Li v GSC Holdings Limited
[2018] NZHC 1769
•17 July 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-000172
[2018] NZHC 1769
BETWEEN JINCHANG LI
Plaintiff
AND
GSC HOLDINGS LIMITED
Defendant
Hearing: 18 June 2018 Appearances:
S R G Judd and J Rafiei for the Plaintiff T J Herbert for the Defendant
Judgment:
17 July 2018
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 17 July 2018 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
William Gong Lawyers Ltd, Auckland Doug Cowan, Auckland
T J Herbert, Auckland S R G Judd, Auckland
LI v GSC HOLDINGS LTD [2018] NZHC 1769 [17 July 2018]
Introduction
[1] The plaintiff applies for summary judgment on part of his claim against the defendant.
[2] The basis of the plaintiff’s claim is an agreement to purchase one of the lots in the defendant’s proposed subdivision at Huapai entered into by the parties on 20 October 2015.1 The plaintiff claims he validly cancelled the agreement and is entitled to have his deposit of $46,800 refunded. He also seeks interest and costs.
[3]The application is opposed.
[4] Both sides rely on the terms of the agreement. Several terms at the heart of their argument featured prominently in their dealings leading up to the commencement of this proceeding. It is helpful to refer to them at the outset:
(a)Under cl 22(1)(a) the agreement was conditional on the defendant (as vendor) procuring a certificate for the subdivision under s 224 of the Resource Management Act 1991 (“s 224 certificate”) within two years of the date of the agreement.2 The special term was expressly inserted for the sole benefit of the defendant.
(b)Under cl 9.8(5), if the date for fulfilment of certain conditions (including special conditions) passed without the condition being fulfilled, either party was entitled to avoid the agreement by giving notice to the other at any time before the condition was fulfilled or waived. (Emphasis added).
(c)Under cl 44, the plaintiff was entitled to cancel the agreement by notice in writing if notice of satisfaction of the special term relating
1 The claim originally related to two agreements for sale and purchase for two lots. The plaintiff sought a refund of $963,600 for the deposits for the two lots (lots 29 and 30) plus interest and costs. It proceeds in relation to lot 30. This is on the basis that the part of the claim relating to lot 29 has been satisfied.
2 A s 224 certificate certifies compliance with the resource consent for the subdivision. It is a prerequisite obtaining titles for the new lots.
to the procuring of a s 224 certificate was not given by 4 pm on 30 November 2017. (Emphasis added).
Accepted background
[5] On 21 October 2017, two years had passed from the date of the agreement, the defendant had not procured the s 224 certificate. On 18 October 2017 (shortly before the expiry of that two year period), the defendant’s solicitors gave notice to the plaintiff’s solicitor stating that the defendant waived the special term. The s 224 certificate was not procured by 30 November 2017. When 4 pm passed on that day the defendant had not given any further notice concerning the s 224 certificate. Shortly after 4 pm on 30 November 2017 the plaintiff’s solicitor gave notice that the plaintiff cancelled the agreement. He requested the return of the deposit.
[6] The parties’ solicitors exchanged correspondence debating the legal effectiveness of the defendant’s notice of waiver and the plaintiff’s notice of cancellation.
[7] On 5 February 2018 the plaintiff issued this proceeding claiming the return of his deposit.
[8] On 22 December 2017, the defendant obtained a s 224 certificate for the subdivision. He filed documents in opposition to summary judgment, asserting that the agreement was on foot.
The central issue in this proceeding
[9] Counsel agree that there are no material disputes as to the factual sequence. Whether summary judgment should be granted turns on the construction of the agreement and whether the vendor’s notice of waiver was arguably effective.
The agreement in more detail
[10] The agreement is dated 20 October 2015. It was for the sale and purchase of Lot 30 in the defendant’s proposed 60 lot subdivision at Huapai. It is on the standard form REINZ/ADLS agreement (Ninth Edition, 2012). The purchase price was
$468,000 including GST (if any), to be paid by a deposit in two tranches totalling 10% (which were paid), with the balance payable upon the settlement date. The settlement date was 5 working days after the vendor’s notice that a separate certificate of title for Lot 30 had issued.
