ETB Realty Limited v Eastlight Asset Trading no.3 Limited
[2014] NZHC 2041
•27 August 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-6582 [2014] NZHC 2041
IN THE MATTER OF The Companies Act 1993 BETWEEN
ETB REALTY LIMITED Applicant
AND
EASTLIGHT ASSET TRADING NO. 3
LIMITED Respondent
Hearing: 11 August 2014 Counsel:
B A Tompkins for Applicant
P C Gilbert for RespondentJudgment:
27 August 2014
JUDGMENT OF ASSOCIATE JUDGE SMITH
Introduction
[1] The applicant (ETB) is a real estate agent which trades in Rotorua, Whakatane and Kawerau, under the Harcourts Brand.
[2] In September 2013, one of ETB’s agents, Paul Sanford, had a number of properties listed for an urgent mortgagee sale. An auction was arranged for the afternoon of 28 November 2013, in Rotorua.
[3] The mortgagee/vendor was a company called Jafaar Holdings Limited. The properties which Jafaar put up for sale at the auction included three properties in Fenton Street, Rotorua. The titles to two of them were unit titles under the Unit Titles Act 2010. They were No. 1189 - 1193 Fenton Street, and No. 241 Fenton
Street. The title to the other property, described either as No. “1211 - 1217”
ETB REALTY LIMITED v EASTLIGHT ASSET TRADING NO. 3 LIMITED [2014] NZHC 2041 [27 August
2014]
Fenton Street, or simply as No. “1211” Fenton Street1, was freehold. For
convenience, I will refer to this property as “the freehold property”.
[4] On the day of the auction, at approximately 12.40pm, Mr Michael Kooiman of the respondent (Eastlight) telephoned ETB’s Rotorua office. He spoke to Lisa Crowe, one of ETB’s agents, and told her that he wanted to bid at the auction on Eastlight’s behalf. He would not be in Rotorua for the auction, and wanted to participate by telephone. Ms Crowe told him that he would need to fill out a telephone bidder registration form, and be approved by Jafaar as a telephone bidder, before he could participate. Jafaar promptly approved Mr Kooiman as a telephone bidder.
[5] Ms Crowe emailed the telephone bidder registration form to Mr Kooiman at
12.53 pm on 28 November. Time was short, as the auction was due to start at 1 pm.
[6] Initially, Eastlight was only interested in bidding on two of the Fenton Street properties, No. 241 and the freehold property. Mr Kooiman completed the telephone bidder registration form with the street numbers of those two properties written at the top of the form, and emailed it back to Ms Crowe shortly after 1 pm. For the freehold property, he wrote “‘1211 – 1217’ Fenton Street”.
[7] Through Lisa Crowe, Mr Kooiman placed telephone bids at the auction on those two Fenton Street properties.
[8] In the course of the auction he was asked if he was also interested in bidding on No. 1189 - 1193. He replied that he was, and participated in the bidding for that property as well as the other two.
[9] Eastlight was the successful bidder on all three properties.
[10] Following the auction, Mr Sanford asked Mr Kooiman to amend the telephone bidder registration form by adding a reference to No.1189 - 1193 at the top
of the form. Mr Kooiman added “1189 FENTON STREET” on the form, and emailed it back to Ms Crowe at 2.30pm.
[11] Eastlight paid the deposits on the three properties into ETB’s trust account
(total sum $193,800) later that afternoon.
[12] Eastlight completed formal purchase documents for the three properties but it never completed the purchases. Eventually, Jafaar cancelled the agreements, and sold the three properties to other parties.
[13] A little over three months later, Eastlight wrote to Jafaar’s solicitors and to ETB contending that the purchase agreements it had signed were either void or conditional, and that ETB should not have released the deposits to Jafaar. It demanded a refund of the $193,800. When ETB refused to do that, Eastlight served ETB with a statutory demand for the $193,800 under the Companies Act 1993 (the Act). ETB now applies for an order setting aside that demand pursuant to s 290 of the Act.
Events following the auction
[14] Mr Kooiman signed the Particulars and Conditions of Sale for each of the three properties on Eastlight’s behalf, on the evening of the auction. The last of them was returned to ETB at 11.05 pm that day.
