Hart v Bankfield Farm Limited HC Tim CIV-2008-476-000072

[2008] NZHC 2340

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2008-476-000072

BETWEEN  RAYMOND LESLIE HART STEPHEN JOHN MACFARLANE AS TRUSTEES OF THE HARVEST TRUST

Plaintiffs

ANDBANKFIELD FARM LIMITED Defendant

Hearing:         22 April 2008

Appearances: D R Forman for Plaintiff

J P McCarthy for Defendant

Judgment:      21 May 2008

RESERVED JUDGMENT OF HON. JUSTICE FRENCH

[1]      This   is   a   summary   judgment   application   for   an   order   for   specific performance.   The plaintiffs seek to enforce what they contend was a written settlement agreement concluded by the parties in July 2007, the terms of which they say obligate the defendant to transfer ownership of a farm property situated in the Esk Valley.

[2]      The factual background is relatively complicated and, for reasons which will become apparent, I need to set it out in some detail.

[3]      The  defendant  company  is  the  registered  proprietor  of  a  farm  property situated at Esk Valley Road containing 120.8088 hectares comprised in Certificate of

Title CB499/168 (Canterbury Registry).

RAYMOND LESLIE HART AND ORS V BANKFIELD FARM LIMITED HC TIM CIV-2008-476-000072  21

May 2008

[4]      The plaintiffs are the trustees of a trust known as the Harvest Trust.   In October 2001, the plaintiffs entered into a deed of lease with the defendant to lease the Esk Valley farm property.  The deed of lease stipulated that, with the exception of  an  old  farm  dwelling,  the  plaintiffs  were  not  entitled  to  occupy  or  use  the buildings on the property, nor were they entitled to occupy or use the surrounding land of approximately ten acres.

[5]      Under the deed of lease, the plaintiffs were given an option to purchase the freehold of the property for the sum of $960,000 plus GST (ie $1,080,000.00) with possession date to be one month after the option was exercised.   The option was expressed to be in respect of the entire property, ie unlike the lease, it included all land and buildings.

[6]      At the time the deed of lease was executed, the sole director of the defendant company was a Mr Peter Gray.  Mr Gray was also a shareholder in the company.

[7]      On 13 November 2005, Mr Gray died and his directorship in the defendant company passed to the executor and trustee of his estate, Mr Bill Davey.  Mr Davey had been a close personal friend of Mr Gray.   Under Mr Gray’s will, the sole beneficiary of his estate was a discretionary trust Mr Gray had established called the Peter Gray Family Trust.  The trustees of that Trust are Mr Davey and a solicitor, Mr Edgar Bradley.  The discretionary beneficiaries included Mr Gray’s two daughters.

[8]      Following Mr Gray’s death, his two daughters issued proceedings in the Family Court seeking further provision from the estate under the Family Protection Act 1955.  They were represented by an Oamaru law firm Hope & Associates and a Dunedin barrister Mr Andrew Belcher.

[9]      In April 2006, the plaintiffs purported to exercise the option to purchase under the deed of lease.

[10]     The defendant however disputed the purported exercise of the option and refused to transfer the property.  In July 2006, the plaintiffs commenced proceedings in the High Court seeking to enforce the option (the option litigation).

[11]     The defendant filed a statement of defence and counterclaim.  In due course, the matter was allocated a fixture.

[12]     At that stage, the plaintiffs’ solicitors were Aspinall Joel (Ms Saunderson- Warner).

[13]     The  defendant  had  been  represented  by  Rhodes  &  Co.    In  June  2007 however, Mr Davey terminated his instructions with that firm and instructed another law firm Thompson & Morgan (Mr Bill Morgan).

[14]     On  17  July 2007,  as  the  date  for  the  hearing  was  fast  approaching,  the plaintiffs’  solicitor  Ms  Saunderson-Warner  received  a  telephone  call  from  Mr Belcher (Mr Belcher, it will be recalled, up to that point had been acting for the daughters  in  the  Family  Protection  Act  litigation).     Ms  Saunderson-Warner’s affidavit sworn in these proceedings states:

On or about 17 July 2007 I received a phone call from Andrew Belcher who advised that he had instructions from the defendant to discuss settlement of the High Court proceedings.  Mr Belcher asked whether the plaintiff would be  willing to  settle  the  High  Court  proceedings  on  the  following  terms (“Settlement Terms”):

(a)       The High Court proceedings be discontinued;

(b)       The  property  be  transferred  to  the  plaintiff  for  the  price  of

$1,080,000 (including GST);

(c)       That costs lie where they fall;

(d)That the defendant would not bring any further claim against the plaintiff for rent or costs for occupying the property; and

(e)That the  plaintiff  would  not  bring any further  claim for  interest against the defendant.

[15]     After  obtaining  instructions,  Ms  Saunderson-Warner  faxed  the  following letter to Mr Belcher on 18 July 2007:

Further to our discussion yesterday, I have taken instructions from my client. He is prepared to settle the matter on the basis that he pays $1,080,000.00 (including GST) and the property outlined in the Deed of lease is transferred to him with no payment with respect of interest or costs and no claims from your client in respect of rent.  This will be in full and final settlement of the issues between parties.

