Khalesi v Lane

[2022] NZHC 787

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2015

[2022] NZHC 787

IN THE MATTER

AND

of the Land Transfer Act 1952

IN THE MATTER

of Caveat No.12091076.2 and Caveat No.12091076.1

BETWEEN

SAM KHALESI and SHAHIN KHAYAMI

Applicants

AND

LESLIE PHILLIP LANE

First Respondent

FAST PARK DEVELOPMENTS LIMITED

Second Respondent

Hearing:	23 February 2022
Appearances:	A Gilchrist for the Applicants CFL Godinet for the Respondents
Judgment:	13 April 2022

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 13 April 2022 at 4pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors/Counsel:

Churton Hart & Divers Ltd, Auckland Henley-Smith Law, Auckland

A Gilchrist, Auckland CFL Godinet, Auckland

KHALESI & ANOR v LANE & ANOR [2022] NZHC 787 [13 April 2022]

Introduction

[1]    The applicants are seeking to sustain Caveats 12091076.2 and 12091076.1 registered over properties owned by the first respondent, Mr Lane, and the second respondent, Fast Spark Developments Limited, at 59 and 59A Ernie Pinches Street, Mt Roskill.

[2]    The caveats record the applicants’ interest in the property as purchaser under a sale and purchase agreement entered into orally which has been partly performed.

[3]    Section 24 of the Property Law Act 2007 requires a contract for the sale of land to be in writing and signed by the party against whom the contract is sought to be enforced. Section 26 of the Property Law Act however provides that s 24 does not affect the operation of the doctrine of part performance.

[4]    The parties agree that there is no signed written agreement in this case. The applicants say however that they can rely on the oral agreement reached because it has been partly performed. The respondents submit that there was no concluded oral agreement and so the caveats ought to lapse.

[5]    As this is a caveat application determined on a summary basis, the applicants only have to establish that their case is reasonably arguable to succeed in their application. The substantive determination of the applicants’ claim must await a full hearing.

Issues

[6]The issues are:

(a)Is it reasonably arguable that there was a concluded oral agreement?

(b)Is it reasonably arguable that there is part performance of that agreement?

(c)Is it reasonably arguable that it would be unconscionable in the circumstances for the respondents to rely on the Property Law Act requirement for the agreement to be in writing?

(d)If the answer to the above questions is yes, is there a caveatable interest as purchasers under the alleged agreement?

Caveat principles

[7]The parties agree on the legal principles applying to this application.

[8]    In applications both to remove and sustain caveats under ss 142 and 143 of the Land Transfer Act, the onus is on the caveator to show a reasonably arguable case for the interest claimed.1

[9]    The principles governing an application that a caveat not lapse are settled, with the Court of Appeal providing a helpful summary in Philpott v Noble Investments Ltd:2

[26]The applicable legal principles which governed the application to sustain the caveats, and which now govern this appeal, are as follows:

(a)The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;

(b)It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;

(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained — either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists; and

(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.

1      Sims v Low [1988] 1 NZLR 656 (CA) at 660.

2 Philpott v Noble Investments Ltd [2015] NZCA 342 (footnotes omitted). Recently approved in Melco Property Holdings (NZ) 2012 Ltd v Hall [2021] NZCA 184 at [19] and [36]; and Wallace v Studio New Zealand Ltd [2021] NZCA 392 at [40].

Doctrine of Part Performance

[10]   As referred to above, s 24 of the Property Law Act requires a contract for the sale of land to be in writing and signed by the party against whom the contract is sought to be enforced. Section 24 does not however affect the operation of the law relating to part performance.3

[11]   The requirements for establishing part performance are set out in TA Dellaca Ltd v PDL Industries Ltd, where Tipping J held that the court must consider the following three questions:4

(a)Was there a sufficient oral agreement such as would have been enforceable but for the [Property Law] Act?

(b)Has there been part performance of that oral agreement by the doing of something which:

(i)clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral agreement; and

(ii)when viewed independently of the oral contract was, on the probabilities, done on the footing that the contract relating to the land and such as that alleged was in existence.

(c)Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the [Property Law Act requirement]?

Was there a sufficient oral agreement such as would have been enforceable but for the Act?

