James v Robb HC Christchurch CIV-2009-406-000266
[2011] NZHC 682
•11 July 2011
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2009-406-000266
BETWEEN SHAUN DAVID JAMES First Plaintiff
ANDBLUE COD INVESTMENTS LIMITED Second Plaintiff
ANDJAMES IVAN ROBB EULALIE RATA ROBB First Defendants
ANDGARY WILLIAM ROBB Second Defendant
Hearing: 2-4 February 2011
Counsel: J E Bayley for Plaintiffs
M J Wallace for Defendants
Judgment: 11 July 2011
RESERVED JUDGMENT OF HON JUSTICE FRENCH
Introduction
[1] Mr James seeks rectification of a written agreement for the sale and purchase of land. He contends that the Certificate of Title specified in the contract did not comprise all of the land which he and his vendors intended him to acquire. This is denied by the vendors, Mr and Mrs Robb. They have since sold the land at issue to the second defendant, their son Mr Gary Robb.1
[2] The key issues for determination are:
(i) Did the written agreement fail to record the parties’ common
intention?
1 In order to avoid confusion, Mr Gary Robb is referred to throughout this judgment as Gary.
JAMES V ROBB HC CHCH CIV-2009-406-000266 11 July 2011
(ii)Was there an operative unilateral mistake for the purpose of the Contractual Mistakes Act 1977?
(iii)Are Mr James and his company prevented from obtaining rectification as a result of delay in issuing these proceedings?
Factual background
[3] Mr and Mrs Robb are an elderly couple. As at December 2006 they were living in a residential property at Kie Kie Bay, south of Kaikoura. They had purchased the property from a Mrs Scott in 1982.
[4] The house faces the sea and is only separated from the coastline by State Highway 1 and the main trunk railway line. Access to the property is by easement crossing the railway line. To the rear of the house is steep bush, and to the side a creek known as the Kie Kie Stream. The property comprised both a freehold interest and a leasehold interest. The leasehold land was owned by the New Zealand Railways Corporation.
[5] By 2006 the Robbs’ health was failing and they decided to sell and move into
a rest home.
[6] Gary put a for sale sign in the window of their house.
[7] The sign attracted the interest of a regular visitor to the area, Ms Keiran
Horne. She duly inspected the property and also had discussions with Gary.
[8] During the course of their discussions, Gary told Ms Horne that the property comprised a total area of 1353 sq m freehold and 304 sq m leasehold. Gary’s figures were obtained from a rates demand notice.
[9] Subsequently, Ms Horne’s solicitor discovered that Mr and Mrs Robb only had 847 sq m registered in their name under Certificate of Title MB53/35.
[10] Ms Horne drew this discrepancy to Gary’s attention. Land area as such was
not however particularly important to her, and accordingly around 30 November
2006 she made a formal conditional offer of $300,000.
[11] Ms Horne’s offer was still under consideration when a few days later, on 4
December 2006, the first plaintiff Mr James happened to be driving past and saw the for sale sign.
[12] Mr James stopped and knocked at the front door. He spoke with Mrs Robb for approximately 30 minutes. According to his uncontradicted evidence, Mrs Robb
told him the following:
She and her husband Jim had decided to sell everything up and move to
Kaikoura for health reasons.
The land for sale included the four-bedroom home which was on leasehold land and the freehold land behind the house which went down
to the creek (Kie Kie Stream) and up the hill into the bush.
She did not know exactly how far up the hill the boundary was – it was “way up there somewhere” but Mr James need not worry because he would have the place all to himself. The rest of the land was DOC or Mäori land and he could use it as his back yard. The closest neighbours
lived down the road.
His children would love playing on the section as they love climbing hills and trees, and would be able to make boats and have races down the
creek.
[13] The upshot of the conversation was that if Mr James wanted to pursue the matter any further he would need to speak to her son, Gary.
[14] Mr James was very taken with the property. In evidence, he said the seclusion and bush area sounded like paradise. He and his wife had been looking for a home of that nature for some time.
[15] Mr James then drove to meet Gary at the latter’s restaurant where they
discussed Mr James buying the property.
[16] While there are aspects of the conversation that are in dispute, it is common ground that during the discussion Gary told Mr James about there being another offer and warned that if Mr James wanted to purchase the property he would need to better it by 10 a.m. the following day, as that was the time Gary’s parents were meeting their lawyer.
