Harlow v Sherman Ltd - [2010] NZCA 627

IN THE COURT OF APPEAL OF NEW ZEALAND
CA785/2009
[2010] NZCA 627
BETWEENROY JAY HARLOW AND NANCY JEAN HARLOW

Appellants

ANDSHERMAN LIMITED

Respondent

Hearing:7 October 2010

Court:Chambers, Harrison and Wild JJ
Counsel:G J Kohler and A M Cook for the Appellants

D J Taylor and J C G Cochrane for the Respondent

Judgment:20 December 2010 at 4 pm

JUDGMENT OF THE COURT

A            The appeal is allowed.
B            The judgment of the High Court is set aside.
CThe respondent must pay the appellants $45,000 plus interest pursuant to s 87 of the Judicature Act 1908 from 1 December 2009 to the date of this judgment.
DThe respondent must pay the appellants costs in the High Court. In the absence of agreement, these costs must be fixed in the High Court in light of this judgment.
E            The respondent must pay the appellants costs for a standard appeal on a band A basis and usual disbursements.

REASONS OF THE COURT
(Given by Wild J)
Table of Contents
Introduction  [1]
Factual background  [5]
Issue 1: Was Sherman entitled to register the three covenants?  [21]
Did Rodney Hansen J find an oral collateral agreement?  [22]
Does the evidence nevertheless indicate there was an oral collateral
agreement?  [24]
Issue 2: Did the Harlow’s failure to requisition for the removal of the three covenants mean that they were deemed to have accepted them?  [31]
Issue 3: Was Sherman entitled to cancel the agreement?  [37]
The consequences of our findings  [46]
Introduction
[1]        In a judgment he delivered on 19 November 2009, Rodney Hansen J held the respondent company (Sherman) had lawfully cancelled an agreement to sell the appellants (the Harlows) a block of land near Hamilton.[1] Following the judgment the Harlows vacated possession of the land, but brought this appeal.
[1]      Sherman Ltd v Harlow (2009) 11 NZCPR 387 (HC).
[2]        The parties’ dispute was about three covenants Sherman created and registered against the title to the land after agreeing to sell it to the Harlows (the three covenants).
[3]        Three principal issues arise on this appeal:
a)Agreement: Was Sherman entitled to register the three covenants? The answer to this first issue depends on whether the Harlows agreed to the three covenants.
b)Requisition: Did the Harlows’ failure to requisition for the removal of the three covenants mean that they were deemed to have accepted them?
c)Cancellation: Was Sherman entitled to cancel the agreement?

[4] If we answer those questions in favour of the Harlows, as we do, then the parties were agreed as to how the appeal should be resolved.
Factual background
[5] On 3 August 2007 Sherman obtained consent from the Waipa District Council to sub-divide into three lots a block of just under nine hectares of land it owned on Raynes Road on the outskirts of Hamilton. The consent was subject to various conditions and to the creation of various easements, including for electricity, telephone and rights of way. There were also conditions relating to effluent and storm water…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NZCA 627
Decision Date: 20 December 2010

CaseChat Overview and Summary

In Harlow v Sherman Ltd, the Court of Appeal of New Zealand considered an appeal brought by the Harlows against Sherman Ltd, a real estate company. The dispute arose from an agreement for sale and purchase of a block of land. The central issue was the validity of three restrictive covenants that Sherman created and registered against the title of the land after the agreement was signed but before the settlement date. The High Court had ruled in favour of Sherman, but the Harlows appealed.

The Court of Appeal first addressed whether Sherman was entitled to register the three covenants. The court concluded that there was no evidence of an oral collateral agreement regarding the covenants and found that the evidence did not support the existence of such an agreement. The court found it unlikely that Sherman genuinely believed it had the Harlows' agreement to the covenants, given Sherman's failure to inform the Harlows or their solicitor about the covenants.

Next, the court considered whether the Harlows' failure to requisition the removal of the covenants meant they were deemed to have accepted them. The court determined that the requisition clause did not apply because the covenants were not defects arising out of the plan or existing at the date of the agreement. Instead, they were voluntarily created by Sherman without the Harlows' knowledge or consent.

Lastly, the court examined whether Sherman was entitled to cancel the agreement. The court found that Sherman was not "ready, able and willing" to settle according to the terms of the agreement, and thus it was not entitled to cancel the agreement. The court ordered Sherman to refund the deposit to the Harlows, plus interest, and to pay the Harlows' costs in both the High Court and the Court of Appeal.

Orders