Lawson v Tupe HC Auckland CIV 2007-404-8051
[2009] NZHC 2620
•11 November 2009
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2007-404-8051
BETWEEN KENNETH FRANCIS LAWSON AND AKINESA TAURANGIE LAWSON Plaintiffs
ANDFRANCIS TAUALAI TUPE First Defendant
ANDGREGORY BODAY MASSON Second Defendant
Hearing: 9, 10, 11 November 2009
Counsel: G Illingworth QC and G Wiles for Plaintiffs
J Samuel for First Defendant
G Masson, Second Defendant, appearing on his own behalf
Judgment: 11 November 2009
JUDGMENT OF ASHER J
L Duncan, Duncan Horrocks Law, PO Box 26688, Epsom, Auckland
JG Connell, PO Box 28 172, Greenwoods Corner, Epsom, Auckland 1347
G Masson, 6/68 Ferndale Road, Mt Wellington, Auckland
Copy:G Illingworth QC, PO Box 7205, Auckland Central
GD Wiles, PO Box 7292, Wellesley Street, Auckland 1141
KENNETH FRANCIS LAWSON AND AKINESA TAURANGIE LAWSON V FRANCIS TAUALAI TUPE AND ANOR HC AK CIV-2007-404-8051 11 November 2009
Introduction
[1] The plaintiffs, Kenneth Francis Lawson and Akinesa Taurangie Lawson, live at 19 Ambury Road, Mangere Bridge, Auckland. Their former neighbour is the second defendant, Gregory Bodan Masson, who lived at 21 Ambury Road.
[2] On 12 November 2003, the Lawsons entered into an agreement to buy part of what was then Mr Masson’s land. In this proceeding the Lawsons claim that Mr Masson has failed to meet his obligations under that agreement. They paid for the land, but Mr Masson’s entire property has now been sold to a third party, including that land. The Lawsons seek compensation for what they say they would have gained as a consequence of performance of the agreement or, in the alternative, they seek the recovery of what they have paid, and their wasted expenditure.
Background
[3] Ambury Road is situated in the residential suburb of Mangere Bridge. Mr and Mrs Lawson have owned 19 Ambury Road since 1996. Their property looks up to Mangere Mountain, and is not far from the Manukau Harbour. It is set back from Ambury Road and is accessed by a driveway. The driveway goes past 21 Ambury Road, which fronts onto the road. Behind the rectangular area of land around Mr Masson’s house, there is a wide panhandle of land extending alongside the Lawsons’ property, which was part of 21 Ambury Road. That panhandle could be cut off without damaging the natural curtilage around Mr Masson’s property. Running as it did alongside the Lawsons’ property, it was potentially able to constitute a natural extension of their property.
[4] In 2003, this panhandle of Mr Masson’s property became of interest to the Lawsons. For some time properties in Ambury Road had been zoned under the Manukau City Council for three dwelling units, provided certain conditions were met. The Lawsons formed the view that if they could acquire the panhandle at the back of Mr Masson’s land thereby increasing the size of their property, it would considerably improve its subdivisional potential and value. The strip of land in
question involved approximately 600 square metres in area. The size of the Lawsons’ existing section was 1,652 square metres, and the acquisition of Mr Masson’s panhandle would have increased the size of their property to
2,252 square metres. It seemed to them to be an attractive investment.
[5] Through 2003, there was a considerable train of negotiation in relation to the acquisition of the land between the Lawsons and Mr Masson, with offer and counter- offer being made. At one stage another neighbour was involved as an interested purchaser. Ultimately those negotiations led to the Lawsons and Mr Masson reaching an agreement to purchase part of Mr Masson’s land for $90,000. On 12
November 2003, they entered into a written agreement.
[6] The legal description referred to approximately 600 square metres “… as shown edged red on the attached plan hereto, which shall also include the strip of land to give the purchaser a 4.8 metre driveway.” A $9,000 deposit was payable on execution of the agreement, and the balance of the purchase price was to be paid in one lump sum within 10 working day’s of resource consent issuing from the Manukau City Council. The agreement was on the standard Auckland District Law Society form. There was a page of extra conditions, which reflected the fact that there had to be a resource consent, a subdivision, and a new title, to effect the purchase.
[7] The deposit of $9,000 was paid on 12 November 2003. The Lawsons were given possession of the property for the purpose of carrying out work required to effect the subdivision. On 10 January 2004, the Lawsons filed a form of application for resource consent. Resource consent was obtained from the Manukau City Council on 6 September 2004.
[8] Mr Masson gave evidence that he had anticipated that resource consent would be obtained within a short period of time of the signing of the agreement on
12 November 2003, and that he had committed himself to certain expenditure on that basis. He sought advance payments from the Lawsons prior to settlement. The Lawsons made a payment to Mr Masson of $4,000 on 3 December 2003. They paid further sums of $5,000 on 22 January 2004, $9,000 on 5 February 2004 and $5,000
on 28 March 2004. Thus, prior to settlement following the resource consent they had paid Mr Masson $32,000 including the deposit.