[17] It is also common ground that Gary falsely told Mr James the existing offer was for $340,000 when in truth it was $300,000 and subject to conditions.
[18] Land area was never discussed.
[19] As I have mentioned, other parts of the discussion are however disputed.
[20] According to Mr James’ version, Gary told him the section comprised a piece of leasehold land at the front where the house was situated and the remainder was freehold land which went from the creek up the hill. He says further that Gary confirmed what Mrs Robb had already told him about there being no close neighbours and no possibility of having close neighbours or being built out because the bush around the property was DOC or Mäori land.
[21] Mr James also claims he asked Gary whether he would accept an offer of
$350,000, which Gary said he would, and that if Mr James got to the lawyer’s office before 10 a.m. then Mr James could have the land. The two shook hands on the basis of a gentlemen’s agreement.
[22] Mr James asked Gary to get his lawyer to send through all the information as he himself would not have time to do a search.
[23] According to Mr James, he ended the conversation by specifically asking whether there was anything else he needed to know about the land and whether there was anything else up the back of the section around the bush. Gary said no, and that Mr James would have the place all to himself.
[24] For his part, Gary denies the making of any gentlemen’s agreement. He also claims that any statements he made about the nearest neighbour being DOC (which he admits making) were in the context of what he understood to be concerns about impeded views of the ocean. Gary’s employee, who was also present, does not recall any discussion about whether there would be close neighbours. According to her evidence, she did however mention to Mr James that Ngai Tahu had acquired a block up behind the property and that no-one knew what they planned to do.
[25] The next day, 5 December 2006, the solicitor acting for the Robbs forwarded Mr James’ solicitor a search copy of Certificate of Title MB53/35 together with a copy of the railway lease. Then followed intense negotiations which culminated later that day in Mr James and Mr and Mrs Robb signing an unconditional agreement for $350,000.
[26] The agreement was prepared by Mr James’ solicitor. The parties to it are
shown as Mr and Mrs Robb, with Mr James or his nominee as the purchaser. The contract describes the property being sold as:
Area: Lot: DP: CT: 847m2 Section 40 Block VI MB53/35 more or less Hundalee Survey District
and makes no mention of any leasehold interest.
[27] Mr James subsequently nominated his company, the second plaintiff Blue
Cod Investments Limited, as the purchaser.
[28] Under the agreement, Mr James was required to pay a deposit of $35,000 in
December 2006, with settlement on 31 May 2007.
[29] The deposit was duly paid and on 22 December 2006 Mr James called in to visit the Robbs at Kie Kie. The three of them went for a walk around the property. When they came to a fence sty by the creek Mr Robb pointed up the hill and said “That’s your boundary, boy”. Mr Robb also said the boundary did not matter in any event as it was all his (Mr James’).
[30] Meantime, Gary Robb had been making some inquiries about his parents’ property. In evidence he said that on 8 December 2007 he discovered for the first time there was an area of land to the back of the house which was still in the name of his parents’ vendor, Mrs Scott (now deceased). This area of land, dubbed the “lost land” at the hearing, was comprised in another Certificate of Title MB1B/517. According to the Certificate of Title, the lost land comprised 506 sq m.2
[31] Further inquiries established that a garage used by Mr and Mrs Robb was situated almost entirely on the lost land, with only part on CT MB53/35 land. As for the house, it was found to be situated primarily on the leasehold land but also partly on the lost land and partly on the CT MB53/35 land.
[32] It was also established that the CT MB53/35 land has no frontage with the stream.
[33] On 9 March 2007 the Robbs’ solicitor wrote to the lawyers who had administered Mrs Scott’s estate in the following terms:
ESTATE JOAN MARY SCOTT – JAMES AND EULALIE ROBB – Kie
Kie Bay, Kaikoura
I act for Mr and Mrs Robb who purchased the above property from Mrs Joan Mary Scott in 1982. You acted for Mrs Scott who subsequently died and I understand that you also acted in the administration of the Estate.
When the property was purchased it comprised two Titles CT MB53/35 and CT MB1B/517. A notice of sale including both these addresses was sent to the Council and rates have been paid on these properties ever since my clients have been in possession. Both properties form part of their living accommodation. However, it now transpires that the land in the enclosed copy of CT 1B/517 is still in the name of Mrs Scott. I understand that you act for Mrs Scott’s daughter, Mrs McIvor. She may recall the transaction.