I have  spoken  to  Mr  Hart’s  financier  and  finance  is  still  available  and settlement could be arranged at a relatively short date.

Obviously, the High Court proceedings are set down for 30 July 2007 and we need to advise the High Court as soon as possible as to settlement.  You have indicated that you would wish to draft a Deed of Settlement.

You raised the issue of whether the $1,080,000.00 was inclusive or exclusive of GST. The purchase price as set out in the Deed of Lease was $960,000.00 plus GST.  Our client tells us this comes to the $1,080,000.00.

Please confirm as a matter of urgency that Bankfield Farm will settle on this basis.

[16]     The next day, 19 July 2007, Ms Saunderson-Warner received a fax from Mr

Belcher dated 18 July and signed by him.  The fax read:

Dear Partners

The offer set out in your letter dated 17 July 2007 (a copy of which is enclosed) is accepted and I am authorised by Bankfield Farm Ltd to accept that offer upon the basis that a notice of discontinuance is signed by you on behalf of the Plaintiff and is then held by you upon your undertaking that it is filed once cleared funds to the amount of $1,080,000.00 have been deposited into the trust account of Bradley West and upon Mr Edgar Bradley’s undertaking that upon deposit of the said funds the freehold of the leased premises will be conveyed to the lessees or such other persons as they may nominate.

I take it that your client has no objection to debts secured by mortgage over the property are re-paid immediately from the amount deposited into Bradley West’s trust account.

[17]     It should be noted although Mr Belcher refers to an offer in a letter dated 17

July from Ms Saunderson-Warner, there is no question he meant to refer to her letter of 18 July. There was no letter of 17 July from Ms Saunderson-Warner.

[18]      It is the above exchange of faxes which the plaintiffs rely on as constituting a binding settlement agreement and which they seek to enforce through the summary judgment procedure.

[19]     The same day as the plaintiffs received Mr  Belcher’s fax, they obtained finance approval from SBS Banking.

[20]     Shortly thereafter, the plaintiffs’ solicitors were advised that Mr Bradley’s firm, Bradley West, would be acting for the defendant on the sale.

[21]      On 24 July 2007, the plaintiffs’ solicitors wrote to Bradley West stating:

BANKFIELD FARM LIMITED TO HARVEST TRUST

We refer to our telephone conversation on 23 July 2007 and confirm that we will let you know when we are in a position to settle this matter.

Although it may be that some of the transaction will be able to be registered by way of e-dealing.  In this instance, the writer is of the view that it would be good  conveyancing  practice  to  have  an  executed  transfer  and  therefore enclose one for your perusal and order of execution.

[22]     A further letter from Bradley West to the plaintiffs’ solicitors dated 2 August followed.   This letter was headed Bankfield Farm Limited To Harvest Trust and included the following paragraph

You will find enclosed copy of letter from Thompson & Morgan.   On subsequently talking to Mr Morgan we were informed that in the absence of a definite settlement date Mr Davey was proposing to attend the Court  on Monday notwithstanding your firm’s letter to the Court.  In the meantime Mr Davey was not signing anything.   Mr Morgan has no authority to attend himself.

[23]      It is reasonable to assume the Monday mentioned in Bradley West’s letter was Monday 6 August, which was the date of the Court fixture for the option litigation.

[24]     The enclosure (a letter from Thompson & Morgan dated 1 August) stated:

re Bankfield Farm Ltd

We refer to your letter of 30th July 2007.

Mr Davey is concerned at where the issues are presently at.  We note Aspinall Joel’s letter to Anderson Lloyd refers to the proceedings having been settle [sic].  Unfortunately that is not correct as is clearly indicated by the fact that Harvest Trust have not yet finance in hand nor is there any agreed settlement date. From that perspective, there is not yet agreement on settlement.

Mr Davey has indicated to us that he is most reluctant to proceed when matters are so uncertain.  He still firmly holds the view that the option was not legally exercised and should not be honoured.

The real problem is that settlement is still up in the air.  To finalise a settle- ment we need a firm enforceable offer from Mr Hart’s trust as to price and settlement date.  The agreement should incorporate the twelve day settlement notice procedure in the standard form agreement for sale and purchase.

Would you please see whether matters can be firmed up.

[25]     On Friday 3 August, there was a telephone conference call with the High Court Judge scheduled to hear the option litigation.   The minute of Panckhurst J, which the defendant adduced in evidence in these proceedings, states:

Counsel:   S A Saunderson-Warner for Plaintiffs

A Belcher for the beneficiaries of the Gray Estate

W F Morgan for Mr Davey

MINUTE OF PANCKHURST J

[1]       This proceeding is scheduled to be heard before me commencing on

Monday next, 6 August.

[2]        However, I am satisfied on the advice of counsel for the first-named parties that a binding settlement is in place, save that the settlement agreement does not provide a date for implementation of the property sale. As to that Ms Saunderson-Warner advised that payment may be made on Friday, 17 August

2007, unless the parties agree otherwise.

