Lentjes v Bremner HC Christchurch M211/01

[2001] NZHC 815

In the High Court of New Zealand
Christchurch Registry M211/01

Between CARRY PETER LENTJES and SUSAN MARIE LINKLATER
Applicant

And ALISTER WALTON HOWORTH BREMNER
Respondent

Hearing: 28 August 2001

Appearances: L Harding for Applicants
D H Hicks for Respondent

Judgment: 3 September 2001

JUDGMENT OF MASTER VENNING
On Application A Caveat Not Lapse

Solicitors: Ronald W Angland & Son, Christchurch for Applicants
Harold Smith & Dallison, Christchurch for Respondent

APPLICATION

[1] The Applicants seek an order under s145 Land Transfer Act that the caveat described in the application not lapse.

BACKGROUND

[2] The parties to these proceedings are farmers. On 6 April 2001 they entered an agreement for sale and purchase of farm land. Pursuant to that agreement the Respondent agreed to sell a farm property at Te Oka Bay Road, Banks Peninsula to Mr Lentjes. Subsequently and by agreement Ms Linklater was also nominated as purchaser with Mr Lentjes.

[3] The agreement for sale and purchase dated 6 April 2001 was completed on the standard REINZ 7th edition (2) July 1999 form. The agreement incorporated the standard conditions of that agreement. In addition there were a number of further conditions of sale, in particular:

“1.0 Purchasers/Solicitors Approval
This offer is subject to the purchasers’ solicitor’s approval as to Certificate of Title, Resource Management Act 1991 and all matters arising from a Land Information Memorandum from the Local and Regional Councils within Fifteen (15) working days from the date of this agreement. This condition is inserted for the sole benefit of the purchasers.

2.0 Purchasers Approval of Finance

The parties This Agreement is subject to the purchasers arranging finance satisfactory to themselves within Fifteen (l5) working days of the date of this agreement. This clause is inserted for the sole benefit of the purchasers.

. . .

5.0 The purchaser shall allow at no cost to the vendors and adjoining owners, continued use of the airstrip and bin provided however that they contribute towards the maintenance of this facility. Such agreement to be documented in a formal Deed of Agreement to be prepared by the Vendors Solicitors and mutually between both parties prior to settlement.”

[4] Further conditions of sale 1.0 and 2.0 were due for confirmation on 2 May 2001. On that day the Respondent agreed to an extension of time to 2.00 pm on 4 May 2001 for those conditions to be confirmed.

[5] The agreement provided for a deposit of $26,000. The Applicants paid the deposit. The agreement also provided for possession and settlement on 8 May 2001.

[6] On 4 May 2001 Mr Angland, the solicitor for the Applicants, wrote to the Respondent’s solicitors as follows:

“1. I approve the matters contained in special condition 1.0 of the Contract subject to my approval of the form and content of the airstrip easement and the constitution of the company that is to enjoy the rights contained in the easement document. My client is reading willing and able to pay the deposit to Pyne Gould Guinness as stakeholder until such time as the form and content of the easement documentation has been approved.

2. Satisfactory finance has been arranged.

3. The possession date of 8 May 2001 requires review. My client suggests settlement be effected on 25 May 2001 or such other date as may be mutually agreeable to the parties.

4. Mr Lentjes also seeks your client’s consent to the purchaser being himself and his partner Susan Linklater. Does your client have any objection to this variation?

I look forward to hearing from you regarding the matters in 1, 3 and 4 above.”

[7] Despite the reference in clause 5.0 of the further conditions to a deed of agreement, it appears that the Respondent required an easement to protect the right of access and use of the airstrip and the Applicants were, at least initially, prepared to consider an easement.

[8] By letter of 16 May 2001 the Respondent’s solicitors responded to the Applicants’ solicitors letter of 4 May. In the letter the Respondent’s solicitor suggested possession and settlement take place on 25 May 2001 on the basis inter alia:

“(c) The purchaser pays rental at $2,000.00 plus GST per month from possession until the airstrip easement is registered at which time settlement will be completed.
Alternatively possession and settlement can be deferred until the airstrip easement is registered at which time the stock will be valued as provided in the agreement.”