[9] After resource consent was obtained, it was then necessary for Mr Masson’s lawyers, Daniel Overton & Goulding, to obtain a mortgage discharge from Mr Masson’s mortgagee, TEA Custodians Limited. Prior to settlement the Lawsons obtained an approval of the survey plan under s 223 of the Resource Management Act 1991. Ultimately settlement took place on 11 November 2004, with the balance of the settlement moneys of $58,000 being paid. A partial discharge of mortgage was provided by TEA Custodians Limited, together with a transfer executed by Mr Masson and an order for a new certificate of title.
[10] The agreement was unusual in that although there had been full settlement it was necessary following that settlement for the Lawsons to complete the subdivision by meeting the Council requirements, arranging for the plan to be deposited, and arranging for a new title to be issued by the District Land Registrar. This meant that following settlement the work required by the resource consent was still to be carried out by the Lawsons, so that the certificate under s 224(c) of the Resource Management Act could be obtained.
[11] The Lawsons engaged a surveyor, Mr Ivan Siu. He indicated what had to be done. A drainage contractor had to be retained, and with the approval of the appropriate Council officers the necessary drainage work and other works necessary for the resource consent had to be completed. In the end this task took over
18 months to complete.
[12] Mr Lawson has given reasons for the delays. In late 2004 and early 2005
Mr Lawson says there was a building boom, and it was not possible to get a contractor initially. Contractors who were approached wanted unreasonable sums of money or proposed unacceptable delays. Finally a drainage contractor was organised but work could not start until May 2005. It took some four to six weeks through to the end of June or July 2005 to lay the piping. Winter conditions created further delays. It was then necessary to have the drainage works tested, with the involvement of the Manukau City Council engineers. This was ultimately not done
until January 2006. There were then some further delays, which are not fully explained. On 20 April 2006, Mr Siu finally certified completion of the subdivision work and as-built plan for the sanitary sewer. Final inspection and testing of the drainage was carried out and approved by the Manukau City Council on
26 July 2006.
[13] It seems that by around the middle of 2006 it had become clear that the Council had lost the original survey plans and that it was necessary to replace them. Mr Lawson approached Mr Masson in late July 2006 and asked him to sign-off the replacement plans that had been prepared following the loss of the original plans. He understood it was necessary to get them signed-off by Mr Masson so that the s 224(c) certificate could issue. Mr Masson said he was not prepared to sign the plans because Mr Lawson had not put a fence between the subdivided property and his property. He also said that he had refinanced the property and would need to consult with his solicitors and mortgagee.
[14] Following this the Lawsons set about erecting a fence on the common boundary. After doing so they approached Mr Masson again and asked him to sign the plans. That approach ended up in something of an argument, the details of which are not material to the issues. The result was that the documents were not signed.
[15] On 22 August 2006, Mr Lawson wrote directly to Mr Masson’s lawyers asking for the documents to be signed, and referring to the new mortgage. On
28 August 2006, Mr Masson’s lawyer, Mr Guy Newlove, wrote to the Lawsons’ lawyer, Duncan Horrocks Law. Mr Newlove stated that he had given the plan to Mr Masson together with his file as he was no longer acting for him in the matter.
[16] Mr Lawson then looked into registering a caveat against Mr Masson’s title. There was a clause in the agreement stating that the purchaser would not lodge a caveat against the vendor’s title prior to the deposit of the purchaser’s plan of subdivision. Mr Lawson gave evidence, having waived privilege, that he was advised that he should not lodge a caveat given the presence of that clause. No caveat was registered.
[17] On 1 September 2006, Duncan Horrocks Law wrote to Mr Masson direct pointing out the requests made for him to sign the replacement plans and his refusal to do so. Mr Masson was again requested to do so and notice was given that if he did not co-operate the Lawsons would pursue their legal remedies.
[18] On 15 September 2006, Mr Masson replied. He stated that:
Mr Lawson’s continual lax attitude towards completing the necessary steps to obtain clear title has placed me in an untenable and unresolved situation that has gone on from Oct 2003 to August 2006 causing unnecessary financial/emotional stress.
He concluded the letter as follows:
Our contract for the purchase of the property of approx. 600sqm has gone beyond the boundary of being a working document. And as such I give notice that the Sale and Purchase signed by both parties is now null and void.
I give notice that I am preparing a report outlining costs and damages to be claimed against the moneys paid and the balance to be returned to your clients. If you could [bear] with me I shall complete the assessment and forward it to you in the next 20 working days.