[3]       On this basis I am satisfied that the case is settled and the fixture is vacated.                 There  shall  be  a  further  telephone  conference  on  Monday,  3

September 2007 to enable counsel to confirm that settlement has been finally implemented, unless in the interim a notice of discontinuance is filed.

[26]     That same day, the plaintiffs’ solicitors received a letter from Bradley West dated 3 August 2007 confirming an agreed settlement date of 17 August 2007, advising their CP for e-dealing purposes, and enclosing a settlement statement.

In account with Bankfield Farm Limited C/- Bradley West

2007

Aug 17       To        purchase price as agreed  1,042,562.15

To       purchasers proportion Waimate District

Council 2007/08 rates $23.24 GST exclusive

from17.8.07 to 30.9.07 (44 days)  280.15

To       purchasers proportion Environment

Canterbury 2007/08 rates $592.57 from

17.8.07 to 31.12.07 (136 days)  220.79

$1,043,063.09

We undertake to pay Waimate District Council rates to 30.9.07

And Environment Canterbury rates to 31.12.07

E&OE               )           BRADLEY WEST
6.8.07               )

Timaru              )           per EB

[27]     The plaintiffs’ solicitors acknowledged receipt of the settlement statement and by letter dated 9 August advised Bradley West of the e-dealing number.

[28]     On the 17 August 2007, Bradley West wrote to the plaintiffs’ solicitors:

BANKFIELD FARM LTD TO HARVEST TRUST

We are advised by Mr Morgan that Mr Davy refuses to sign the A & I form while your client persists with the view that the plant on the property is part of the sale.  Your confirmation is required confirming that such is not the case, any dispute regarding the plant being a separate issue.

[29]      The plaintiffs’ solicitors responded the same day:

We  refer  to  your  letter  of  17th   August  and  in  turn  refer  to  the  writers telephone conversation with Mr Morgan of yesterday wherein he confirmed that the plant on the property is not part of the settlement of the sale that is to take place today and that any dispute regarding same is a separate issue.

We have funds in hand (just received) and are ready to settle.

[30]     Mr Davey however continued to refuse to sign the A & I form and the transaction accordingly did not proceed on 17 August.

[31]     It appears that at some stage after 17 August, the plaintiffs became aware one of the reasons Mr Davey was refusing to sign was because he was claiming Andrew Belcher had no authority to conclude a settlement agreement on behalf of the defendant.

[32]     There is no evidence as to whether the plaintiffs then approached Mr Belcher or whether he approached them.  In any event, what happened next was that on about

1 October 2007 Mr Belcher supplied Ms Saunderson-Warner with copies of five documents.  The five documents were

(i)A letter to Mr Belcher dated 17 July 2007 from Thompson & Morgan (who it will be recalled were the solicitors Mr Davey had instructed in June 2007 following termination of his instructions to the defendant’s previous solicitors Rhodes & Co)

Re Estate Peter Gray

Attached please find copy beneficiary direction letter signed by Mr Davey and written instruction to us to proceed with negotiating settlement with Harvest Trust (Hart & McFarlane).

I will send copies to Hope & Associates to enable them to formally instruct you.     However  in  the  meantime  you  may  wish  to  open  exploratory discussions with Mr Hart’s barrister.

We struggled a little with Mr Davey to proceed but fortunately his wife has been involved in encouraging him to accept the need for finality.  Mrs Davey is encouraging Mr Davey to seek finality in the Family Proceedings as well as the company issues.

(ii)      A handwritten letter from Mr Davey dated 17 July 2007:

I Will Davey also known as Bill Davey instruct Thompson & Morgan to proceed with negotiations with the parties and their legal advisers to reach settlement of the issues relating to the claim by Harvest trust (Raymond Leslie Hart and Stephen John McFarlane) and in particular to confirm instructions for Hope & Associates and Andy Belcher in conjunction with Thompson and Morgan to negotiate in full settlement of the sale pursuant to an option to lease of the Bankfield Farm having regard to the directions of the beneficiaries and statutory beneficiaries now in writing directed to me.

(iii)     A fax from Mr Belcher to Thompson & Morgan dated 18 July 2007:

Re: Gray/Davey – Direction to Trustee and Executor

Dear Bill

Please find the enclosed from Aspinall Joel.  I take it that we can reply as follows:

The offer set out in your letter dated 17 July 2007 is accepted and I am authorized by Bankfield Farm Ltd to accept that offer upon the basis that a notice of discontinuance is signed by you on behalf of the Plaintiff and is then held by you upon your undertaking that it is filed once cleared funds to the amount of

$1,080,000.00 have been deposited into the trust account of Bradley West and upon Mr Edgar Bradley’s undertaking that upon  deposit  of  the  said  funds  the  freehold  of  the  leased premises will be conveyed to the lessees or such other persons as they may nominate.

I also note that the beneficiary direction letter has not in fact been signed or witnessed by Mr Davey.

(iv)      A fax from Thompson & Morgan to Andrew Belcher dated 19 July

2007:

re Gray/Davey

We refer to your facsimile of today and enclose herewith signed and witnessed beneficiary direction letter.

We advise that you can reply to Aspinall Joel as set out in your facsimile.

