Enzo Ltd v Boulcott Realty no.1 Limited HC Auckland Civ-2004-404-6904

[2005] NZHC 1689

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2004-404-006904

IN THE MATTER OF     s.145 of the Land Transfer Act 1952 AND

IN THE MATTER OF     Caveat Number 6213895.2

BETWEEN  ENZO LTD

Applicant

AND  BOULCOTT REALTY NO.1 LTD

Respondent

Hearing:         27 April 2005

Appearances: Anthony Banbrook for Applicant

David Smyth for Respondent Judgment:  5 May 2005

JUDGMENT OF HARRISON J

In accordance with R540(4) I direct that the Registrar endorse this judgment with the delivery time of 1.00 p.m. on 5 May 2005

SOLICITORS

David Welch (Kerikeri) for Applicant

Simpson Dowsett Mackie (Auckland) for Respondent

COUNSEL
AD Banbrook; DE Smyth

ENZO LTD V BOULCOTT REALTY NO.1 LTD HC AK CIV-2004-404-006904 [5 May 2005]

Introduction

[1]    At issue in this case is whether or not a party can sustain a caveat lodged against title to a property at Warkworth based upon a claim of part performance of an oral agreement for sale and purchase.

Background

[2]The relevant background circumstances are as follows:

1)At all relevant times Mr Stanley Cobbold was a real estate agent living in Kerikeri. He was Enzo Ltd’s sole director. Mr Ranginui Bidois also lived in Kerikeri. The two were friendly. In early 2004 they engaged in discussions about land which Mr Cobbold understood Mr Bidois was developing in Pulham Road, Warkworth. The land  was then owned by Boulcott Realty No.1 Ltd.  Its  sole  director  is  Mr Stuart Robertson;

2)Mr Bidois showed Mr Cobbold an aerial photograph of the proposed subdivision. The latter expressed an interest in buying a piece of land marked out as Lot 17. Mr Bidois gave Mr Cobbold a copy of an amended scheme plan identifying Lot 17 together with a list of values for all lots which Mr Bidois described as “an estimated market appraisal”;

3)Mr Cobbold says that he agreed with Mr Bidois to purchase Lot 17 or an equivalent area of 1.23 hectares for $300,000 plus GST; that he explained he would buy through Enzo; that Mr Bidois required a site office; that he offered to supply a relocatable cabin already owned by Enzo valued at $30,000 to constitute the deposit being the equivalent of 10% of the purchase price; and that in early April 2004, in accordance with their agreement, he delivered the cabin to Northern Concrete Products Ltd which transported it from Kerikeri to the

subdivision  at  Warkworth  for  $1102.50  including   GST   which Mr Bidois paid;

4)In early July 2004 Mr Robertson at Mr Cobbold’s request arranged for Boulcott’s solicitors, Simpson Dowsett, to forward to Mr Cobbold’s solicitor, Mr David Welch, a contract which was incomplete in all material respects except for its inclusion of an incorrect reference to Lot 11. Mr Welch completed the document including the name of Enzo or nominee as purchaser and a sale price of $270,000 including GST. He amended the property description to Lot 17. The agreement did not contain details of a deposit or provision for payment of the balance of the purchase price. Nor did it nominate a possession date. Mr Welch included a new condition requiring the vendor to provide to the purchaser within 15 days:

… an irrevocable acknowledgement by the mortgagee of the property, Contributory Mortgage Nominees Ltd, that a discharge of its mortgage in respect of the land purchased under this agreement … would be available on settlement of the purchase on payment of the sum of $270,000 being the purchase price under this agreement.

5)Mr Cobbold signed the agreement as amended. Mr Welch returned it to Simpson Dowsett. A further three months passed without any action. On 14 October 2004 Mr Welch received the agreement back from Simpson Dowsett in further amended form. Materially, Boulcott had deleted the provision deeming the purchase price to be GST inclusive; changed the price from $270,000 to $370,000 plus GST; and   deleted   the   special   condition   included    by    Mr Welch.  Mr Robertson had signed as director. Mr Cobbold did not sign on those terms. Instead he  engaged  in  unproductive  discussion  with Mr Robertson about the appropriate contractual terms;

6)On 21 October 2004 Boulcott listed Lot 17 with Harcourts for sale at a price of $450,000.  Mr Robertson signed the listing authority.  On   5 November 2004 Harcourts sold the property to a third party for

$435,000 including GST. On 11 November 2004 Enzo lodged this caveat.