[11] The agreement contained the usual standard form terms. It also contained further terms that the parties inserted, dealing with matters concerning the subdivision, requisition of the new title, and the s 224 certificate, and compliance with the conditions of subdivision.3
[12] Cl 9 of the REINZ ADLS form sets out “General terms of sale”. These comprise a set of “particular conditions” together with additional conditions for the operation of the particular conditions and for the operation of any other conditions that the parties chose to expressly include as further terms. Clause 9 materially states:
9.0 Conditions and mortgage terms Particular conditions
9.1 …
Operation of conditions
9.8If this agreement is expressed to be subject either to the above or to any other condition(s), then in relation to each such condition the following shall apply unless otherwise expressly provided:
(1)The conditions shall be a condition subsequent.
(2)The party or parties for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.
(3)Time for fulfilment of any condition and any extended time for fulfilment to a fixed date shall be of the essence.
(4)The condition shall be deemed to be not fulfilled until notice of fulfilment has been served by the party on the other party.
(5)If the condition is not fulfilled by the date for fulfilment, either party shall at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this
3 Without the issue of the s 224 certificate the defendant would be unable to procure the issue of certificates of title for the subdivisional lots including lot 10.
agreement the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement, and neither party shall have any right or claim against the other arising from this agreement or its termination.
(6)At any time before this agreement is avoided, the purchaser may waive any financial condition and either party may waive any other condition which is for the sole benefit of that party. Any waiver shall be by notice.
(Italics added for emphasis).
[13] By the introductory words to cl 9.8, the parties acknowledged that they could expressly provide in the agreement that any condition in the agreement would operate differently to what is described in the general operational terms in cl 9.8.
[14] In the further terms added by the parties, Special Conditions 21 (cl 21) and 22 (cl 22) dealt with the subdivisional and title matters:
21. Subdivision and title requisition
21.1The Purchaser acknowledges:
(a) That a separate certificate of title under the Land Transfer Act 1952 is not yet been issued for the property.
(b) The Vendor does not provide any warranty or undertaking as to the day upon which the certificate of title will be available.
(c) That the Purchaser shall have no right to requisition for removal of any consent notice or other memorial required by any territorial or other authority to be endorsed on the certificate of title.
(d) That the Purchaser shall not be entitled to a transfer of property or call for a title thereof until the vendor has obtained individual certificates of title for the lots.
(e) That the Vendor does not provide any warranty or undertaking as to the date upon which the plans will be deposited and the individual certificates of titles issued, nor as to when the purchaser will be able to register a memorandum of transfer.
22. Conditional agreement
22.1 This Agreement is conditional upon:
(a) The Vendor at its own expense of doing all things necessary for and procuring the issue of a section 224 Certificate under the Resource Management Act 1991 within two years of the date of this Agreement. This clause is inserted for the sole benefit of the Vendor.
(b) The Vendor at its own expense obtaining the certificate of title for the Lot(s) being sold and purchased under this Agreement.
[15] Clauses 22(1)(a) and 9.8(5) were relied on by the defendant in purporting on 18 October 2011 to waive compliance with cl 22(1)(a). The defendant’s notice stated:
Please note that our client has made satisfactory progress in the subdivision and is working towards applying for section 224 certificate. Accordingly our client hereby waives clause 22.1 (a). We will keep you advised once the section 224 certificate and new titles are issued.
[16] Another further term, special condition 44, referred to “the condition” in cl 22.1(a), providing:
If notice of satisfaction of the condition in clause 22.1(a) is not given by 4
p.m. on 30 Nov 2017 then the Purchaser may cancel this agreement by notice in writing to the other party and the deposit shall be refunded to the Purchaser and neither party shall have any claim against the other.
[17] Clause 44 was relied on by the plaintiff in purporting to cancel the agreement on 30 November 2017. The plaintiff’s solicitors in the notice stated that: “A notice of waiver is not a notice of satisfaction in accordance with clause 44.”
The grounds of opposition
[18] The defendant’s grounds of opposition (as further expanded upon by counsel at the hearing) involve three principal propositions:
(a)Under cl 22.1(a) the agreement was conditional on the defendant, at its own expense, doing all things necessary for and procuring the issue of the s 224 certificate within two years of the date of the agreement.
