Du v Youn
[2025] NZHC 621
•24 March 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001801
[2025] NZHC 621
IN THE MATTER of a claim for specific performance for breach of contract BETWEEN
NINGFEI DU
Plaintiff
AND
DAVID YOUN and MIJI SUNWOO
defendants
Hearing: 24 – 27 February 2025 Appearances:
D J Chisholm KC, M Singh and P S Kim for the Plaintiff P J Napier and J Y Leenoh for the Defendants
Judgment:
24 March 2025
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 24 March 2025 at 10:30 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………..
Counsel/Solicitors:
D J Chisholm KC, Auckland Glaister Keegan, Auckland K3 Legal Ltd, Auckland
DU v YOUN and MIJI SUNWOO [2025] NZHC 621 [24 March 2025]
Table of Contents
What happened? [6]
The essentials of the purchase [7]
Agreement for sale and purchase of replacement property [11]
Parties prepare for settlement [12]
The Anniversary Day weekend storm [15]
Red Placard issued [19]
Correspondence between solicitors on settlement day [23]
Correspondence after 31 January 2023 [31]
Assessments by geotechnical and structural engineers [32]
Defendants seek to reassure Mr Du and obtain his assistance [35] Defendants conclude licence agreement to occupy Mellons Bay Property [38] Defendants’ geotechnical report [39]
Babbage report recommends placard be changed from red to yellow [44]
Mr Du enters into agreement to purchase 76F Lucerne Road [49]
Yellow Placard issued for Arney Road Property [50]
Defendants vacate Arney Road Property [51] Defendants propose settlement of sale and purchase of Arney Road [52] Defendants send notice requiring settlement and settlement statement [57] Defendants serve notice of breach [61]
Mr Du cancels the ASP [62]
Defendants’ consultants exchange emails about further investigations [65]
Discussions on need to stabilise Arney Road Property [67]May Geoconsult Report [69]
Defendants assert cancellation of ASP was a repudiation and themselves cancelASP [73]
Proceedings commence [75]
Subsequent developments [76]
Questions for determination and relevant evidence [87]
Relevant provisions of the ASP [93]
Submissions of counsel for Mr Du [94]
Submissions of counsel for the defendants [106]
Analysis [119]
What was the settlement date? [120]
Was there a mutual agreement to vary the settlement date? [121] Was there a valid notice to fix a new settlement date under cl 5.15? [125] Was there a valid late settlement notice? [143] Was the Arney Road Property untenantable on the settlement date? [147] Is it relevant the Arney Road Property was under a Yellow Placard from
15 March? [149]
Was Mr Du entitled to cancel the ASP? [159]
Counterclaim [162]
Result [163]
Costs [165]
Appendix: Relevant provisions of the ASP
[1] This proceeding concerns the operation of clauses in a standard form agreement for the sale and purchase of land that apply when damage is caused to the property by natural events occurring between the making of the agreement and settlement, and when settlement does not take place on the settlement date.
[2]The plaintiff, Ningfei Du, says he is entitled to the return of the deposit of
$1,063,000.00, which he paid following his successful tender to purchase the property at 149A Arney Road, Remuera, Auckland (the Arney Road Property) from the defendants, David Youn and his wife, Miji Sunwoo, in accordance with an agreement for the sale and purchase of the Arney Road Property (the ASP).
[3] Mr Du seeks specific performance of what he says is the defendants’ obligation to return the deposit after he cancelled the ASP, following damage to the Arney Road Property caused by the extreme weather events that took place over the Auckland Anniversary Day weekend in late January 2023. Mr Du says these events made the property untenantable, which entitled him to cancel the ASP. Mr Du also seeks interest on the amount of the deposit from the date of cancellation to the date of payment, plus costs.
[4] The defendants say the property was not untenantable and Mr Du had no right to cancel the ASP. They say the purported cancellation was a repudiation of the ASP and the deposit was forfeit. The defendants counterclaim for damages of $391,764.19 for losses they say they suffered as a result of Mr Du’s repudiation of the ASP and for interest on those losses.1
[5] Mr Du denies any liability in respect of the counterclaim but says that, if he is held to have repudiated the ASP, the defendants’ claimable losses do not exceed the amount of the deposit, as received by the defendants.
1 The defendants’ counterclaim, as filed, was for $1,646,042.87. In closing submissions, counsel for the defendants accepted that, if the deposit was forfeited for wrongful cancellation, the deposit as received by them — less agent’s commission of $251,217.50 — should be deducted from the damages claimed. Counsel also accepted that the defendants could not separately claim for the amount of the commission. Following these deductions, the counterclaim reduced to $391,764.19.
What happened?
[6] On 26 October 2022, following Mr Du’s successful bid at auction for the purchase of the Arney Road Property, Mr Du and the defendants entered into the ASP. The ASP was a standard form agreement for the sale of real estate by tender prepared by the Auckland District Law Society (ADLS) and the Real Estate Institute of New Zealand (REINZ).
The essentials of the purchase
[7] The Arney Road Property comprises 1,102 square metres of land in a generally rectangular shape, which is situated at the northern edge of a plateau of land overlooking Shore Road. The property has unobstructed views out to Hobson Bay, Rangitoto Island and the Waitemata Harbour. The dwelling on the property (the Dwelling) comprises three levels containing four bedrooms, five living or office areas, four bathrooms, and a large kitchen. The master bedroom on the northwest corner of the first floor looks out over Shore Road to Hobson Bay and beyond. A large deck extends out from the northern frontage of the Dwelling and overlooks a drop of over 20 metres down to houses on Shore Road below. Access to the Arney Road Property is from a right of way from Arney Road.
[8] The purchase price was $10,630,000.00. The deposit was 10 per cent of the purchase price; namely, $1,063,000.00, which Mr Du paid to the defendants’ real estate agent in accordance with the ASP.
[9] The ASP was conditional on Mr Du obtaining “OIA consent” within five working days from the date of the ASP.2 The condition was satisfied on 1 November 2022. Three days later, Mr Du’s deposit, less the real estate agent’s commission of $251,217.50, was released to the defendants.
[10] Under the ASP, the Arney Road Property was sold with vacant possession to be given and taken on the settlement date. The ASP also provided for the purchaser, upon reasonable notice, to enter the Arney Road Property prior to the settlement date
2 That is, consent under the Overseas Investment Act 2005.
for the purpose of examining the property, chattels and fixtures included in the sale. The settlement date as provided for in the ASP was “31/01/2023 or by mutual consent”.
Agreement for sale and purchase of replacement property
[11] Also on 1 November 2022, an agreement for the sale and purchase of a property at Mellons Bay, Howick (the Mellons Bay Property), which Mr Youn had entered into in anticipation of selling the Property, became unconditional. The purchase price for the Mellons Bay Property was $3,770,000. The settlement date under that agreement was also 31 January 2023.
Parties prepare for settlement
[12] On 20 January 2023, Great Wall Lawyers Ltd, then solictors for Mr Du, and Morrison Kent, then solicitors for the defendants, exchanged emails to prepare for electronic settlement (e-dealing) of the sale and purchase of the Arney Road Property on 31 January 2023.
[13] On 23 January 2023, Morrison Kent sent a settlement statement to Great Wall Lawyers.
[14] On 24 January 2023, Morrison Kent asked Great Wall Lawyers that settlement of the Arney Road Property take place early on 31 January 2023 because the defendants had a subsequent settlement that day.
The Anniversary Day weekend storm
[15] Beginning on the evening of Friday, 27 January 2023, the Auckland region experienced heavy rainfall which caused flooding and landslips around various parts of the city. Later that evening, the Mayor of Auckland declared a state of regional emergency in accordance with the Civil Defence Emergency Management Act 2002 (CDEM Act). Further heavy rain and flooding continued over 28 and 29 January 2023.
[16] A substantial landslip occurred across the cliff face on the northern frontage of the Arney Road Property and adjacent properties overlooking Shore Road. A large
amount of soil and debris fell down the cliff onto the properties below, causing substantial damage to the houses at 31 and 33 Shore Road, and the death of one person at 33 Shore Road. 33 Shore Road was later demolished because of the extent of the damage.
[17] The slip included land below the decks of the Arney Road Property and a concrete crib retaining wall. At one corner, the foundations of the Dwelling, in particular columns supporting the master bedroom, were exposed. Because of concerns about the safety of the Dwelling, the Police required Mr Youn and his family to vacate the Arney Road Property.
[18] Over the ensuing days, there was extensive media coverage of the storm and the damage caused. Some of the coverage focused on the landslip below the Arney Road Property and the apparently precarious situation of the property. A front-page article in the New Zealand Herald on 8 February 2023 described the Arney Road Property as “teetering on the edge”.
Red Placard issued
[19] At 4.15 pm on 28 January 2023, following a visual inspection of the Arney Road Property, the Auckland Council issued a Red Placard under s 133BT of the Building Act 2004 and placed warning tape across the entranceway to the Dwelling.3 The Red Placard recorded that the building was at risk from an external hazard, that a major landslip had occurred at the rear part of the property and that part of the building foundation structures was likely compromised. The Red Placard also recorded that access to the property was not permitted without written authorisation from the Civil Defence Emergency Management Controller or other Responsible Person.