[9] The solicitors enclosed a draft easement for the airstrip with the letter of 16 May, together with a draft constitution for the company in whose favour it was proposed the easement would operate.

[10] The Applicants’ solicitor responded by fax of 18 May. He recorded the Applicants’ instructions were to reluctantly accept possession on the terms that rental would be paid until “such time as the airstrip easement is registered or 31 August 2001 whichever is the earlier”. The letter concluded by noting that the solicitors would contact the Respondent’s solicitors in the next week in relation to the easement as Mr Lentjes wished to discuss the matter with Ms Linklater over the weekend.

[11] The Respondent’s solicitor confirmed the arrangement for settlement by 31 August 2001 by letter of 18 May, again sent by fax. Although it did not specifically refer to the earlier letter, it confirmed the basis upon which possession was to be taken on 25 May 2001.

[12] The Applicants’ solicitors replied to that correspondence by letter of 21 May and noted:

“. . . Aside from the date that our respective clients are to meet to undertake the stock count all matters now appear to have been settled in respect of possession and settlement issues apart from the wording of the airstrip easement.”

[13] There was then a request for further information regarding the adjoining landowners. At this stage of discussions it seems the parties and their solicitors all anticipated that agreement would be reached as to the term of the easement.

[14] Correspondence continued between the respective solicitors during the latter part of May 2001 regarding the easement terms but no final resolution was able to be concluded.

[15] Unfortunately the discussions broke down. Possession was not given and taken on 25 May. The Respondent’s solicitors wrote to the Applicants’ solicitors on 28 May in the following terms:

“Mr Bremner is not willing to have further amendments to the easement document. He has signed the transfer in the form that was forwarded to you by fax on Friday 25th May 2001.

As noted in our letter of 25th May 2001 the agreement has not been confirmed as unconditional. Mr Bremner has requested that we record his intention to cancel the agreement if it is not confirmed as unconditional on the basis the airstrip easement in the form submitted is approved, and the possession payment is made before 2.00 pm today.”

[16] That was met by a letter without prejudice as to costs. Shortly put, the Applicants did not accept the Respondent was entitled to cancel.

[17] The Respondent’s solicitors then sent a further letter later on 25 May in which the solicitor concluded:

“Further terms of sale 1.0 and 5.0 are conditions subsequent: general condition 8.7(1). You have not given a clear and unequivocal (sic) notice that further term of sale 1.0 has been confirmed or waived. The time for fulfilment of that condition has expired.

On behalf of Mr Bremner we give notice that the agreement is voided for non-fulfilment of the further terms of sale. The purchasers are entitled to the return of the deposit as provided in general condition 8.7(5).”

[18] The Applicants’ response was to lodge a caveat over the land in issue. A mortgage has been presented for registration. That required the Applicants to bring this application to sustain the caveat.

PRINCIPLES

[19] The general principles that apply to applications such as the present are settled. The onus is upon the caveator to establish an arguable case for the continuation of the caveat. As Somers J put it in Sims v Lowe [1988] 1 NZLR 656:

“The caveator seeks to clog or fetter the proprietary interest of another. As a matter of principle it seems right that he must justify the continued existence of his caveat. He will do that if he can show he has a reasonably arguable case for the interest he claims. The issue is the same as which arises under s145.”
P660

[20] However, once the caveator shows that he or she has a reasonably arguable case for the interest claimed then:

“. . . an order for the removal of such a caveat will not be made under s 143 unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so. See eg Plimmer Bros v St Maur, Re Caveat No 2538 (1906) 26 NZLR 294, 296; Catchpole v Burke [1974] 1 NZLR 620, 623-624, 625 (a case under s 145); Mall Finance & Investment Co Ltd v Slater [1976] 2 NZLR 685, 686, 688. The patent clarity referred to will not exist where the caveator has a reasonably arguable case in support of the interest claimed. Catchpole v Burke, New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41, 43 and Holt v Anchorage Management Ltd [1987] 1 NZLR 108 show that the same test applies to both s 143 and s 145.”
P659-660

[21] A conditional agreement for sale and purchase can support a caveat: Bevin v Smith [1994] 3 NZLR 648; McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612.

