Golestaneh v Tang

[2024] NZHC 3560

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-980

[2024] NZHC 3560

UNDER

the Land Transfer Act 2017

IN THE MATTER

of Caveat no. 12954918.1

BETWEEN

MARJANEH SEYEDEH GOLESTANEH

Applicant

AND

FEI TANG and JUN YANG

Respondents

Hearing:

25 November 2024

Appearances:

A R Gilchrist for Applicant

P J Napier and R Y Wang for Respondents

Judgment:

26 November 2024

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 26 November 2024 at 4:30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

……………………………………….

GOLESTANEH v TANG [2024] NZHC 3560 [26 November 2024]

[1]    Ms Golestaneh applies to sustain a caveat over a property in Albany, Auckland. Ms Golestaneh had been a tenant of the property since  November  2020  and  in June 2023 she agreed to buy the property from Fei Tang and Jun Yang (the vendors).

[2]    The principles are not in dispute — Ms Golestaneh must show a reasonably arguable case her contract is still alive. If that is the case, the Court can impose conditions in relation to an order that the caveat not lapse.

[3]    Settlement was originally scheduled 15 January 2024 but was extended in July 2023 to 29 January 2024.

[4]    The contract was subject to a finance condition and a Land Information Memorandum (LIM) condition. While the time for satisfying those conditions was short (four working days), I note that prior to Ms Golestaneh’s June 2023 contract, her husband agreed on 21 May 2023 to purchase the property from the vendors where the time for the satisfaction of finance and LIM were each 15 days, so presumably some preliminary work had been done in respect of those matters. Both conditions were satisfied.

[5]    I note for completeness, that the property was not built by the vendors rather the building work of concern to Ms Golestaneh were completed by the original builder or others well prior to the vendors buying the property. Mr Gilchrist,  counsel  for Ms Golestaneh, accepted there was no evidence to contradict the vendors’ evidence that they did not undertake the works that may mean two bedrooms at the property are not consented or otherwise do not meet Council requirements. Accordingly, no breach of warranty issue arises because the vendors’ warranty in relation to resource consents, building consents and so on relates to work done or caused or permitted to be done by the vendors (pursuant to cl 7.3(5) of the contract).

[6]    The  property  was  marketed  as  having   seven   bedrooms   and   again,   Ms Golestaneh having lived in the property for two and a half years, would have been aware of the layout and nature of the property when she signed the contract. It appears two of the seven bedrooms the property has may have been created by the installation of internal walls in a larger room without meeting Council requirements.

[7]    Notwithstanding that the contract was unconditional, Ms Golestaneh says she discovered in December 2023 that the property was consented to only have five bedrooms and not seven.

[8]    When this issue was raised, rather than the vendors requiring Ms Golestaneh to settle on the basis that any misrepresentation claim had to be dealt with under the compensation provisions of the contract, the vendors on 25 January 2024 sent an email to their real estate agent to pass on to Ms Golestaneh.   The email requested that    Ms Golestaneh choose between the following alternatives:

Next step, absolutely depends on how the buyer would choose.

1.          If the buyer wants to go ahead with the purchase and want it to be    a “legal” 7-bedroom house, then we have to wait for [Certificate of Acceptance (COA)]. In that case, the settlement date has to be postponed to a later date. We suggest COA approval + 10 working days.

2.          If the buyer finds somewhere else to buy/stay, and wants to cancel the contract. We would accept the contract termination.

Can you please deliver our message to the buyer and let us know which case they would like to go ahead.

[9]    The vendors asked their agent to deliver the message to Ms Golestaneh and advise them of her the response.

[10]Ms Golestaneh had her solicitors reply which included the following:

We are instructed to reserve her full rights under the contract and in law.

Our client instructs us to accept proposal under point 1 to defer settlement by COA + 10 working days for now.

Without prejudice to our client’s legal options, our client will make a decision when COA is obtained.

[11]   On its face, Ms Golestaneh did not accept the offer to defer settlement made on 25 January 2024 as the reply advises she “will make a decision when COA is obtained”, rather than agreeing to settle the purchase 10 days after the issue of the COA — in other words Ms Golestaneh would “wait and see”.

[12] Mr Gilchrist emphasised that the second paragraph of the reply at [10] above records Ms Golestaneh’s acceptance of the proposal to defer settlement “by COA + 10

working days for now”. The “for now” is of itself a qualification of the acceptance suggesting that the commitment to settle on that basis was temporary, however, the last line of [10] above undoes any suggestion that Ms Golestaneh was committing to settle once a COA was available.

[13]   The purchase did not settle on 29 January 2024. The vendors approached the Council about a COA but the Council’s position was that a COA was not required because  at  the  time  the   property   was   built   a   Letter   of  Acceptance   dated 26 August 2009 was issued — whether the work of concern to Ms Golestaneh was in place in 2009 is not known. That has left the parties each initially adopting different legal positions, neither of which, in my view, are sustainable.

[14]   Ms Golestaneh maintains that settlement had been deferred until after the COA has been obtained and she maintains the vendors have an obligation to “provide       a legally complying seven bedroom property”.

[15]   The vendors originally submitted the contract was frustrated as a result of settlement being linked to the issue of a COA which could not be obtained.

Ms Golestaneh’s position

[16]   The contract to purchase became unconditional. If Ms Golestaneh considered there were misrepresentations by the vendors then she had the option either to cancel the contract, if the requirements of s 37 of the Contract and Commercial Law Act 2017 were met, or to call for settlement and invoke the compensation mechanism in cl 10 of the contract. Ms Golestaneh did neither.

[17] I find Ms Golestaneh did not accept the proposal set out at [8] above as she did not commit to settle if a COA was provided. For the settlement date to have been varied, the offer made by the vendors to link settlement to the issue of a COA had to be accepted unconditionally — the response set out at [10] above was not a commitment to settle.