[15] Each of the agreements was due for settlement on 12 December 2013. The balance required to settle the three purchases on 12 December 2013 was $1,745,366.
[16] Eastlights’ solicitor, Mr Young, says that he duly received the signed particulars and conditions for each of the properties, but Mr Kooiman told him to place them in a file. He said he would get back to Mr Young regarding completion and settlement.
[17] When Eastlight did not settle on 12 December 2013, Jafaar sent settlement notices to Mr Young for each of the three properties, calling on Eastlight to settle within 12 working days from the date of service of the notices. The notices warned
that if Eastlight did not then settle, Jafaar would be entitled to exercise its remedies under cl 11 of the sale agreements, which included a right to cancel and resell.
[18] Under the Real Estate Agents Act, ETB was obliged to hold the deposits in its trust account for a period of ten days following the sales.2 That statutory period expired on 13 December 2013. ETB released the deposits to Jafaar on that date.
[19] Mr Young made two requests on Eastlight’s behalf for an extension of time to settle. On 11 December 2013, the day before the scheduled settlements, he wrote to Jafaar’s solicitors advising that Eastlight had just been advised that settlement funds would not be available until 20 December, due to the “seasonal delays” in preparation and processing documentation supporting the advances.
[20] Mr Young made another extension request on 9 January 2014. He had by then received Jafaar’s settlement notices. He advised Jafaar’s solicitors that Eastlight had arranged funds to settle, but due to the holiday break it would be unable to settle within the period stipulated in Jafaar’s settlement notices. He noted that the situation had become “somewhat of an embarrassment” for Eastlight. He requested a further ten working days following 13 January 2014, to enable settlement to be completed.
[21] Jafaar’s solicitors replied the following day, asking what steps Eastlight had taken towards being in a position to settle. Mr Young replied the same day, saying that he would seek instructions.
[22] Further communications passed between the solicitors for Jafaar and
Eastlight, but no progress was made towards settlement. On 29 January 2014
Mr Young advised Jafaar’s solicitors that funding for the purchases was being worked on, and that Eastlight did not wish to lose the deposits it had paid and would “fight to achieve a successful settlement of the purchase”.
[23] That response did not satisfy Jafaar, and on 30 January 2014 it resold the three properties, exercising its rights under cl 11 of the three agreements. Under
cl 11.4, the entry into replacement sale contracts was deemed to result in the agreements being immediately cancelled.
[24] There was apparently some delay before Eastlight learned of the cancellation and resale. It was only on 2 May 2014 that it wrote to ETB raising concerns over the events surrounding the auction. It threatened to make a complaint to the Real Estate Agents’ authority, and demanded the return of the deposits together with interest, legal costs, and exemplary damages. With the letter, there was a lengthy statement of complaint, in which Eastlight alleged that the three sale contracts were either “not unconditional” or “illegal”. The complaint alleged that Eastlight had validly cancelled the agreements and so became entitled to the return of its deposits.
[25] ETB advised Eastlight on 9 May that the deposits had been paid to the mortgagee. On 14 May 2014 Eastlight wrote to Jafaar’s solicitors, contending that the sales were illegal and void, and that it was entitled to the return of the deposits. On the same day ETB was served with the statutory demand.
[26] Eastlight’s complaints can be summarised as follows:
(1)In respect of the freehold property, Eastlight contends that only number 1211 Fenton Street was put up for sale at the auction, while its instructions to ETB had been to bid on “No. 1211 - 1217”. The formal contract documents submitted to Eastlight after the auction referred only to “No. 1211”, and Eastlight contends that the sale documents did not include all of the land it had paid for.
(2)In respect of the other two pieces of land, both subject to the requirements of the Unit Titles Act 2010, Eastlight says that the vendor failed to provide Eastlight with the statutory form of notice which a vendor of land held under a unit title must provide to a
purchaser before the purchaser agrees to buy.3 Eastlight says that the
effect of that failure was to make the agreements for sale of the two unit title properties void.
Applications to set aside statutory demands – legal principles
[27] Section 290 of the Act provides in relevant part as follows:
Court may set aside statutory demand
(1) The court may, on the application of the company, set aside a statutory demand.
