back to pasture. The footprint of each quarry was to be kept to approximately five hectares; and

g) The Applicants would have access from the date the contract became unconditional to put in a road, electricity and to build a house.

[5] In addition, Mr Cribb considered he had negotiated a grazing only lease agreement whereby the Applicants would lease all of the grazing land on Chalk Hill until settlement in five years, at a rental of $5,000 plus GST per annum payable in advance with the first years rent to be paid on execution of the lease.

[6] Mr Cribb understood that Mr Home would refer the agreement to the Respondent’s solicitor, Mr Tavendale, for confirmation.

[7] On 22 April 2002 Mr Cribb contacted Mr Oliver, an experienced legal executive with his solicitors, Preston Russell Law, Invercargill, and advised him of the agreement.

[8] On the same day that Mr Cribb advised Mr Oliver of the agreement, Mr Oliver was contacted by Mr Tavendale, the Respondent’s solicitor. Mr Oliver’s evidence is:

“5. On 22 April 2002 I was contacted by the Respondent’s solicitor, Mark Tavendale. Mark Tavendale advised that he had been instructed by the Respondent to draft an agreement for the sale of the land and the grazing lease. He suggested that the settlement be brought forward from five years out to inside of 12 months say by end of December 2002 and have a shorter term agreement for lease.”

[9] Mr Tavendale’s evidence is:

“10. . . . In my discussion with Mr Oliver I said that discussions had been held between his client Cribb and David Home concerning the possible purchase. I indicated to him on the basis of my knowledge that there was broad acceptance as to price of $250,000.00 but the terms of payment being proposed by Cribb namely $50,000.00 with $200,000.00 being paid in five years time and a lease payment of $5,000.00 per year, were likely to be unacceptable to our client. I asked Mr Oliver to go back to his client to see if his client would be prepared to pay the $250,000.00 at an earlier date. I also suggested a three month lease to allow sufficient time for contractual and conveyancing matters to be discussed and finalised. . . .”

[10] The solicitors agree that on the next day, 23 April, Mr Tavendale telephoned Mr Oliver to advise that the purchase price of $250,000 with $50,000 being paid upon confirmation, the balance being paid in five years time and with an interest or lease payment of $5,000 being paid per annum were all acceptable. Mr Oliver made a file note to the effect that:

“Cribb wins on all counts. Cattle will be removed tomorrow. There will be sheep and 8 horses remaining for some time. Tomorrow afternoon - Brian can put his stock on. He to draft an agreement.”

[11] Mr Oliver’s evidence about the preparation of the agreement is:

“9. The conversation concluded with the understanding that Mark Tavendale was to draft a written agreement for the sale of Chalk Hill on the terms previously negotiated and a grazing lease. The agreement and lease were then to be forwarded to me to arrange signing. Mark Tavendale advised me he was extremely busy and that he would not be in a position to forward the agreement and lease immediately.”

[12] On the afternoon of 24 April 2002 the Applicants entered into possession and put stock on the Chalk Hill property. Shortly afterwards the Applicants instructed contractors to undertake work on the property relating to:

• Fencing;

• Clearing gorse;

• Track work;

• Clearing dead trees;

• Soil samples; and

• Establishing a culvert and water supply.

[13] The Applicants also entered a five year sub-lease (including an option to purchase) in respect of part of the Chalk Hill property with a third party.

[14] By fax dated 10 May 2002, some four days before the applicants were due to confirm the contract, the Respondent’s solicitors wrote to the Applicants’ solicitors to advise the Respondent did not wish to proceed with the sale. The letter was in the following terms:

“After considerable discussion among the Directors of our client Company it has been decided that the Company does not wish to proceed with a sale of [sic] your client. The property has now been withdrawn from the market.

Our client is happy to continue to lease the property to your client on a short to medium term based on the rental of $5,000-00 plus GST per annum. Please advise if your client wishes to accept this offer and we will send to you a brief lease document.

We await your advice.”

[15] The Applicants did not consider that the Respondent was able to withdraw from the agreement and instructed its solicitors accordingly. The Applicants’ solicitors responded by a letter of 14 May in which the solicitors said inter alia:

“Having now had the opportunity to consider the matter in more detail, we have reached a view that in the circumstances as they stand our client has the ability to rely upon the equitable doctrine of part performance.”

The solicitors then set out a number of matters the Applicants relied upon in support of the part performance argument.

[16] Further correspondence followed thereafter but no resolution was reached. The Applicants lodged a caveat against the Chalk Hill property.

[17] On 27 June 2002 Land Information New Zealand wrote and advised that an application had been made to register a transfer of mineral rights from the Respondent to Oxford Lime Company Ltd.

[18] The Respondent has commenced proceedings in this Court at Christchurch to seek orders for delivery up of possession of the Chalk Hill property by the Applicants to the Respondent. The Applicants have counterclaimed for specific performance.