2 A subsequent survey established that in fact the correct area was 1.264 hectares.
As the Title is still in the name of Mrs Scott because of an oversight at the time of settlement and in view of the fact that my clients have been paying rates on the property for the last 25 years, please advise whether your client would be prepared to transfer the property to my clients as originally intended. Obviously any costs payable will be met by my clients.
I look forward to hearing from you.
[34] The letter met with a favourable response, the surviving executor of the Scott estate agreeing on 19 April 2007 to sign a transmission and transfer “so that the transaction documented in 1982 can be finally consummated”.
[35] Gary’s evidence was to the effect that before this letter was received, he had
made Mr James aware of the discovery of the lost land, in January 2007.
[36] For his part, Mr James says the first he knew of it was on 26 April 2007 when he visited the property with a valuer. Mr James testified that Gary and Mr Robb Senior told him they had discovered an additional piece of land behind his land which had been lost and which Gary wanted to build on once everything was sorted. They had plans with them and wanted to discuss possible boundary adjustments so Gary could have access.
[37] Mr James said he was confused, in a state of disbelief and unsure about the implications of what he was being told. He protested, stating this could not be right as the three Robbs had all told him there was nothing to the rear of his section other than DOC or Mäori land. Later that same day, when Mr James remonstrated with Mrs Robb, she became visibly upset and said “it wasn’t supposed to happen this way”.
[38] Despite what had transpired, Mr James settled the purchase on 1 June 2007. He did so on legal advice and in the belief that the issues surrounding the lost land could be dealt with once all relevant information was to hand.
[39] By the time of the settlement, the executors of Mrs Scott’s estate had already transferred legal title in the lost land to Mr and Mrs Robb. That was effected on 3
May 2007. Later, in September 2007, the Robbs in turn transferred the lost land to
Gary, the purchase price being shown as $53,207.49. This figure is the same amount
which Mr and Mrs Robb had paid to discharge their mortgage over the CT MB53/35 land when settling with Mr James.
[40] In late August 2007, Mr James was informed that Gary had engaged a building consultant to assist with the construction of a new house on the lost land.
[41] Then followed protracted discussions about boundary adjustments between Gary, Gary’s building consultant and Mr James, the latter continuing to object and complain about what had happened.
[42] By letter dated 19 February 2008, Mr James’ solicitors formally notified the Robbs of a claim against them over the lost land, said to be under the Contractual Remedies Act 1979 and the Contractual Mistakes Act. The letter invited proposals for a solution. There was an exchange of correspondence in which the Robbs’ solicitors denied liability.
[43] The proceedings were eventually issued on 4 December 2009 after Mr James changed solicitors.
[44] For completeness in this recital of the background facts, I should record that there was no evidence of the value of the lost land other than a desktop valuation obtained by the Robbs’ lawyer from Quotable Value in June 2007 of $8000, and of course the purchase price of $53,270.49 paid by Gary to his parents. According to Gary’s counsel, Mr Wallace, that was a transfer for value.
[45] The valuer commissioned by Mr James in April 2007 valued the land and improvements at $320,000. The valuation made no mention of the title to the lost land. The garage was, however, included as part of the valuation and the improvements were said to include a grassed yard with native bush to the hillside.
[46] Finally, I should record that although the agreement omitted any reference to the leasehold interest (as well as the lost land), on settlement there was a conveyance of the Railways lease to Mr James’ company.
The failure of Mr and Mrs Robb to give evidence
[47] Before turning to a discussion of the relevant legal principles and their application to the facts, it is necessary for me to note an issue that arose regarding the failure of Mr and Mrs Robb to give evidence.
[48] At the pre-trial case management conference held in December 2010, counsel for the plaintiffs understood, as did I, that Mr and Mrs Robb would be providing a brief of evidence, subject to a possible delay due to Mrs Robb’s ill health. When the briefs did not eventuate and when counsel for the plaintiffs, Mr Bayley, did not receive a response to correspondence raising the matter, he issued subpoenas. The subpoenas were duly served on Mr and Mrs Robb, although in the meantime their counsel, Mr Wallace, had advised for the first time on 21 January 2011 that health problems precluded both Mr and Mrs Robb from attending and participating in the hearing.
[49] The matter was raised with me at the commencement of the hearing on 2
February 2011. The medical information was insufficient to justify discharging the subpoenas, and I accordingly directed that the defendants were to provide updated and detailed medical reports and to explain why alternative means of giving evidence were not possible.