…
(4) The court may grant an application to set aside a statutory demand if it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or is due; or
(b) the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
(5) A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.
(6) In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.
(7) An order under this section may be made subject to conditions.
[28] The principles applicable to such applications are well established:
(1)The applicant must show there is arguable a genuine and substantial dispute as to the existence of the debt. The task for the Court is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(2)The mere assertion that a dispute exists is not sufficient. Material, short of proof, is required to support the claim that the debt is disputed.
(3)If such material is available, the dispute should normally be resolved other than by means of proceedings in the Companies Court.
(4)An applicant must establish that any counterclaim or cross-demand is reasonably arguable in all the circumstances. The obligation is not to prove the actual claim.
(5)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.4
[29] However a conflict in the evidence on its own, does not necessarily mean that a setting aside application cannot succeed. A court is not required to accept uncritically any or every disputed fact.5
[30] The statutory demand procedure is not to be utilised more widely than its clear purpose, which is to require the payment of a sum certain – or largely certain – in a context where there is no substantial dispute.6
The issues for determination
[31] The following issuess fall to be considered:
(1) Did the sale agreement for the freehold land include all of the land
Eastlight agreed to buy at the auction?
(2)In respect of the two unit title properties, what was the effect of the failure by Jafaar and/or ETB to provide Eastlight with a copy of the statutory notice required by s 146 of the Unit Titles Act, before the auction? Did that failure render the agreements entered into at the auction void?
(3)If the answer to question (b) is “yes”, was the situation remedied when ETB furnished Mr Kooiman with copies of the s. 146 notices
4 Brookers Companies and Securities Law, Vol 1, at [CA 290.02(1)], referred to in Greys Avenue Investments Ltd v Harbour Construction Ltd HC Auckland CIV-2009-404-2026, 12 June 2009 at [8].
5 Eng Mee Yong v Letchumanan [1980] AC 331 at 341, applied in the context of a setting aside application in Freemont Design and Construction Ltd v W Stevenson & Sons Ltd, HC Auckland CIV-2005-404-4807, 20 April 2006 at [8].
6 Link Electrosystems Ltd v GPC Electronics (New Zealand) Ltd [2007] NZCA 501, (2007) 18
PRNZ 946.
within a few hours after the auction sales, and/or when Eastlight executed the Particulars and Conditions of Sale?
(4)What is the effect of the fact that the s 146 notices sent to Mr Kooiman immediately after the auction were not signed by the vendor, but copies signed by the vendor were supplied shortly thereafter?
(5)Did Eastlight waive its entitlement to receive the s 146 notices when it completed the telephone bidding registration form?
(6)Is Eastlight estopped by its conduct after the auction, including its conduct in executing the three sale agreements and requesting extensions of time to settle, from contending that the agreements were void (or voidable at Eastlight’s option)?
(7)What is the proper basis for Eastlight’s claim against ETB? Is it an equity-based claim for the return of monies paid under a mistake of fact or law, a claim for unjust enrichment, or a claim on some other basis?
(8)What is the effect of ETB having altered its position, by paying the deposit monies out to Jafaar?
[32] It is for ETB to show that it has an arguable case on one or more of these issues, sufficient to show that there is a genuine and substantial dispute as to the existence of the debt claimed in the statutory demand.
Issue (1) – Did the Particulars and Conditions of Sale for the freehold land include all the land Eastlight agreed to buy?
[33] The telephone bidder registration form completed by Mr Kooiman showed as the address of the freehold property “1211 – 1217 Fenton Street”. In the form, Eastlight undertook that if it should be the successful bidder at the auction it would forthwith “on the day of the auction or immediately thereafter”:
(1) complete all relevant details on two copies of the Memorandum of
Agreement for the property;
(2) sign both completed copies of the Memorandum of Agreement;
(3)send by facsimile one copy of the Memorandum of Agreement with Particulars of Conditions of sale to ETB, for immediate acceptance by Jafaar; and
(4)send hard copies of the Memorandum of Agreement and Particulars and Conditions of Sale, together with a cheque for the required
10 per cent deposit, to ETB by courier.
