Gill v New Zealand Home Bonds Limited HC Christchurch CIV 2010-409-1587

[2010] NZHC 2122

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2010-409-001587

BETWEEN  BERNADETTE GILL SANGEET GILL SURINDER GILL Appellants

AND  NEW ZEALAND HOME BONDS LIMITED

Respondent

Hearing:         17 November 2010

Counsel:         Hon M Foley and OD Peers for Appellants

D M Lester for Respondent

Judgment:      1 December 2010

JUDGMENT NO. 2 OF FOGARTY J

Introduction

[1]      This is an appeal against a decision of the District Court (Judge R E Neave) entering summary judgment for New Zealand Home Bonds Limited (NZHB) against Bernadette Gill and her daughters, Sangeet and Surinder.    The summary judgment was to reimburse payments made by NZHB to satisfy the deposit requirements on the purchase of two residential units in Auckland.   Judgment was entered against each of the defendants in the sum of $86,240 together with costs and disbursements

on a 2B basis to be certified by the Registrar.

GILL AND ORS V NEW ZEALAND HOME BONDS LIMITED  HC CHCH CIV 2010-409-001587  1

December 2010

[2]      Judge  Neave  rejected  numerous  arguments  against  summary  judgment including:   that the contracts were not made in New Zealand and could not be enforced in New Zealand;   that the proceedings were incompatible with the proceedings NZHB has commenced in the Supreme Court of Queensland to enforce caveats over property of Mesdames Gill;  that in any event the Court should decline jurisdiction and allow the litigation to proceed in Australia;  and, more pertinently to this argument, that the first defendant’s solicitors had cancelled the contracts upon NZHB’s entitlement in this proceeding rests and had cancelled the contracts with NZHB.   Furthermore, the solicitors argued that Mesdames Gill had no liability to pay NZHB as the vendor had not given NZHB valid qualifying claims triggering NZHB’s obligations to the vendor.

[3]      More  substantially,  before  Judge  Neave,  Mesdames  Gill  argued  that  a Mr Brian Cutfield was acting as agent of NZHB in procuring the bond contracts, that he should be joined and in any event Mrs Gill was induced into entering into the contract upon misrepresentation made by Mr Cutfield as NZHB’s agent entitling her to cancel the contract and releasing them from further obligation to perform the contract under ss 7 and 8(3) of the Contractual Remedies Act 1979.

[4]      All these arguments were rejected.

[5]      Judge Neave began his summation of the facts by starting the narrative at the time that he assumed that Mrs Bernadette Gill entered into an agreement to purchase two units in a development in Grey Lynn in Auckland.

[6]      To my mind the context is better appreciated, relevant to the issues that have to be resolved, by starting with the agreement between NZHB and the vendor of these properties which was entered into on 2 August 2006, before the units were built.  The original vendor (the agreements for sale and purchase were later assigned) was MacKelvie Trust Limited as corporate trustee of the MacKelvie Trust.  In this August 2006 agreement it is defined as being the developer and as the vendor.  The agreement records that McKenzie Trust were developing a property known as 33-35

MacKelvie Street.  Clause 3 of the contract reads:

3)The Developer and the Vendor intend to promote the sale of real estate from the Project using Development Homebonds (“Bonds”).

4)NZHB  agrees  to  provide,  for  this  Project,  Bonds  to  purchasers approved by NZHB (“Purchasers”) to secure the Purchaser’s deposit obligations to the Vendor under the sale and purchase agreements for the Project (“Agreements”).

[7]      Under the agreement the vendor undertook not to declare any agreements to be unconditional  until  certain  steps  had  been  taken  including satisfaction  of  all vendor and purchaser conditions’ precedent and subsequent (cl 17 b)).  Then for its part NZHB promised it would deliver the bonds to the vendor without further reference to the applicant for the bond or the purchaser if NZHB had received its fees in respect of the bonds and the vendor had satisfied its obligations under cl 17.

[8]      Accompanying or attached to this agreement was a document entitled “Home Bond Development Bond Project Approval” in respect of the same development.  It contains expected timing of the development  and the bond period.    It  provides “agency” details and names two “listing agents”, one of whom is Brian Cutfield. Attached or accompanying this document is also the development home bond application form for this project.