3 Sections 133BA to 133BZA of the Building Act contain special provisions for buildings affected by an emergency that has been declared in accordance with the CDEM Act. Under s 133BR of the Building Act, a responsible person or a constable may direct the evacuation of a building in a designated area if satisfied that evacuation is necessary to prevent the death or injury of any person in the designated area. Under s 133BT(1), a responsible person may place signs or notices on or near a building prohibiting or restricting the use of a building. Under s 133BT(4), a person may not occupy or use a building other than in accordance with a sign or notice placed under subs (1) or permit another person to do so. Signs or notices issued under s 133BT are usually referred to as placards or stickers and are coloured red, yellow or white to represent descending orders of seriousness.
[20] At 6.17 pm on 28 January 2023, the defendants’ real estate agent advised Mr Du that they had been informed that:
… due to an unforeseen storm and extreme flood that had happened on Friday, the police told the vendor to move out and sent professionals (engineers and inspectors) to inspect the property. We now need to wait for the report to come out. No one can go inside the property at the moment.
Both purchaser/vendor solicitors will communicate on Tuesday. At now stage, tomorrow’s 5:30 pm final inspection has been cancelled.
[21] On the morning of 30 January 2023, Mr Youn advised his real estate agent by email that he would be at the Arney Road Property that afternoon if the buyer wished to inspect it. The agent replied that the purchaser would not do the final inspection that day and that Mr Du’s solicitor had requested “the legal/safe report” before Mr Du went inside the property.
[22]Monday, 30 January 2023 was Auckland Anniversary Day, a public holiday.
Correspondence between solicitors on settlement day
[23] At 9.47 am on 31 January 2023, Great Wall Lawyers emailed Morrison Kent and asked whether the Arney Road Property had received a red, yellow or white sticker and whether it was still cordoned off by the police. It also asked for the outcome of the engineering assessment of the property. The email concluded:
As settlement date is today, our client requires the above information as a matter of urgency.
[24] At 9.57 am on 31 January 2023, Morrison Kent advised Great Wall Lawyers by email that the Arney Road Property had been red-stickered due to a landslip at the rear of the property. The email went on to advise that the defendants were in the process of “engaging engineers to assess whether any part of the property’s foundations [had] been compromised and an estimate of costs to reinstate the affected part of the property”.
[25] At 3.25 pm on 31 January 2023, Morrison Kent emailed Great Wall Lawyers advising that the defendants expected to have a geotechnical and structural engineer to inspect the Arney Road Property the following morning, and that Auckland Council
had advised that the Red Placard would be removed subject to a favourable geotechnical and structural engineering report. The email also advised that the defendants were in the process of filing an insurance claim with their insurer, Vero (Vero Insurance New Zealand Ltd), and forwarded a copy of the policy, which provided for an insured sum of $1.26 million (excluding GST), with a further $80,000 for a retaining wall.
[26]The email proposed settlement that day, 31 January 2023, on the basis that:
(a)the defendants would take all steps reasonably necessary to remove the Red Placard, including obtaining with all due expediency a geotechnical and structural engineering report;
(b)the defendants would file a claim with Vero as soon as possible and take all steps reasonably necessary to have the claim accepted and insurance money paid out, or for the insurer to rectify;
(c)all insurance claim money (including from the Earthquake Commission (EQC)) would be immediately paid to Mr Du; and
(d)Great Wall Lawyers would hold in their trust account $500,000 from the settlement funds to cover any shortfall in the insurance payout required to rectify the landslip and related damage.
[27] The email also advised that the defendants had obtained an estimate from a contractor that the remedial works for the landslip and damage to the retaining wall would cost approximately $200,000 (excluding GST).
[28] At 4.26 pm on 31 January 2023, Glaister Ennor, newly instructed solicitors for Mr Du, emailed Morrison Kent a letter which stated:
As you may be aware, our client had agreed with your client to undertake his pre-settlement inspection on Sunday 29 January 2023 but was advised by your clients that he was unable to do so due to the damage to the property.
Our client understands that the property was damaged and/or destroyed by the weather event which occurred on 27 January 2023 and 28 January 2023 and
that as a result the property is now untenantable. Obviously this will not be remediable by settlement date.
As our client is unable to inspect the property and in order that our client can consider his rights and remedies under clause 7 of the [ASP], would you please advise immediately by return the extent of the damage and/or destruction to the property. Our client also understands that the Council may have given notice to your clients under the Building Act following these events. If that is the case, would you please immediately provide our client with a copy of this notice and any other correspondence.
[29] At 5.24 pm, Morrison Kent emailed Glaister Ennor advising they would reply to the letter in due course. The email attached a copy of the Red Placard, photos of the damage and Morrison Kent’s email to Great Wall Lawyer earlier that day containing the defendants’ settlement proposal. The email asked Glaister Ennor to seek instructions and advise if the settlement terms were agreed or what terms would be agreeable to Mr Du.
[30]There was no further correspondence between solicitors on 31 January 2023.
Correspondence after 31 January 2023
[31] On 2 February 2023, Glaister Ennor emailed Morrison Kent a letter in which they asked to be supplied with copies of all correspondence, reports and other documents held by the defendants in relation to the extent of the damage to/destruction of the Arney Road Property. The letter also asked, without prejudice to Mr Du’s rights under the ASP, for the defendants’ consent to Mr Du’s structural and geotechnical engineers attending the property to better understand the situation. This was on the basis that access was not an inspection under cl 5.2 of the ASP and was not an election of any remedies available under the ASP.
Assessments by geotechnical and structural engineers
[32] On 3 February 2023, Mr Ouwejan, a geotechnical engineer engaged on behalf of Mr Du, undertook a preliminary visual inspection of the Arney Road Property, including the landslip and debris flow. In an emailed report sent later that day, Mr Ouwejan said the landslip had caused the evacuation of site soils below the Dwelling and the deck. He also said that, because of the wet and slippery nature of the site, he had only been able to carry out a visual assessment from the deck area and
that it would not be safe to fully assess the land damage until the site had significantly dried out and that rope access may be required. The report said there was presently no visual damage to the exterior of the Dwelling that could be apportionable to the landslip. It said that the main issue was the risk of the slip further affecting the Dwelling and deck, and the loss of usable land. The report also said that further instability was expected to happen, particularly if heavy rainfall occurred, and recommended a geotechnical investigation to assess the final regression of the landslip and remedial options. It also said any remedial solution would require investigation and design prior to any contractor mobilising to the site.
[33] Also on 3 February 2023, Tonkin and Taylor, engineering and environmental consultants, issued a report to the Auckland Council on the emergency response inspection it had undertaken on 28 January 2023 of 33 Shore Road and surrounding properties. The report identified 10 properties on Shore Road as being in the “Red” category and two more Shore Road properties as being in the “Yellow” category. It also identified the Arney Road Property as being in the “Red” category, and 141 and 147A Arney Road, as being in the “Yellow” category. The report assessed there was imminent risk of further slope instability affecting properties on Shore Road (debris inundation) and Arney Road (landslip headscarp evacuation) and said permanent remedial works would need to be implemented by the property owners.
[34] On 5 February 2023, structural engineers from Envivo Ltd, who had been retained by Mr Du, provided an initial structural assessment of the Arney Road Property, based on Mr Ouwejan’s inspection and their examination of the Council’s file on the property and drone photographs. The assessment stated that the most affected area of the slip was the northwestern side of the deck and that the slip had caused the concrete crib retaining wall to collapse and fall down the cliff. The footings of the retaining wall and the deck were exposed, showing gaps between the ground and the base of the footings. The assessment stated that additional investigation would be required to assess further damage to the foundation and the Dwelling. It said a further slip was possible and that the upper bedroom supported by posts on the northwestern corner of the property (i.e. the master bedroom) could be at immediate risk. It also stated that Envivo anticipated that restoring the slipped area would be costly, considering the steepness of the cliff.
Defendants seek to reassure Mr Du and obtain his assistance
[35] On 8 February 2023, Morrison Kent emailed Glaister Ennor to advise they had been instructed by the defendants to provide Mr Du with an update on matters, including on the New Zealand Herald front-page article that day. The email said the defendants had engaged Geoconsult to complete a geotechnical investigation report of the land and that the report was expected to take approximately two weeks to complete. It also advised that the defendants had engaged Babbage Consultants (Babbage) to complete a structural integrity report following the geotechnical report. The email noted that the defendants were waiting on Auckland Council to provide a copy of the Tonkin and Taylor assessment. The defendants’ understanding was that the Red Placard had been based on a visual assessment of the Arney Road Property from Shore Road and that no Council inspector had been on the property. The email also referred to the New Zealand Herald article and said the concrete block wall exposed in the photographs was from a disused swimming pool (which was under the deck) and did not form part of the Dwelling’s foundations.
[36] The email also referred to the defendants’ reliance on the sale of the Arney Road Property to purchase the Mellons Bay Property. It noted that the vendors of the Mellons Bay Property had granted temporary reprieve from the obligation to settle that purchase but said the defendants’ risk of defaulting under the agreement for the sale and purchase of that property remained. The email enquired whether Mr Du would be agreeable to discussing the possibility of providing financial assistance to the defendants to complete the purchase of the Mellons Bay Property.
[37]There was no reply to this email.
Defendants conclude licence agreement to occupy Mellons Bay Property
[38] On 15 February 2023, the defendants and the vendors of the Mellons Bay Property executed, by deed, a licence for the defendants to occupy the property from that date. The licence fee was $4,000 per week. The settlement date of the agreement for the sale and purchase of the Mellons Bay Property was varied to 15 June 2023 or three working days from the date the defendants gave notice calling for settlement.