[12]   One of the applicants, Mr Khayami, has sworn an affidavit on behalf of the applicants saying that he met with Mr Lane on 1 April 2021 and at that meeting entered into an oral agreement for the sale and purchase of the properties at 59 and 59A Ernie Pinches Street, Mt Roskill. Mr Khayami says that the agreement reached had the following essential terms:

(a)that the vendors would be the first and second-named respondents;

(b)that the purchasers would be the first and second-named applicants;

3      Property Law Act 2007, s 26.

4      TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 at 109.

(c)that the agreement was for the sale of the properties at 59 and 59A Ernie Pinches Street, Mt Roskill;

(d)that the purchase price would be $1,550,000 inclusive of GST;

(e)that there would be a deposit of $100,000 Bartercard dollars;

(f)that the balance of the purchase price would be met on settlement date by the payment of $250,000 Bartercard dollars with the balance ($1,200,000) in cash;

(g)that settlement would be 45 days from the date that the agreement was unconditional;

(h)that the agreement was conditional on the applicants being satisfied with the result of a due diligence investigation of the property within three working days, and with it being for the purchaser at its absolute discretion to give notice in writing to terminate the agreement if it was not satisfied with any aspect after due diligence.

[13]   The first respondent, and sole director and shareholder of the second respondent, Mr Leslie Lane, has sworn an affidavit in response in which he records that the meeting was on 30 March 2021, not 1 April 2021 as deposed by Mr Khayami. Mr Lane says that Mr Khayami is wrong that an oral agreement for the sale and purchase of the properties was entered into on the terms that Mr Khayami states. Mr Lane records that Mr Khayami said that he was interested in buying the properties but that he needed to check with his partner before putting an offer to Mr Lane. Mr Lane says that he asked Mr Khayami if by partner he meant his wife and Mr Khayami commented that he was not sure at that stage.

[14]   Mr Lane says that he explained to Mr Khayami that he had recently purchased one of the properties, No.59, where he lived, and that he needed to check with his lawyer and accountant about the new law on buying and selling properties within a certain period of time and what that meant. Mr Lane says that the parties “had to agree the terms and conditions of a contract yet to be written up, with further terms and conditions to be identified and inserted, if necessary, after [Mr Lane] had consulted

[his] lawyer and accountant”. He says that he could then either accept or reject any offer in his personal capacity as owner of No.59 and as director of the second respondent. Mr Lane says that Mr Khayami acknowledged and agreed that both parties had to consult with their lawyers and because Mr Khayami was “not able to tell [him] who his partner/co-purchaser was going to be”.

[15]   In his affidavit in reply, Mr Khayami disputes that these matters were discussed at the meeting. Mr Khayami’s evidence is that, at the meeting, Mr Lane advised him that he had a debt to repay to Bartercard hence the need for a component of the purchase price to be paid in Bartercard dollars. Mr Khayami understood that Mr Lane needed to sell the properties relatively quickly to raise cash. Mr Khayami’s evidence is that Mr Lane said to him that he was not prepared to negotiate on the price of the properties and advised what the terms of payment would be. Mr Khayami says that he agreed to these terms on the spot. Mr Khayami says further that Mr Lane said that other people were looking at the properties and “whoever pays him the right price and pays the deposit first, gets it”. Mr Khayami said that on that basis the parties agreed everything and that it was to be drawn up for formalisation. Mr Khayami’s evidence is that it was on Mr Lane’s insistence that the deposit was paid and that there was no other discussion as to whether they needed to get legal or accounting advice. Mr Khayami says that Mr Lane seemed to know what he was doing as did Mr Khayami.

[16]   Mr Khayami’s evidence is that following the meeting the terms of the agreement were set out in writing using the ADLS/REINZ Agreement for Sale and Purchase and that it was executed by the applicants and forwarded to the respondents on 1 April 2021. A copy of this agreement is attached to Mr Khayami’s original affidavit. It records that the purchase price is $1,550,000 and that the payment of that price will be as follows (as set out on agreement):5

(a)$100,000 payment of Barter Card dollars into the Vendor’s Barter Card account (refundable if this agreement is not declared unconditional) (confirmed by the parties that this amount was deposited on 1/04 /21 by the purchasers);

5      See further terms of sale, clause 20.0.

(b)$250,000 payment of Barter Card dollars into the Vendor’s Barter Card account on settlement date. If the amount of $250,000 Barter Card dollars cannot be raised by settlement date, the Purchaser shall pay any shortfall in said sum as cash and in addition to the payment due under clause “c” below;

(c)$1,200,000 into the Vendors solicitors trust account on settlement date.

[17]   Mr Khayami attaches copies of his text correspondence with Mr Lane between 31 March and 1 April 2021 to his affidavit. This is helpful in considering whether an oral agreement was concluded and so I set it out in some detail below.

[18]On 31 March Mr Khayami texts:

Hi Leslie just calling back to organise that deal with cash barter and cars etc.