[19] No such assessment appears to have been forwarded, but an undated notice was given by Mr Masson requiring the Lawsons to stop using the back part of
21 Ambury Road, and referring to their obligation to pay the rates.
[20] Mr Masson had in fact refinanced the property on 30 March 2005, approximately four months after the November 2004 settlement, some 17 months before declaring the contract null and void. This new mortgage was with an associated but different company to the original mortgagee, the new mortgagee being TEA Custodians (Pacific) Limited. The mortgage was over all of the property. Given the fact that the plan had not been deposited this meant that all of Mr Masson’s land, including the land to be transferred to the Lawsons, was subject to the new mortgage. The discharge of the original mortgage that had been provided on settlement thus became inapposite.
[21] Mr Masson says that he did not deliberately mortgage the land to be transferred to the Lawsons when he entered into this further mortgage. He says he assumed that the title change had already occurred. The Lawsons became aware of
the existence of the new mortgage in late 2005. However, they also say they did not appreciate the implications of this at the time.
[22] In the letter of 1 September 2006, Duncan Horrocks Law had sought confirmation that at the time of the refinancing with TEA Custodians (Pacific) Limited the agreement for the boundary adjustment was disclosed to that company, and that they had consented to registration of the new title. In his reply of
15 September 2006 Mr Masson did not address this issue.
[23] Following the letter from Mr Masson on 15 September 2006, there were further exchanges where efforts were made to have the mortgage discharged in relation to the land to be transferred to the Lawsons, and to obtain Mr Masson’s co- operation in relation to the subdivision. Ultimately proceedings were issued in December 2007.
[24] Mr Masson got into default with his mortgage. A facsimile from the lawyers who were involved in the mortgage for the mortgagee, dated 18 December 2006, in response to an email from Duncan Horrocks Law, recorded:
Thank you for your letter of 14 December 2006 which we have referred to the lender in order to obtain consent to the release of 600 sq.m. as described in the agreement for sale and purchase.
It was stated that when that advice was received they would send a partial discharge of mortgage for execution.
[25] An email dated 31 January 2007 that had been obtained, in seems on discovery, was put to Mr Masson, where the approval officer for a company associated with the mortgagee stated:
I have got this one. However, I have talked to Mr Masson. [H]e asked me to hold on and not action until he said so. I think he is one of our Wizard people.
Wizard was the name of a finance company associated with the mortgagee, and Mr Masson was doing work for it as a mortgage broker. It was put to Mr Masson in cross-examination that he had instructed the approval officer not to action the request. Mr Masson’s reply avoided the question.
[26] In February 2007, Mr Masson wrote to the Lawsons asking for $2,100 for rates for three-and-a-half years’ on the land at issue “without prejudice” to his claim that the sale and purchase agreement had now become invalid.
[27] On 21 October 2007, Mr Masson entered into an agreement for sale and purchase with Mr Francis Tupe for the sale of all his property, including the land to be transferred to the Lawsons. That sale was in due course settled and the transfer registered. The agreement records that of the purchase price of $860,000, $301,000 was gifted by Mr Masson. There was a deed of acknowledgement of debt, which shows Mr Masson as a creditor for $301,000. It records that that sum will be gifted at the rate of $27,000 per annum, and that Mr Masson would forgive and release Mr Tupe from repayment at a rate of $27,000 per annum. It also records that Mr Tupe will repay the advance to Mr Masson on demand. There are other more detailed provisions.
[28] Mr Tupe was initially joined as a first defendant, but at the outset of these proceedings that claim was discontinued against Mr Tupe.
[29] The original statement of claim sought a registered title to the subdivided portion of land. Given the discontinuance against Mr Tupe that remedy is no longer pursued. The claim now is for damages.
The proceedings
[30] The statement of claim contains two causes of action against Mr Masson. The first is for breach of contract, alleging a breach of express or implied contractual obligations. The alleged breaches included the taking out of the further mortgage and the refusal to release that mortgage.
[31] The second cause of action is for breach by Mr Masson of his fiduciary duty as a trustee. The allegation there is that from the date of settlement of
10 November 2004 Mr Masson became the constructive trustee of the subdivided portion of land, holding it on behalf of the Lawsons. The breaches of trust include the taking out of the further mortgage, and the refusal to release it.
[32] Mr Masson’s statement of defence has been prepared without legal assistance. The effect of it, though, is to assert that he was entitled to cancel the contract on 15 September 2006. It is a theme of the document that the Lawsons did not act in a timely manner and were guilty of unacceptable delays. It was also apparent from his brief and from his submissions that he considered that he had been misled, or indeed defrauded, in relation to the width of the driveway from the reconstituted Lawson property going past his land, by it being widened from
4.57 metres to 4.88 metres.