(b)As the condition was for the sole benefit of the defendant, performance did not affect both parties. By waiving the condition, the defendant indicated “it did not require fulfilment or that it was satisfied with the level of fulfilment at the time”. It therefore eliminated the need for fulfilment of the condition because the condition was fictionally “fulfilled”. Mr Herbert submitted that
upon such “fictitious” fulfilment, the defendant had to obtain the s 224 certificate within a “reasonable time”.
(c)20 December 2017 (when the s 224 certificate issued) was within a reasonable period after 18 October 2017.
(d)As “notice of satisfaction as to fulfilment” of the condition in cl 22.1(a) was given by the notice of waiver on 18 October 2017 the purchaser had no right to cancel.4
Summary of submissions
[19]For the plaintiff, Mr Judd submitted that:
(a)The defendant’s notice of waiver did not satisfy the condition in cl 22.1(a) by either 21 October 2017 or the date of 30 November 2017 provided in cl 44.
(b)As a matter of construction of the agreement, the plaintiff was therefore entitled, as purchaser, to cancel the agreement.
(c)Accordingly, the plaintiff’s cancellation on 30 November 2017 was effective.
[20] For the defendant, Mr Herbert submitted that the notice of waiver satisfied the condition in cl 22.1(a) because waiver is an available means of satisfying a condition that is for a party’s sole benefit. He invokes the provisions of cl 9.8(5) and relies also on what he submits is reasonably implied. He submits that the defendant, by waiving cl 22.1(a), caused the right of cancellation under cl 44 to fall away. He relied upon three Court of Appeal authorities which dealt with the availability and effect of a right of waiver under cl 9.8(5) or similar provisions.
4 The defendant originally relied on a further ground of opposition based on rectification. That ground was abandoned at the hearing.
[21]The first decision is Hawker v Vickers, where the Court said:5
The legal principles are well established. A party may waive a condition or a provision in a contract which is solely for that party’s own benefit and is severable. In such a case the other party is denied the right to treat the condition as unsatisfied, and is obliged to complete notwithstanding the loss of that advantage. The question is one of construction of the contract. It turns on whether the stipulation is in terms or by necessary implication for the exclusive benefit of that party, and the answer is derived from consideration of the contract as a whole in the light of the surrounding circumstances …
(Emphasis added)
[22] The second decision, Globe Holdings Ltd v Floratos, concerned a condition inserted expressly for the benefit of the purchaser.6 The Court referred to the same passage in Hawker (at [21] above).7 The Court also observed:8
Once the time allowed for the fulfilment of the condition expires [the vendors] can forthwith give notice of cancellation if they have not already been informed that the sale will go ahead. It matters not to them whether [the purchaser] does so because of fulfilment or because the purchaser elects to proceed anyway. The achieving of certainty is in the vendors' own hands if there has been no action by the purchaser. If there has been a waiver the transaction proceeds as it would have done if the condition had been satisfied on the date of the waiver.9
[Emphasis added]
[23] In To v Huang the Court of Appeal cited passages in the judgments in both Hawkers v Vickers and Globe Holdings Ltd v Floratos.10 In relation to a due diligence condition expressly inserted for the benefit of a purchaser, the Court recorded:
Mr Blanchard, for the vendors, emphasised the practical operation in these circumstances of cl 9.8(5). That is, it preserves the purchaser’s position until the date specified in the relevant condition but after that date the purchaser and vendor have equal rights, with either able to avoid the agreement. If the purchaser neither waives nor confirms fulfilment of the due diligence condition by the specified date the vendor will be uncertain as to whether settlement will proceed on the agreed date. If that uncertainty is or becomes unacceptable to the vendor or, the vendor or may avoid the agreement. Thus, a purchaser who neither waives the due diligence condition nor declares it to be satisfied by that date risks the vendor avoiding the agreement thereafter.