[19] The Applicants filed these proceedings in response to the notice from the District Land Registrar. When the matter was first before the Court on 29 July 2002 an interim order was made that the caveat not lapse until further order of the Court.

THE APPLICANTS’ CASE

[20] The Applicants contend that an oral agreement for sale and purchase was concluded between Messrs Tavendale and Oliver on 23 April 2002, that there has been sufficient part performance of the agreement to satisfy s 2(3)(c) of the Contracts Enforcement Act 1956 and that the Respondent was not entitled to cancel the agreement.

THE RESPONDENT’S CASE

[21] For its part the Respondent says there was no sufficient oral agreement as either negotiations were never concluded, or the agreement was always subject to a formal contract being concluded. In the alternative, even if there was an oral agreement which but for the Contracts Enforcement Act would have been enforceable, the Respondent says that nothing the Applicants have done constitutes a sufficient act of part performance of that agreement.

PRINCIPLES

[22] The onus of proof lies on the applicant caveator to satisfy the Court it has an arguable case to an interest in the land or that there is a serious issue to be tried: Sims v Lowe [1988] 1 NZLR 656. If an arguable case is made out the caveat is to be maintained while the substantive rights are determined in proceedings issued for that purpose.

[23] In Macrae v Rapana (HC Auckland, M 633/94, 17/6/94) Fisher J noted that:

“Except where patently lacking in credibility on its face, the evidence advanced:by and on behalf of the plaintiff should be accepted as correct for present purposes.”

THE ISSUES

[24] There are two principal issues for the Court in this case:

a) Whether there was a concluded oral agreement for the sale and purchase of the Chalk Hill property which, save for the provisions of the Contracts Enforcement Act would otherwise be enforceable; and

b) If there was such an oral agreement, whether there were sufficient acts of part performance.

IS THERE AN ARGUABLE CASE FOR AN ORAL AGREEMENT?

[25] Mr Reid noted that the parties expected a formal agreement would be drawn up. He referred to the following comments from the decision of Tipping J in T A Dellaca Ltd v PDL Industries Ltd [ 1992] 3 NZLR 88:

“I accept Mr Miller’s submission that where parties in negotiation for the sale and purchase of property have in mind that a formal agreement will be drawn up by solicitors the prima facie inference is that they do not intend to be bound until the formal document is signed: see Whitaker v Carruthers [1975] 1 NZLR 372 and Carruthers v Whitaker [1975] 2 NZLR 667; Masters v Cameron (1954) 91 CLR 353; Eccles v Bryant [1948] Ch 93.

I also accept that this proposition has particular force in what might be described as commercial agreements and that the onus is on the plaintiff to show that notwithstanding the approach which the law takes there was nevertheless an intent to be bound ab initio and before the more formal agreement was executed: see Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd [1981] 2 NZLR 385, particularly at p 389.”

P95

[26] Mr Reid then referred in more detail to the Carruthers v Whitaker [1975] 2 NZLR 667 decision, and noted that the Court of Appeal in that case observed that where parties are proposing to enter into a contract the manner in which it is to become binding must be gathered from the intentions of the parties, express or implied, and that in a contract for the sale of land there is a well known common and customary method of dealing, viz a document signed by both the vendor and purchaser.

[27] Mr Reid then referred to the evidence of Messrs Home and Tavendale for the Respondent and submitted that their evidence showed that a written agreement was contemplated.

[28] However, Mr Home’s evidence is not quite that clear about the matter. Mr Home says that he sent an email to Mr Cribb on 17 April 2002 and requested a formal offer. He also:

“14. . . . indicated that Cribb could not move stock onto the property, until the Heads of Agreement was signed.

15. Cribb replied the same day indicating that his preference was to enter discussions to reach an agreement and then to formalise this in writing.

16. My clear understanding of this and from the previous discussions that I had had with Cribb was that all of the discussions between us were informal in nature and would not be legally binding until a formal agreement for sale and purchase was entered into.”

[29] That may well have been Mr Home’s understanding. However, his evidence is somewhat ambiguous and able to be read another way. He and Mr Cribb may have been at cross purposes. It appears from Mr Home’s evidence at paragraph 15 that Mr Cribb made it clear he preferred to continue to discuss the matter, reach an agreement and only then to document it. On one view of it the process that Mr Cribb seemed to favour, according to Mr Home, would lead to an oral agreement that was subsequently to be reduced to writing. At the least the matter is arguable. The fact the parties expected the agreement would ultimately be reduced to writing does not mean that an oral agreement concluded prior to that was not to be binding prior to the execution of that written agreement. That is more so in this case, because it was accepted by both parties that the written agreement would not be prepared for some time. Despite that the Respondent agreed that the Applicants would be let into possession of the property. The fact that the Applicants were let into possession of the property is consistent with there being an agreement because, as Mr Home referred to and as Mr Cribb stated:

“11. . . . David Home advised me that I was not to have access to the property until the agreement had been confirmed by Mark Tavendale.”