[22] The two issues for the Court on this application are:

•   Whether in light of further condition 5.0 it can be said the parties made a concluded agreement that, albeit conditional, would support the caveat, and if so;

•   Whether the agreement was validly avoided by the Defendant. If it was then the agreement is at an end and any interest the Applicants had in the land under it must also be at an end.

HAVE THE PARTIES MADE A CONCLUDED AGREEMENT?

[23] Further condition 5.0 anticipates that the parties will have further discussions and agree the terms upon which the purchaser will allow the vendor and adjoining owners continued use of the airstrip and bin. As it stands, the last sentence of clause 5.0 appears to be missing a word after “mutually”. It could be inferred that the word missing is “agreed”. In any event the effect of the clause is to require further negotiations and agreement on this issue. Clause 5.0 does not settle the terms and nor does it, or the balance of the agreement, establish a mechanism for resolving any dispute about the terms of use.

[24] Mr Hicks referred to two Court of Appeal authorities that have considered the effect of a condition in a contract that requires the parties to further agree on a material term of the contract.

[25] The first authority is Willetts v Ryan [1968] NZLR 863. It concerned an application to sustain a caveat. The caveat was based upon an option document that provided consideration for the option, identified the property and the parties, and stated that the sale price was:

“. . . payable 10 percent cash deposit on signing the agreement for sale and purchase, the balance by mutual arrangement, such option to expire . . .”

The offeree purported to accept the offer and tendered the 10% deposit.

[26] At first instance Richmond J noted that cases in which the Court is called upon to decide whether or not a concluded contract has been entered into fall into two broad classes. First he noted:

“. . . in the case of a contract for the sale of land, that a binding contract may be concluded if there is agreement as to the parties, the particular land in question and the price. Such a contract is normally called an “open contract” and the various rights and obligations of the parties as to payment of the price, completion, giving and taking of possession and other incidental matters, will all be supplied by implication in so far as they have been left open by the parties . . . .

The second class of case arises when language has been used which is indicative of the fact that the parties are still in a state of negotiation about some matter which they intend to settle by further agreement. In such cases it does not matter whether the term of the contract still outstanding and subject to further agreement is or is not an “essential” term in the sense in which I have just used that word.”
P722

[27] His Honour then referred to the authorities of Hussey v Horne-Payne (1879) 4 AC. 311, Denny v Kerr (1903) 23 NZLR 719, In re W. G. Apps & Sons Pty. Limited and Hurley [1949] VLR. 7, Nicolene Limited v Simmonds [1953] 1 All ER 822, and Fowler v Bratt [1950] 1 All ER 662.

[28] Richmond J concluded that in the case before him not only was the balance of the purchase price to be paid by mutual agreement, nothing was said of the date of completion which would carry with it by implication the date of possession. His Honour accepted the authority of Hussey v Horne-Payne that as the parties had evinced an intention that the matter still for agreement should be decided by agreement between them, rather than by implication of law, no concluded contract came into existence, and also accepted the following reasoning of Denniston J in Denny v Kerr applied in the circumstances of the case before him:

“It is claimed by the plaintiff that, as the parties did not come to an agreement on the point of delivery and payment, a reasonable time will be assumed. But this is to substitute an implied agreement for the agreement of the parties.”

[29] Thus in a case where the parties have expressly recorded that a further term of the contract is to be agreed by them, it is not open to the Court to imply a reasonable time for completion or to imply a term into the contract to ensure performance or satisfaction of that condition. The bargain the parties have made is that they agree to agree the clause themselves in terms in the future.