[33] Mr Masson has represented himself in these proceedings. On
27 August 2008, a conference Minute of Associate Judge Doogue records a discussion about possible legal representation for him. It was emphasised to Mr Masson that he should seek counsel and to that end should make an application for legal aid as quickly as possible. I raised this issue again with Mr Masson at the outset of the trial. I have given him the Court memorandum for unrepresented litigants. It has been necessary to accommodate the ordinary Court procedures for the fact that Mr Masson is representing himself. This has included giving him the right at the conclusion of cross-examination, to make any further response that he wished to points that had been made in the course of that cross-examination.
[34] I propose proceeding to first consider the two causes of action. I will then turn to the two broad defences affirmatively put forward by Mr Masson.
Claim in contract
[35] A number of express and implied terms of the agreement for sale and purchase are relied on. It is necessary for the Lawsons to rely on implied terms given the fact that the agreement for sale and purchase did not cover in any detail what would happen after the resource consent was obtained and settlement effected. The pleaded implied term that I consider of relevance is an implied term set out at
11(b) of the statement of claim that the plaintiffs “generally take all such steps as may be necessary to enable the plaintiffs to obtain an unencumbered title to the subdivided portion”.
[36] To consider this implied term it is necessary to consider the agreement for sale and purchase in greater detail. Clause 14.2 of the extra conditions of the agreement for sale and purchase provides:
14.2The purchaser undertakes, with all due diligence, and at the purchaser’s expense, to lodge with the Manukau City Council an application for resource consent to complete the subdivision in the form attached (the “Subdivision Plan”). The purchaser shall forthwith take all such steps as may be reasonably required to satisfy the conditions of the resource consent and complete the survey of the property and the issue of the new certificate of title for the property. Upon resource consent being issued by the Manukau City Council, this agreement shall be unconditional and the purchase price shall be due and payable in full.
(emphasis added)
This clause places an obligation on the Lawsons, not Mr Masson, but it shows that the parties clearly contemplated that after obtaining the resource consent, the survey of the property and the issue of a new certificate of title for the property were still tasks to be carried out under the agreement.
[37] The plan that is attached to the agreement contains some handwritten words which, although not wholly decipherable, contain a reference to their being “six sections”. This appears to be an optimistic view as to the subdivision potential of the property given the fact that the valuer called by the Lawsons, Anthony Gardner, could only confirm that the property would be subdividable into three sections. Nevertheless, it shows that subdivision was clearly the goal of the Lawsons.
[38] In his evidence Mr Masson did not readily accept that he was expressly advised of the Lawsons’ wish to subdivide, although he did concede that he was generally aware that this was their goal. I record that given the reference to the six sections on the plan, it is my view that it must have been openly understood between the parties that subdivision was the Lawsons’ intention.
[39] It is also necessary to refer to clause 3.7 of the agreement for sale and purchase, which is one of the standard form clauses. Clause 3.7(2) provides:
3.7 On the settlement date:
….
(2) The vendor shall concurrently hand to the purchaser:
(a)the memorandum of transfer of the property provided by the purchaser under subclause 3.5, in registrable form; and
(b)all other instruments in registrable form required for the purpose of registering the memorandum of that's right; and
(c) all instruments of title,
the obligations in subclauses 3.7(1) and 3.7(2) being interdependent.
[40] Given these clauses in the agreement it is implicit that there will be a process of doing all things that are necessary to obtain a new certificate of title for the property. It is implicit that the purchasers will forthwith take such steps, and it is implicit that the defendant will co-operate in relation to such steps. It is, indeed, expressly provided at clause 3.7(2)(b) that Mr Masson will provide all instruments in registrable form required for the registering of the memorandum of transfer, and that, therefore, any documents that a vendor would normally provide to enable title to issue will be so provided. However, this express obligation only relates to the settlement date.
[41] In considering the implication of terms I am guided by the statement of
Cooke P in Vickery v Waitaki [1992] 2 NZLR 58 at 64, where he stated from line 10:
It has been said that there are varieties of implications in contracts, that they are categories or shades in a continuous spectrum: see Liverpool City Council v Irwin [1977] AC 239, 253-254 per Lord Wilberforce. Discussions on the subject are legion, and it may be doubted whether tabulated legalism will ever produce an exhaustive or a rigidly discrete classification. But three broad classes are obviously terms implied by rules of law in certain kinds of contract (eg sale of goods), terms deduced by implication or interpretation from the express terms of the contract, and terms held to be implied to give business efficacy to the contract …
[42] Considering cumulatively the features and provisions of the agreement that I have traversed and having regard to its whole purpose, I conclude that it was an implied term that Mr Masson should take all such steps which might be necessary to enable the Lawsons to obtain an unencumbered title to the subdivided portion of land. The implication of such a term arises naturally from the wording of the
agreement, and in particular the need for the issue of a new certificate of title. This could only be done after settlement, and could be expected to involve co-operation from Mr Masson.
[43] I also record that on the approach set out in Devonport Borough Council v Robbins [1979] 1 NZLR 1, following the judgments in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363, that the five probanda required for implication of a term set out in that case would also have been met. Such a term would have to be implied to give business efficacy to the agreement. That term, as pleaded, was to take all steps as may be necessary to enable the plaintiffs to obtain an unencumbered title to the subdivided portion.