Defendants’ geotechnical report
[39] On 23 February 2023, Mr Williams of Geoconsult, geotechnical consultants instructed by the defendants, provided a report to Ms Park of TNS Construction Ltd, who had been instructed by the defendants to obtain geotechnical and structural reports for the Arney Road Property, on Geoconsult’s inspection of the property (the February Geoconsult Report).
[40] The February Geoconsult Report advised that a preliminary hand auger investigation had revealed that most of the soil had been removed from the slope, leaving a surface of very stiff or very soft sandstone under a veneer of loose sand and silt. The report said Geoconsult would be recommending the slope be stabilised by soil nailing to prevent further slippage in the future. Prior to that, Geoconsult would expect any slope deterioration to be restricted to minor frittering of the surface. The report also said they did not expect the slope to regress further uphill towards the Dwelling structure.
[41] The February Geoconsult Report said the main part of the deck on the northern side of the Dwelling, which covered a pre-existing swimming pool and a pre-existing concrete block retaining wall, appeared to be sound. The report also said the corner of the retaining wall had been slightly exposed and Geoconsult would be recommending it be underpinned. However, the outside foundations of the northwestern extension of the deck had been severely damaged and needed to be replaced and possibly strengthened.
[42] The February Geoconsult Report also said the slip scarp ended at least three meters from the house structure foundations, that Geoconsult considered it very unlikely that the slip would regress further uphill, and they could see no evidence of movement in the Dwelling structure. However, this would need to be confirmed by a specialist or structural engineer. The report went on to say that, provided the house structure inspection revealed no damage, Geoconsult were of the opinion that the Dwelling could be reoccupied, provided the deck remained out of bounds.
[43] On 24 February 2023, Morrison Kent forwarded the February Geoconsult Report to Glaister Ennor by email. The email described the report as “preliminary
advice” and said the understood the full report would be available “in 1-2 weeks’ time”. In fact, the report was not available until 8 May 2023.
Babbage report recommends placard be changed from red to yellow
[44] On 6 March 2023, Mr Calvert of Babbage provided a safety assessment report to Ms Park based on Babbage’s inspection of the Arney Road Property (the Babbage Report). The report said Babbage had undertaken a visual inspection from ground level and the other floors to identify readily any visible damage. However, the inspection had not included any intrusive investigation or inspection at heights and there had been limited inspection from the deck because the area was deemed to be unsafe.
[45] The findings of the Babbage Report included: the slip had caused the deck at the northwest end of the Dwelling to become unsupported and unsafe; ground cracking was visible below the deck, indicating the potential for further slips; and there was no visible evidence of damage to the Dwelling structure. The report also said the Dwelling had been found to be undamaged and appeared to have been unaffected by the slip. It said four columns supporting the first floor were the closest part of the Dwelling structure to the affected areas, so further investigation was recommended. It recorded Babbage’s support for Geoconsult’s recommendation for additional geotechnical investigation. The report said further investigation was required for the support of the four building columns, the extent of the undermining and the stability of the disused pool structure, and the solutions required to stabilise the ground so the deck structure could be rebuilt.
[46]In its conclusions, the Babbage Report stated:
The landslip appears to have undermined the decking area to the north west of the site and small area of the pool structure.
There are visible ground cracks which mean that the potential for further slips remain, the extent of the ground cracking is unknown at this stage and is the subject of further investigation by Geoconsult.
The four columns which support the first-floor structure are quite close to the slip face and the remaining ground cracks, and so we recommend further investigation of the ground in this location, however, Geoconsult note that “we consider it very unlikely that the slip will regress further uphill”.
[47] The Babbage Report recommended that the placard for the Arney Road Property be changed from Red to Yellow, and that the Yellow Placard should restrict access to the deck to the north of the Dwelling until further geotechnical investigation and repair could be completed.
[48] On 7 March 2023, Morrison Kent forwarded the Babbage Report to Glaister Ennor. The covering email said they were advised that a further report from Babbage was to follow “after the full geotechnical investigation of the site”.
Mr Du enters into agreement to purchase 76F Lucerne Road
[49] On 14 March 2023, Mr Du entered into an agreement for the sale and purchase of a property at 76F Lucerne Road, Remuera. The purchase price was $12,800,000. The settlement date was 28 April 2023.4
Yellow Placard issued for Arney Road Property
[50] On 15 March 2023, the Auckland Council removed the Red Placard from the Arney Road Property and replaced it with a Yellow Placard. The Yellow Placard recorded that restricted access was permitted to parts of the building and that no access was permitted to restricted areas, which were: “decks; outdoor pool house; first floor room at northwest rear corner; slope under and north of decks”.
Defendants vacate Arney Road Property
[51] On 18 and 19 March 2023, the defendants removed their belongings from the Arney Road Property, with the exception of the spa pool which was located on the deck at the northwest corner of the property, to which access was prohibited.
Defendants propose settlement of sale and purchase of Arney Road
[52] On 20 March 2023, Morrison Kent emailed Glaister Ennor information about the Arney Road Property and a settlement proposal (the 20 March 2023 email). The
4 In evidence, Mr Du said he bought the Lucerne Road property for his parents to live in and that they currently reside there and that it was purchased with money provided by his father. He said it was never his intention to live there and that it was not purchased as an alternative to the Arney Road Property.
email advised that the Auckland Council had “today” replaced the Red Placard with a Yellow Placard and attached a copy of the latter as well as a diagram of the areas to which access was restricted. The email then stated:
We are advised that further soil analysis and investigation is being undertaken by our client’s geotechnical engineers and our client anticipates the report being available towards the end of this month. We understand that the contents of this geotechnical report will determine the remedial works required to be undertaken for lifting of the remaining access restrictions.
We are advised that the property is currently vacant but delivery of vacant possession is subject to the spa pool remaining in its current position until it can be safely removed.
Our client proposes for settlement to be completed following availability of vacant possession on the following terms.
[53]The terms were:
(a)The defendants would provide confirmation of claims lodged with the EQC and the defendants’ insurer.
(b)On settlement, the defendants would do all things necessary to assign their interest in the claims to Mr Du.
(c)The defendants would pay any funds received under the claims to Mr Du.
(d)The defendants would agree to provide all information reasonably required by Mr Du regarding the claims and would cooperate with Mr Du in dealing with EQC and the defendants’ insurer.
(e)The parties would agree that any expenses incurred by the defendants as to settlement that were covered by EQC or the defendants’ insurer would be excluded from the assignment of the defendants’ benefit in the claims.
[54] The only reply was an email on 21 March 2023 from Glaister Ennor to Morrison Kent asking that, as previously agreed, Morrison Kent send all
communications with the Auckland Council. There was no reference to the settlement proposal.
[55] On 22 March 2023, Morrison Kent emailed Glaister Ennor enclosing correspondence received from the Auckland Council and information received from Vero. In this email, Morrison Kent advised that a credit of $5,042.03 would be provided on settlement, in consideration of damage to timber decking as set out in one of the Vero documents. The email asked for advice on whether the “additional terms of settlement” provided in the email of 20 March 2023 were acceptable to Mr Du.
[56] At 2.58 pm on 23 March 2023, Morrison Kent sent a further email to Glaister Ennor asking whether Mr Du agreed to the defendants’ proposal as set out in the earlier emails “or” to complete settlement as provided in cl 7.2(2) of the ASP.5
Defendants send notice requiring settlement and settlement statement
[57] At 1.36 pm on Friday, 24 March 2023, Morrison Kent sent a further email to Glaister Ennor (the 24 March 2023 email) noting that they had not had any response to “our client’s settlement proposal”.
[58]The 24 March 2023 email then stated:
To that end, our client requires settlement to be completed in accordance with [clause 7.2(2)] of the agreement and for the purpose of such clause, our client has obtained from their contractor a cost estimate of $300,000 inclusive of GST for reinstatement of the landslip and retaining wall at the northern boundary of the property. Our client wishes to highlight that EQCover building cap is $400,000 plus GST, a cap which would have considering all factors been set to sufficiently cover most claims under the EQC scheme.
Please find attached our amended settlement statement allowing for a credit for the damage to the timber decking and the diminution in value to the property, and our e-dealing undertakings. Please be advised that our client is ready, willing and ready to complete settlement.
[59] The enclosed settlement statement, after allowing credits for the deposit, damage to the timber decking ($5,042.03) and the diminution in value of the property
5 The actual reference was to cl 5.2(2) but it is common ground that the intended reference was to cl 7.2(2).
($300,000), advised that a balance of $9,265,673.82 was required to settle on 24 March 2023.
[60] At 2.50 pm on 24 March 2023, Glaister Ennor advised Morrison Kent they were taking instructions and would revert in due course.
Defendants serve notice of breach
[61] At 6.45 pm on 24 March 2023, Morrison Kent emailed Glaister Ennor a letter giving notice that the ASP required settlement of the purchase of the Arney Road Property to take place on 24 March 2023 and asserting that Mr Du had failed to pay the settlement amount of $9,265,673.82 on the settlement date and, therefore, was in breach of the ASP. The letter said the defendants were at all material times ready, willing and able to settle. The letter also said interest accrued daily on the settlement amount at 15 per cent per annum and that, to remedy the breach, Mr Du was required to pay the settlement amount plus interest and other monies owing within 12 working days of the notice.
Mr Du cancels the ASP
[62] On 27 March 2023, Glaister Ennor emailed Morrison Kent a letter responding to the Mr Kim’s letter of 24 March 2023. The letter referred to the Glaister Ennor letter of 31 January 2023 expressing Mr Du’s view that the Arney Road Property was untenantable as of that date, and to recent correspondence referring to further investigations still to be carried out and work to stabilise the slope and deck structure. The letter said evidently the property was untenantable as of 31 January 2023 and remained untenantable, and the defendants were unable to demonstrate otherwise.