[18]   The vendors’ first argument, which is one that I accept, is that settlement was not deferred until the availability of a COA. On that basis, the date for settlement was left at large.

The vendors’ initial response

[19]   The vendors originally argued the contract was frustrated when it was learnt that a COA would not be issued by the Council. However, frustration was not the correct analysis of the present situation. In the first place I have found no agreement to vary the settlement date to COA + 10 days was made. That conclusion means the frustration submission cannot succeed. But even if such an agreement had been made, performance of the contract did not become unenforceable when the Council said a COA was not available. A settlement date agreed on the basis of a common mistake

— here the availability of a COA — does not make performance of the contract impossible.

[20]   Accordingly,  the  situation  is  this:   the  contract  is  still  alive  because   Ms Golestaneh has not purported to cancel the contract for misrepresentation — indeed she has affirmed it — nor was the contract frustrated.

Vendors’ amend their position

[21]   This matter was originally scheduled for a hearing in August 2024 but was adjourned when the vendors filed an amended notice of opposition. The amended opposition was based on the proposition that Ms Golestaneh was obliged to settle on the deferred settlement date of 29 January 2024 and, having failed to do so, the vendors were entitled to issue a settlement notice which they did on 7 August 2024. Ms Golestaneh did not settle and the vendors purported to cancel the contract relying on the settlement notice.

[22]   The vendors did not intend settling on 29 January 2024 as they approached the Council about a COA. Both parties allowed that date to come and go. The vendors on 2 February 2024 wrote to Ms Golestaneh’s solicitors suggesting a new settlement date of 19 February 2024 on a without prejudice basis. That email also referred to the

vendors’ view that as a COA could not be issued, the vendors considered the contract had been frustrated.

[23]   The vendors’ view that the contract had been frustrated was reinforced by their return of the deposit on 27 February 2024 and by a further letter on 15 March 2024 reiterating their view that the contract was frustrated.

[24]   Where a party acts so as to lead the other party to believe that performance on time will not be enforced, time is no longer of the essence.1 After essentiality of time has been lost by waiver or by election it must be restored by a valid notice.2 While the original contractual date for performance remains the basis for the defaulter’s obligation, time is no longer of the essence as to that date and a further reasonable period must be allowed.3

[25]   Having taken the view on 15 March 2024 that the contract was at an end, it was not open to the vendors to act as if they had not taken that stance. This is not altered by the fact Ms Golestaneh did not accept the contract was at an end. If the vendors considered their view that the contract had been frustrated was incorrect and now accepted Ms Golestaneh’s position the contract was on foot, the vendors had to give reasonable notice calling for settlement and, if Ms Golestaneh did not settle, then the vendors could issue a settlement notice.

[26]   Accordingly, even at this summary stage, I find the vendors did not have the right to issue a settlement notice and any purported cancellation in reliance on that settlement notice was invalid.4 Ms Golestaneh has not purported to cancel the contract for that repudiation, indeed she has affirmed the contract by seeking to sustain the caveat.

1      D W McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at [12.22].

2      At [12.25].

3      At [12.25].

4      At [12.20].

Conclusion

[27]   Ms Golestaneh’s caveat was lodged on the basis she has an extant agreement for sale and purchase with the vendors. Having concluded that the contract was not frustrated and that the vendors’ settlement notice was not valid, the contract remains on foot and thus the caveat is sustained.

[28]However, the caveat is sustained on the following conditions:

(a)Ms Golestaneh is to pay the deposit within five working days of this judgment and otherwise as required by the contract. If she fails to do so, a notice under cl 2.2 of the contract may issue.

(b)Settlement is to occur on Friday 31 January 2025.

(c)If Ms Golestaneh wishes to settle on that date then she is to follow the provisions in the contract relating to compensation for what she alleges were pre-contractual misrepresentations.

(d)If Ms Golestaneh does not settle on 31 January 2025 then the vendors may issue a Settlement Notice in the ordinary way.

[29]   Leave is reserved for the parties to seek a telephone conference in respect of the above conditions.

Costs

[30]   Given the incorrect original analysis by both parties, my instincts are that costs should lie where they fall but if counsel wish to be heard, memoranda may be filed of not more than five pages, to be filed and served within five working days.

Observations

[31]   Ms Golestaneh should think carefully about how she might frame any claim in misrepresentation. As the vendors point out, by the time of the contract Ms Golestaneh

had lived with her family in the property for some time. That meant that she was familiar with the property and what she was buying in terms of its layout, the quality, location and size of the rooms.

[32]   Mr Gilchrist submitted that reference in marketing material to seven bedrooms “… must mean seven fully legally compliant bedrooms, not two only compliant as temporary bedrooms”. This is not a straightforward proposition.

[33]   Firstly, the starting point with real estate is caveat emptor. Secondly, the contract contains express provisions in relation to the vendors’ responsibilities for meeting local authority requirements for the building. Those provisions are limited to work carried out by the vendor (not the case here) or where the vendor has received notice of issues of concern to the Council. To say it is implicit that the bedrooms are legally compliant amounts to implying a term inconsistent with the express provisions of the contract. Or if it is said the representation the house had seven bedrooms would reasonably be understood to mean all consent requirements in respect of those rooms were met, such would again not be consistent with the contract and the principle of caveat emptor. Finally, Ms Golestaneh had the benefit of a LIM condition which she confirmed.

[34]   In any event, these are all arguable issues in relation to the compensation provision under the contract but will require careful consideration.

Associate Judge Lester

Solicitors:

K3 Legal Limited, Auckland Octagon Law, Auckland

Copy to counsel:

A Gilchrist, Barrister, Auckland