[30] Richmond J’s decision was upheld on appeal by the Court of Appeal comprised of North P, Turner and McGregor JJ. The Court’s decision was delivered by Turner J who expressly accepted that where the parties were identified, the land described, and the amount of consideration specified then the Court might find a concluded contract and all other unexpressed obligations of the vendor and purchaser could be implied in terms reasonable in the particular circumstances. However, Turner J stated:

“. . . it is otherwise where they have expressly reserved such a matter as one for later negotiation and agreement. Such an express reservation will compel the Court to conclude that the matter so reserved is not one about which the parties thought it unnecessary to say anything, being content that the Court should if necessary decide what is reasonable; on the contrary they have declared it to be a matter upon which they must negotiate and agree before their pactum shall be given legal force.”
P868

[31] The matter has more recently been considered by the Court of Appeal in Barrett v IBC International Ltd [1995] 3 NZLR 170. That case also concerned a document for the purchase of a property. The document contained an option that was stated to be:

“. . . exercisable at any time during the currency of this Agreement by the purchaser giving to the vendor notice in writing of the purchasers intention to exercise the option and upon such notice in writing being given then and in such case the vendor and the purchaser shall forthwith enter into a binding agreement for sale and purchase of the items referred to in the Schedule.”

The schedule provided inter alia for the date of settlement “to be mutually agreed upon exercise of option”.

[32] The Court of Appeal accepted that as the parties had expressly agreed that the date should be mutually agreed later there was no ground or basis for not applying the rule in Willetts v Ryan that there could not be a concluded contract where there had been an express reservation of a matter for further negotiation and agreement.

[33] Cooke P accepted that the modern approach is that the Court is slow to hold a purported contract void for uncertainty. However, His Honour noted again the validity of the distinction made in Willetts v Ryan between the express reservation of a matter for future negotiation and agreement on the one hand, and silence about it on the other. In the event of silence, it may well be possible to hold that the gap is filled by an implied term as to reasonableness. In the event of an express reservation, according to the reasoning in Willetts, that solution is excluded. Cooke P concluded by observing:

“Willetts was decided some 27 years ago. So far as appears from the argument today, it has not hitherto been questioned. It is an authority relating to transactions regarding the proposed sale of land and may have been relied upon by professional persons concerned with such transactions. In my opinion it is not appropriate to do other than follow that case.”
P174

[34] This Court is bound by Willettsv Ryan and Barrett v IBC International Ltd. Further condition 5.0 in the present case effectively left the precise of terms of the Deed of Agreement for future agreement between the parties. A number of issues remained open to be further agreed upon. For example, definition of who were the “adjoining owners”, the basis of the continued use of the airstrip (ie was it to be personal or commercial use of all of the purchaser, vendor and adjoining owners), if commercial was the use of the airstrip to be limited to farming activities, how were the costs and expenses of maintenance of the airstrip and bin to be paid. Further condition 5.0 did not provide how these and other issues were to be determined, other than by the parties’ agreement. Nor was any mechanism to resolve disputes and to conclude an agreement, such as an arbitration clause, provided for in the agreement.

[35] In Barrett v IBC International Ltd counsel suggested that the condition left for mutual negotiation must be vital or at least important to the parties on the facts of the particular case. Cooke P noted that the judgment of the Court of Appeal in Willetts v Ryan did not appear to treat the relative importance on the particular facts as a determining factor. At first instance in that case Richmond J had held that it did not matter whether the term of the contract still outstanding and subject to further agreement was or was not an essential term of the contract.

[36] Mr Harding did not suggest further condition 5.0 was not a material or important clause. Moreover, in the present case it is apparent from the discussions between the parties and the difficulty that has arisen in relation to this clause that the subject matter of clause 5.0 is an important and material part of the agreement or bargain between the parties, quite apart from Richmond J’s clear decision on this point.

[37] Mr Harding did submit that there was an obligation upon the vendor to take all reasonable steps to fulfil the condition and that in this case the vendor had not done so. The submission was to the effect that the vendor has sought to impose obligations and restrictions on the clause that were not present and has refused to consider alternative means of resolving the impasse. It was a submission that the vendor has not acted in good faith to negotiate under further condition 5.0.