[63] The letter advised that, in accordance with cl 7.2(1)(b) of the ASP, Mr Du hereby cancelled the agreement.6 The letter asked that the deposit be refunded to Glaister Ennor’s trust account and that, if the defendants refused to do so, Mr Du would seek relief in the High Court with increased costs following a successful outcome.
6 The letter referred to cl 7.2(b), but it is clear the intended reference was to cl 7.2(1)(b).
[64]There was no response to this letter until August 2023.
Defendants’ consultants exchange emails about further investigations
[65] On 29 March 2023, Ms Park emailed Mr Calvert noting that the buyer of the Arney Road Property was concerned that the structure below the master bedroom might need further investigation. Ms Park noted that Mr Williams was happy the whole Dwelling could be occupied but wanted confirmation from Mr Calvert too. Ms Park observed that if the master bedroom was prohibited from use, the buyer would not agree with settlement.
[66] In his reply, Mr Calvert referred to the conclusions of the Babbage Report recommending further investigation of the ground near the four columns and the note in the February Geoconsult Report that Geoconsult considered it very unlikely the slip would regress further uphill. Mr Calvert then said that, without further investigation, Babbage could not comment further structurally and, if further certainty was required, he recommended that the deck boards around the columns were lifted so Mr Williams could inspect and advise.
Discussions on need to stabilise Arney Road Property
[67] In late April 2023, Mr Brian Lim, a director of Sparta Construction NZ Ltd, who had been retained by Mr Youn to complete investigations and undertake repair work at the Arney Road Property, and Mr Oh Chan Lian, a geotechnical engineer who had offered his services to Mr Youn, exchanged emails about how to stabilise the slope surface at the property. Mr Oh advised that, once the slipped slope surface had been stabilised, they would carry out an extensive evaluation of the soil profile beneath the structure that had been yellow stickered. He also said that, until that soil profile had been determined, the analysis of the structure could not be carried out. He also observed that it was important to prevent further regression of the slipped slope surface because the exposed slope surface was at the mercy of the natural elements.
[68] Over the same period, Mr Lim engaged with the Auckland Council on obtaining Council approval for the proposed stabilisation works. In his emails to Council, Mr Lim referred variously to discussions he had had with an engineer about
the safety factor of the land being negatively affected when it rained, the need for urgent stabilisation of the landslip, the possibility of another landslide and the threat that erosion posed to the property itself sliding down.
May Geoconsult Report
[69] On 8 May 2023, Geoconsult issued a Geotechnical Investigation Report (May Geoconsult Report) to Ms Park. The May Geoconsult Report described the site of the Arney Road Property, summarised the March Geoconsult Report and existing information, provided photographs of the site, described the investigation undertaken and the findings on subsoil conditions and site stability, and made recommendations.
[70]On site stability, the May Geoconsult Report said:
… the soil evacuation has extended to just below the existing deck on the northwest side of the building. Whilst there is unlikely to be further regression in the short term, regression is most likely to occur eventually if left unattended. Hence the recommendation (below) of a barrier pile wall, which will be primarily to protect the existing building foundations, but will also serve as replacement deck foundations, so that the deck will no longer be in danger of being undermined.
[71]The first recommendation began:
The soil beneath and below the deck has been vacated and it is not practical to reinstate soil to this area. We recommend a barrier pile wall be constructed beneath the existing deck, from the western end to the existing concrete block wall. This wall will have the dual functions of protecting the existing house foundations from any further soil evacuation and replacing the existing failed deck foundations. …
[72] In an email sent to Morrison Kent on 4 May 2023, Ms Park advised that, following discussions with Mr Williams and Mr Calvert, it was considered that the most urgent work was the construction of the barrier wall. The primary objective of this work was to protect the existing Dwelling from settlement that would result if there was undermining of the house foundations by further ground movement.
Defendants assert cancellation of ASP was a repudiation and themselves cancel ASP
[73] On 17 August 2023, K3 Legal Ltd, newly instructed solicitors for the defendants, sent a letter to Glaister Ennor asserting that, for cl 7.2(1)(b) of the ASP to
apply, the Arney Road Property needed to be untenantable, which it was not. The letter asserted that Mr Du’s purported cancellation was a repudiation and that the defendants hereby cancelled the ASP. The letter also asserted that the deposit was forfeit.
[74] On 21 August 2023, Glaister Ennor advised K3 Legal that Mr Du did not accept that the Arney Road Property was tenantable and that, as the defendants had purported to retain the deposit, proceedings must follow.
Proceedings commence
[75] On 21 August 2023, Mr Du’s statement of claim and notice of proceeding were filed.
Subsequent developments
[76] In early September 2023, Sparta removed the decks to allow pricing of remediation works at the Arney Road Property. Following the removal, Geoconsult undertook a further investigation and, in a report dated 21 September 2023 (the September Geoconsult Report), confirmed there were no risks to the master bedroom’s foundations.
[77] On 13 September 2023, the defendants completed the purchase of the Mellons Bay Property, using bridging finance of $1,600,000 from SouthernCross Group. The defendants incurred additional costs of $43,155 in obtaining the bridging finance.
[78] On 5 October 2023, the Auckland Council modified the Yellow Placard to remove the restriction on access to the master Bedroom. Under the modified Yellow Placard, access was restricted to the outdoor deck areas and the rear garden deck.
[79]On 29 November 2023, Sparta provided Mr Youn with a quotation of
$1,988,802.77 to undertake the remediation work on the Arney Road Property. While it appears that quote was not accepted, Sparta was appointed lead contractor for the work.
[80] On 12 December 2023, the defendants sold the Mellons Bay Property at auction for $3,450,000, with a settlement date of 28 February 2024.
[81]In January 2024, work commenced at the Arney Road Property.
[82] On 18 February 2024, the defendants moved back into the Arney Road Property.
[83] By March 2024, the major remediation work on the Arney Road Property was underway. Because the owners of neighbouring properties refused access from their properties, all the remediation work was undertaken from within the property.
[84] In June 2024, the remediation works were completed. The total remediation costs incurred by the defendants came to $1,120,593.40.
[85] On 27 June 2024, the Auckland Council advised Mr Youn the Yellow Placard was no longer required and authorised its removal.
[86] On 17 September 2024, the defendants again put the Arney Road Property on the market for sale.
Questions for determination and relevant evidence
[87] The evidence at the hearing covered a broad range of matters, including the design and undertaking of the remediation works and the effect of those works on the value of the Arney Road Property. However, based on the pleadings, the submissions of counsel and the terms of the ASP, the questions that the Court must determine are more limited. They are:
(a)What was the settlement date under the ASP? In that regard:
(i)Was the settlement date altered by agreement?
(ii)Was there a valid notice to fix a new settlement date under the ASP?
(iii)Was there a valid late settlement notice under the ASP?
(b)Was the Arney Road Property untenantable on the settlement date? In that regard, is it relevant the Arney Road Property was under a Yellow Placard from 15 March 2023?
(c)Was Mr Du entitled to cancel the ASP?
(d)If Mr Du was not entitled to cancel the ASP, what is his liability to the defendants?
[88] Determination of these questions requires consideration of the relevant provisions of the ASP and the evidence as to the state of the Arney Road Property as at the settlement date.
[89] The evidence relevant to the latter question is that of the technical witnesses called by the parties. Mr Du called Mr Ouwejan, a geotechnical engineer, and Ms Smeal, a structural and civil engineer. The defendants called Mr Williams, a geotechnical engineer, and Mr Calvert, a structural engineer. As noted in the above summary of what happened, Mr Ouwejan, Mr Williams and Mr Calvert were involved in assessing the Arney Road Property following the Anniversary Day weekend events.
[90] In considering the state of the Arney Road Property as at the settlement date, I have also had regard to the evidence of Mr Du and Mr Youn. Also relevant, is the evidence of Mr Oh and Mr Lim who were also involved in assessing the Arney Road Property following those events and in advising Mr Youn on its remediation. I have also taken into consideration the evidence of Mr Shim, a director of TNS Construction, Mr Moodie, who gave evidence on the emergency management process and the issuing of placards, Mr Cheyne and Mr Quinlan, who are both valuers, and Ms Bracey, a property manager.
[91] As I ruled at the hearing, however, I held the evidence of Ms Gibbon, a property manager, to be inadmissible. Most of Ms Gibbon’s evidence was addressed principally to the interpretation of the Residential Tenancies Act 1986, which is properly a matter
for the Court and, in any event, of marginal relevance. Ms Gibbon also provided no factual foundation for her opinion that the Arney Road Property would have been easy to rent, even though it had been yellow-stickered.
[92] I am grateful to the geotechnical and structural engineers, the valuers and the property managers for their work in identifying where they agreed and disagreed on matters in issue. I have taken that work into consideration. However, I consider that decisions on the questions requiring determination do not require resolving the differences between the experts. Rather, it requires analysis of what was known about the state of the Arney Road Property at the settlement date, whenever that was, and at the time the ASP was cancelled in order to determine whether the property was untenantable on the settlement date and when the ASP was cancelled.