[19]Then on 1 April 2021 at 9.17am Mr Khayami replied:

Good morning mate. Just letting you know I will get the extra $100k barter today if you respond to the lawyers email regarding the reversal of funds if the deal don’t happen then I will transfer the 100k over today then the other 100k on unconditional etc. and we can do a 45 days settlement.

[20]At 3.08pm on 1 April 2021, Mr Khayami sent a further text:

Hi Les thanks for your help and the 100k barter should show in your account now and Sam is organising the agreement hoping to get to you today but if not first thing Tuesday. Thanks again.

[21]Mr Khayami then sent a text saying:

If you are happy I can even drop off the signed forms to you so that you can have a look over the weekend or whenever and get your lawyer to check it then sign and send back?

[22]   The agreement was sent on 1 April 2021 in the afternoon. Mr Khayami then sent a text saying:

Agreement sent please read over and once happy and signed please sent back to the lawyer. Thanks.

[23]At 5.23pm Mr Lane sent a text saying:

I got you agreement thanks but I still not received confirmation your deposit to bartercard.

[24]Mr Khayami replied:

100% done check your account $88k and $12k I have the signed vouchers and the deduction from my account already I’ll send you a pic of my account.

[25]   The text conversation then displays a photo of what appears to be the Bartercard account with the amounts withdrawn on 1 April 2021.

[26]   Mr Khayami sends a suggestion by text for Mr Lane to refresh his system and says:

And can call your broker and he can confirm etc. I’ll also ask my guy to confirm too. Thanks.

[27]Mr Lane then confirms:

Ok know problemo.

[28]Mr Khayami then sends a ‘thumbs up’ and Mr Lane replies:

Ooh you sold your car now you hitchhiking    

[29]Mr Khayami then sends a message saying:

Oh right Na I have that as a work horse, it’s a 1998 Datsun ute mate. Not worth selling it runs too well. I use it for moving things and lens to mates etc when they need a work horse     

[30]Mr Lane replied saying:

I just found out my lawyers are gone for the weekend. Agreement looks to me ok. But have sign it at the lawyer.

[31]Mr Khayami replied:

No drama don’t rush take your time next week is all good cause we can’t do anything over the weekend either so take it easy and if you wanna catchup etc for anything let me know. Might be keen to look at the other property you have too if this goes all well?

[32]Mr Lane then replied:

If I sell everything I will need to live in your Datsun.

[33]Mr Khayami replied saying:

Haha good call m, I’ll include it in one of the trades. Alright mate have a good night and a good weekend.

[34]   At the same time that the above text conversation was happening there was email correspondence between Mr Khayami, Mr Sam Khalesi (the other applicant and alleged purchaser) and Mr Lane.

[35]   On 31 March 2021, Mr Khalesi sent an email to Mr Lane confirming that they had spoken that morning. He asked Mr Lane to confirm that if $100,000 of Bartercard dollars were deposited into Mr Lane’s Bartercard account that those funds would be

returned if the agreement over the two properties is not unconditional within three working days of the date of the agreement.

[36]Mr Lane replied at 10.29am to Mr Khalesi saying:

I except (sic) under the term of bartercard that if the agreement does not become conditional, the amount paid into my account will be refunded to the senders account.

[37]Mr Khalesi replied saying:

Your email should say “unconditional” rather than “conditional” (as the agreement is conditional until declared unconditional).

Please resend as per the above.

[38]Mr Lane replied at 11.58am saying:

Yes my bad.

Should the agreement NOT become UNCONDITIONAL any amount paid into my account will be refunded to the senders account.

[39]Mr Khayami then replied to Mr Lane, copying in Mr Khalesi, saying:

Thanks guys I’ll have the funds transferred over and if we can start working on the agreement to start the due diligence process.

[40]On 6 April 2021 at 5.18pm Mr Khayami sent a text to Mr Lane saying:

Good day mate hope you had a good Easter. I didn’t hear back from the lawyer regarding the agreement. Did you get a chance to look it over with your lawyer and sign and send through at all?

Cheers

[41]On 7 April 2021 Mr Khalesi sent an email to Mr Lane saying:

We have tried to contact you a number of occasions but cannot get through.

The email records that the matter needs to be finalised and says:

… Please bear in mind that the deposit has been paid in part performance of the contemplated transaction and the agreement now must be executed and finalised.

[42]Mr Lane replied to Mr Khalesi at 5.03pm on the same day saying:

Hi Sam

I will not be signing you offer of the sale and purchase. 59 and 59a Ernie pinches st. The matter is at end.

I never did receive confirmation from bartercard of your clients funds transfer to my account. If the funds have left your clients account, they should his broker for a refund.