[38] A similar submission was made to both Richmond J and the Court of Appeal in Willetts v Ryan. In that case the purchaser submitted that the vendor was effectively relying upon a self-induced frustration which was not permissible at law. That submission was rejected by both Richmond J and the Court of Appeal without hesitation. The Court noted that that submission could have no bearing on negotiations which never attain the status of a binding contract. The reasonableness or otherwise of the parties’ negotiating positions cannot be the test because the matter is not to be decided by the test of reasonableness but rather is to be decided by agreement.

[39] For those reasons, and in light of the Court of Appeal authority which is binding on this Court, I find that by incorporating further condition 5.0 into the agreement for sale and purchase between them in the circumstances of this case the parties have left a material condition to be further agreed between them at a later date. By so doing they have failed to conclude a binding and enforceable agreement. The caveat can not be sustained.

AVOIDANCE IN THE ALTERNATIVE

[40] In the circumstances it is strictly unnecessary to go on and consider the alternative ground relied upon by the Respondent. However, for completeness I deal with the matter shortly.

[41] Further conditions 1.0 and 2.0 were to be confirmed by 2 May. The time for confirmation was extended to 2.00 pm on 4 May. By his letter of 4 May faxed to the vendor’s solicitors the purchases’ solicitor confirmed finance. Further condition 2.0 was thus satisfied. However, the solicitor gave a conditional acceptance only of further condition 1.0. The approval of further condition 1.0 was tagged to be subject to (ie conditional upon) the solicitor’s approval of the form and content of the airstrip easement and constitution of the company.

[42] I accept the force of Mr Hicks’s submission that it matters not whether the solicitor was entitled to tag the acceptance in that way. In my view he was not, as a matter of law. The airstrip easement was not a matter covered by or provided for in further condition 1.0. Despite that, however, the approval of further condition 1.0 was subject to and conditional upon the solicitor’s approval of documents relating to the airstrip. Further condition 1.0 is a condition subsequent: clause 8.7(1) of the standard conditions of contract. By standard condition 8.7(5) either party could avoid the contract if a condition of the contract was not fulfilled by the date for fulfilment. Clause 8.7(3) of the standard conditions makes time for performance of further condition 1.0 of the essence. By extending the time for fulfilment to 2.00 pm on 4 May 2001 the essentiality of time was preserved and transferred to the new date: clause 7(3) and Baker v McLaughlin [1967] NZLR 405; Buckland v Farmer & Moody [1978] 3 All ER 929.

[43] Thus, even if a binding contract was concluded despite the wording of further condition 5.0, the contract was avoided by the vendor’s solicitors by their letter of 25 May. They were entitled to avoid the contract at that time as the Applicants had neither unconditionally confirmed nor waived condition 1.0.

[44] Mr Harding submitted that if the Court came to that view then it should accept the logic of Mr Angland’s argument set out in correspondence that the provisions of standard condition 5.2 required the lodging of a plan and observance of the requisitions procedure before the Respondent could cancel the contract. However, with respect to that submission and reasoning, it is based upon a misapprehension. The purchaser had to confirm further condition 1.0 by 2.00 pm on 4 May. The purchaser made the approval conditional. The conditional approval could not create fresh obligations upon the vendor. The purchaser Applicants were not entitled to requisition the vendor’s title in relation to an airstrip easement that the parties were negotiating the terms of. If the parties concluded an agreement before the contract was avoided then that would be an end of the matter. If the parties did not conclude an agreement or did not conclude an agreement before the contract was avoided then again that would be an end of the matter but on a different basis. There was nothing for the Applicants to requisition. Standard clause 5.2 has no application.

ORDER

[45] Not without some sympathy for the Applicants, I conclude there is no basis upon which the Applicants can sustain an arguable claim to an interest in the vendor’s land. The caveat must be allowed to lapse. The previous order of the Court sustaining the caveat until further order of the Court is vacated.

COSTS

[46] The Respondent is entitled to costs. Costs are fixed on a 2B basis together with disbursements.