Relevant provisions of the ASP
[93] The provisions of the ASP that bear on the questions for determination are set out in the appendix to this judgment. In brief, they are:
(a)clause 1, which provides the conditions of sale, including the settlement date and the interest rate for late settlement;
(b)clause 3, which provides the General Terms of Sale and which includes:
(i)clause 3.1, in particular the definitions of “settlement”, “settlement date” and “settlement statement”:
(ii)clause 3.2, which provides that a party is in default if it did not do what it has contracted to do to enable settlement to occur, regardless of the cause of the failure; and
(iii)clause 3.3, which stipulates time for performance under the ASP;
(c)clause 5, which deals with possession and settlement, and with deferment of possession and settlement;
(d)clause 7, which deals with risk and insurance and has specific provisions on what can be done when a property is destroyed or damaged before settlement; and
(e)clause 13, which sets out the process for issuing a settlement notice if settlement does not take place on settlement date and the remedies for default.
Submissions of counsel for Mr Du
[94]Mr Chisholm KC says the legal position is straightforward:
(a)the settlement date was that set out in the ASP, 31 January 2023 and it was never varied;
(b)as at the settlement date, the property was untenantable and remained so, even after the Red Placard was replaced by a Yellow Placard;
(c)in accordance with cl 7.2(1)(b) of the ASP, Mr Du was entitled to cancel the ASP and he did so; and
(d)in accordance with cl 7.2(1)(b), the defendants were required to return the deposit to Mr Du and the parties had no further claim against each other.
[95] Mr Chisholm says, even though settlement did not take place on 31 January 2023, there was no agreement by the parties that settlement would not proceed on that date. He says all that happened was that settlement did not proceed on the settlement date or at any time thereafter. He notes that Mr Du’s solicitor expressly reserved Mr Du’s rights under cl 7 on that date so Mr Du could obtain more information. For these reasons, Mr Chisholm says the settlement date remained 31 January 2023, even though settlement did not take place that day.
[96] Mr Chisholm also says cl 5.15 of the ASP, under which the settlement date could have been varied, does not apply and that none of the notices sent by the defendants was a valid notice under cl 5.15.
[97] Mr Chisholm says the 20 March 2023 email was not a notice to vary the settlement date under cl 5.15 or a settlement notice under cl 13 of the ASP. Rather, it was a proposal to settle outside the ASP.
[98] As to the 24 March 2023 email, Mr Chisholm says the precondition for the operation of cl 15.5, namely that neither party had been ready, willing and able to settle on the settlement date, did not apply. Mr Chisholm says on 31 January 2023, Mr Du was ready, willing and able to purchase the property he had contracted for, in accordance with the terms of the ASP. In addition, Mr Chisholm says the defendants themselves were not ready, willing and able to settle on 24 March 2023, despite their claim to be so. They had not provided Mr Du with the opportunity to undertake the pre-settlement inspection and they had failed to tender a revised settlement statement a reasonable time prior to settlement, as required by cl 5.5.
[99] Mr Chisholm says that, for the same reasons, the settlement notice sent on 24 March 2024, was also not valid.
[100] Mr Chisholm notes that the defendants inaccurately claimed in the 24 March 2023 email to have had a contractor’s estimate of $300,000 for the costs of remediation when they had no such estimate and when the costs of remediation were quite unknown.
[101] Mr Chisholm says the test for whether the Arney Road Property was untenantable is not whether it was contractually rentable or whether it would be possible for someone to sleep there. Mr Chisholm says the terms of the Residential Tenancies Act are not relevant to the question of whether the property was untenantable and notes that, in Bahramitash v Kumar,7 the Supreme Court held as apt the statement by D W McMorland that the test for untenantability would seem to be
7 Bahramitash v Kumar [2005] NZSC 39, [2006] 1 NZLR 577 at [14].
whether the property as a whole had been rendered unfit for the occupation and use of someone assumed to want the property for the same purposes as the purchaser.8
[102] Mr Chisholm submits that, judged against that criterion, the Arney Road Property was untenantable on the settlement date. He submits it remained untenantable even when the Red Placard was removed and replaced with a Yellow Placard restricting access to the decks and the master bedroom. He says no reasonably minded occupant would be unconcerned at having no access to the large northern facing decks, which were a particular selling point of the property in 2022 and in 2024 or at having no access to the main bedroom, or of the risk of further landslips when it rained, or of the likely disruption caused by a lengthy period of remedial works. He notes that the property remained empty for the rest of 2023 and was occupied only after substantial initial remedial works had been undertaken.
[103] Mr Chisholm refers to the evidence of Ms Bracey, who had said no tenant would want to take on the problems inherent in occupying the property pre-remediation when other better options would be available. Mr Chisholm also refers to the evidence of Mr Oh about the risk of further slips if water entered the subsoil and the statements Mr Lim had made to this effect in his communications with Auckland Council in April 2023, notwithstanding Mr Lim’s attempts to walk back from those statements when giving evidence. Mr Chisholm says that Mr Ouwejan, Ms Smeal, Mr Williams and Mr Calvert all acknowledged, to various degrees, that this risk remained.
[104] For these reasons, Mr Chisholm says Mr Du was entitled to cancel the ASP and is entitled to the full refund of his deposit, in accordance with cl 7.2(1)(b).
[105] Mr Chisholm also says, that if he is wrong and Mr Du was not entitled to cancel the ASP, it is accepted that the defendants are entitled to retain the deposit. However, he says that is all the defendants can claim because the damages they can claim for foreseeable losses caused by wrongful cancellation do not exceed the amount of the deposit.
8 See D W McMorland Sale of Land (4th ed, 2022), Cathcart Trust, at 10.13.
Submissions of counsel for the defendants
[106]Mr Napier also says the legal position is clear:
(a)the settlement date was not 31 January 2023 because the parties did not settle on that date;
(b)on 20 March 2023, the defendants gave notice under cl 5.15 of the ASP that had the effect of setting a new settlement date — being 23 March 2023;
(c)on 23 March 2023, the property was not untenantable because, although the master bedroom and decks could not be accessed, the balance of the Dwelling was available and liveable;
(d)in accordance with cl 7.2(2) of the ASP, Mr Du was required to complete the purchase at the purchase price less the amount that Mr Du reasonably estimated was the amount of the diminution in value caused by the Anniversary Day weekend storm, with any dispute as to that amount to be resolved in accordance with cl 12; and
(e)accordingly, Mr Du was not entitled to cancel, his purported cancellation was a repudiation of the ASP and the deposit was forfeit.
[107] Mr Napier says the Settlement Date was not 31 January 2023. The parties did not settle on that date, and it was plain from their dealings that they did not expect to settle on that date. In terms of cl 15.5, it was clear that neither party was ready, willing or able to settle on 31 January 2023. Both were seeking further information and verification of the state of the property and the Dwelling.
[108] In opening submissions, Mr Napier said the 24 March 2023 email was a notice to settle in terms of cl 15.5. While acknowledging that the notice required settlement that day and not in three days’ time as provided for in the clause, he said the notice became effective on 27 March 2023 in accordance with the clause. However, in closing submissions, Mr Napier accepts that the 24 March 2023 email could not have
been effective in terms of cl 5.15. Instead, he submits that the 20 March 2023 email constituted notice in terms of cl 15.5, making 23 March 2023 the effective settlement date.
[109] Mr Napier also says that, if the 20 March 2023 email was not valid notice of a new settlement date, then there was no operative settlement date. That means Mr Du had to serve his own settlement notice in order to obtain a settlement date — at which the defendants would have been required to provide the property in a tenantable state. Mr Napier says that, in the absence of such notice, Mr Du could not cancel the ASP in accordance with cl 7.2. In any event, Mr Napier says that, with settlement having been deferred, Mr Du could not rely on 31 January 2023 as being the settlement date for the purposes of cl 7.2.
[110] Mr Napier submits that tenantability is a factual issue and to be determined by the state of the Arney Road Property. Because he says the settlement date was not 31 January 2023, Mr Napier also submits that tenantability is to be assessed either on 23 March 2023, which he says was the settlement date, or at the date Mr Du purported to cancel, 27 March 2023. Both dates post-dated the removal of the Red Placard and its replacement by the Yellow Placard on 15 March 2023.
[111] Mr Napier notes that, as Ms Bracey accepted, once the Yellow Placard had been issued, the Arney Road Property had three operative bedrooms, five living or office areas, four bathrooms, and a large kitchen. All were fully accessible, and all services were working. The Dwelling could be lived in and rented. Mr Napier says Ms Smeal and Mr Ouwejan did not dispute that assessment and that Mr Williams and Mr Calvert did not move from the positions in their briefs of evidence; namely, that the Anniversary Day weekend slips did not render the Arney Road Property uninhabitable. The slips affected only the decks and the disused pool areas and there was no damage to the Dwelling and, as confirmed by the September Geoconsult Report, no risks to the foundations of the master bedroom. Mr Napier also notes that Mr Lim is not an expert or qualified to comment on land stability.