[30] The Applicants were not to have access to the property until an agreement was concluded. That the Applicants were allowed access to the property suggests the Respondent accepted a sufficient agreement had been concluded.

[31] Mr Reid then submitted that there were a number of outstanding issues that the formal agreement for sale and purchase would need to address. However, as Tipping J noted in the Dellaca (supra) case, for there to be a binding contract there must, as a minimum, be clear reference to the five “Ps” - parties, price, possession, parcels and payment. There is no issue as to the identity of the parties. The price was agreed. The time for payment was agreed and confirmed by Mr Tavendale after he had taken further instructions and had attempted to vary the time for payment proposed by Mr Cribb. Possession was agreed, again on the Applicants’ terms. There has been no issue taken that the land in question was not sufficiently described or known to the parties.

[32] Finally Mr Reid submitted that in general terms it was inconceivable that an experienced solicitor and legal executive would proceed on the basis they intended to commit their clients to an agreement for sale and purchase in what was plainly a casual telephone discussion.

[33] However, the telephone conversations between Mr Tavendale and Mr Oliver have to be seen in the context of the negotiations that had taken place between Messrs Cribb and Home prior to the conversations between the solicitors. Those conversations and exchanges were over a number of days and covered a number of detailed matters. Mr Cribb then briefed Mr Oliver as to the basis of the agreement as he understood it. Mr Home, for his part, refers to a detailed file note he prepared and dated 23 April 2002. His evidence then is:

“24. There were then further emails and discussions with Jan MacPherson and Euan Hilson. Jan MacPherson indicated by email and in discussions that she was generally willing to proceed. On that basis I talked to Mark Tavendale with a view to him drafting an agreement in discussion with Cribb’s solicitor. I discussed with Mark the detail of the Title issues and other matters. Mark suggested that these matters could not be sorted out quickly and that he should contact Cribb’s solicitor to discuss the issues and to arrange for Cribb to enter the property for the purpose of grazing on an informal lease arrangement. . . .”

[34] From Mr Oliver’s point of view the only two issues that were outstanding from his discussion with Mr Tavendale on 22 April were the date for settlement and the shorter term lease. Mr Oliver’s evidence is that on 23 April Mr Tavendale rang back and advised the Applicants “win on all counts”. From Mr Oliver’s point of view then there were no other outstanding issues, at least in relation to the five “Ps” referred to by Tipping J in the Dellaca (supra) case.

[35] In summary, whilst the matter is not absolutely clear, it is arguable for present purposes that the negotiations between the parties had reached the stage that there was an oral agreement for the sale of the Chalk Hill property by the Respondent to the Applicants by 23 April 2002, and that the parties intended to be bound by that agreement pending the preparation of a formal written agreement.

HAS THERE BEEN A SUFFICIENT ACT OF PART PERFORMANCE?

[36] Mr Reid submitted that the transaction between the parties should be categorised as a “simple” rather than a “composite” transaction, and that the agreement for sale and purchase was not in any way dependent upon the lease of the property or vice versa. He submitted that the giving and taking of possession of the property on 24 April was pursuant to the agreement for lease which was not part of the agreement for sale and purchase. Again he referred to and relied upon the reasoning of Tipping J in the Dellaca case.

[37] In the Dellaca case Tipping J held that there was a sufficient oral agreement such as would have been enforceable but for the Contracts Enforcement Act, but that the act of part performance relied upon, namely possession, could not be relied upon as Dellaca took possession as sub-lessee. Further, the work carried out on the premises was not an act of part performance, rather it was a series of acts undertaken by Dellaca in reliance on their view they had an enforceable contract.

[38] After an extensive review of the law, both in New Zealand and overseas, Tipping J concluded:

“Against the background of the authorities and learned writings which I have traversed and for the reasons given I am of the view that in a part performance case the Court must consider three points which I would frame as follows:

1. Was there a sufficient oral agreement such as would have been enforceable but for the Act?

2. Has there been part performance of that oral agreement by the doing of something which:

(a) clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and

(b) when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land and such as that alleged was in existence.

3. Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the Act?”

P109

[39] On the part performance issue His Honour accepted that Dellaca took possession as sub-lessee to the Council not qua purchaser. The date for settlement and for taking possession under the contract had not arrived. In the circumstances Tipping J held there was no giving of possession by the defendant as vendor.

[40] The facts of the present case are, however, somewhat different. Despite Mr Reid’s submissions I consider they are more akin to the composite agreement authorities referred to and considered by the Court of Appeal in Fleming v Beevers [1994] 1 NZLR 385.