(v)      A signed beneficiaries’ direction letter:

We the undersigned being the beneficiaries and statutory beneficiaries of the will dated 28 October 2005 of the late Peter Lockhart Gray of Otaio, Farmer, the said will having been granted probate by the High Court at Timaru under CIV-2005-476-590 hereby direct Mr Bill Davey of Christchurch, being the executor and trustee of the said will to forthwith complete the sale of the land known as Bankfield Farm being all of the land in certificate of title CB

499/168 between Raymond Leslie Hart and Stephen John McFarlane being trustees of the Harvest Trust and Bankfield Farm Limited as per the option

contained in the lease of Bankfield Farm between the Harvest Trust and

Bankfield Farm Limited at the option price of $960,000.00 plus GST on condition  that  the  sale  at  the  option  price  operates  as  a  full  and  final

settlement of the Civil Proceedings under CIV-2006-476-322 between the

Harvest Trust and Bankfield Farm Limited with no orders for costs or damages against the parties to the said civil proceedings and furthermore that

the conveyancing in relation to the said sale be completed by Mr Edgar

George Bradley Solicitor of Timaru and furthermore that the balance of the purchase price after the debts secured against Bankfield Farm have been paid is to be held in trust account of Bradley West Lawyers of Timaru until such time as the Family Protection proceedings under FAM-2006-076-262 are settled or at such sooner time as may be agreed by the parties to the said Family Protection proceeding the signatories furthermore agree that this document may be signed in any number of counterparts and still constitute a valid and binding direction to the trustee and executor of the said will and the signatories furthermore agree to indemnify the trustee and executor of the  said  will  against  any  losses  and  claims  in  respect  of  actioning  the direction contained within.

[33]     As mentioned above, there is no evidence before me as to the circumstances in which Mr Belcher came to provide these five documents to Ms Saunderson- Warner.  All she says is he gave them “voluntarily” and never attempted to claim privilege.  There seems however little doubt Mr Belcher handed over the documents without the knowledge or consent of the defendant.

[34]     The current proceedings were not issued until 14 February 2008.    In his affidavit,  Mr  Hart  explained  that  between  August  and  mid-October  2007  the

plaintiffs stayed their hand because of a threatened mortgagee sale of the property. There was apparently a possibility the mortgagee would sell to the plaintiffs at the same price of $1,080,000.00.  However, the mortgagee sale did not go ahead and the plaintiffs instructed new solicitors to act for it on this matter.   Following further correspondence between the parties’ solicitors, the plaintiffs then issued these proceedings.

[35]      At some stage, there was a request for urgency because a mortgagee sale may again have been imminent.   However, it appears that is no longer the case. Presumably, all interested persons have decided to wait the outcome of this summary judgment application.

[36]     On behalf of the plaintiffs, affidavits were filed by Mr Hart and by Ms Saunderson-Warner.  The defendant filed an affidavit by Mr Davey and also put in evidence a ring bind folder of documents from its solicitors’ files via an affidavit from a legal secretary.   The documents are described as a “bundle of documents sourced from the Bankfield Farm Limited Civil Litigation file, the Peter Gray Estate Family Protection Act Claim file and the Property Law Act file”.   The bundle consists of some 97 documents and in relation to matters at issue in this proceeding includes correspondence between Messrs Davey and Morgan, between Bradley West and Thompson Morgan, between Thompson Morgan and solicitors acting for the mortgagees and between Mr Morgan and solicitors acting for the Family Protection Act claimants.

[37]     Finally in this recital of facts, I record that according to a valuation obtained by the defendant in February 2008, the property at issue has been valued at $2.2 million.  This significantly exceeds the price under the alleged settlement agreement and would appear to be at least one reason why the defendant is resisting having to sell to the plaintiffs.

Principles to be applied in applications for summary judgment

[38]      In order to grant the plaintiffs’ application, I must be satisfied there is no arguable or tenable defence to the claim.

[39]     I am also mindful of authority to the effect that in cases involving specific performance, special care needs to be taken at summary judgment level.   This is because issues relevant to the exercise of the Court’s discretion to order specific performance of a contract of land may well be different from or additional to those bearing on whether a defendant has an arguable defence as regards liability (see for example Lyons v Stewart HC Napier CP19/97, 29 October 1997, Master JCA Thomson).   The need for special care still remains, notwithstanding the repeal of Rule 136 (3) of the High Court Rules.

Alleged arguable defences

[40]      The defendant opposes the application on several grounds prompting its counsel Mr McCarthy to submit that because of the multiplicity of issues raised, the case  was  clearly  not  amenable  to  summary  judgment.     However,  it  is  well established the Court must take a realistic and robust approach.  The fact a defendant raises a plethora of arguments cannot of itself be fatal to summary judgment if on proper analysis the points are specious or without any real substance.