[112] On the legal test for whether a property is untenantable, Mr Napier notes that the definition of “tenantable” in the Shorter Oxford English Dictionary is “able to be
tenanted or inhabited, fit for occupation”9 However, he also refers to the observations of the Supreme Court in Bahramitash v Kumar to which Mr Chisholm refers.10
[113] Mr Napier also refers to the Court of Appeal’s decision in Miller v Downey, in which the Court declined to uphold the cancellation of a lease on the grounds of untenantability and which, Mr Napier says, has some passing similarities to the present case.11 He notes that the Court observed that the equivalent of cl 7.2(2) of the ASP required no positive step on the part of the vendors and that it was for the purchaser to make the appropriate payment on settlement, reduced, where appropriate, by the sum representing the diminution in value. Mr Napier also notes that the Court held that the vendors would have been in breach of the agreement for sale and purchase only if they failed to give title and possession after the purchaser had tendered an appropriately reduced sum by way of settlement, but that matters had never reached that point.12
[114] Mr Napier submits that cl 7.2(2) deals with Mr Du’s situation. The Arney Road Property could be, and was, fully remediated and, although the remediation cost of
$1.1 million was high, it was not extreme in the context of a purchase price of
$10.63 million. Mr Napier acknowledges that Mr Du could not have known of the likely costs of remediation in early 2023 when the Yellow Placard was issued. However, Mr Napier says, provided Mr Du made a genuine pre-estimate of the costs of remediation based on the information then available, it would have been open to Mr Du under cl 7.2(2) to have reduced the settlement sum by the amount of that pre-estimate. Mr Napier says Mr Du might have reduced the settlement sum by as much as $2 million and, if that sum had been disputed, the parties would then have been able to resolve the amount to be deducted through the procedure provided for in cl 12 of the ASP.
[115] Mr Napier says settlement on that basis would have preserved the parties’ positions and would have enabled the defendants to settle the purchase of the Mellons Bay Property. He submits that any interpretation of tenantability which results in a property being held to untenantable but fit to occupy has the potential to
9 Shorter Oxford English Dictionary, Oxford University Press 2007; 6th ed.
10 Bahramitash v Kumar, above n 7.
11 Miller v Downey CA121/93, 23 March 1994.
12 At 12.
cause great mischief, particularly in circumstances where there are downstream purchases that depend on settlement of the damaged property.
[116] For all these reasons, Mr Napier says the Arney Road Property was not untenantable once the Yellow Placard had been issued and Mr Du had no right to cancel the ASP.
[117] Mr Napier also says that, even if the settlement date was 31 January 2023, it was not untenantable having regard to the short period between that date and 15 March 2023 when the Yellow Placard was issued. In support of that submission, Mr Napier refers to the decision of the Court of Appeal in DFC New Zealand Ltd v Samson Corporation Ltd and its finding that damage of merely a transitory or temporary nature would be insufficient to satisfy the description of “untenantable”.13
[118] On the defendants’ counterclaim, Mr Napier accepts that the deposit as retained by the defendants; that is, after deduction of the real estate agent’s commission, must be offset against the losses claimed. He also accepts that fee paid to the agents cannot be claimed separately as had been the case in the counterclaim as filed. However, he says the other losses claimed by the defendants were foreseeable and that the defendants took all reasonable steps to mitigate those losses.
Analysis
[119] There is no question that the Arney Road Property was damaged between the making of the ASP and the settlement date. Accordingly, whether or not Mr Du was entitled to cancel the ASP depends on the application of cl 7 of the ASP and, in that regard, on what the settlement date was and whether the property was untenantable at that date.
What was the settlement date?
[120] The starting point is cl 1.6 of the ASP, which provided that the settlement date was “31 January 2023 or by mutual agreement”.
13 DFC New Zealand Ltd v Samson Corporation Ltd CA250/92, September 1993 at 10.
Was there a mutual agreement to vary the settlement date?
[121] There is no evidence of any express mutual agreement by Mr Du and the defendants to vary the settlement date in cl 1.6. The correspondence between the defendants’ real estate agent and Mr Du on 28 January 2023 after the storm and that exchanged between the parties’ lawyers on 31 January 2023 does not establish any such agreement. Nor does the correspondence support an inference that there was such a mutual agreement to vary. To the contrary, the email from Great Wall Lawyers sent at 9.47 am on 31 January 2023 explicitly recorded that “settlement date is today”. The reply by Morrison Kent did not propose varying the settlement date. Rather, it proposed settlement on a basis not provided for in the ASP. Nor is there anything in the subsequent correspondence exchanged after 31 January 2023 to indicate there was an express agreement to vary the settlement date or to support an inference that there was a later agreement to vary the date.
[122] The fact that settlement did not happen on that date does not of itself change the settlement date. The ASP itself contemplates that settlement may not happen on the settlement date and makes provision for what is to happen in such circumstances. For example, cls 5.12 and 5.13 provide for the payment of default interest or other compensation if settlement is delayed, either because the purchaser is unable to settle on the settlement date or because the vendor is unable to settle or to provide possession on the settlement date. Default interest is calculated from the settlement date to the date on which the purchase price is paid or possession is given. As Mr Chisolm says, these clauses could not operate if the settlement date moved simply because settlement, being performance of the interdependent obligations to pay the balance of the purchase price and to give possession as set out in cl 5.8, did not take place on the settlement date.
[123]Of particular relevance to the current dispute are:
(a)cl 5.15, under which, in the circumstances provided for in the clause, one party can set a new settlement date by a notice to the other party; and
(b)cl 13, under which, in the circumstances provided for in that clause, one party can require a late settlement without any change to the settlement date.
[124]The question is whether either of those clauses was validly implemented.
Was there a valid notice to fix a new settlement date under cl 5.15?
[125] Under cl 5.15, if neither party was ready, willing and able to settle on the settlement date, the settlement date is deferred to the third working day following the date one party gives notice that it is ready, willing and able to settle. Two questions arise on the facts of the current case:
(a)Was it the case that neither party was ready, willing and able to settle on 31 January 2023?
(b)If so, was clause 5.15 validly implemented?
Was neither party ready, willing and able to settle on 31 January 2023?
[126] Two things are clear. First, the defendants were not ready, willing and able to settle on 31 January 2023. They were unable to provide the pre-settlement inspection required in accordance with cl 5.2, and they were unable to provide vacant possession because of the Red Placard and because they had been unable to remove their belongings as a result of the storm. Secondly, Mr Du was able to settle on 31 January 2023; he had secured the funds to pay the balance of the purchase price. The more difficult question is whether Mr Du was ready and willing to settle on 31 January 2023.
[127] As Miller J held in Howe v Dempsey, whether a party is ready, willing and able is a question of fact and substance and is not to be resolved in any technical or narrow sense.14
14 Howe v Dempsey [2013] NZHC 2297, (2013) 15 NZCPR 682 at [46].
[128] There is no statement nor suggestion in the emails sent by Mr Du’s solicitors on 31 January 2023 that Mr Du was ready and willing to settle that day. To the contrary, in the email sent at 9.47 am, Great Wall Lawyers emphasised the need for information because the settlement date was that day. The clear inference was that, absent further information, settlement that day was unlikely. Similarly, in the email sent at 4.26 pm, Glaister Ennor recorded Mr Du’s understanding that the property was damaged and/or destroyed and, as a result, untenantable, and that this was not remediable by settlement date, being that day. They asked for advice, immediately by return, on the extent of the damage and/or destruction so that Mr Du could consider his rights and remedies under cl 7.
[129] These emails do not suggest that Mr Du’s solicitors envisaged any change in the settlement date. In the later email, Glaister Ennor were seeking information for the specific purpose of Mr Du being able to decide whether to continue with settlement or to cancel the ASP in accordance with cl 7.2(1) — as is evident from the reference to Mr Du’s understanding that the property was untenantable. That urgent request for information about a property, to which access was forbidden at the time, is not consistent with a willingness to settle that day, particularly given the time the email was sent.
[130] I conclude, therefore, that, contrary to Mr Chisholm’s submission, Mr Du was not, as a matter of fact, ready and willing to settle on 31 January 2023. That conclusion is reinforced by Mr Du’s evidence-in-chief in which he said he was not ready to settle in late March 2023 because he was still waiting on information from the defendants. If that was his position in late March, it must also have been his position on 31 January 2023 when he had no information at all about the extent of the damage to the Arney Road Property.
[131] I have considered the gloss that Mr Chisholm put on Mr Du’s position in closing submissions — namely, that on 31 January 2023 Mr Du was ready, willing and able to purchase the property he had contracted for, in accordance with the terms of the ASP. I take that to mean that Mr Du would have been ready and willing to settle if the property had not been damaged or if he was in a position to make the election under clause 7.2(1).
[132] That interpretation might have been available if cl 5.15 contained the same language as that in cl 13.1(2); namely, that a party was ready, willing and able to settle or was not ready, willing and able to settle only by reason of the default or omission of the other party. In that case, the defendants’ default in not providing the pre- settlement inspection and vacant possession would have enabled Mr Du to say he was ready, willing and able to settle on 31 January 2023 but for that default. The fact the default was caused by factors outside the defendants’ control would not have changed that situation, given that cl 3.2(2) provides that a party is in default if it did not do what it contracted to do to enable settlement to occur, regardless of the cause of the failure.
[133] However, cl 5.15 does not include the language in cl 13.1(2). I consider that omission is deliberate and intended to ensure that the option of varying the settlement date provided for in cl 5 is limited to the situation where neither party was actually ready, willing and able to settle on the settlement date, regardless of the reasons. Clause 13, which enables late settlement without a change in the settlement date, is sufficient to cover the situation where the default of one party is the reason the other was not ready, willing and able to settle on the settlement date.
[134] For these reasons, I am satisfied that neither party was ready, willing and able to settle on the settlement date. Accordingly, it was open to either party to change the settlement date by giving notice that it was ready, willing and able to settle. If they had done so and were indeed ready, willing and able to settle, the settlement date would have been three days from the date of the notice.
Was cl 5.15 validly implemented?