[50] As a result of that direction, Mr Wallace provided me with an email from Mr and Mrs Robb’s doctor. It was to the effect that the current states of both their health were precarious and that partaking in any form of evidence would be impossible in one case and detrimental in the other.
[51] In light of that information, Mr Bayley responsibly agreed to the subpoenas being set aside.
[52] I have set out the background history of this issue in some detail because I consider the situation unsatisfactory. If required, I would have been prepared to draw adverse inferences from the failure to obtain at least affidavits at an earlier date. For reasons which will become apparent, I am however content to leave
matters on the basis that Mr James’ evidence as to his various discussions with
Mr and Mrs Robb on their own was uncontradicted.
[53] It was common ground that the absence of Mr and Mrs Robb was not a matter that in itself precluded a finding of common intention.
Legal principles relating to rectification
[54] Rectification is a discretionary equitable remedy whereby an instrument which does not accord with the intentions of the parties may be corrected. It is a remedy that has been specifically preserved by the Contractual Mistakes Act.3
[55] As noted in Westland Savings Bank v Hancock,4 the legal pre-requisites for rectification are as follows:
(1) That, whether there is an antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question.
(2) That such intention continued to exist in the minds of both or all parties right up to the moment of execution of the formal instrument of which rectification is sought.
(3) That while there need be no formal communication of the common intention by each party to the other or outward expression of accord, it must be objectively apparent from the words or actions of each party that each party held and continued to hold an intention on the point in question corresponding with the same intention held by each other party.
(4) That the document sought to be rectified does not reflect that matching intention but would do so if rectified in the manner requested.
The competing cases
The statement of claim
[56] The statement of claim identifies the requisite “common intention” as being a
common intention to sell and buy all of the land beneficially owned by the Robbs at
Kie Kie Bay. It goes on to plead that the agreement failed to record the common
3 Contractual Mistakes Act 1977, s 5(2)(b).
4 Westland Savings Bank v Hancock [1987] 2 NZLR 21 (HC) at 30.
intention because it excluded the lost land and the leasehold land. The plaintiffs also argue that Gary Robb holds the lost land on a constructive trust for the benefit of Blue Cod.
The defendants’ case
[57] Mr Wallace characterised the case as being that of a careless purchaser repenting his own hasty decision. The plaintiffs’ real complaint, Mr Wallace submitted, was a misrepresentation about neighbours which at best for the plaintiffs could sound only in compensation. Rectification was neither required nor justified.
[58] In support of his contention that rectification was neither required nor justified, Mr Wallace relied on three arguments:
(i)The evidence showed Mr and Mrs Robb did not intend to try and sell more fee simple land than was recorded in the Agreement for Sale and Purchase. Gary Robb was aware as a result of his discussions with Keiran Horne that his parents were only registered as proprietors of a single Certificate of Title. His evidence that he told his parents about this was not challenged in cross-examination. His intention, and likewise his parents’ intention, was to contract to sell what they then knew they could legally convey to whoever was the successful purchaser.
(ii)Even if Mr and Mrs Robb did intend to sell the lost land, rectification of the agreement would not of itself redress the wrong the plaintiffs allege. Rectification of the transfer and ultimately the register is what the plaintiffs require. However, the common intention no longer existed by the time the Robbs came to sign the transfer in late May 2007. By then all parties, including Mr James himself, knew about the lost title.
(iii)The plaintiffs should be denied any equitable remedy on the grounds of acquiescence and delay.
Discussion
Was there a common intention to sell and buy the lost land?
[59] The first issue to be determined is whether the plaintiffs have satisfied me there was a common intention to buy and sell the lost land.
[60] Mr James impressed as an excitable witness, inclined at times to get carried away with his own rhetoric, but generally truthful.
[61] His evidence left me in no doubt that when he signed the agreement in December 2006 he genuinely believed he was buying all of the land beneficially owned by the Robbs at Kie Kie Bay, which included the area behind the house bordered by the creek up to the boundary with DOC. To put it another way, he believed he was buying all of the land which Mrs Robb had pointed out to him was for sale.
[62] I am also satisfied that he came to that belief because of what he was shown at the property and because of what he was told by Mrs Robb and by Gary.
[63] I have come to that conclusion for the following reasons.
[64] First, Mr James’ evidence as to what Mrs Robb told him on 4 December 2006 was uncontradicted. I accept that she identified the land which was for sale as including the area of the lost land.