[41]      The arguments raised by the defendant can be conveniently summarised as follows:

(i) The plaintiff is unable to prove Mr Belcher was authorised to conclude any settlement agreement without recourse to documents which are privileged and hence inadmissible. (Previous  objections  to  the  admissibility of  other  evidence adduced by the plaintiffs on the grounds of hearsay were not pursued at the hearing)

(ii) MrBelcher did not have ostensible authority.  He was not the solicitor on the record for the defendant in the option litigation and therefore the principles set out in Thompson & Anor v Howley [1977] 1 NZLR 16 do not apply

(iii)Even if Mr Belcher did have authority to act on behalf of the defendant, there was never any concluded agreement because his letter to Ms Saunderson-Warner amounted to a counter offer.

(iv)Even if Mr Belcher was purporting to accept the plaintiffs’ offer and conclude a settlement agreement, any agreement is not binding because he exceeded his authority.

(v)In any event the agreement relied upon by the plaintiffs does not comply with all the requirements of the Contracts Enforcement Act 1956 and is therefore not enforceable.

[42]    Logically, the first issue that needs to be addressed is whether the five documents obtained from Mr Belcher are inadmissible on the grounds of privilege

[43]     Counsel for the plaintiffs, Mr Forman, submitted the documents were not covered by solicitor/client privilege because they were simply letters of instructions and not communications tendered for the purpose of obtaining legal advice.   He further submitted that even if they were privileged, the privilege had been waived under s65 of the Evidence Act 2006 by Mr Belcher and/or by the defendant itself by putting its solicitor/client files into evidence.   Mr Forman also referred me to the decision  of  Corporate  Group  Holdings  Limited  v  Corporate  Resources  Group Limited [1991] 1 NZLR 115.

[44]     Section 54(1) of the Evidence Act 2006 provides:

A person who obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was—

(a)      intended to be confidential; and

(b)      made in the course of and for the purpose of—

(i)       the person obtaining professional legal services from the legal adviser; or

(ii)      the legal adviser giving such services to the person.

[45]     In my opinion, the instruction letter given by Mr Davey clearly falls within the above provision.  While there might be an argument the letter was not for the purpose of seeking legal advice, it was, on anyone’s view of it, for the purposes of obtaining legal services.  It follows I do not accept Mr Forman’s first submission.  I find the documents were privileged.

[46]     I also do not accept the submission the privilege was waived by Mr Belcher. As the Evidence Act makes clear, the privilege holder is the client, not the solicitor and only the privilege holder can waive the privilege.   That has always been the position at common law and there is nothing in the Act which changes that position. The privilege was therefore not able to be waived by Mr Belcher.

[47]     It was of course able to be waived by the defendant and there is much greater force  in  the  submission  that  by  putting  large  chunks  of  its  solicitors’  files  in evidence, the defendant has thereby effectively waived the privilege.  In response to that argument, Mr McCarthy contended the otherwise privileged documents were only being adduced  for  the  limited  purpose  of  showing  the  full  context  of  the documents the plaintiffs had improperly obtained from Mr Belcher.   Or to put it another way, they were only being adduced to support the argument  the plaintiff’s evidence was inadmissible.  This is certainly what is stated in Mr Davey’s affidavit as the reason for the production of the documents (paragraph 30).  It is correct that at common law if a privileged document is disclosed for a limited purpose only, it does not thereby cease to be privileged generally.   It can only be used for the limited purpose (B v Auckland District Law Society [2004] 1 NZLR 326, PC). However, in my judgment, the actions of the defendant in putting into evidence the volume of documents that it has done in this case goes far beyond the limited purpose principle and brings the matter squarely within s65(2), a view which was reinforced at the hearing when the defendant’s counsel asked me to take material contained in the bundle into account in connection with other issues.

[48]     Alternatively if I am wrong about waiver, I rely on the principle articulated in the Corporate Group decision (distinguished in B v ADLS) and the discretion conferred on me by s53(4) of the Evidence Act 2006.

[49]     Corporate Group is authority for the proposition that privilege is lost once the copy of a privileged document comes into the possession of a third party – here the plaintiffs – and that the third party is entitled to use the document in evidence subject only to considerations of confidentiality.

[50]     The third party’s ability to use the evidence is now subject to s53(4) of the Evidence Act which stipulates that in these sorts of circumstances where an unauthorised person has possession of the privileged document, a Judge may order the document not to be disclosed.

[51]     The section does not specify the factors which the Judge is to take into account in exercising the discretion.   Obviously, they must however include the policy and purposes of the Act, one of which is to protect rights of confidentiality (s6).   As Mr McCarthy submitted, the defendant was entitled to expect its communications with its solicitors would be kept confidential.

[52]     I am also mindful of the further submission made by Mr McCarthy about the importance of solicitor/client privilege and the need for the Court to be vigilant about upholding it.  There is no question the privilege is fundamental to the administration of justice, a point made by the Privy Council in B v ADLS.  However, if that were to be conclusive in every case, there would obviously be no need for the existence of a statutory discretion.  In this case, the defendant has itself chosen to put in evidence large volumes of privileged and confidential material.  Further, it does not strike me as a very meritorious position for Mr Davey to be denying Mr Belcher had authority, while at the same time seeking to suppress evidence which shows he did.   In my assessment, in the particular circumstances of  this  case,  it  would  not  be  in  the interests of justice for me to rule the evidence inadmissible and I am not prepared to do so.