[44] I will consider Mr Masson’s two defences later in this decision, and in particular the issue of whether he was entitled to cancel on the grounds of delay. Putting them to one side for the time being, it is necessary to consider whether the term was breached. The two pleaded breaches that I focus on in particular are the failure on Mr Masson’s part to execute and return the subdivision plans delivered to him in July 2006, and his failure or refusal to deliver to the Lawsons the necessary partial discharge of the mortgage.
[45] I will consider the events in 2005/2006 in more detail when I deal with delay. However, for the purposes of this breach of contract pleading I find that Mr Masson did refuse to execute and return the subdivision plans, and did refuse to provide a partial release of the mortgage despite requests to do so. They were breaches of the implied term that he take all steps necessary for the title to be issued.
[46] I also observe that Mr Masson’s letter of 15 September 2006 where he stated that he regarded the agreement for sale and purchase as null and void was a repudiation of the agreement, and in itself a breach of contract. It was a clear statement by Mr Masson that he did not intend to be bound further by its terms, and would not co-operate in any way to enable the title to the newly constituted property to be obtained. This is not a pleaded breach of contract, although it has been a key part of the plaintiffs’ case from the outset of the trial. I do not consider it necessary
to deal with any issue of formal amendment given my findings as to other pleaded breaches of the term.
The claim for breach of fiduciary duty
[47] It is clear that in New Zealand the purchaser under a specifically enforceable contract is treated in equity as the owner of the property, and the vendor as constructive trustee: Bevan v Smith [1994] 3 NZLR 648 at 659. It is also clear that an equitable interest in land can pass under a conditional contract even if specific performance of the contract in the strict sense is not available: Bevan at 665. Whether the equitable interest has passed must always depend on the terms of the contract itself. The equitable interest is commensurate with the availability in a given case to afford the purchaser the protection of a specific remedy: Vostock Shipping Co Limited v Confederation Limited [2000] 1 NZLR 37 at [28].
[48] This case is unusual in that the purchaser had actually settled the purchase. However, there remained outstanding obligations and, once the s 224(c) certificate was obtained and all necessary things done by the Lawsons to obtain title, specific performance was available. This was very much a situation where the Lawsons, having paid over all the moneys owed but still having to do certain things to perfect the transaction and obtain the land, were trusting Mr Masson to hold the land for them and to make the land available to them when these tasks were completed. In this situation there was a constructive trust.
[49] The mortgaging of Mr Masson’s land by him in March 2005, after they had paid for it, was a breach of trust by Mr Masson. This is so even if he had wrongly assumed, as he claims, that the land he was mortgaging did not include the land to be transferred to the Lawsons. The lack of any intention to defeat the Lawsons’ interests does not make his action any less a breach of trust. It was his responsibility to hold the land for them. His refusal to co-operate with the Lawsons in signing the plans and his ultimate refusal to provide a discharge of mortgage over that land were also breaches of his fiduciary duty to hold the land for the Lawsons. It could also be added that his disavowal of his obligation in his letter of 15 September 2006 was a breach of trust.
[50] I, therefore, find the cause of action based on breach of a constructive trust to be made out.
The defences
[51] I have referred to the two broad heads of defence put forward by Mr Masson: his claim that the driveway width should not have been 4.88 metres, and his claim that there were unacceptable delays. His statement of defence is worded on the basis that he was entitled to cancel the contract by his letter of 15 September 2006 because of the delay. In his submissions during the trial he backed away from treating his letter of 15 September 2006 as a cancellation, and indicated that it should be better regarded simply as a recognition of a matter of fact; that because of the gross delays the agreement had ceased to have any legal meaning.
The width of the driveway
[52] This defence was not expressly pleaded and is somewhat difficult to articulate in legal terms. Doing the best I can, Mr Masson appears to be asserting that there was a misrepresentation or error which led to the width of the driveway being shown on the plans at 4.88 metres. The original width of the driveway prior to the agreement being entered into was 4.57 metres. The agreement for sale and purchase expressly stated that the land to be transferred “shall also include the strip of land to give the purchaser a 4.8 m driveway.” The plan that was attached to the agreement contained a statement in writing that the total width of the driveway was to be 4.8 metres.
[53] As best I can understand Mr Masson’s submission on this, it is that despite what the agreement said, it would have been possible to have complied with Council requirements and leave the boundary width at 4.57 metres. He relied in this regard on a plan prepared on 28 July 2004 for water and wastewater approval, which showed “the existing driveway” and a width of 4.57 metres.