[34] The telephone bidder registration form included an acknowledgment that Mr Kooiman had seen the Particulars and Conditions of Sale and that, pending actual execution thereof, the acceptance of Eastlight’s bid would be binding on it in terms of the Particulars and Conditions of Sale as if Eastlight had been personally present at the auction. Eastlight could not withdraw its authority to bid once ETB had tendered a bid on its behalf pursuant to the authority.
[35] Eastlight also acknowledged in the telephone bidder registration form that it
had received a copy of ETB’s “Approved Guide before signing this agreement”.
[36] It is common ground that Mr Kooiman was not in fact provided with the particulars or conditions of sale, or ETB’s “Approved Guide”, before the auction.
[37] In an affidavit filed in opposition to the application, Mr Kooiman says that
No. 1217 Fenton Street is a separate property from No. 1211. He says:
I am now not sure if I have received all of the property I bid on as it now seems 1211 – 1217 is not the address present on the Particulars and Conditions of Sale of Real Estate by Auction…There is a property missing from the contract.
[38] Mr Kooiman says that 1217 Fenton Street is lot 2 DPS 13399, being 233m² contained in CT SA 1111C/447, with a rating valuation of $636,000. The land in this certificate of title was not included in the Particulars and Conditions of Sale executed
by Eastlight and Jafaar after the auction. The property which was contained in the
Particulars and Conditions of Sale, described as No. 1211 Fenton Street, is lot 1 DPS
13399 containing 331m², with a rating valuation of $328,000.
[39] The Terralink Property Guru printouts produced by Mr Kooiman describe lot
2 DPS 13399 as No. 1105 Pukuatua Street, Rotorua. That street runs onto Fenton
Street at the corner of the block where No. 1211 (or Nos. 1211 – 1217) are situated.
[40] Mr Kooiman says that it was ETB who told him to write “1211 – 1217
Fenton Street” in the address space in the telephone bidder registration form.
[41] In a reply affidavit, Mr Sanford says that the freehold property was clearly identified in pre-auction publicity, including a New Zealand Herald article published on 12 October 2013, as being a 331m², freehold, property. The article said that there was a two-story building on the property. Mr Sanford says that the property which Mr Kooiman says is No. 1217 Fenton Street, is in fact the next-door property, which
is No. 1105 Pukuatua Street.7
[42] Some LINZ data service printouts produced by Mr Sanford contain an entry for “1217 Fenton Street” which appears to show it in a slightly different location from the corner property, which is shown as “1105 – 1109 Pukuatua Street”.
[43] Clause 25.1 of the Particulars and Conditions of Sale executed by Eastlight provided that “the area, dimensions and descriptions of the property are believed and shall be taken to be correct and no error or misdescription which may exist therein shall annul the sale nor shall any compensation be allowed by the vendor for such error or misdescription if any is found”. Clearly it was for Eastlight to raise any issue over the area of the freehold land, but it did not do so until well after the
agreement had been cancelled by Jafaar.
7 Mr Sanford produced Rotorua District Council and Land Information New Zealand records relating to the two titles, showing that Nos. “1211 – 1217” are the street numbers associated with the property the subject of the auction, while the next-door property, which Mr Kooiman contends Eastlight agreed to buy, is described as 1105 (and 1109) Pukuatua Street.
[44] It is neither necessary nor appropriate for me to attempt to resolve in this setting aside application whether the corner property, No. 1105 Pukuatua Street, is also known as No. 1217 Fenton Street, as Eastlight contends, or whether Mr Kooiman believed he was bidding for both properties. I am satisfied that the LINZ and Rotorua District Council printouts produced by Mr Sanford, together with the fact that Eastlight executed Particulars and Conditions of Sale for the freehold property which described it as “1211 Fenton Street”, with an area of 331m², sufficiently establishes a genuine and substantial dispute over the factual basis for Eastlight’s complaints relating to the freehold property.
Issues (2), (3) and (4) – failure to provide s 146 notices For No. 1189 – 1193
Fenton Street and No. 241 Fenton Street
[45] Section 146 of the Unit Titles Act 2010 provides as follows:
Pre-contract disclosure to prospective buyer
(1) Before a buyer enters into an agreement for sale and purchase of a unit the seller must provide a disclosure statement (a pre-contract disclosure statement) to the buyer.