[53]     I turn now to an analysis of the written instructions and the submissions advanced as to why it is arguable they did not confer express authority on Messrs Morgan and Belcher to negotiate a settlement.

[54]     First,  Mr  McCarthy  submitted  the  beneficiaries’  directions  were  invalid because the signatories included the daughters who were only discretionary beneficiaries under the Trust, not beneficiaries with vested interests under the will. The resulting invalidity, he submitted, rendered the ensuing negotiations “void ab initio”.  I do not accept that is an arguable proposition.  Apart from anything else, the daughters were statutory beneficiaries, while the instructions were also signed by the beneficiary under the will, ie by the trustees of the family trust, Mr Bradley and Mr Davey himself.

[55]     A further argument advanced by the defendant about the written instructions is that Mr Davey signed the instructions only in his capacity as trustee of the Peter Gray Family Trust and his capacity as executor and trustee of the estate, not as director of the defendant, therefore Mr Belcher was not authorised to act on behalf of the defendant.   I consider this argument also to be untenable.   It is clear beyond doubt from the terms of the instructions themselves and all the surrounding evidence that Mr Davey signed on behalf of the defendant, and intended those to whom his instructions were addressed to act on that basis which of course they all did.

[56]     Then, there was a submission it was arguable Mr Morgan was only acting as a sounding board for Mr Davey.   In support of this contention, counsel relied on paragraph 25 of  Mr Davey’s affidavit, where he deposes:

… I instructed Mr Bill Morgan of Thompson & Morgan to act for me personally and to advise me regarding the issues that had arisen from the proceedings.  Bill Morgan became my sounding board but there was mutual agreement that he was not acting as counsel for me or Bankfield.   Bill Morgan  was  not  instructed  until  the  17th   of  July  2007.    He  was  then instructed to attempt to negotiate with Harvest Trust.

[57]     It is clear from the defendant’s own bundle of documents, that Mr Davey had consulted Mr Morgan before 17 July.  In a letter to Mr Belcher dated 27 June 2007, Mr Morgan writes, “Mr Davey attended on us today with a large number of documents.”  The letter goes on to discuss a number of issues including “whether Bankfield Farm Limited should continue to resist the option contained in the lease.”

[58]     While it may well be Mr Morgan was not acting as counsel for Mr Davey or the  defendant  company in  the  option  litigation,  it  is  clear  from  the  telling  last

sentence of paragraph 25 of Mr Davey’s own affidavit quoted above that Mr Morgan was instructed to negotiate a settlement with the plaintiffs.

[59]     In my judgment, there can be no doubt Mr Belcher and Thompson & Morgan had express actual authority from the defendant to negotiate a settlement agreement and that in writing as he did to the plaintiffs’ solicitors on 18 July 2007, Mr Belcher was acting as the defendant’s agent.  I also find that when Bradley & West initiated communication with the plaintiffs’ solicitors about the conveyancing aspects of the sale, they were acting as authorised agents or sub agents.   (The beneficiaries’ directions, which Mr Davey endorsed in his handwritten letter, specifically state Mr Bradley is to complete the conveyancing in relation to the sale.  Bradley & West’s appointment is also confirmed in a letter Mr Davey’s solicitors Thompson and Morgan sent to Bradley & West dated 17 July 2007.)

Scope of Mr Belcher’s authority

[60]     A further defence raised was that even if the plaintiff could prove Mr Belcher was an authorised agent, Mr Belcher exceeded his authority by:

(i) proceeding to conclude a settlement when Mr Davey had only instructed him to engage in negotiations.  In his affidavit, Mr Davey deposed he expected to be consulted about the terms of any proposed settlement before it was a done deal.

(ii) concluding a settlement which involved giving away certain claims the defendant had made regarding unpaid rent, rates and  storage  of  grain.     Mr  Davey  deposed  he  verbally instructed Mr Morgan to pursue those matters, a claim Mr McCarthy submitted was supported by an undated handwritten note said to be in Mr Morgan’s handwriting referring to those three matters.

[61]    These assertions about Mr Belcher exceeding his authority are however inconsistent with the terms of Mr Davey’s own written instruction.   Mr Davey’s

written instruction is “to reach” a settlement.   His instruction also talks about negotiating a settlement “having regard to” the directions of the beneficiaries.  The beneficiaries’ directions give details of the terms of the settlement Mr Belcher is authorised to achieve.   There is no reservation about having to come back to Mr Davey before concluding a settlement and there is no reference in the instructions about ensuring compensation is obtained for the ancillary counterclaim matters.  On the contrary, the instructions are expressly to accept payment of the $1,080,000 in full and final settlement and for there to be no orders for costs or damages against either the plaintiffs or the defendant.  The allegations about Mr Belcher exceeding his authority are also inconsistent with a 26 July 2007 letter written by Mr Davey himself in which he in effect expresses deep regret for ever acquiesced in the beneficiaries’ wish to waive the other claims.

[62]     Mr Belcher’s letter of 18 July to the plaintiffs’ solicitors was undoubtedly in accordance with the written instructions.