[65] Mr James’ testimony as to what both Mrs Robb and Gary told him was corroborated by the evidence of Ms Horne, the only truly independent witness. Ms Horne is a chartered accountant and receiver. She testified that Mr and Mrs Robb Senior and Gary gave her to understand the Robbs were selling all the land they owned, that the creek was the side boundary and that she would have no neighbours other than DOC. The latter feature was particularly important to her. It was the reason she was unconcerned about the discrepancy in the land area. I found Ms Horne a very reliable witness. She had no reason to lie and she was concerned to be accurate.
[66] In my view it would be unlikely that two prospective purchasers would both independently mishear Gary on exactly the same issue (lack of residential neighbours at the back), especially given the importance of that issue to both of them.
[67] Secondly, Mr James’ evidence was consistent with the physical appearance of the property – the lost land was a steep irregularly shaped rear parcel of land with no legal frontage or apparent access5 – and also consistent with the location of the house and garage.
[68] Thirdly, Mr James’ evidence was also consistent with the conduct of the Robbs in paying rates in respect of the lost land since 1982, as well as being consistent with the terms of the letter their lawyer wrote to the Scott estate.
[69] In contrast to Ms Horne and Mr James, I did not form as favourable an impression of Mr Gary Robb. Some aspects of his evidence on key points were unsatisfactory and lacked credibility. He claimed, for example, that he did not appreciate the lack of neighbours was a selling point, despite discussing it with both Ms Horne and Mr James. He also claimed that the reason he lied to Mr James about the amount of Ms Horne’s offer was not to maximise the purchase price, but to put Mr James off buying altogether. This was inconsistent with evidence that he had told Ms Horne, a person to whom his parents wanted to sell, that the property could fetch up to $400,000. Gary even attempted to explain away the solicitor’s letter to the Scott estate by claiming that his parents’ lawyer wrote that letter despite knowing there was no evidence of any oversight in 1982 and despite knowing all the evidence was actually against it.
[70] In coming to this finding, I have not overlooked the evidence of Gary’s employee about Ngai Tahu. However, the evidence established that the Ngai Tahu block which the employee mentioned does not border the Robbs’ land, and I am satisfied that if anything was said to Mr James about that block it would not have
been sufficient to dispel the understanding he had been given by the Robbs.
5 Description in desktop valuation obtained by the Robbs’ lawyer.
[71] For the purposes of rectification, it is not of course enough that one party is labouring under a mistake, not even if that mistake is known to the other party. There must be a common intention, a common mistake.6
[72] Included amongst the documents provided by Gary on discovery was a copy of a search of the lost land dated 4 December 2006. That is to say, it was a search done the day before the agreement was signed. In cross-examination, Gary was unable to explain how this document had come into his possession. That, together with evidence of his making inquiries at the local council offices in late November/early December 2006, and a document he faxed to his lawyer on 13
December 2007,7 tends to suggest that his knowledge of the true position in
December 2007 was more advanced than he was portraying in evidence.
[73] I have come to the view that if Gary did not know for a fact about the lost land being in a different title in the name of Scott before the agreement was signed, he certainly had suspicions.
[74] However, it is Mr and Mr Robb’s intention that is relevant and there is no evidence that Gary ever told his parents of his suspicions about the lost land prior to
22 December 2006. I accept Mr James’ evidence of what Mr Robb said to him on that occasion, and have no reason to believe that Mr Robb would have been dissembling.
[75] There was evidence that before the agreement was signed Gary did tell his parents the information he had learnt from Keiran Horne – namely that they were only registered as proprietors of a single Certificate of Title. That prompted Mr Wallace to argue that Gary’s intention, and that of his parents, was to contract to sell only whatever it was they could legally convey to the successful purchaser.
[76] I do not accept that argument.
6 Tri-Star Customs and Forwarding Ltd v Denning [1999] 1 NZLR 33 (CA).
7 The fax bears a date imprint of 30 November 2006. However, I accept Gary’s explanation that the transmission date recorded by his fax machine was inaccurate by 13 days. This is confirmed by another document put in evidence, sent by Gary to his solicitor. In the case of each
document, the solicitor’s receipt date is 13 days ahead of Gary’s transmission date.
[77] Apart from anything else, according to Gary’s own testimony, the information he had obtained from Keiran Horne did not result in him appreciating there must be another title. Further, in cross-examination, Gary expressly acknowledged that his parents intended to convey the land on which the garage is situated, and, as I have mentioned, the garage is primarily located on the lost land. Gary admitted he (and by implication, his parents) thought the boundary ran behind the garage. Thus, even on the defendants’ own evidence it is accepted that the agreement did not reflect the Robbs’ intention. The Robbs did intend to try and sell more fee simple land than was formally recorded in the agreement. At best for the defendants, their mistake was limited to a belief they owned the land on which the improvements were situated.
