Ling v Northwest Developments Limited
[2019] NZCA 630
•10 December 2019 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA247/2019 [2019] NZCA 630 |
| BETWEEN | KE LING |
| AND | NORTHWEST DEVELOPMENTS LIMITED |
| Hearing: | 12 September 2019 |
Court: | Courtney, Duffy and Wylie JJ |
Counsel: | AJB Holmes for Appellant |
Judgment: | 10 December 2019 at 10.30 am |
JUDGMENT OF THE COURT
A The appeal is dismissed.
BThe appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Courtney J)
Introduction
This is an appeal from a grant of specific performance by Associate Judge Bell in favour of the respondent, Northwest Developments Ltd.[1]
[1]Northwest Developments Ltd v Ling [2019] NZHC 1023 [High Court judgment].
Northwest was the vendor and Ke Ling the purchaser under a sale and purchase agreement dated 24 May 2016. The subject property was part of a proposed subdivision being undertaken by Northwest. Title was not expected to issue for some time. For the protection of both vendor and purchaser in the event of title not issuing within the expected time, cl 24.2 (commonly known as a sunset clause) provided that:
24.2Should title have not issued by 31 March 2018 then either party may cancel the agreement by giving written notice to the other party notifying them that the agreement is now terminated. Provided however that in the event that the vendor has submitted the survey plan for approval to LINZ the vendor may at its sole discretion, prior to 31 March 2018, notify the purchaser that the time for satisfaction of this condition has been extended for a further 6 months.
On 16 February 2018, Northwest exercised its right to extend time under the proviso to cl 24.2. By then it already had approval from the Auckland Council for subdivision in accordance with its survey plan, LT Plan 509469, and had approval as to survey from Land Information New Zealand (LINZ). However, Northwest also required the consent of its neighbours to the survey plan. Difficulties in obtaining that consent led to Northwest submitting a revised survey plan, LT Plan 522391. Title ultimately issued on the basis of the revised survey plan.
Mr Ling refused to settle the purchase, claiming that Northwest’s extension of time was invalid. He argued that “the survey plan” referred to in the proviso had to be the same plan on which title ultimately issued.
Northwest applied successfully for summary judgment and obtained an order for specific performance of the agreement.[2] In this appeal Mr Ling asserts error by the Associate Judge in (1) holding that the time for assessing the validity of the extension was when notice was given under the sunset clause and (2) wrongly interpreting the phrase “the survey plan” in cl 24.2.
The statutory context
[2]At [47].
At the relevant time the subdivision of land was controlled by the Resource Management Act 1991 (RMA).[3] Section 11 relevantly provided that:
11 Restrictions on subdivision of land
(1)No person may subdivide land, within the meaning of section 218, unless the subdivision is—
(a)both, first, expressly allowed by a … resource consent and, second, shown on one of the following:
(i)a survey plan, as defined in paragraph (a)(i) of the definition of survey plan in section 2(1) [of the Act], deposited under Part 10 by the Registrar-General of Land; …
[3]As it stood on 30 April 2016.
Section 218 set out the relevant definitions and meaning of subdivision of land. Relevantly:
218 Meaning of subdivision of land
(1)In this Act, the term subdivision of land means—
(a)the division of an allotment—
(i)by an application to the Registrar-General of Land for the issue of a separate certificate of title for any part of the allotment;
…
(2)In this Act, the term allotment means—
(a)any parcel of land under the Land Transfer Act 1952 that is a continuous area and whose boundaries are shown separately on a survey plan, whether or not—
(i) the subdivision shown on the survey plan has been allowed, or subdivision approval has been granted, under another Act; or
(ii)a subdivision consent for the subdivision shown on the survey plan has been granted under this Act;
…
The term “survey plan” was defined in s 2:
survey plan has the meaning set out in the following paragraphs, in which cadastral survey dataset has the same meaning as in section 4 of the Cadastral Survey Act 2002:
(a)survey plan means—
(i)a cadastral survey dataset of subdivision of land, or a building or part of a building, prepared in a form suitable for deposit under the Land Transfer Act 1952; …
The process for subdivision can be summarised briefly as follows. A developer seeking subdivision arranges for a surveyor to produce a survey plan showing the proposed subdivision. This may also be referred to as a scheme plan. In order to obtain titles for the proposed subdivision the developer must obtain consent to the survey plan from the relevant territorial authority, which must be satisfied that the proposed subdivision complies with the terms of the resource consent.[4] The territorial authority issues a certificate to this effect.[5]
[4]Resource Management Act 1991, s 223(2)(a).