[9]      Mrs Gill said she first met Mr Cutfield in a coffee shop in Brisbane.  He was marketing  units  of  the  MacKelvie  Street  project.    She  was  with  her  daughter, Surinder.  For this part of the narrative I rely on Mrs Gill’s second affidavit which I gave leave in a separate judgment to be read on this appeal.  In her second affidavit she amplifies that Mr Cutfield at first made contact with her daughter, Surinder, by telephone, following a mutual acquaintance providing Surinder’s contact details to Mr Cutfield.  At the time she met Mr Cutfield she knew he was a real estate agent and that he was acting on behalf of the vendor of two units in Auckland;  that he had contacted Surinder with a proposal relating to the purchase and on-sale of these units.  That is all she knew.  At the coffee shop he explained that the units were in an extremely prestigious area in Auckland, close to many amenities, restaurants and coffee shops, and that they were marketed for sale at well below market value.  They relied totally on Mr Cutfield saying he came highly recommended.  She says she told Mr Cutfield she did not have funds for a cash deposit and she was not intending to own property.  Mr Cutfield told her that it was not a problem, all she needed was

equity.   Mr Cutfield told her the issue (no funds) could be overcome because she could sign up for the purchase of these properties on the basis that any agreement for sale and purchase would be conditional upon on sale of the units to a third party purchaser prior to any settlement or in the event that any units could not be on-sold he would purchase the units himself.

[10]     He had brought to this meeting a pre-prepared signed letter dated 18 October recording this obligation to purchase the units himself at the purchase price if unable to sell the units which condition was essential.  She says he promised her to attach this letter to the contracts for sale and purchase.   (This aspect of the case was the centre of a lot of argument before me, as to Mr Cutfield’s power as agent.)

[11]     He gave her an unsigned agreement for sale and purchase of the two units at that meeting.  The next day, she prepared a letter to Mr Cutfield from herself which has been hand dated 2 November 2006 and contains a handwritten note:

Attachment to contract dated 2-11-06

And opens with this paragraph:

After our discussions yesterday in connection with the purchase of Home Bonds, we understand that we are purchasing the units only on the condition that they are resold – or on-sold prior to settlement possibly in March 2008 and there would be a substantial profit for us in doing this transaction.

It continues on, inter alia:

We have not had time to consult any solicitor here as your stay is short. However, we do understand from your letter that there will not be any responsibility on our part to incur any charges or penalties listed in the contract received only yesterday ie 12.1 Settlement Notice,  12.2 Service and

12.3 Vendor’s Remedies Clauses or any other penalties or charges other than the usual commission and costs.   Please list and advise us of the costs

involved.

This letter is signed by Mr Cutfield.  So he must have received it.

[12]     Judge Neave readily accepted that Mr Cutfield was the agent of the vendors. He found, however, that the letter of 10 October between Mr Cutfield and Mrs Gill

was a side agreement.   He likewise found that the letter of 2 November prepared by

Mrs Gill:  “although expressed as a condition” was also a collateral agreement.

[13]     I set out his reasoning, as to both letters:

[20]     The defendants were told by Mr Cutfield that their object could be achieved by signing an Agreement for Sale and Purchase thereby enabling the developer to start the construction.   Once that was done Mr Cutfield would then on-sell the units prior to their completion and settlement and in the event that he was unable to achieve sale to a third party Mr Cutfield promised he would purchase the units himself at cost price.   In that event whilst the defendants would not make any profit at least they would not be out of pocket.  Mrs Gill advised him that that requirement needed to be in writing and by letter of 18 October 2006, a copy of which is attached to this judgment as Appendix 1, Mr Cutfield provided the defendants with a signed statement verifying that he would personally take over the sale in the event sale to a third party could not be achieved prior to settlement.   Mrs Gill confirmed their arrangements in writing the following day.  This was signed by Mr Cutfield and Mrs Gill says was to be an attachment to the contract dated 1 November 2006 which appears to be a reference to the Agreements for Sale and Purchase.   The Agreements for Sale and Purchase were then signed by the defendants in Mr Cutfield’s presence in Brisbane.  At the time the contracts were undated as Mr Cutfield was to take them back to New Zealand and he agreed he would attach Appendix 1 to the contract prior to delivering them to the vendor.