5 Hawker v Vickers [1991] 1 NZLR 399 (CA) at 402 – 403.
6 Globe Holdings Ltd v Floratos [1998] 3 NZLR 331, (CA).
7 At 334.
8 At 339.
9 To v Huang [2015] NZCA 446.
10 At [11].
[24] Mr Herbert’s argument essentially rested on a notion of “fictional” satisfaction or fulfilment of cl 22.1. He acknowledged that in order to settle the sale, the defendant (notwithstanding a “waiver” of cl 22(1)) would still have had to fulfil its obligation under the agreement to provide a title for Lot 30 and that the defendant’s ability to provide the title was dependent upon first procuring a s 224 certificate. But, in his submission, it was a matter for the defendant, as vendor, to choose whether (through a waiver) it took the risk of being able to procure the certificate within a reasonable period after 21 October 2017 if at all. He submitted it was significant that the s 224 certificate was obtained in late December 2017, suggesting that it was a “fair bet” that the defendant would have been able to settle within “a reasonable time”. Mr Herbert’s submission was that 20 December 2017 – when the s 224 certificate issued – fell within a reasonable time (above at [18](c)).
Assessment
[25] The questions are whether (arguably) the notice of waiver given on 18 October 2017 was a legally available means to “satisfy” the special condition in cl 22.1(a), and whether the notice effectively extinguished the purchaser’s right of cancellation in special condition 44?
[26] I conclude that the notice of waiver was not arguably a legally available means to satisfy the condition in cl 22.1(a).
[27] Underlying this finding are the following features of the agreement and its construction:
(a)The condition in cl 22.1(a) makes the contract conditional upon procuring a s 224 certificate for the subdivision by the specified date. The condition is solely for the vendor’s benefit.
(b)As general rule, a condition for the sole benefit of one party may be waived by that party. Generally, the right is to waive the substance of the condition rather than the benefit of a time limit.11 Therefore,
11 Globe Holdings Ltd v Floratas above n 6 at [14].
such a condition will generally mean subject matter dealt with in the condition can be satisfied either by fulfilment or waiver within the time specified in the condition.12
(c)It is well-established that under the standard form provisions in cl 9.8 the party who has the sole benefit of the condition may achieve fulfilment of the condition or waive it at the time before the other party’s notice of cancellation (even if not done by the written date for fulfilment).13
(d)The question whether, in the context of this agreement as a whole, waiver was available as a means of satisfying the condition in cl 22.1(a) is not resolved by the application of a general approach alone. Whether the general approach informs the interpretation in a particular case remains a matter of construction of the particular contract (as a whole). One indication of that is found in the introductory words in standard cl 9.8, providing that the parties may expressly provide for the practical operation of special conditions to be different to that described in the standard provisions.
(a)It can be no accident that cl 44 was added to the set of further terms of sale that include condition 22.1(a). That set of conditions reads as the vendor’s standard conditions for dealing with issues affecting its sales of all the proposed lots in its intended subdivision. Condition 44 appears as a special condition designed to meet the purchaser’s concerns and the parties must be taken to have intended that it would operate in accordance with its plain terms. Any other approach would be inconsistent with the vendor’s obligation to provide a new title for Lot 30.
12 A common example of such a condition is one that gives a purchaser the right to cancel a contract if consent is refused to subdivide an existing lot. The purchaser may choose to waive the condition and to proceed irrespective of whether consent is granted.
13 Globe Holdings Ltd v Floratos above n 4.
(b)The only sustainable interpretation of cl 22(1)(a) is that when the parties agreed that the special term was for the sole benefit of the vendor, they were agreeing the benefit that was conferred on the vendor was the right to waive the need to procure the s 224 certificate by 21 October 2017 (or alternatively to avoid the contract altogether), but that it did remain a condition that the s 224 certificate be procured before the 30 November 2017 cancellation date.
(e)The Court of Appeal in Hawker v Vickers in the passage cited (above at [21]) identified two requirements if a waiver is to be effective – it must be of a term that is both for the sole benefit of the waiving party and the provision must be severable.14 In this case, it is clear that the actual performance of the substance of the condition contained at cl 22.1(a) is a prerequisite to the performance of the agreement. The operation of the condition must be viewed in that light. The agreement could remain unperformed and unperformable if the need to procure a s 224 certificate was waived. Without a s 224 certificate completion of sale would be doomed – there could be no new title without the certificate, and without title there could be no settlement. Waiver cannot therefore be construed to be an available means of satisfying cl 22.1 (a). Fictional fulfilment or satisfaction of the requirement for a s 224 certificate is not a proposition that could sensibly have been intended by the parties in this agreement. It cannot reasonably be suggested that the parties by this contract could have intended that the vendor could dispense with the need to obtain a s 224 certificate and at the same time cause the contract to be unqualified by the need to obtain a s 224 certificate and to provide the purchaser with title to the new lot.