[63]     In any event, I do not need to resolve this issue.  For, in the circumstances of this case whether Mr Belcher did or did not exceed his actual authority is a matter between him and the defendant.  It is not a matter which would enable the defendant to escape liability vis a vis the plaintiffs who had no notice of any such limits on the agent’s authority.   The defendant entrusted Mr Belcher and Mr Morgan with the conduct of the negotiations and accordingly if they did not have actual authority to conclude an agreement on the terms they did, it was certainly a situation of apparent or ostensible authority.  Either way, the defendant is bound.

[64]     Similarly, another submission that it was improper of Mr Belcher to have accepted the instructions, he having a conflict of interest in acting for the defendant while also acting for the Family Protection Act claimants.  That again is not a matter which can impact on the plaintiffs.

[65]     Nor under this head can the fact Mr Davey subsequently purported to revoke his written instructions by a letter addressed to Mr Morgan dated 26 July 2007.  The revocation was never communicated to the plaintiffs.  No doubt, Mr Morgan took the view it was too late for Mr Davey to attempt to withdraw his instructions.

No concluded agreement

[66]     I now turn to the defence that even if Mr Belcher did have authority to act on behalf of the defendant, there was never any concluded agreement because his letter to Ms Saunderson-Warner was a counter offer, rather than an acceptance.

[67]     The basis of this argument is the first paragraph of Mr Belcher’s letter in which  he  raises  two  matters  that  were  not  contained  in  the  offer  from  Ms Saunderson-Warner, namely:

(i) the signing and filing of a notice of discontinuance of the option litigation

(ii)the giving of an undertaking from Mr Bradley to convey title on deposit of the funds

[68]     There is no question the matters were new in the sense they had not been mentioned in the offer letter.  That however of itself does not mean the Belcher reply must amount to a counter offer.

[69]     Mr  Forman  argued  these  further  matters  were  not  new  conditions  or stipulations in the contractual sense so as to render the letter a counter offer or conditional acceptance but simply standard mechanical provisions about implementation of an agreement that had been reached.  He further submitted that even if the reference to an undertaking was to be construed as a condition, it was a condition solely for the benefit of the plaintiffs which the plaintiffs could and did waive.

[70]     In my firm opinion, on a true construction of the letters having regard to their wording, the factual matrix and the immediate post contract conduct of the parties, there was undoubtedly an intention to be bound on the terms set out in Ms Saunderson-Warner’s offer.  The Belcher letter properly construed amounted to an acceptance of that offer and a settlement contract thereby came into existence.

[71]     Another point raised by the defendant was that in her letter to Mr Belcher, Ms Sanderson-Warner states, “you have indicated that you would wish to draft a deed of settlement.”  Mr McCarthy argued this suggested an intention not to be bound until a deed had been signed.   However, that submission overlooks the fact it was only expressed to be an indication and in his subsequent letter purporting to accept the offer, Mr Belcher made no mention whatsoever of still wanting a deed.

[72]     A further submission made by Mr McCarthy about uncertainty related to the reference to an undertaking to be given by Mr Bradley to transfer title on settlement. As I understand the argument, because it could not be safely assumed Mr Bradley would agree to undertake to do something that was beyond his control – transfer being dependent on Mr Davey – the contract is vitiated for uncertainty.   I do not accept that argument.  The undertaking was of a mechanical nature only, there was no evidence Mr Bradley was not willing to give the undertaking and he did of course have express written authority to complete the conveyancing.   The purpose of the undertaking was to protect the plaintiffs once they filed the discontinuance.  A party cannot take advantage of his own wrong and if Mr Davey was legally obliged to sign documents effecting the sale, it would be a bizarre result if he could then turn around and use his own wrongdoing as grounds for declaring the contract uncertain and hence unenforceable.

[73]     In coming to the view there was a binding concluded settlement agreement, I have not overlooked the fact that in September 2007, the plaintiffs’ financial advisers sent a tax invoice to the defendant purporting to claim interest payments for late settlement dating back to the date of the purported exercise of the option to purchase in 2006.  Mr McCarthy suggested this was evidence the plaintiffs themselves did not regard the July 2007 letters to be a binding settlement agreement.  However, I do not believe that is a realistic inference to be drawn, given the overwhelming evidence the plaintiffs regarded themselves as bound by the settlement agreement, have consistently asserted that view and consistently asserted their desire to enforce the agreement both before and after the financial advisers’ letter.   The letter was not relied upon in any way by the defendant at the time and no significance can properly be attached to it.

Unenforceable due to non compliance with s2 of The Contracts Enforcement

Act 1956

[74]     This being a contract for the sale of land entered into in July 2007, it is governed by the requirements of the now repealed Contracts Enforcement Act 1956

[75]     Section 2 of that Act provides, “no contract to which this section applies shall be enforceable by action unless the contract or some memorandum or note thereof is in writing and is signed by the party to be charged therewith or by some other person lawfully authorised by him.”

[76]     It  is  trite  law  that  the  written  document  relied  upon  as  constituting  the necessary contract or memorandum must contain all the material terms of the contract, in particular the names or adequate identification of the parties, the subject matter and the price.  It must also be signed.