[54] However, the actual plan that was prepared and was the subject of the resource consent was a different plan, which showed a width of 4.88 metres. This plan was dated 23 September 2004. It was the plan that was sent by the Lawsons’ lawyer to Mr Masson’s lawyer on 28 October 2004. It is the plan that was clearly going to be the basis for the new title. In fact, the width of the driveway shown on this plan at 4.88 metres only varied by 8 centimetres in width from the width referred to in the agreement for sale and purchase.
[55] Clause 14.3 of the agreement for sale and purchase provided:
14.3All measurements and areas are subject to checking by Land Information New Zealand, and to any variation which may be required as a result of such check, or which may be required by Land Information New Zealand or the Manukau City Council or the District Land Registrar.
It is clear then that all measurements and areas were subject to any variation which may be required by, amongst others, the Manukau City Council.
[56] Mr Lawson gave evidence that he was required to provide for this extra
8 centimetres of width by Mr Craig Moriarty of the Manukau City Council. Mr Lawson produced a letter he had sent to Mr Moriarty of the Manukau City Council recording that the width of the driveway had been changed to 4.88 metres, and there was a handwritten note on the document, apparently from Mr Moriarty, recording the altered driveway width “to reflect the above changes and altered lot dimensions”. It was Mr Lawson’s evidence that he was required to make this change by the Council. He was not expressly challenged on this by Mr Masson in cross- examination. However, Mr Masson clearly doubts his motives on the change.
[57] I accept Mr Lawson’s account of what happened. The change is small, the width being increased only by 8 centimetres. I do not accept that Mr Lawson would have tried to trick Mr Masson on the topic by pretending that the Council wanted the increased width. I find that the Council did require the width of the driveway to be increased to 4.88 metres. I also find that this variation fell within clause 14.3 of the agreement for sale and purchase, and was therefore a permissible variation.
[58] It is also relevant that the change was shown in the plan sent to Mr Masson before settlement, and his receipt of the balance of the purchase price. I am of the view that Mr Masson must have been aware of the dimensions of the driveway prior to settlement, despite his unwillingness to expressly concede this knowledge. He is a mortgage broker and impressed me as being intelligent and commercially aware. Therefore, the fact that his lawyers were given this plan and my conclusion that he would have, therefore, been aware of the change, makes his lack of protest at the time relevant. It indicates to me that the increased width was regarded by him at the time as being within the ambit of the agreement for sale and purchase. There might also be an issue of estoppel on his part having settled with the Lawsons, when he already had a copy of the plan showing the actual width. It is not necessary to determine this issue further given my other findings.
[59] I conclude, therefore, that it was always understood that the driveway would widen from 4.57 metres. The variation to the width of the driveway from 4.8 metres as stated in the agreement to 4.88 metres was not a breach of contract, and did not involve any misrepresentation. It was not fraudulent as Mr Masson has, on occasions, stated. I also note that even if it was a breach of contract, it would not have been a breach sufficient to warrant cancellation. It was not a breach that substantially reduced the benefit of the contract to Mr Masson, or made the contract substantially different from that contracted for in terms of s 7(4)(b) of the Contractual Remedies Act 1979.
Delay
[60] I have outlined the delays that took place. The delay between the settlement of November 2004 and the ultimate presentation of the plans and requests to settle in July/August 2006 was in excess of 19 months. Mr Lawson complained that Mr Masson caused some of this delay. There is a difference between them on this point. Mr Lawson asserts that on four or five occasions through 2005 he sought co- operation from Mr Masson on various matters and that it was not forthcoming. Mr Masson denies this and says that he had no contact with Mr Lawson through
2005. There is a dispute about an incident involving work being done on
Mr Masson’s property by a drainlayer. It is common ground that at some stage Mr Masson stopped this work being done, although shortly after he allowed it to resume. Mr Masson says that this incident took place in about August 2004, whereas Mr Lawson says it took place during 2005.
[61] I consider that the incident regarding the drainlayer would have been during
2005. This is because the work was being done in pursuit of the resource consent, and the resource consent was not available until September 2005 after the time when Mr Masson says the incident occurred. Actual settlement and the commencement of the work to obtain the s 224(c) certificate did not start until after settlement on
11 November 2004.
[62] I find that there were incidents during 2005 where Mr Masson was showing some hostility towards Mr Lawson and his activities in trying to pursue the subdivision. Nevertheless, the delay has not been adequately explained by Mr Lawson, and certainly as time progressed, on an objective test, the delays could have been a source of legitimate concern to a vendor. It is to be noted that clause 14.2 of the agreement required the purchaser to “forthwith” take such steps as might be necessary to obtain the issue of a new certificate of title for the property.