[78] I am satisfied on the evidence that in fact the Robbs understood their legal boundary to border Kie Kie Stream and the DOC land, a boundary which would of necessity embrace all the lost land.
[79] As Mr Bayley submitted, both Mr James and Mr and Mrs Robb reached their common intention based upon the characteristics of the property and the physical locality of the perceived boundaries. The precise square meterage and the legal description of the land within the Certificate of Title had no bearing on the formulation of their common intention. Size was never discussed.
[80] That Mr and Mrs Robb were under the impression they owned the lost land is borne out not only by Mrs Robb’s statements on 4 December 2006, but also by their conduct in paying the rates on it for so many years. It is also reinforced by the terms of their solicitor’s letter to the Scott estate, as well as by uncontested evidence of Mr Robb’s conduct on 22 December 2006 when he and Mr James walked around the property. It is further confirmed by the evidence of Ms Horne.
[81] This belief that they owned the lost land (which in equity they undoubtedly did) when combined with an intention to sell all the land they owned establishes a common intention to convey the lost land. The mistake they and Mr James made was to assume that all the land they owned was contained in the one Certificate of Title specified in the agreement. The common intention subsisted right up to the
point of signing the agreement and afterwards until at least 22 December 2006 (the
time of Mr James’ second visit to the property).
[82] In short, correctly analysed, I consider that this is a case like Dundee Farm Ltd v Bambury Holdings Ltd8 where the legal description of the land stipulated in the written agreement does not reflect the physical land the parties thought they were buying and selling.
[83] The evidence of a common intention to transfer the lost land is convincing and in my assessment sufficient to rebut the usual presumption that a document signed by parties is an expression of their agreement.
[84] I accept that Mr James acted precipitously and indeed recklessly without making proper checks. However, it is established that negligence or carelessness on the part of the party seeking rectification is not fatal.9
[85] Mr Wallace, of course, argues that whatever may have been the position in December 2006, any common intention had well and truly dissipated by the time it came to preparing and signing the transfer, and it is the transfer that must be rectified. By then, both parties had realised the mistake but nevertheless went ahead, Mr James even signing company resolutions about the sale for the purposes of obtaining finance. Mr Wallace drew my attention to authority which requires the common intention to subsist, right up to the moment of execution of the formal
instrument of which rectification is sought.10 He also drew my attention to authority
that where a person executes a document under protest and threatens at the time he executes it that he will later bring rectification proceedings, a Court of equity will not decree rectification.11
[86] However, that argument is based on the premise that the instrument to be rectified is the transfer. It is not. As Mr Bayley submitted, the instrument to be
8 Dundee Farm Ltd v Bambury Holdings Limited [1978] 1 NZLR 647 (CA).
9 Hanbury & Martin Modern Equity (18th ed, Sweet & Maxwell, London, 2009) at 903.
Performance Industries Ltd v Sylvan Lake Golf & Tennis Club Ltd [2002] 1 SCR 678 (SCC). Although not decisive, it may however be relevant to the exercise of the discretion.
10 Westland Savings Bank v Hancock, above n 4.
11 Eaton v Bennett (1865) 34 Beav 196.
rectified is the agreement and the common intention must be assessed as at the time of the agreement. Rectification of the agreement, coupled with the non-merger clause leaves Mr and Mrs Robb under an obligation to transfer title to the lost land. Rectification of the agreement has retrospective effect. Accordingly, the agreement is deemed to have always included the title to the lost land, and Mr and Mrs Robb are under an obligation to transfer the land notwithstanding that a transfer has already been signed.
Should the plaintiffs be denied a remedy on the grounds of delay?
[87] In my view, Mr Wallace was on stronger ground when he argued that even if the pre-requisites for rectification were satisfied, Mr James and his company should be denied a remedy on account of delay. Counsel referred me to the defences of laches, acquiescence and estoppel.
[88] Rectification being an equitable remedy is a discretionary remedy. Whether the issue is described as laches, acquiescence or estoppel, ultimately the question is whether it would be unconscionable to grant relief in light of the reasonable expectations of the parties. Delay is an important factor in determining whether relief should be withheld, as is the position of third parties.