[77]     For the defendant, Mr McCarthy submitted the memorandum in this case (the exchange of lawyers’ correspondence) failed to comply with the requirements of the Act in a number of respects:

(i)  the omission of any reference to settlement date,

(ii)the  property  to  be  sold  was  not  identified  with  sufficient certainty,

(iii)it was not signed by Mr Davey.

[78]     As regards the settlement date, I accept Mr Forman’s submission that any deficiency in this regard is overcome by the standard implication of a term that settlement would take place in a reasonable time.  The solicitors did of course later expressly agree on a settlement date of 17 August 2007 although by that time Mr Davey had, unbeknownst to the plaintiffs, revoked his instructions to Thompson & Morgan.

[79]     The property to be sold is described variously in the letters as “the property outlined  in  the deed  of  lease”,  and  “the freehold of the leased  premises”.    Mr McCarthy says the references mean the property sold was the land being leased (ie buildings and ten acres  excluded), thereby requiring a subdivision which would make specific performance inappropriate.  Alternatively, Mr McCarthy submitted the expressions were ambiguous and accordingly it was uncertain whether the property that was to be sold was all of the land comprised in the Certificate of Title or the land that had been leased.

[80]     I do not accept either argument.  In construing the words used, the Court is entitled to look to the factual matrix – in particular, the fact these letters were written in the context of settling a dispute about an option to purchase the entire land for

$1,080,000.00.   Significantly, in Ms Saunderson-Warner’s letter, she  says,  “you raised the issue of whether the $1,080,000.00 was inclusive or exclusive of GST. The purchase price as set out in the Deed of Lease was $960,000.00 plus GST.  Our client tells us this comes to the $1,080,000.00.”  It is clear the property being sold was all of the land.

[81]     As regards the signature, the issue is whether Mr  Belcher  was  a  person lawfully authorised.

[82]     As stated at para 4.17 of McMorland Sale of Land (2nd edition)

The authorisation required is not to sign a memorandum, but to sign the writing set up as the memorandum for whatever purpose that writing is brought into being.  This follows from the fact that the writing need not have been brought into being in order to record the agreement or to act as a memorandum.   If it is alleged that the writing put forward is the contract itself, whether in the form of an agreement an exchange of letters or otherwise,  the  agent  must  have  had  authority  to  bind  the  principal  in contract.

[83]      I am satisfied that on the facts of this case, Mr Belcher was a person lawfully authorised for the purposes of s2  and that it is not tenable to argue  otherwise. Accordingly, the contract does comply with the Contracts Enforcement Act, notwithstanding the absence of Mr Davey’s signature, and is therefore enforceable.

[84]     In coming to that conclusion, I have not overlooked the decision of New Lynn Borough v Auckland Bus Company [1964] NZLR 511. However, while there are some superficial similarities between that case and this, there are some crucial distinguishing factors, namely that in this case the litigation the lawyer was instructed to settle was itself a claim for specific performance, and the instruction he received was to meet that claim by agreeing to sell the property at a specified price. He was in effect actioning an instruction to agree to sell the property on certain terms which he secured. Further, in New Lynn, the signature relied upon came in letters which indicated the client was resiling from the settlement – a very different scenario to the one at issue here.

Specific performance and the Court’s discretion

[85]      I now turn to consider whether there is anything to preclude the Court from finding  specific  performance  is  without  question  the  remedy  which  should  be ordered.

[86]     I am satisfied the plaintiffs are and have at all material times been ready willing and able to fulfil their obligations under the settlement agreement.  Any delay in  seeking  specific  performance  has  been  satisfactorily  explained.    I  also  find damages would clearly not be an adequate remedy .

[87]     Finally, I must consider the issue of clean hands.  The defendant argued the plaintiffs were not coming to the court with clean hands – first, because they wrongfully took possession of the privileged documents from Mr Belcher and secondly because they conspired with one of the mortgagees who apparently attempted to exercise their powers of sale by way of private contract rather than auction.

[88]     As regards the acquisition of the privileged documents, the evidence is that Mr Belcher handed the documents over voluntarily.  The plaintiffs did not steal the documents nor did they coerce Mr Belcher into providing them.  I do not accept that the use of the documents – which I have found to be admissible – means the plaintiff should be denied specific performance.

[89]     Similarly, in relation to the actions of the mortgagee.   According to Mr McCarthy, the mortgagee unsuccessfully sought the approval of the Registrar of this court to endorse a private sale between them and the plaintiffs rather than proceed by way of public auction.  I do not see how in the circumstances the mortgagee’s action can reasonably be visited upon the plaintiffs so as to deprive the plaintiffs of their equitable remedy.

[90]     The plaintiffs have satisfied me there is no arguable defence to their claim.  I therefore make an order for specific performance compelling the defendant to sell its farm property to the plaintiffs on the terms contained in the exchange of solicitors’ letters dated 18 July 2007.

[91]      Costs are awarded to the plaintiffs on a 2B basis with disbursements to be fixed by the Registrar.

Solicitors:

Raymond Sullivan McGlashan, Timaru

Sumner Bay Law, Christchurch