[5]Section 223(3).
The developer must then obtain approval as to survey from LINZ on the basis of the same survey plan. Timothy Jones, an experienced conveying solicitor who gave expert evidence for Mr Ling, described the purpose of this part of the process:
In deciding whether to approve a survey plan LINZ (formerly the Surveyor‑General) will consider whether the digital cadastral data set, prepared and lodged by the surveyor in the LandOnline system, complies with all of the relevant legislation and regulations in relation to surveys, such as the Cadastral Survey Act 2002 and the Rules for Cadastral Survey 2010 (which relate to the accuracy and form of cadastral datasets).
LINZ will also assess whether the survey plan is a “fit” within the New Zealand survey cadastre held in LandOnline. As part of this process LINZ will ensure that all of the relevant survey marks and the drawing of the survey plan submitted fits within the underlying cadastre.
The role of LINZ in approving a survey plan is to ensure, in a practical sense, that land in the survey plan fits in to the cadastral matrix. [T]he cadastral survey data submitted by the surveyor must fit within the “cadastre” … This process normally takes ten to 15 working days. …
In addition, where land that is subject to the Land Transfer Act 1952[6] is shown on the survey plan as vesting in the Crown or territorial authority, written consent to the subdivision must be given by every registered proprietor of an interest in the land.[7] This was the position here.
[6]Now the Land Transfer Act 2017.
[7]Resource Management Act, s 224(b)(i).
After all these steps are completed the survey plan is deposited with LINZ and new titles issued.
Background
In 2016, Northwest was in the process of subdividing property it owned at 81 Nobilo Road, Huapai, Auckland. A number of other property owners in Nobilo Road were also subdividing their respective properties. Northwest’s intended subdivision provided for roads running along two boundaries of the subdivision to vest in the local authority. Northwest was to contribute half of the road width from its land with the neighbouring owners contributing the other half from their properties (which were also being subdivided). The various owners had entered into a written agreement to cooperate with one another on the approval and deposit of survey plans.
By February 2018, Northwest had completed most of the steps described above. It had obtained consent to survey plan LT Plan 509469 from the Auckland Council and the required certificate under s 223. It had also obtained LINZ’s approval as to survey in respect of LT Plan 509469.
However, title to the plan could not be deposited for issue until Northwest’s neighbours had given their consent. One of the neighbours, the owners of 77 Nobilo Road, reneged on the earlier agreement and refused to give consent. Northwest began proceedings for specific performance.[8] In February 2018, Northwest’s lawyers advised Mr Ling’s lawyers that although LT Plan 509469 had been approved as to survey:
… delay has arisen in our lodging our documents for the plan to deposit titles to issue as a party whose consent is required to the deposit of our client’s plan has been uncooperative, despite having contracted to cooperate in all things to enable the plan to deposit and titles to issue …
Accordingly, as a precaution only, pursuant to the proviso of cl 24.2 of the agreement, our client hereby exercises his right to extend the “sunset” date of 31 March 2018 for a further six months.
[8]This application was successful, though judgment was not given until July 2018: Northwest Developments Ltd v Zhang [2018] NZHC 1736, (2018) 19 NZCPR 726. An appeal against that decision was eventually abandoned, with the defendants consenting to the deposit of Northwest’s survey plan.
Mr Ling did not object to the extension.
Before the February 2018 hearing of its specific performance application against the owners of 77 Nobilo Road, Northwest became aware of another problem; the owner of 69 Nobilo Road, GSC Holdings Ltd, had sought approval for its subdivision on the basis that it would not require the consent of the owners of either 77 Nobilo Road or of Northwest as owner of 81 Nobilo Road. GSC Holdings deposited its plan in March 2018. This meant that Northwest had to prepare a new survey plan to take account of the new titles created by GSC Holdings’ plan.
Northwest’s revised plan, LT Plan 522391, showed a change to the boundaries required by GSC Holdings’ subdivision i.e. changes to the periphery of the land being subdivided to reflect changes to the cadastre on the deposit of the neighbour’s plan. The proposed subdivision of the lots, including the lot that was the subject of the sale and purchase agreement, was unchanged.