[41] In Fleming v Beevers the appellant and her de facto partner purchased a property in Queenstown as tenants in common in equal share. She claimed that her deceased partner had promised to leave her in his will his half interest in the property. The Court of Appeal considered the correct view with regard to the Queenstown property was that there was one composite transaction in relation to which all material aspects (including the wills) were intended to affect the legal relationship between the parties and to create formal legal obligations. In the course of the decision the Court of Appeal noted:

“It is important to note that in the present case the acts of part performance were themselves clearly related to the same land as is the subject of the oral contract to devise. If the contract to devise had related to different land the issue may have been more difficult. . . .

This case is similar in principle to a case noted by Viscount Dilhome in Steadman at p 554D. That case is Brough v Nettleton [1921] 2 Ch 25 where there was an oral agreement for the lease of a house with an option to purchase during the tenancy. The tenant exercised the option but the landlord sought to rely on the Statute of Frauds. It was contended on his behalf that the tenant could not succeed unless he could prove some act of part performance referrable to the contract of sale effected by the exercise of the option. Lawrence J at p 29 held that the obligation to sell following the exercise of the option was:

“. . . an essential term of the agreement upon the faith of which the plaintiff entered into possession, and can, in my judgment, be enforced without the necessity of proving any further act of part performance just as much as any other term of the agreement could have been so enforced.”

It will be seen that Lawrence J referred to “any further act of part performance”. He was of the view that the taking of possession under the oral agreement was a sufficient act of part performance in relation to the agreement as a whole - the tenancy and the option to purchase.”

P393

[42] In the present case I consider, despite Mr Reid’s careful submissions, that the agreement for sale and purchase and lease in this case can properly be regarded as a composite agreement. It is unlikely that the Applicants would have pursued a lease of the Chalk Hill property independently and without the agreement for sale and purchase and the right to purchase the property. The lease was to formalise the basis upon which the Applicants would take early possession of the property prior to settlement of the agreement for sale and purchase. The lease was only to run during the period prior to the final settlement of the agreement for sale and purchase. It was then to merge or be extinguished on settlement.

[43] On that basis the granting of possession of the Chalk Hill property by the Respondent, and the taking of possession by the Applicants, amounts to a sufficient act of part performance of the composite agreement, including both the agreement for sale and purchase and lease arrangements. It is significant that the parties tied the taking of possession to the agreement for sale and purchase of the land. As Mr Homes himself, said, Mr Cribb was not to move stock onto the property until the Heads of Agreement was signed. The Heads of Agreement referred to was for the agreement for sale and purchase itself. The Respondent resiled from that position and allowed the Applicants into possession, but only after consenting to the Applicants’ conditions for the purchase. During Mr Tavendale’s discussion with Mr Oliver regarding the deferred settlement date for the agreement for sale and purchase, Mr Tavendale expressly agreed to the Applicants taking possession of the property.

SUMMARY

[44] In summary, for present purposes, the Applicants satisfy the Court that they have an arguable case on the balance of probabilities that there was an oral agreement concluded on 23 April 2002 for the sale of the Chalk Hill property that would have been enforceable but for the provisions of the Contracts Enforcement Act, and that the granting of possession by the Respondent and taking of possession by the Applicants is a sufficient act of part performance to justify the maintenance of the caveat lodged by the Applicants against the Chalk Hill property, at least until the issues can be explored in the context of a full hearing and with Messrs Cribb, Home, Oliver and Tavendale cross-examined. The interim order is to continue.

[45] I record that Ms McKenzie confirmed during the course of submissions that the Applicants are agreeable to the registration of the transfer of mineral rights from the Respondent to Oxford Lime Company Ltd, provided that an undertaking is given that at any one time Oxford Lime Company Ltd will only operate two quarries on the property and that the two quarries will each be for an area of approximately five hectares only. The Applicants will also agree to the quarries being moved, provided that the area of the former quarry is reinstated back to grass. That concession should enable the registration of the dealing lodged with the Registrar to be completed.

[46] I understand that the Respondent has commenced proceedings in this Court for an order for the recovery of the Chalk Hill property. The Applicants have filed a statement of defence and a counterclaim seeking specific performance of the agreements for the lease and sale of the property. All issues between the parties can be determined in those proceedings. If necessary, and with the co-operation of the parties, the proceedings can be brought on for early hearing.

COSTS

[47] The Applicants have succeeded in maintaining the caveat. However, the caveat has been sustained on the basis that the Applicants have an arguable case. It may be that when all of the evidence is available to the Court the Respondent’s case will ultimately carry the day. In the circumstances I consider it appropriate that costs in this case be reserved to be dealt with when the substantive case is determined. I would also like to record my appreciation of both counsels’ thorough and helpful submissions in this case.