[63] No actual time was fixed for the fulfilment of this requirement. Where no time has been fixed for the fulfilment of a condition, the time for completion is a question of fact to be determined with regard to all the circumstances of the case. Generally where no time is fixed the law will imply obligation to perform or fulfil that condition within a “reasonable time”: Steele v Serepisos [2007] 1 NZLR 1, [47]- [61], (Tipping J - majority decision). It was stated by Tipping J in Mt Pleasant Estates Co Ltd v Withell [1996] 3 NZLR 324 at 329:
What is a reasonable time must be determined upon all the circumstances of the case. Repudiation is not to be lightly inferred from an action. In order for there to be repudiation from delay, the delay must generally be so substantial that it can reasonably be inferred from the delay alone that the party concerned does not intend to perform its contractual obligations.
[64] The general approach now is that time is prima facie not of the essence adopting the approach of equity rather than the approach of the common law: Steele
v Serepisos, Tipping J at [60]. The party faced with delay cannot normally hold the other party in substantial breach of the contract so as to entitle the innocent party to cancel, until an appropriate notice has been given making time of the essence and requiring performance by a stated date, and there has been a failure to so perform: Mt Pleasant Estates Co Ltd v Withell at 330, Steele v Serepisos at [61]. It was stated in Steele v Serepisos at [61]:
The purpose of the notice which equity required in that situation was to make it clear to the recipient that the giver regarded a reasonable time as having elapsed and that, in this light, the giver regarded the proposed date as the date by which it was reasonable for the recipient’s contractual obligation to be performed.
Lord Simon’s comment in United Scientific Holdings Ltd v Burnley borough Council [1978] AC 904 at 946 was noted; that the notice was designed to tell the recipient that he would be regarded as being in repudiation unless he performed by the stated date. In equitable terms it can be said that it is unfair to cancel an agreement on the grounds of delay when no time has been specified for the completion and the obligation. This is because the person upon whom the obligation is placed will not know the time by when it must be fulfilled. Clause 14.2 contains no date for completion.
[65] Clause 14.2 (see at [36]) does contain the word “forthwith”, but this is not the provision of an express date. The word “forthwith” applies to all steps, including the original obtaining of the resource consent. It cannot mean “immediately” in its normal sense. The clause must be seen in its factual matrix. The task of obtaining new certificates of title is notoriously fraught. The difficulties outlined by Mr Lawson in finding drainlayers to carry out the work, getting it done in a timely manner, completing necessary Council requirements and then finding that the Council had lost the relevant plans, could not, unfortunately, be regarded as unique. For instance, in Parsot v Greig Developments Ltd [2009] NZCA 241 where there was a provision for subdivision and transfer back, titles were issued four-and-a-half years after the agreement was entered into. The facts were different from the present, but it is to be noted that the Court of Appeal accepted that a notice making time of the essence in those circumstances was given prematurely. The word “forthwith” may impart the expectation of speed, and be relevant as to when a notice
making time of the essence could issue, and the duration of that notice. But I do not consider that the word displaces the need for some express notice to be given making time of the essence.
[66] In the circumstances, I conclude that a notice making time of the essence had to be given before Mr Masson was in a position to cancel on the grounds of delay. No notice was given. For that reason I find that the delays did not constitute a repudiation by the Lawsons, entitling Mr Masson to cancel.
[67] It is possible that in some circumstances the delay may be so protracted that it is obvious that the condition has not been fulfilled, and that no notice at all is required: Blanchard A Handbook for the Sale and Purchase of Land (4 ed 1988), quoted in Steele v Serepisos at [64]. I record that the delay in itself, while long, could not in terms of s 7(4) of the Contractual Remedies Act 1979 be regarded as a substantial breach. There were reasons for the delay, which although not a full explanation, put it in context. Such reasons arising after the contract can be considered: Parsot v Greig Developments Ltd at [22]. The delay was not causing any particular inconvenience to Mr Masson in that he had been paid in full. There was no work proceeding on the property to be subdivided save for some minor works and the drain-laying work, causing him no significant inconvenience.
[68] The only real inconvenience to Mr Masson was that he was paying the rates on the property that he was to transfer. He has estimated the amount of rates he had to pay at $2,100 on a proportional basis over a period of delay of approximately three-and-a-half years. The Lawsons, when the issue of rates was raised, indicated immediately a willingness to pay their share. The delay did not reduce the benefits or add to the burden of the contract sufficient to warrant cancellation.
[69] I record that I do consider that Mr Masson did not co-operate with Mr Lawson through 2005. This contributed to the delays. Through 2006 he decided that he did not wish to provide the discharge of mortgage, which would enable the new title to issue. Where there is a conflict between Mr Lawson’s evidence and Mr Masson’s evidence in this regard, I prefer the evidence of Mr Lawson. I found Mr Masson’s evidence at times to be quite inconsistent with the documentary
evidence that was available. I found his answers to questions to often be evasive and meaningless. On the other hand, I find Mr Lawson’s evidence to be credible.
[70] Nevertheless, I do not regard Mr Masson’s actions as having been the primary cause of the delay through to mid-2006. However, they were the cause of the delay from the point when Mr Lawson was seeking final sign off for the plans and, later, release of the mortgage to enable a new title to issue, and Mr Masson was not co-operating.