(2) The pre-contract disclosure statement must be in the prescribed form and contain the prescribed information.
[46] Under s 152 of the Unit Titles Act, the disclosure statement required by s 146 must be dated and signed by the seller or a person authorised by the seller.
[47] Under s 145, a provision in any agreement to exclude or limit the obligation to disclose under s 146 is deemed to be of no effect.
[48] It is common ground that no s 146 disclosure statements were provided to
Eastlight before the auction.
[49] Immediately after the auction, Mr Sanford scanned copies of the Particulars and Conditions of Sale for Unit 1189 – 1193, including an unsigned pre-contract disclosure statement, and emailed those documents to Mr Kooiman. That was done at 3.40pm on 28 November 2014. At 4.43pm the same day, he emailed to Mr Kooiman a scanned copy of the Particulars and Conditions of Sale for Unit 1241, and signed copies of pre-contract disclosure statements for both Unit 1181 – 1193
and Unit 1241. In each case, the signed pre-contract disclosure statement was dated
14 October 2013 and signed by a director of Jafaar.
[50] The contract documents in each case consisted of the Particulars and Conditions of Sale, together with a “Memorandum of Contract”, with spaces for execution by vendor and purchaser. In bold type immediately above the space for the signatures, the following acknowledgement appeared:
Where this agreement relates to the sale of a unit title property, the purchaser acknowledges that the purchaser has been provided with a pre-contract disclosure statement under s 146 of the Unit Titles Act 2010.
[51] On the final page of the Particulars and Conditions of Sale form there were some notes for prospective purchasers headed “Before Bidding at the Auction”. The first sentence under that heading read:
If you are the successful bidder or you sign this agreement before or after the auction this sale will be legally binding on you.
[52] Again, the notes contained specific advice relating to the purchase of unit title properties, including advice that the vendor must provide the purchaser with a pre- contract disclosure statement under s 146 of the Unit Titles Act.
[53] Mr Kooiman says that he did not receive Mr Sanford’s 4.43 pm email until
5.20 pm. In support of that statement he produced a scanned copy of what he says was his email inbox for 28 November 2013, showing that an email was received from Mr Sanford (relating to 1241 Fenton Street) at 5.20pm on 28 November 2013.
[54] In the meantime, Mr Kooiman had emailed back to Mr Sanford a signed and initialled version of the particulars and conditions for sale for Unit 1189 – 1193, including initialled pages of the unsigned pre-contract disclosure statement. Mr Austin counter-signed and dated the documents, including the disclosure statement, the following day.
[55] The final step in the relevant events is that, at 11.09 pm on the evening of the auction, Mr Kooiman emailed back to Mr Sanford a signed and initialled copy of the Particulars and Conditions of Sale and Memorandum of Contract for Unit 1241. He
initialled only the unsigned version of the pre-contract disclosure statement for this unit, notwithstanding that he had received a signed copy of the pre-contract disclosure statement for this unit, signed by Jafaar on 14 October 2013, with Mr Sanford’s 4.43 pm email.
[56] Mr Kooiman therefore had received a properly signed pre-contract disclosure statement relating to Unit 1241 before he signed and returned the contract documents for that unit. Whether he had received a properly signed pre-contract disclosure statement for Unit 1189 – 1193 before he signed the contract documents for that unit, appears to depend on whether he received the pre-contract disclosure form at or about 4.43 pm (as the date on Mr Sanford’s email would suggest) or whether that email did not arrive in his inbox until 5.20 pm (as Mr Kooiman’s scanned inbox tends to suggest).
[57] Mr Kooiman does acknowledge receiving the contract documents for Unit
1189 – 1193 at 3.40pm on the afternoon of the auction. It appears that he did not read the documents carefully, and did not take any particular note of the references to the need for the vendor to provide a pre-contract disclosure statement. He says that he paid no attention to the signed pre-contract disclosure documents, as he could not see their significance given that the forms were already contained in the Particulars and Conditions of Sale for both unit title properties.
[58] Mr Kooiman says that his understanding was that the signing of the Particulars and Conditions of Sale for the three properties was a mere formality, as he already had binding written agreements to purchase them by virtue of his execution of the telephone bidder registration document, which contained an obligation on Eastlight to complete the formal contract documentation if it were the successful bidder.