On 27 August 2018, Northwest’s lawyers advised Mr Ling that they had lodged Northwest’s documents with LINZ for the plan to deposit and titles to issue, which they expected to happen within two to three weeks. At that point, Mr Ling engaged a new lawyer, who gave notice of cancellation of the agreement for non-satisfaction of the condition in cl 24.2 as to issue of title. Mr Ling’s position was that:
For the vendor to be entitled to utilize that clause the subdivision plan to lead to the titles being issued was required to be lodged by 31 March 2018, however as that survey plan was not lodged until 19 June 2018 … the vendor did not meet the prerequisite to be able to extend the sunset date.
The new plan was deposited on 11 September 2018 with titles for the lots, including the lot that Mr Ling had agreed to buy, issuing on that day. LINZ notified Northwest of this on 27 September 2018, and Northwest, in turn, advised Mr Ling that title to the property subject to the sale and purchase agreement had issued and settlement would be 11 October 2018. Mr Ling failed to settle.
The case in the High Court
Mr Ling’s argument was essentially that the phrase “the survey plan” in cl 24.2 had to be read as referring to the plan deposited and on which title issued, not merely a survey plan. On this argument, once Northwest had submitted LT Plan 522391 to LINZ for approval, it could no longer rely on LT Plan 509469 to extend time under the proviso in cl 24.2.
The Associate Judge was not at all attracted to that argument:[9]
That argument means that what is initially a survey plan is disqualified later because another plan has been submitted for approval. The extension would be valid at the start but would not count later. It is an unwieldy interpretation to provide that the validity of an extension can flicker, sometimes on, sometimes off. That would create uncertainty when it is important that both parties understand what their position is. The better interpretation is that the time for deciding whether there has been an extension under the proviso is when Northwest exercises the power and not later when circumstances have changed.
…
The submission requires “the” to carry too much [weight]. The agreement for sale and purchase clearly provides that land will be subdivided into smaller lots and certificates of title for the new subdivided lots will issue. In that process a survey plan will be required. “The” used before “survey plan” does no more than refer to the survey plan for that subdivision. That can also be seen in cl 23.1:
The vendor gives no warranty to the purchaser as to when the plan will be deposited …
The plan must be one that is capable of being used for deposit for the subdivision in the agreement (subject to requisitions by LINZ for approval as to survey), but the plan cannot be counted out because changes may be required because of changes in circumstances.
Appeal
[9]High Court judgment, above n 1, at [38] and [43].
Mr Ling ran the same argument before this Court. Mr Holmes, for Mr Ling, advanced the two grounds of appeal recorded earlier: that the Associate Judge was wrong to hold that Northwest’s entitlement to extend time under cl 24.2 was to be assessed at the time it purported to do so; and wrong to find that the second survey plan, LT Plan 522391, was “the survey plan” for the purposes of the proviso in cl 24.2.
Mr Holmes submitted, correctly, that the interpretation of the sale and purchase agreement fell to be determined on the general principles affirmed in Firm PI 1 Ltd v Zurich Australian Insurance Ltd:[10]
[60] …the proper approach is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background”, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning.
(footnotes omitted)
[10]Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432.
By reference to these principles he articulated the issue as being what the words “the survey plan” in cl 24.4 would convey to a reasonable person having all relevant background knowledge reasonably available at the time of the agreement. The interpretative exercise was to be undertaken against the overall context of the agreement.
Mr Holmes argued that the ordinary meaning of “the” meant that the phrase “the survey plan” could relate to only one plan and, given the context of the clause, that could only be the plan on which title ultimately issued. It was common ground that Northwest’s right to extend time under the sunset clause could only be exercised if the conditions for the proviso had been met — in other words, that “the vendor has submitted the survey plan for approval to LINZ”. A strict interpretation of “the survey plan” would provide the most straightforward means of objectively determining whether the proviso had been satisfied because it was a simple matter to determine whether “the” survey plan in respect of which notice had been given was the same survey plan on which title ultimately issued. For that reason, the relevant time for assessing whether the conditions for the proviso to be exercised had been fulfilled and whether the parties have obligations to perform at settlement is when the titles are actually issued.
Mr Holmes submitted that any other interpretation would allow Northwest to gain an unfair advantage by, for example, lodging a dummy survey plan simply for the purpose of exercising the right to extend time under the sunset clause.