Enzo’s case

[3]    Mr Anthony Banbrook for Enzo accepted that the company carries the onus of showing a reasonably arguable case. He accepted that the parties did not  enter into a written contract (s 2(2) Contracts Enforcement Act 1956). Instead, he submitted that the parties had partly performed an oral agreement for sale and purchase of Lot 17 for $300,000 plus GST entered into on or about 25 March 2004  (s 2(3)(c)). He adopted the test formulated by Tipping J in TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (approved in Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 at 285) at 109:

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

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

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

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

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

[4]    Mr Banbrook relied squarely upon Mr Cobbold’s delivery on Enzo’s behalf to Boulcott’s agent of the relocatable cabin and Boulcott’s payment of the delivery costs as part performance of the oral contract. He submitted that these events satisfied the second stage identified by Tipping J in Dellaca; they amounted to a step in the performance of a contractual obligation, and when viewed independently of the agreement they were done on the footing that a contract relating to the land existed in the terms alleged. Mr David Smyth for Boulcott accepted that the  evidence of Mr Cobbold’s delivery and Mr Bidois’ receipt of the cabin were consistent with an understanding between them that it was to be treated as the

monetary equivalent of a deposit. But its provision begged the primary question of whether the parties to this proceeding ever entered into an enforceable agreement.

Decision

[5]    In my judgment Enzo has failed to approach the evidential threshold necessary to establish a reasonably arguable case. It must fall at the first stage identified by Tipping J in Dellaca (supra). The evidence points conclusively  towards uncertainty and unenforceability for three principal reasons.

[6]    First, I agree with Mr Smyth that there is no evidence of Mr Bidois’ legal capacity to bind Boulcott. Mr Robertson has described Mr Bidois as “the  manager of certain earthworks being undertaken at Boulcott’s site at Warkworth”. Whether  or not that is an economical description of Mr Bidois’ role, I accept that he is neither a shareholder in nor officer of Boulcott. Accordingly, Mr Banbrook must satisfy me that the company either appointed Mr Bidois to effect a sale – that is, he had actual authority – or held him out as having ostensible authority for that purpose.

[7]    In argument Mr Banbrook relied principally  upon  an  affidavit  sworn  by Mr Kenneth Woodcock, a Harcourts representative, that Mr Bidois had originally instructed him on Boulcott’s behalf to list and market sections in the subdivision and fix prices. However, Mr Woodcock acknowledged that Lot 17 was not included within these instructions. Mr Woodcock’s affidavit was sworn on 26 April, the day before the hearing, and Mr Smyth did not have an opportunity to obtain instructions upon its brief contents. Following conclusion of argument on 27 April, Mr Smyth at my request arranged for a copy of Boulcott’s listing authority to Harcourts for Lot 17 to be delivered to the Court. The document was signed by Mr Robertson on Boulcott’s behalf and did not refer to Mr Bidois. It does not assist Mr Banbrook’s argument. There is no evidence prior to 21 October 2004 of Boulcott’s appointment of Mr Bidois as its agent.

[8]    Alternatively, there is nothing to suggest that Mr Robertson, who is the only person with the requisite capacity, held out to Mr Cobbold or others that Mr Bidois had authority to bind the company. I sense that Mr Banbrook relied upon Mr Bidois’

own conduct between March and October 2004. However, the law is clear that an alleged agent’s assertion is insufficient to establish ostensible authority. That representation could only emanate from Boulcott itself in the persona of its sole director and shareholder (New Zealand Tenancy Bonds Ltd v Mooney [1986] 1 NZLR 280 (CA) at 283; Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR

257 (CA) at 305). The evidence suggests Mr Bidois acted without actual or ostensible authority when entering into and pursuing negotiations with Mr Cobbold for the purposes of selling Lot 17. Anything that the two of them may have agreed could not bind Boulcott.

[9]    Second, I agree with Mr Smyth that the evidence points towards a fundamental lack of consensus between Messrs Cobbold and Bidois on essential terms. Mr Bidois denies Mr Cobbold’s allegation that they reached agreement at a price of $300,000 plus GST; he says that they discussed Mr Cobbold’s intention to make an offer at $300,000 plus GST plus a cabin he owned but that any proposal would be subject to Mr Robertson’s approval.