Regards Les Lane

[43]Mr Khayami texted Mr Lane on 8 April 2021 at 5.31pm saying:

Hi mate how’s it going? Just got word from Sam you don’t want to go ahead etc? Just checking what went wrong? If there’s an issue we can sort. Cause I sold that Porsche and broke another contract for it just so that I could be safe with our deal, which puts Me out of pocket etc. so would really like to discuss what’s happened.

[44]Mr Lane did not reply until 15 April 2021 at 6.02pm when he said:

Hi been really busy this time of year. I trust you got your money back. I sorted bartercard out so I didn’t have to sell my properties cheap. Regards.

[45]   There were discussions between the parties between August and October 2021 including the provision of a further agreement that was offered by the applicants at the same purchase price of $1,550,000 which Mr Lane then countersigned for $2,100,000. The agreement included a further term at clause 23 headed “Prior Agreement and Legal Proceedings” which said:

23. Prior Agreement and Legal Proceedings

This agreement has been drafted on the request of the Vendors and on the basis that if the parties herein each respectively enter into this agreement which shall constitute full and final settlement of all matters as between the Vendor and purchasers Sam Khalesi and Shahin Khayami (of an agreement prior) and they each agree that they will do all such things necessary to ensure the caveat Shahin Khalesi and Sam Khalesi have lodged as part of an agreement prior shall be removed.

The parties agree that Shahin Khayami and Sam Khalesi reserve all rights under the previous agreement until such time as this agreement has been executed by all of the parties.

[46]When Mr Lane countersigned the agreement he amended this clause so it read:

23. Prior Agreement and Legal Proceedings

This agreement has been drafted on the request of the Vendors and on the basis that if the parties herein each respectively enter into this agreement which shall constitute full and final settlement of all matters as between the Vendor and purchasers Sam Khalesi and Shahin Khayami (of an agreement prior) and they each agree that they

will do all such things necessary to ensure the caveat of Shahin Khalesi and Sam Khalesi have lodged as part of an agreement prior shall be removed.

The parties agree that Shahin Khayami and Sam Khalesi [they] reserve all rights under the previous agreement until such time as this agreement has been executed by all of the parties.

[47]On 21 October 2021 Mr Khayami sent a text saying:

Thank you for confirming receipt of the original contract and acceptance of our deposit and verbally and by messages confirming your willingness to proceed previously and again at the agreed price. Hence I believe it is best to proceed as previously which was agreed by you. Also best that from this point on to reduce the wastage of my time that all correspondence be through our lawyers and in court.

[48]   Mr Lane says in his affidavit that if the applicants believed that they had a binding agreement then they would not need the second agreement sent in October 2021 to prove their case.

Consideration of correspondence

[49]   For the caveats to be sustained, the applicants simply need to establish that it is reasonably arguable that an oral agreement was reached. There is some dispute as to exactly what was agreed including in relation to the tenancy and so forth. However the texts following the meeting on 31 March 2021 appear to support the applicants’ version of events.

[50]   Mr Lane says that there was no agreement reached on the parties, price or payment of the deposit by Bartercard dollars. But the text conversation appears to support the applicants’ version of events as when the agreement was sent through on 1 April 2021, Mr Lane replied by text “agreement looks to me ok”. If there had been an issue with the parties or purchase price, it would be surprising for Mr Lane to have replied in this way. Furthermore, Mr Lane said by text that he had received the agreement but had “still not received confirmation of the deposit to bartercard”.

[51]   Mr Khayami then confirmed that it had been paid, copied a picture of his Bartercard account and made suggestions to “refresh his system and call his broker” to which Mr Lane responded “ok no problem”. Again, all of this supports the applicants’ version of events.

[52]   Another important exchange in the correspondence is in relation to the refund of the deposit. Mr Lane confirmed that “[s]hould the agreement NOT become UNCONDITIONAL any amount paid into my account will be refunded to the senders account.” If there was no agreement, then Mr Khalesi’s question and Mr Lane’s confirmation were more likely to have been in terms of an agreement not having been reached, rather than referring to the agreement not becoming unconditional.

[53]   Finally, the text sent by Mr Lane on 15 April 2021 that Mr Lane had “sorted Bartercard out so I didn’t have to sell my properties cheap” appears to support the applicants’ version of events.

[54]   I therefore conclude that it is reasonably arguable that an oral agreement was concluded between the parties.

Has there been part performance of that oral agreement?