[59] Eastlight raises two further issues. First, the telephone bidding registration form was only amended to include Unit 1189 – 1193 after the auction. ETB accepts that that is so. Secondly, Eastlight says that ETB inserted in the formal contract documents the pre-contract disclosure forms which had been signed by Jafaar in October 2013, before the signed documents were sent to Eastlight’s solicitors.
Eastlight says regards that was a unilateral, unauthorised purported addition to what was a binding contract, and had the effect of converting the sale documents into counter-offers by Jafaar which Eastlight never accepted.
[60] Eastlight submits that once ETB failed to provide it with the pre-contract disclosure statements prior to the auction, the situation was incapable of remedy. It says that the s 146 requirement to provide the pre-contract disclosure is mandatory, and there can be no question of Eastlight having waived its entitlement to that disclosure: s 145 prohibits either party from contracting out of the disclosure obligations. It contends that, at the time Mr Kooiman signed the telephone bidder registration form, there was a binding agreement between the parties which was subject to the seller’s obligation to have (prior to entering into the agreements) made disclosure in accordance with s 146.
[61] Eastlight submits that the mandatory requirement for pre-contract disclosure, combined with the fact that there is no remedy for default provided in the 2010 Act and the prohibition against contracting out, together make it clear that Parliament intended that no contract should legally exist without full compliance with s 146 of the Act. In Eastlight’s submission, there was no possibility of the unit title contracts ever becoming unconditional, as no valid contracts existed in the first place. The result is said to be that when ETB received the deposits it was in the position of a stakeholder, holding the monies for Eastlight until a binding unconditional contract was reached between the parties. Eastlight says that never occurred, and that ETB should have returned the deposit monies to Eastlight upon demand.
[62] Neither counsel was able to refer me to any authority on the consequences of a vendor failing to provide pre-contract disclosure under s 146. It may be that such a purported contract is void and of no effect, as Eastlight submits, but it is not necessary for me to decide the point on this application, in which I have only to decide whether or not there exists a substantial and genuine dispute as to the existence of the debt which Eastlight claims. In considering that question I will assume, without deciding, that the position is as Eastlight submits, namely that no valid contract between Eastlight and Jafaar could come into existence before the signed pre-contract disclosure was given.
[63] On that assumption no binding sales of the two unit title properties came into existence when Eastlight was declared to be the successful bidder at the auction.8
The question then becomes whether or not Eastlight entered into binding contracts to purchase the two units after the auction sale. I am satisfied that it is reasonably arguable for ETB that it did.
[64] On Mr Kooiman’s own evidence, he received a signed pre-contract disclosure form for Unit 1241 at 5.20 pm on 28 November 2013. He also had the Particulars and Conditions of Sale document for that unit by that time, including the warnings above the signature space (and on the back of the form) about the need for pre- contract disclosure in sales of unit title land. It was not until after 11 pm that evening that Mr Kooiman signed and returned the contract documents for Unit 1241, and it was not until the documents were completed by Mr Austin the following day that Eastlight became bound. In those circumstances, it seems to me that Eastlight did receive pre-contract disclosure complying with the Unit Titles Act before it became committed to the purchase.
[65] I do not think it matters that Mr Kooiman did not initial the same form of pre- contract disclosure which Jafaar executed in October 2013. The pre-contract disclosure form, by its very nature, was not part of the contract itself. It was a document created unilaterally by the vendor which was intended to be given to the purchaser before any contract came into existence. The only relevant matter, in my view, is whether Eastlight had a signed pre-contract disclosure form, which complied with the Act, before it entered into a binding agreement to purchase. And because the pre-contract disclosure form was not part of the contract itself, adding it to the contract documents which were sent to Eastlight’s solicitors did not, in my view, affect the validity of any contract which had, by then, been made.
[66] Turning to Unit 1189 – 1193, the first issue is whether it matters that Eastlight did not complete a telephone bidder registration form for this unit until after the auction was over. On the assumption that no binding contract was completed at the
auction anyway, that cannot matter. The more important question is whether
8 Ex hypothesi, there could be no binding sale because no pre-contract disclosure had been given.
Mr Kooiman received the signed pre-contract disclosure statement before Eastlight entered into an agreement to purchase Unit 1189 – 1193.