…

[27]      Further, the letter of 2 November prepared by Mrs Gill and signed by her and Mr Cutfield, although expressed as a condition, it too is quite clearly a collateral agreement.  Even if the agreement was complied with to the letter it could not prevent Mrs Gill from being required to settle under the original Agreement for Sale and Purchase.   What the alleged condition or side agreement provided was that in the event that she was called upon to settle she would have recourse either to the ultimate purchaser to whom she would then on-sell the apartment or Mr Cutfield who would ensure she suffered no loss.  It was not a condition to the entry of the agreement;  rather it  was  an  agreement  whereby  ultimately  the  purchase  of  the  agreement would be funded either by anyone to whom she sold the apartments or as a last resort Mr Cutfield effectively indemnifying her for the cost of the purchase price.  The “condition” could only be enforced at the point at which Mrs Gill was required to settle the agreement.   It would be a nonsense to suggest that the Agreement for Sale and Purchase did not come into effect until the “condition” was satisfied in these circumstances.

[14]     With respect I disagree with Judge Neave’s finding that the second letter should be characterised as a collateral agreement, even though it is expressed as a condition to the purchase of the units, and requires removal of standard clauses 12.1-

12.3.   The letter was expressed to be a condition.  It discusses the non-application of

clauses 12.1-12.3.  The fact that it was a “nonsense” does not mean that it was not being sought by Mrs Gill as an offeror at the time she was making an offer to purchase the two units.

[15]     It follows, inevitably, that on 2 November Mrs Bernadette Gill is presenting by her letter to Mr Cutfield, the agent for the vendor, proposed conditions to be agreed as terms of the purchase.

[16]   The Court at this stage has only partial copies of agreements between MacKelvie Trust, the vendor, and Mrs Gill for units 1D and 2F. 33-34 MacKelvie Street.    The agreement is dated 7 November 2006.  There is no date of execution by MacKelvie Trustee Limited, the signatory, who accepted the offer.

[17]     It appears very likely that Mr Cutfield did not send Mrs Gill’s letter of

2 November  to  the  vendor.    Rather,  that  he  sent  the  vendor  only  the  form  of agreement for sale and purchase that she had signed.  If so, he did not send to the vendor the whole of her offer.  If these are the facts there is no contract for sale and purchase for the vendor did not accept her offer.

[18]     It would appear that the NZHB application form was also likely signed on

2 November, by Mrs Gill and Sangeet Gill, who offered a charge over Australian property by way of security.  The credit manager for NZHB said the application for two bonds was not made until 6 March but provision for a date on the application form reads this way:

The date of this document is deemed to be [      ] irrespective of the date on which the last person signs in the absence of any date may be dated by NZHB when received by NZHB.

Inside that box the date of “6/03/07” has been added.   Mrs Gill says that the application  forms  were  produced  along with  the  unsigned  contracts  of  sale  and purchase.  It was clearly Mr Cutfield’s decision to send off the NZHB application on the assumption that there was a contract.  Clause 1 of the NZHB presumes there is an existing contract of purchase.

[19]     Thereafter all parties assumed the existence of the contract of purchase of the units.  A mistaken common assumption does not mean there was a contract.  If the letter of 2 November was not sent and accepted, the assumption that there was a contract was a common mistake of all parties.

[20]     In July 2008 Surinder Gill lodged a bond application in support of the first two bonds.

[21]     In  the  subsequently  correspondence  approaching  settlement  time  in  June

2009, Mrs Gill’s earlier solicitors wrote both to NZHB and to the vendor’s assignees, Safari Group, arguing the contracts were conditional and the conditions had not been satisfied.   NZHB was  warned not to pay any deposits to the vendor under the agreements.

[22]     NZHB replied to her appellant’s then solicitors saying that she had a contract at issue between her client and the vendor.  Her solicitors warned NZHB’s solicitors that if they went ahead and paid the deposit that was at their risk and at the same time her solicitors purported to cancel the agreements for sale and purchase by notice to the vendor’s solicitors.