[135] Mr Napier submits that the 20 March 2023 email was a notice under cl 5.15. It was not. It did not state that the defendants were ready, willing and able to settle. Nor were they as a matter of fact. The pre-settlement inspection had not taken place.15 The email itself acknowledged that vacant possession was subject to the spa pool remaining until it could be safely removed. Mr Du’s consent to the spa pool remaining in place would have been required before the defendants could be said to be able to
15 Glaister Ennor’s email of 31 January 2023 had specifically said that an inspections to assess the damage from the storm was not a pre-settlement inspection.
provide vacant possession and to have been ready, willing and able to settle. That consent had not been obtained.
[136] More generally, as Mr Chisholm submitted and Mr Napier did not dispute, the principal purpose of the 20 March 2023 email was to settle on the basis of the terms set out in the email — which was a settlement outside the ASP. That is clear from the Morrison Kent emails of 23 and 24 March 2023. The first asked whether Mr Du agreed to the defendants’ proposal as set out in Morrison Kents’ earlier emails — being the emails of 20 and 22 March 2023 — “or” was ready to complete settlement as provided for in cl 7.2.2 of the ASP. The second referred to the defendants’ “settlement proposal”. It follows that the 20 March 2023 email could not have been a notice to settle in accordance with the ASP.
[137] The email sent by Morrison Kent at 1.36 pm on 24 March 2024 was also not a valid notice under cl 5.15. While the email said the defendants were ready, willing and able to settle, the email did not purport to be a notice under cl 5.15. The email instead purported to require settlement that day, which would have been inconsistent with a notice under cl 5.15. It also said the defendants were requiring settlement under cl 7.2(2) and purported to provide the defendants’ calculation of the diminution in value of the Arney Road Property for settlement to take place in accordance with that clause.
[138] As Mr Napier says, it was for Mr Du and not the defendants to estimate and deduct from the settlement sum the diminution of value caused by the damage to the property. However, the defendants took it upon themselves to require settlement on the basis of their estimate which, as Mr Chisholm notes, was based on an erroneous statement; namely that the defendants had obtained an estimate of $300,000 for the costs of remediation. In fact, the only evidence of an estimate provided to Mr Youn at about that time was that provided by Mr Shim after he attend the property in early February 2023. Mr Shim says his estimate was for “around $500,000”.
[139] However, it is unnecessary to draw any legal consequences from that erroneous information given that, as I have found, the email was ineffective as a notice under cl 5.15 and the defendants were not ready, willing and able to settle on 24 March 2023.
[140] As Mr Napier accepted in closing submissions, the letter sent on 24 March 2023 was also not a valid notice under cl 5.15. Nor did it purport to be. If anything, it was a notice under cl 13, alleging breach for late settlement and requiring settlement plus payment of default interest within 12 days of the notice.
[141] I discuss below the validity of the letter in terms of cl 13. For now, it is sufficient to record that none of the communications sent to Mr Du’s solicitors by the defendants’ solicitors between 20 and 24 March 2023 was a valid notice under cl 5.15. Accordingly, there was no valid notice varying the settlement date from that set in cl 1.6, being 31 January 2023.
[142] Because there was no valid notice varying the settlement date, it must follow that the settlement date remained 31 January 2023, even though neither party was ready, willing and able to settle on that date. For the reasons already given, a simple failure to settle on the settlement date does not change the settlement date. The date can only change if a valid notice was given under cl 5.15. None was.
Was there a valid late settlement notice?
[143] The answer to this question turns on whether the letter sent by Morrison Kent at 6.45 pm on 24 March 2023 was a valid late settlement notice in terms of cl 13. Clearly, it was not.
[144] First, despite the assertion in the letter that the defendants were, at all material times, ready, willing and able to settle, they were not in that position either on 20 March 2023 or on 24 March 2023. The pre-settlement inspection had not taken place. The spa pool was still on the deck and Mr Du had not consented to take vacant possession on the basis the spa pool remained. The fact the defendants were not able to give vacant possession was not due to any default or omission by Mr Du. It follows that the defendants were not in a position to give an effective notice under cl 13 because, in terms of cl 13.2(2), the defendants were not, at the time of service of the notice, ready, willing and able to proceed to settle or not so ready, willing and able to settle only by reason of the default of Mr Du.
[145] In addition, the settlement statement that the settlement notice purported to enforce had only been provided earlier that afternoon and asserted that settlement was to be that day. That was not a reasonable time before settlement as required by cl 5.5.
[146] For all these reasons, I find that the settlement date under the ASP was and remained 31 January 2023 and that there was no valid late settlement notice under cl 13 of the ASP that would have required Mr Du to settle on a date other than 31 January 2023.
Was the Arney Road Property untenantable on the settlement date?
[147] As recorded above, on 31 January 2023, the Arney Road property was under a Red Placard because it was considered that the building was at risk from an external hazard and that part of the building foundation structures was likely compromised. The Red Placard meant access was not permitted without written authorisation from the Civil Defence Emergency Management Controller or another Responsible Person. Under s 133BT of the Building Act, neither the defendants nor any other person could occupy the property while it was subject to the Red Placard.
[148] Given those circumstances, it must be the case that the property was untenantable on the Settlement Date, irrespective of the fact that the Red Placard was issued on the basis only of a visual inspection and irrespective of the findings of the later geotechnical engineering and structural engineering reports. No-one would be able to live there or to rent out the property, even if “tenantable” is construed as Mr Napier submits it should be. The property was completely unusable. It was also adjacent to a number of other properties subject to Red or Yellow Placards, as noted in the Tonkin and Taylor report of 3 February 2023. In terms of the test approved by the Supreme Court in Bahramitash v Kumar, as at the settlement date the property as a whole had been rendered unfit for the occupation and use of someone assumed to want the property for the same purposes as Mr Du.
Is it relevant the Arney Road Property was under a Yellow Placard from 15 March?
[149] Mr Napier invites the Court to accept that whether or not a property is tenantable has a temporal element; that is, it is not untenantable if the damage is only
of a transitory or temporary nature and can be repaired within a period of a few weeks
— as was held to be the case in Samson Corporation.16 However, that decision is not apposite.
[150] Samson Corporation concerned a tenant’s right to cancel a lease on the grounds the premises had become untenantable. That is, it concerned the right of the tenant to exit an existing situation. That is very different from cancelling a contract to purchase a property; that is, to commence a new undertaking. In addition, in Samson Corporation, the question of tenantability under the lease was not linked to the state of the premises at a particular point in time. That is very different from the ASP, which specifically requires tenantability to be assessed at settlement date. Most importantly, settlement date is the date at which possession is to be given and taken in accordance with cl 5.3 of the ASP and the point at which settlement and the exchange of the interdependent obligations set out at cl 5.8 are to be performed. It would be quite inconsistent with the scheme of the ASP if the question of whether or not the property was untenantable for the purposes of cl 7.2 was to be determined other than as at settlement date.
[151] Accordingly, I do not accept that the Arney Road property could be considered as tenantable on 31 January 2023 simply because someone could have lived there six weeks later; that is, from 15 March 2023 when the Red Placard was replaced by the Yellow Placard.
[152] Furthermore, even if untenantability were to be assessed when the Arney Road Property was under the original Yellow Placard, I am satisfied that it was untenantable in March 2023 when the defendants attempted to require Mr Du to settle and when Mr Du cancelled the ASP.
[153] Despite the evidence of Mr Williams and Mr Calvert that the property was safe and there was no risk to the foundations of the master bedroom, as was subsequently found to be the case, that was not the state of knowledge in March 2023. As at that date, the most optimistic assessment of about the safety and integrity of the Dwelling was that in the February Geoconsult Report which stated that Geoconsult considered:
16 DFC New Zealand Ltd v Samson Corporation Ltd, above n 13, at 12.
(a)it was very unlikely that the slip would regress further uphill and they could see no evidence of movement in the dwelling structure, but that this would need to be confirmed by a specialist or structural engineer; and
(b)that, provided the house structure revealed no damage, they were of the opinion that the Dwelling could be reoccupied, provided the deck remained out of bounds.
[154] Clearly that was a preliminary and provisional assessment view and was dependent on further investigation — as Morrison Kent’s email of 24 February 2023 to Glaister Ennor acknowledged. The assessment could not be taken as providing a basis for concluding that the Dwelling was safe and ready for occupation.
[155] While the May Geoconsult Report largely confirmed the March assessment, its recommendations for the proposed barrier pile wall showed there was still a concern to protect the Dwelling’s foundations from further soil evacuation. The September Geoconsult Report removed any concerns about the risk of further slips that might affect the foundations of the master bedroom, but that was produced only after the deck had been removed and further investigations undertaken. None of this information was known or available in March 2023.
[156] Furthermore, in March and April 2023 there was evidence of cracking near the foundations and a general concern about the possible effect of further rainfall and the effect that may have on the integrity of the master bedroom — as is clear from Mr Ouwejan’s report and the Babbage Report, as well as Mr Oh’s evidence and Mr Lim’s communications to Auckland Council, irrespective of whether Mr Lim may have exaggerated the risk to engender Council action, as he said in evidence. There was also a concern to know what the design solutions might be, as is clear from the Envivo Report and the Babbage Report. Until that was known, there must have also been uncertainty about how the repairs would affect the ability to occupy the Dwelling, given the likely scale of the works and the constraints of the site, particularly with respect to access.
[157] In addition, while the Babbage Report recommended that the Red Placard be removed and replaced by Yellow Placard and that access to the decks be restricted until further geotechnical work was undertaken, it is noteworthy that Mr Calvert was not prepared to assure Ms Park, on 29 March 2023, that the whole of the Dwelling could be occupied when she sought specific reassurance on the point.