[67] It appears from Mr Sanford’s evidence that the relevant signed disclosure form was sent to Eastlight at 4.43 pm, some seventeen minutes before Eastlight sent the completed contract documents for this Unit back to Mr Sanford. Mr Kooiman’s says that for some reason, the signed pre-contract disclosure forms did not arrive in his inbox until 20 minutes after he had signed and returned the contract documents for Unit 1189 – 1193 to Mr Sanford. The reason why an email might have taken 37 minutes from dispatch to arrival is not something I can determine on this application; in my view that question raises a genuine and substantive dispute in and of itself. If Mr Kooiman in fact had the email at or very soon after 4.43pm, ETB can reasonably argue that he received the signed pre-contract disclosure before he sent off the signed Particulars and Conditions of Sale and Memorandum of Contract for the unit.
[68] Quite apart from that issue, it is clear that Mr Kooiman was in possession of the Particulars and Conditions of Sale and Memorandum of Contract for Unit 1189 –
1193, including an unsigned pre-contract disclosure form, from around 3.40 pm that day, some one hour and 20 minutes before he sent the signed contract documents for the unit back to Mr Sanford. From 3.40 pm, he had therefore been in possession of the standard form acknowledgement on the Memorandum of Contract, a few centimetres above his signature, which referred expressly to the need for pre-contract disclosure under s 146. The sale documents do not appear to have been executed by Jafaar until the following day, 29 November, and I think it at least arguable for ETB that Eastlight did not in fact “enter into” the agreement for sale and purchase of Unit
1189 – 1193 until Jafaar executed the document, and both parties were committed. If that is right, Eastlight’s offer contained in the Memorandum of Contract accompanying the Particulars and Conditions of Sale could have been withdrawn after Mr Kooiman received the signed copy of the pre-contract disclosure for Unit
1189 – 1193, and before the documents were signed by Jafaar.
[69] In the foregoing circumstances, I am satisfied that ETB has raised a substantial and genuine dispute in respect of the claims for the return of the deposits paid on the two unit title properties. For completeness, I add that if (contrary to
Eastlight’s submissions) the failure to comply with s 146 made the contracts for the purchase of the unit title properties voidable rather than void, further disputes of fact would arise over whether Eastlight affirmed the purchase contracts, including by requesting time extensions for settlement. None of these issues are suitable for determination on a setting aside application.
[70] In those circumstances it is not necessary for me to refer to the various other arguments made by Mr Tompkins in support of the application. I make an order that the statutory demand served on ETB by Eastlight on 14 May 2014 be set aside.
Costs
[71] At the hearing Mr Tompkins indicated that ETB would seek indemnity costs against Eastlight, and an award of costs against Mr Kooiman personally. I indicated that I would allow counsel to file memoranda on costs after I gave judgment on the application.
[72] I am not presently minded to award indemnity costs, or costs against Mr Kooiman personally. It seems to me that ETB brought much of the trouble on itself by failing to comply with s 146 before the auction. It knew that s 146 disclosure needed to be made, and it knew during the auction that it had not been made. If there was insufficient time for ETB to send the disclosure documents to Mr Kooiman, his request to be accepted as a telephone bidder should have been declined. And if no contracts with Jafaar had come into existence, Jafaar would have had no entitlement to the deposit monies, which could only then have been held by ETB for Eastlight.
[73] Those circumstances do not suggest to me that there is any basis for other than ordinary scale 2B costs on the setting aside application. However the question of costs was not argued at the hearing, and in case there are other considerations which I have not addressed, I will receive any costs memorandum ETB may wish to file within 14 days of the date of this judgment.
[74] If ETB does not file a costs memorandum within that 14 day period, there will be judgment in its favour for costs on a Category 2B basis, with disbursements as fixed by the Registrar.
[75] Eastlight may file a memorandum in reply within 14 days of its receipt of any memorandum on costs from ETB.
Associate Judge Smith
Solicitors:
Gilbert Walker, Auckland for Applicant
P C Gilbert, Wellington for Respondent
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