14 Hawker v Vickers, above n 3, at [402].
(f)Condition 44 must have been intended to inject a degree of certainty into the agreement in relation to the latest time the purchaser could reasonably expect to wait for the s 224 certificate to be procured.
[28] Where the contract document expressly contemplates waiver and at the same time describes possession and settlement in terms of fulfilment or satisfaction of an obligation that is a prerequisite to performance of the agreement, then waiver of the obligation cannot be a permissible means of satisfaction or fulfilment.
[29] For these reasons, as a matter of construction the defendant’s purported waiver did not dispense with the requirement to procure a s 224 certificate. Waiver was not an available means of satisfying the condition in cl 22.1(a).
[30] The Court in Globe Holdings Ltd v Floratos15 discussed such a circumstance by reference to Daubney v Kerr.16 In the latter case, completion was to be effected within two months of a specified event. The Court of Appeal observed that the case fundamentally turned on a question of construction. The fact that the provision as to possession was referenced to a particular event had to be read as referring to fulfilment of the event. In Globe Holdings the Court concluded that on the facts of the case a severability problem did not arise in relation to a waiver because of the time which remained (approximately 3 months) from the date of confirmation.
[31] In Globe Holdings, the Court of Appeal also referred to a decision of a Full Bench of the Supreme Court of Queensland in Sheridan v Nikolic.17 That case involved a contract for the sale of a house property. The contract was conditional upon registration of a plan of subdivision by which a boundary of the property was to be realigned so as to cure a potential encroachment by the house over the balance of the vendor’s land. Completion was to be within 14 days of notification of registration. The Court said:18
It seems surprising that anyone took the view that such a condition should be waived, because it was so obvious on the face of the condition that it provided
15 Globe Holdings v Floratos, above n 4, at 337.
16 Daubney v Kerr [1962] NZLR 319.
17 Sheridan v Nikolic [1982] Qd R 725.
18 Globe Holdings v Floratos, above n 4, at 337.
protection for both parties – for otherwise the purchaser could complain that the vendor was not transferring title at all of house, and the vendor would be left with the problem of a neighbour’s encroaching building.
[32] The Court of Appeal’s conclusions in Globe Holdings emphasise that a condition is not severable and therefore not able to be waived if the subject condition goes to the very obligation that the vendor has (whether of transferring title or of another fundamental obligation).
[33] In the present case, the duty to obtain a s 224 certificate (and consequently to be able to provide title) goes to the very heart of the defendant’s obligations.
[34] That being so, there is no tenable argument that the plaintiff’s rights under cl 44 fell away on the basis that cl 22(1)(a) was fulfilled or fictionally fulfilled. At most, the defendant’s notice of waiver may have created an extension of time to procure the s 224 certificate until 30 November 2017. But, if on that date, the defendant wished to see the agreement remain on foot, it could not, by purporting to rely on a waiver of cl 22 dispense with the need to obtain a s 224 certificate. I accept, as counsel for the defendant submitted, that the defendant could elect to do nothing, but to do nothing was to risk the plaintiff’s exercising his right of cancellation before the defendant could procure the issuing of the s 224 certificate (as occurred).
Result
[35] The application for summary judgment should be allowed. The plaintiff has established to the requisite standard that the defendant has no tenable defence.
[36]I order:
(a)There is judgment for the plaintiff against the defendant in the sum of $46,800, together with interest pursuant to s 9 of the Interest on Money Claims Act 2016, for the period that begins on 1 December 2017 and ends on the day on which the judgment debt (including all interest payable) is paid in full.
(b)As costs follow the event under the statutory costs regime, the defendant is to pay the plaintiff’s costs on a 2B basis together with disbursements to be fixed by the Registrar.
[37] Leave is reserved to the parties to file brief memoranda if there is any remaining issues as to the interest payable. For that purpose a memorandum may be filed on 2 days’ notice.
Associate Judge Sargisson
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