We do not accept these arguments. The interpretative exercise in this case must proceed on the basis of the known purpose of a sunset clause, which was to protect both parties in the event that title does not issue by the agreed date. This risk is common knowledge, given the uncertainties inherent in the subdivision process. As Mr Jones explained in his evidence, a sunset clause helps to ensure that a developer endeavours to complete the project within time while allowing some flexibility where, for unforeseen reasons, titles do not issue within the agreed time but it also ensures that the purchaser is not committed to a contract that runs on perpetually. This is done by the parties agreeing that if title has not issued by a specified date either party can cancel. This right may, as it was in this case, be subject to a proviso allowing the vendor to extend the time for cancellation, but with an ultimate “drop dead” date — in this case six months from 31 March 2018.
Self-evidently, a sunset clause can only achieve its purpose if it provides certainty for the parties as to their respective rights and obligations on the agreed date. In this case the agreed date was 31 March 2018. That was the date on which the parties had agreed that if title had not issued either would be entitled to cancel. In addition, if the conditions of the proviso were satisfied, the vendor would be entitled to extend the time for title to issue for a further six months. The contract clearly intended to ensure that on 31 March 2018 the parties would be able to determine their respective positions.
If neither party cancelled the agreement and Northwest notified Mr Ling that the time for satisfaction of the condition had been extended then Mr Ling would know that he was committed to the contract for another six months and Northwest would know that it could rely on Mr Ling as a purchaser for a further six months. Waiting until title actually issued in six months’ time to know whether a purported extension of time was valid or whether a right of cancellation had arisen would place both parties in an uncertain position to which no reasonable vendor or purchaser of land would agree.
The suggestion that a vendor in Northwest’s position could gain an unfair advantage by submitting a “dummy” survey plan is not realistic because, as we come to next, there was a sufficient basis evident from the terms of the sale and purchase agreement on which to determine whether the plan submitted to LINZ for the purposes of cl 24.2 was “the survey plan”.
Whether the survey plan that Northwest had deposited at the time it gave notice under cl 24.2 satisfied the requirement for “the survey plan” in that clause falls to be interpreted in the context of both the known process for obtaining title to subdivided land and the terms of the sale and purchase agreement as a whole, particularly in cls 20 and 23.
The process by which title would issue that we have outlined above was reflected in the various clauses that were annexed to the standard terms of the sale and purchase agreement and which referred to the “Plan of Subdivision”, including:
20.2The vendor shall as soon as practicable after the issue of all consents required to obtain a separate certificate of title for the property and at the vendor’s cost carry out all works (including development works) necessary to subdivide the land comprised in the computer freehold register NA 66A/206 (‘the Head Title’). The Vendor will also use its best endeavours to have the Plan of Subdivision deposited at LINZ as soon as reasonably practicable to create a separate computer freehold register for the property.
20.3The purchaser acknowledges that the Plan of Subdivision is a preliminary plan subject to approval by the Territorial Authority, LINZ and other regulatory authorities and if required by them or considered reasonably necessary or desirable by the vendor then the plan may be amended by the vendor.
…
23.1The vendor gives no warranty to the purchaser as to when the plan will be deposited with LINZ, nor as to when the purchaser will be able to register a transfer instrument of the property to the purchaser. The purchaser acknowledges that time shall not be of the essence in regards to the issue of separate computer freehold registers.
Because of our findings thus far, the status of Northwest’s revised plan, LT Plan 522391, could not affect the parties’ rights and obligations as they arose on 31 March 2018. But we not consider that there could be any complaint about the revised plan in any event because under cl 20.3 the parties had expressly contemplated that “the survey plan” that was submitted to the territorial authority and to LINZ might be amended (ss 223 and 224 of the RMA do not provide for the amendment of survey plans so Northwest’s revised plan was submitted as a fresh plan). In the context of the sale and purchase agreement as a whole and the known process for the issuing of titles, a reasonable person would unquestionably treat a revised “Plan of Subdivision” submitted to the Auckland Council and to LINZ for approval as to survey as being “the survey plan” for the purposes of cl 24.2.
Accordingly, a reasonable person having all the relevant background knowledge reasonably available at the time of the agreement would understand that the survey plan referred to in cl 24.2 is the survey plan (or any amended version of it) that had been submitted to the territorial authority or LINZ for approval as at the date specified in cl 24.2. LT Plan 509469 was that plan.
Result
The appeal is dismissed.
Northwest is entitled to costs for a standard appeal on a band A basis with usual disbursements.
Solicitors:
Pidgeon Law, Auckland for Appellant
Castle/Brown, Auckland for Respondent
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