[158] For all these reasons, I am satisfied that, in March 2023, the Arney Road property was untenantable in the sense approved by the Court of Appeal in Bahramitash v Kumar. It was unfit for the occupation and use of someone assumed to want the property for the same purposes as Mr Du, which was as his family home. The reality was that, until more information was known, the property remained unusable as a home for permanent occupation by a family. Yes, someone could live there if they were prepared to put up with not having access the master bedroom or the decks and could cope with the possibility that there might be further slips if there was heavy rain and the uncertainty about the scale and effects of the remedial works that would eventually have to be undertaken. But, at that time, the property was not liveable or rentable as a family home.
Was Mr Du entitled to cancel the ASP?
[159] Since I have found that the Arney Road Property was untenantable on the settlement date (as well as in March 2023), it follows that Mr Du was fully entitled, under cl 7.2(1)(b), to cancel the ASP.
[160] The terms of cl 7.2(1)(b) are clear. If the property is untenantable on the settlement date, the purchaser may cancel the ASP by serving notice on the defendants
— as was done by Glaister Ennor on 27 March 2023. The fact this right was exercised after the settlement date is of no consequence. Nor was there any need for Mr Du to file a settlement notice just because the settlement date was passed.
[161] It follows that Mr Du is also entitled to the return, in full, of the deposit he paid of $1,063,000 plus interest, from the date of cancellation to the date of payment in accordance with s 10 of the Interest on Money Claims Act 2016.
Counterclaim
[162] Because Mr Du was entitled to cancel the ASP, cancellation did not amount to repudiation and the defendants have no right to damages for repudiation.
Result
[163]I uphold Mr Du’s claim and dismiss the defendants’ counterclaim.
[164]I order the defendants:
(a)to return to Mr Du the deposit of $1,063,000 in accordance with cl 7.2(1)(b) of the agreement for the sale and purchase of 149A Arney Road, Remuera, Auckland concluded on 26 October 2022; and
(b)to pay interest on the sum of $1,063,000 from 28 March 2023 to the date of payment, in accordance with the Interest on Money Claims Act 2016.
Costs
[165]As the successful party, Mr Du is entitled to costs.
[166] I would expect experienced counsel to be able to agree costs. If they are unable to do so, memoranda of no more than five pages may be filed as follows:
(a)Any memorandum by Mr Du may be filed by 18 April 2025.
(b)Any memorandum by the defendants may be filed by 9 May 2025.
[167]I will then decide costs on the papers.
G J van Bohemen J
Appendix: Relevant provisions of the ASP
1.0CONDITIONS OF SALE
1.1The property and the chattels included in the sale are sold on these Particulars and Conditions of Sale, the General Terms of Sale and any Further Terms of Sale.
…
1.6The settlement date is 31/01/2023 or by mutual agreement.
1.7The interest rate for late settlement is 15% p.a.
GENERAL TERMS OF SALE
3.0Definitions, time for performance, notices, and interpretation
3.1Definitions
…
(29)“Settlement” means (unless otherwise agreed by the parties in writing) the moment in time when the vendor and purchaser have fulfilled their obligations under clause 5.8.
(30)“Settlement date” means the date specified as such in this agreement.
(31)“Settlement statement” means a statement showing the purchase price, plus any GST payable by the purchaser in addition to the purchase price, less any deposit or other payments or allowances to be credited to the purchaser, together with apportionments of all incomings and outgoings apportioned on the settlement date.
…
3.2Unless a contrary intention appears in clause 1.7 of the Conditions of Sale or elsewhere in this agreement:
(1) …
(2)a party is in default if it did not do what it has contracted to do to enable settlement to occur, regardless of the cause of such failure.
…
5.0Possession and Settlement Possession
5.1Unless particulars of a tenancy are included in this agreement, the property is sold with vacant possession and the vendor shall so yield the property on the settlement date.
5.2If the property is sold with vacant possession, then subject to the rights of any tenants in the property, the vendor shall permit the purchaser or any person authorised by the purchaser in writing, on reasonable notice:
(1)to enter the property on one occasion prior to the settlement date for the purposes of examining the property, chattels and fixtures which are included in the sale; and
(2)to re-enter the property no later than the day prior to the settlement date to confirm compliance by the vendor with any agreement made by the vendor to carry out any work on the property, chattels and the fixtures.
5.3Possession shall be given and taken on the settlement date. …
…
Settlement
5.5 The vendor shall prepare, at the vendor’s own expense, a settlement statement. The vendor shall tender the settlement statement to the purchaser or the purchaser’s lawyer a reasonable time prior to the settlement date.
…
5.8On the settlement date:
(1)the balance of the purchase price, interest and other moneys, if any, shall be paid by the purchaser in cleared funds or otherwise satisfied as provided in this agreement …
(2)the vendor’s lawyer shall immediately thereafter:
(a)release or procure the release of the transfer instrument …
(b)pay to the purchaser’s lawyer the LINZ registration fees …
(c)deliver to the purchaser’s lawyer any other documents that the vendor must provide to the purchaser on settlement …
5.9All obligations under clause 5.8 are interdependent.
…
Purchaser Default: Late Settlement
5.12If any portion of the purchase price is not paid upon the due date for payment, then, provided that the vendor provides
reasonable evidence of the vendor’s ability to perform any obligation the vendor is obliged to perform on that date in consideration for such payment:
(1)the purchaser shall pay to the vendor interest at the rate for late settlement on the portion of the purchase price so unpaid for the period from the due date for payment until payment (“the default period”); but nevertheless, this stipulation is without prejudice to any of the vendor’s rights or remedies including any right to claim for additional expenses and damages.
(2)the vendor is not obliged to give the purchaser possession of the property or to pay the purchaser any amount for remaining in possession, unless this agreement relates to a tenanted property, in which case …
(3)if the parties are unable to agree upon any amount payable under this clause 5.12, either party may make a claim under clause 12.0.
Vendor Default: Late Settlement or Failure to Give Possession
5.13(1) For the purposes of this clause 5.13:
(a)the default period means:
(i)in clause 5.13(2), the period from the settlement date until the date when the vendor is able and willing to provide vacant possession and the purchaser takes possession; and
(ii)…
(b)the vendor shall be deemed to be unwilling to give possession if the vendor does not offer to give possession.
(2)If this agreement provides for vacant possession but the vendor is unable or unwilling to give vacant possession on the settlement date, then, provided that the purchaser provides reasonable evidence of the purchaser’s ability to perform the purchaser’s obligations under this agreement:
(a)the vendor shall pay the purchaser, at the purchaser’s election, either:
(i)compensation for any reasonable costs incurred for temporary accommodation for persons and storage of chattels during the default period; or
(ii)an amount equivalent to interest at the interest rate for late settlement on the entire purchase price during the default period; and
(b)the purchaser shall pay the vendor an amount equivalent to the interest earned or which would be earned on overnight deposits lodged in the purchaser’s lawyer’s trust account on such portion of the purchase price (including any deposit) as is payable under this agreement on or by the settlement date but remains unpaid during the default period less:
…
Deferment of Settlement and Possession
…
5.15 In every case, if neither party is ready, willing and able to settle on the settlement date, the settlement date shall be deferred to the third working day following the date upon which one of the parties gives notice it has become ready, willing and able to settle.
…
7.0Risk and Insurance
7.1The property and chattels shall remain at the risk of the vendor until possession is given and taken.
7.2If, prior to the giving and taking of possession, the property is destroyed or damaged, and such destruction or damage has not been made good by the settlement date, then the following provisions shall apply:
(1)if the destruction or damage has been sufficient to render the property untenantable and it is untenantable on the settlement date, the purchaser may:
(a)complete the purchase at the purchase price, less a sum equal to any insurance moneys received or receivable by or on behalf of the vendor in respect of such destruction or damage, provided that no reduction shall be made to the purchase price if the vendor’s insurer has agreed to reinstate for the benefit of the purchaser to the extent of the vendor’s insurance cover; or
(b)cancel this agreement by serving notice on the vendor in which case the vendor shall return to the purchaser immediately the deposit and any other moneys paid
by the purchaser, and neither party shall have any right or claim against the other arising from this agreement or its cancellation;
(2)if the property is not untenantable on the settlement date, the purchaser shall complete the purchase at the purchase price less a sum equal to the amount of the diminution in value of the property which, to the extent the destruction or damage to the property can be made good, shall be deemed to be equivalent to the reasonable cost of reinstatement or repair;
(3)if the property is zoned for rural purposes under an operative District Plan, damage to the property shall be deemed to have rendered the property untenantable where the diminution in value exceeds an amount equal to 20% of the purchase price; and
(4)if the amount of the diminution in value is disputed, the parties shall follow the same procedure as that set out in clause 12.8 for when an amount of compensation is disputed.
7.3The purchaser shall not be required to take over any insurance policies held by the vendor.
…
13.0Notice to complete and remedies on default
13.1(1) If the sale is not settled on the settlement date, either party may at any time thereafter serve on the other party a settlement notice.
(2)The settlement notice shall be effective only if the party serving it is at the time of service either in all material respects ready, willing and able 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 of the other party.
(3)If the purchaser is in possession …
13.2Subject to clause 13.1 (3), upon service of the settlement notice the party on whom the notice is served shall settle:
(1)on or before the twelfth working day after the date of service of the notice; or
(2)on the first working day after the 13th day of January if the period of twelve working days expires during the period commencing on the 6th day of January and ending on the 13th day of January, both days inclusive,
time being of the essence, but without prejudice to any intermediate right of cancellation of either party.
…
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