[23]     On 12 June 2009 NZHB solicitors essentially said they were not going into enter into contractual disputes, referred to the fact that they had been winning cases consistently in the District Court, High Court and Court of Appeal.  The vendor’s assignee issued the settlement notice and NZHB paid the deposits to the assignee, having previously advised Mrs Gill and her daughters to obtain an injunction within seven days from the High Court or be obliged to reimburse NZHB for the deposit to be paid on their behalf.   Four days later NZHB paid the bonds to the vendor.  NZHB then moved to register caveats over the appellant’s properties and have now commenced proceedings in New Zealand and in Australia to collect their outgoings plus interest and costs.

[24]     Faced with Mr Foley’s argument that there was no contract, Mr Lester argued that Mrs Gill and her daughters were estopped now from arguing that there was no contract.   Mr Lester argued they had asserted the contracts existence when their

solicitors in 2009 protested the intentions of NZHB to pay the bonds to the vendor’s assignee they were accepting that there was a contract, and only arguing that the conditions had failed and the contract was to be, had been, cancelled.

[25]     There are always three elements broadly to be considered before an estoppel is raised:

1.        Whether there is a clear representation of fact.

2.        Whether there has been reliance on those facts being true.

3.Whether it is unjust for the maker of the statement to be allowed to deny it.

[26]     The purpose of the June correspondence of the lawyers of Mrs Gill and her daughters   was   to   warn  NZHB  of   Mrs   Gill’s   view   that   the   contract   was unenforceable.    Its  purpose  did  not  consciously  include  taking  a  position  on  a question of fact as to whether or not the contract had ever come into existence.

[27]     There is no evidence that I have seen that NZHB relied on the June letters from the Gills’ lawyers for the proposition that the contract was in existence. Everybody was assuming that.

[28]     The third limb requires  the Court to take into account the  whole of  the context.  Equity looks to all the facts.

[29]     The second and the third limb considerations can be taken together.  There is no doubt that Mr Cutfield was well known to NZHB.  As discussed he is one of two named listing agents in NZHB’s contract with MacKelvie Trust.  Plainly NZHB and the vendor thought it important to agree on the listing agents.      Before NZHB released the bond monies they are told by letter, twice, that Mr Cutfield has breached assurances he gave at the time that he persuaded Mrs Gill to enter into the sale and purchase agreement.   NZHB was in a position to check the argument about the condition, raised by Mrs Gills’ lawyers with Mr Cutfield.  They were not reliant on Mrs Gills’ account.

[30]     To establish an estoppel in this case NZHB has to assert it.   It is not a defence.     It  is  plainly  arguable  that  there  are  serious  difficulties  in  NZHB maintaining such an estoppel on these facts.

[31]     Finally, Judge Neave relied upon the recent decision of Sim v New Zealand Home Bonds Limited [2010] NZCA 192 that a default on the part of a purchaser in the context of the bond occurs only if there is failure to settle in response to a valid settlement notice. He found:

However,  here  the  validity  of  the  settlement  notice  is  not  put  into  any jeopardy by the arguments raised by the defendants.

[32]     There was no question in Sim as to whether or not there was an underlying contract.  The material facts of Sim simply bear no relationship to the facts of this case.  On that basis the ratio of Sim however defined cannot resolve the outcome of this case.   Nor are there are dicta in the decision which clearly render any of the arguments identified above as being ruled out.  If there is no contract there can be no valid settlement notice.

[33]     The appeal is allowed.   The summary judgment is set aside.   The case is remitted back to the District Court.  Costs will be awarded to the appellant on a 2B basis.   I reserve the question of whether I can or should fix costs in the District Court. However, inasmuch as it may be argued that the grounds of appeal raised matters not presented in the Court below there may be a question of reducing the award that would otherwise follow.  I will receive written submissions by the parties limited to five pages in length after they have been exchanged in draft.

Solicitors:

Buddle Findlay, Christchurch, for Appellants (Counsel Acting: W J Palmer) GCA Lawyers, Christchurch, for Respondent (Counsel Acting: D M Lester)