[55]   As discussed above, $100,000 was paid by way of Bartercard transfer. In T A Dellaca Ltd v PDL Industries Ltd, no part performance was found, with Tipping J commenting that no deposit was tendered (let alone accepted) and that he could see nothing on the evidence amounting to an act of part performance.6 In Welsh v Gatchell, Miller J held that payment of the deposit specified in the agreement “was an unequivocal act of part performance in circumstances where I have found that payment followed formation of the contract”.7

[56]   There is clear evidence that the deposit was paid in this case following the alleged formation of the contract, with Mr Lane chasing up payment, Mr Khayani confirming that it had been paid, including by sending a photo of his Bartercard account, and then Mr Lane texting “ok no problem”.

6      T A Dellaca Ltd v PDL Industries Ltd, above n 4, at 111.

7      Welsh v Gatchell [2009] 1 NZLR 241 (HC) at [79].

[57]   I therefore find it is reasonably arguable that there has been part performance of the oral agreement.

Do the circumstances in which the part performance took place make it unconscionable for the respondent to rely on the Property Law Act requirement?

[58]   I consider that it is reasonably arguable that the circumstances in which the deposit was paid would make it unconscionable for the respondents to rely on the Property Law Act requirement for the agreement to be in writing.

[59]   A written agreement had been provided by the applicants setting out the terms but had not been signed by the respondents.

[60]   Mr Lane’s evidence is that he did not agree to receive Bartercard dollars — yet it was Mr Lane who chased up payment of the deposit through Bartercard when the draft agreement was sent through. Importantly when questioned about why he did not want to go ahead with the agreement, Mr Lane referred to having sorted his Bartercard issue and not wanting to sell the properties cheap. Mr Lane does not say there was never any agreement in the first place.

[61]   In these circumstances it is reasonably arguable that it would be unconscionable for the respondents to rely on the requirement for the agreement to be in writing.

Is there a caveatable interest as purchasers under the alleged agreement?

[62]   The alleged agreement was subject to a 3-working-day due diligence condition expressly inserted for the sole benefit of the purchaser and to be exercised at the applicants’ absolute discretion. If the applicants were not satisfied with any aspect of the due diligence investigation then the applicants could give notice in writing to terminate the agreement and their deposit would be refunded in full.8

8      Further terms of sale, clause 20.1.

[63]In Bevin v Smith the Court of Appeal held:9

There will be some conditional contracts, particularly those subject to true conditions precedent, where the parties cannot be regarded as intending that equitable title will pass to the purchaser until the condition is waived or fulfilled.

[64]A later decision of the Court of Appeal, O’Leary v Sentiero Properties Limited,

referred to the above passage and went on:10

Features of the May agreement which point against an intention to pass equitable title are the fact that the deposit was not payable until the agreement became unconditional and the open-ended nature of cl 14.0. That clause effectively allowed Sentiero to pull out of the contract for any reason prior to 14 July 2004. In those circumstances, there is an argument that the parties cannot have intended an equitable interest to pass until Sentiero had declared the condition unconditional and had paid the deposit.

[65]    In this case the deposit was payable prior to the due diligence condition being fulfilled. Furthermore, the applicants did not issue a written notice to terminate the agreement within the three working days and their lawyers confirmed by letter dated 28 April 2021 that the applicants had chosen to waive the due diligence condition and so the agreement was unconditional.

[66]   If the applicants succeed in establishing that an oral agreement was reached, that there was part performance and that it would be unconscionable for the respondents to rely on the Property Law Act requirement for writing, it is reasonably arguable that the applicants could sue for specific performance of the contract. It is therefore reasonably arguable that the applicants have a caveatable interest.

Result

[67]   Caveats 12091076.1 and 12091076.2 registered by Mr Khalesi and Mr Khayami over 59 and 59A Ernie Pinches Street are not to lapse until further order of the Court.

9      Bevin v Smith [1994] 3 NZLR 648 (CA) at 665.

10     O’Leary v Sentiero Properties Limited (2006) 7 NZCPR 869 (CA) at [32] – [33].

[68]   Substantive proceedings have already been commenced by the applicants with a substantive hearing scheduled to commence in March 2023. The usual orders in relation to the commencement and prosecution of substantive proceedings are therefore unnecessary.

Costs

[69]   The applicants have succeeded and so are entitled to costs. I did not hear from the parties on costs but record that the applicants submit that they proposed that the parties proceed directly to the substantive proceedings with steps taken to sustain the caveats in the meantime. My preliminary view is that there was clearly a caveatable interest and that this would have been an appropriate course.

[70]   I ask the parties to confer and attempt to agree costs. If that is not possible, memoranda may be filed, on behalf of the applicants within 20 working days of this judgment and the respondents within a further 10 working days. Costs will then be determined on the papers.

Associate Judge Sussock