[71] It is against this background that I turn to the submission of Mr Illingworth that Mr Masson cannot in any event rely on his 15 September 2006 letter as having cancelled the agreement because he was not ready, willing and able to settle himself at the relevant time. He relied in this regard on the statement of the Court of Appeal in Noble Investments Limited v Keenan [2006] NZAR 594, where it was stated at [44]:
[44] A series of cases, however, have assumed, albeit with little discussion, that, despite the Contractual Remedies Act, a party must be ready, willing and able to proceed to completion in order to be able validly to cancel a contract
[72] The Court of Appeal observed that the purpose of the common law rule was to ensure that a party does not benefit from its own wrong: Noble Investments Limited v Keenan at [47]. A party can be seen as benefiting from its own wrong where it seeks to cancel a contract in circumstances where that party’s own actions in breach of contract have caused the other party’s breach. I respectfully accept this as a correct basis on which to approach the issue of whether the principle is applicable.
[73] The Lawsons were in a position where they had satisfied all the Council’s requirements and could obtain a s 224(c) certificate by late July 2006. At this stage Mr Lawson started to actively seek Mr Masson’s sign-off on the new plan that had had to be prepared because the Council lost the original plan. In his letter of
22 August 2006 to Daniel Overton & Goulding, Mr Lawson recorded that all the work had been completed, and that Mr Masson had informed him that he wished to consult with a lending institution before he signed the papers off. He asked for Mr Masson to sign the papers and to give a clearance of the title. The response was
the letter from Daniel Overton & Goulding stating that they not longer acted for Mr Masson. Mr Lawson’s requests were stated again in the Duncan Horrocks Law letter of 1 September 2006, where sign off on the plans and confirmation that the mortgagee consented to the registration was required.
[74] At this point Mr Masson had a contractual obligation pursuant to the implied term, referred to earlier in this judgment, to co-operate. He was contractually obliged to sign the plans and to provide a discharge of mortgage or consent from the mortgagee. He refused to do so. He was in default. By then purporting to cancel on
15 September 2006 on the grounds of delay, he was seeking to take advantage of his own wrong. While his actions had only caused the most recent delays, he was, nevertheless, the party in default at the time that he purported to cancel, and had been for some months. I consider, therefore, that he was seeking to take advantage of his own wrong. For that reason, also, I find that the agreement was not validly cancelled and that Mr Masson was in breach.
[75] It is also relevant that he had been in breach of his obligations as a constructive trustee in March of the previous year when he had entered into the new mortgage over the land he was to transfer to the Lawsons. His refusal to meet the obligations in August and September 2006 reflected that earlier breach of trust. In cancelling he was seeking to take advantage of that breach of trust.
Conclusion on liability
[76] I find that the causes of action based on breach of an implied term and breach of trust made out.
Relief
[77] The Lawsons seek compensation for their expectation losses, namely the difference between the value of their land without the additional area, and the value of their land with the additional area. They called a valuer, Mr Gardner. He gave evidence that the valuation of 19 Ambury Road as at October 2006 without the
additional land of 1,652 square metres was $450,000, and with the additional land of
2,244 square metres was $660,000.
[78] In the alternative they seek restitution damages, for their payments to
Mr Masson, and the costs of endeavouring to effect the subdivision of $90,000 and
$12,077 respectively.
[79] This claim for damages is entirely orthodox. The Lawsons are entitled to compensation for the loss of their bargain, and to be financially restored to the position that they would have been in if the contract had been performed. If the contract had been performed they would have owned the property in October 2006 worth $210,000 more than what it was actually worth without the additional land. There is no need to vary from the unusual rule that the loss is assessed at the date when the contract was breached.
[80] I, therefore, fix damages in the sum of $210,000. The Lawsons also seek interest at the statutory rates from 1 September 2006 to 1 July 2008 at 7.5 percent per annum, and from then to today’s date at 8.4 percent per annum. I have pointed out that 8.4 percent per annum is considerably higher than current bank rates, and Mr Illingworth has been content to leave the issue of interest to my discretion.
[81] I consider that looking at the period from 1 September 2006 from an overview, from an interest perspective, the appropriate rate of interest to be paid from 1 September 2006 is 6 percent per annum. I consider 1 September 2006 to be a reasonable start point for interest, as it was a little later than that when Mr Masson failed to meet his obligations to take the necessary steps to enable the plaintiffs to obtain their unencumbered title.
Result
[82] The plaintiffs have succeeded in their claims against the second defendant and are awarded damages in the sum of $210,000, together with interest to today’s date from 1 September 2006 to be calculated at the rate of 6 per cent per annum.
Costs
[83] I award costs in favour of the plaintiffs to be paid by the second defendant on a 2B basis.
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Asher J
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