[10]   Normally a dispute of this kind would require determination following cross- examination on disputed evidence at trial. However, Mr Cobbold’s own evidence on price  is  so  internally  inconsistent  that  it  can  be  dismissed  now.   As  noted,   Mr Cobbold alleges that he struck a price of $300,000 plus GST (less the cabin at

$30,000 by way of deposit) with Mr Bidois. Four months later his solicitor completed the blank agreement sent by Boulcott’s solicitor at a price of $270,000 inclusive of GST.  It did not provide anything about a deposit or provision of a  cabin.

[11]   In late October 2004 Mr Cobbold sent Mr Robertson a letter following a telephone discussion between them the previous day and enclosing the agreement as further amended. His note stated:

Based on that conversation and your statement that [Mr Bidois] informed you the asking price and stated price to me was $330,000 plus GST leads me to the reality I may have been wrong. The problem with  verbal agreements [is that] they always leave room for misunderstandings. Please let me assure you both that at no time did I intend to pay the agreed asking price. I believe [Mr Bidois] knows me well enough to accept that.

[Emphasis added]

[12]   This note speaks for itself. It constitutes Mr Cobbold’s admission of his uncertain recollection of the purchase price agreed between the parties. He acknowledged the scope for a misunderstanding. It could not survive cross- examination.

[13]   Additionally, at Mr Cobbold’s direction Mr Welch included in the incomplete agreement submitted by Simpson Dowsett in July 2004, which he signed, a requirement to discharge its existing mortgage over Lot 17 “on payment of the sum of $270,000 being the purchase price under this agreement”. This requirement is further evidence that Mr Cobbold himself understood the parties had agreed on a price at $270,000.

[14]   Third, Mr Cobbold’s reference in his note to Mr Robertson about the scope for misunderstandings arising from verbal agreements coupled with his express written acknowledgement in another note (“Rangi to send contract ASP”) and his participation in a series of documentary exchanges through solicitors is compelling evidence of his understanding that the parties did not intend to be bound until they had signed a written agreement confirming all relevant terms.

[15]   As Mr Smyth submitted, the law is well settled – where parties contemplate that a formal agreement for sale and purchase will be drawn up by their solicitors, a presumption arises that they do not intend to be bound until that document is signed by both (Carruthers v Whitaker [1975] 2 NZLR 667 (CA)). This presumption has special force in the field of sale and purchase of land (s 2(2) Contracts Enforcement Act). Mr Cobbold has not established an evidential basis to rebut it.

[16]   As noted, Mr Cobbold was a real estate agent; he had worked for Barfoot & Thompson in Kerikeri. He is familiar with the common practice in New Zealand of requiring both parties to sign a formal agreement for sale and purchase before they are bound. Its obvious purpose is to minimise the scope for misunderstanding which Mr Cobbold  acknowledged  occurred  here.    Indeed,  in  another  note  sent  to    Mr Robertson, Mr Cobbold wrote:

Rangi agreed to have you write up the contract in my name and/or nominee… and he would bring me the contract for signing within a couple of weeks.

[17]   On his own  evidence,  I  am  satisfied  that  Mr Cobbold  negotiated  with  Mr Bidois on the basis that neither party or their corporate manifestations were to be bound unless and until both signed a formal agreement.

Conclusion

[18]   In summary, the relevant evidence points away from the existence of a binding agreement struck between Enzo and Boulcott on  12 March 2004  to  sell  Lot 17 for $300,000 plus GST less a cabin valued at $30,000. Even if Mr Bidois had authority to bind Boulcott, of which there is no evidence, Mr Cobbold’s own statements and other relevant documents suggest that the parties never progressed past the stage of negotiations. Even if they were agreed in principle on a price of

$300,000 plus GST, Mr Cobbold knew that neither intended to be bound until completion and signature of a formal agreement. The evidence suggests that he intended to provide and Mr Bidois intended to receive the cabin as a deposit for his performance of an agreement once its terms were settled. But they were never agreed.

[19]   Accordingly, I dismiss Enzo’s application for an order that Caveat No. 6213895.2 registered against Certificate of Title NA42B/685 (North Auckland Registry) do not lapse.

[20]   An award of costs must follow the event. I order Enzo to pay costs to Boulcott on this application fixed according to category 2B.

[21]   I wish to express my appreciation for the quality of the written and oral submissions made by both Mr Banbrook and Mr Smyth.

Rhys Harrison J