[89] In this case there has been significant delay in issuing the proceedings. This was due, it seems, to a combination of factors – confusion, lack of information, willingness to explore potential compromises, perceived tardiness or failings on the part of Mr James’ former solicitors and lack of funds. Whatever the reasons, the delay on anyone’s view of it has been inordinate. The mistake was realised in late
April 200712, but the proceedings were not issued until December 2009, over two
and a half years later.
[90] As Mr Wallace responsibly acknowledged, the issue when considering acquiescence, delay and laches is not however the period of delay in itself, but rather
the effect of that delay.13
12 In so far as there was a conflict of evidence on this point, I prefer the evidence of Mr James that the first time he was made aware of the mistake was on 26 April 2007.
13 Eastern Services Ltd v No 68 Ltd [2006] 3 NZLR 335 (SC)
[91] Mr Wallace submitted that Mr James’ inaction had prejudiced Mr and Mrs Robb, his inaction giving them the confidence to proceed with the transfer to Gary in the belief there was no impediment to their doing so. It had also prejudiced Gary, who had incurred expenditure such as survey costs and building consultancy fees.
[92] In support of his submission, Mr Wallace also drew my attention to an email sent by Mr James to Gary Robb in November 2008 in which Mr James says “never mind the past is the past.”14
[93] On the face of it, the email could well be construed as a representation that Mr James was waiving any legal rights he had in relation to the dispute and was not going to take matters any further.
[94] This aspect of the case has certainly given me pause for thought.
[95] However, after very careful consideration I have decided it would be unconscionable not to grant rectification, rather than the other way around. The evidence established that Mr James has protested throughout, both before and after the transfer of the lost land to Gary and both before and after the email of November
2008. Importantly, I am also satisfied that Gary did not rely on the email. Some of the expenses were in fact incurred in 2009, after the formal letter of claim. Gary chose to take the risk.
[96] A claim to rectification is an equity which is not binding on a bona fide purchaser for value without notice, actual or constructive.15
[97] However, Gary is not a bona fide purchaser for value without notice. He received the property with notice of the equity and indeed personally played a significant role in the events that gave rise to that equity. He knew when he received the land that it was land which his parents had already agreed to sell to Mr James, and for which Mr James had provided consideration. He knew that his parents intended to sell that land when they signed the agreement in December 2006. Gary
himself either shared that intention or, worse, knew the others were labouring under
14 Exhibit E, 28 November 2008.
15 AMP Society v Bridgemans Art Deco Ltd [1996] 2 NZLR 263 (CA).
a mistake but stood by, even although he personally had helped foster the mistake in the first place. On my view of the evidence, it must be one or the other, and either way Gary does not come to this Court with clean hands. He, in effect, has acted in an opportunistic way and exploited a situation for his own benefit, a situation which he had helped to create. He had notice of the equity and any expenses he has incurred can validly be seen as being in furtherance of attempts to profit from his own wrongdoing. Further, he did not as I have said rely on the email.
[98] In those circumstances, I am satisfied that Gary does indeed hold the lost land on a constructive trust. It was unconscionable for him to receive it and it is unconscionable for him to retain it.
[99] Because of the view I have taken, it is not necessary for me to consider the claim under the Contractual Mistakes Act and issues raised about unequal exchanges of value and clauses in the contract regarding requisition of title and the pointing out of boundaries.
Outcome
[100] I order that the agreement between the first defendants and the second plaintiff for sale and purchase dated 5 December 2006 is rectified so as to provide that the land described in the agreement as being sold includes the land comprised in Certificate of Title MB1B/517.
[101] I declare that Mr Gary Robb holds the land comprised in Certificate of Title MB1B/517 on a constructive trust for the benefit of the second plaintiff and order him to transfer that land to the second plaintiff.
[102] I reserve the right for any party to come back to the Court for further directions should there be any practical difficulties relating to the implementation of these orders.
[103] As regards costs, my expectation is that the parties will be able to resolve these without the need for any formal Court order. Should that not prove possible,
then Mr Bayley is to file submissions with any response from the defendants within ten working days thereafter.
Apology
[104] Unfortunately, delivery of this judgment was delayed as a result of the
Christchurch earthquake of 22 February 2011.
[105] I regret any inconvenience the delay may have caused the parties.
Solicitors:
Rhodes & Co, Christchurch
I McNish, KaiapoiCounsel: M J Wallace, Christchurch
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