MacDonald v C1 Gloucester Street Ltd
[2012] NZHC 2842
•30 October 2012
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2010-409-001531 [2012] NZHC 2842
BETWEEN RICHARD WILLIAM MACDONALD Plaintiff
ANDC1 GLOUCESTER STREET LIMITED First Defendant
Hearing: 8 August 2012
Counsel: H C Matthews and M A Jones for the Plaintiff
R G Smedley for the Defendant
Judgment: 30 October 2012
[RESERVED] JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie on 30 October 2012 at 11.00 am
Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Distribution:
HC Matthews: [email protected]
MA Jones: [email protected]
RG Smedley: [email protected]
MACDONALD V C1 GLOUCESTER STREET LIMITED HC CHCH CIV 2010-409-001531 [30 October 2012]
Introduction
[1] The plaintiff, Mr MacDonald, sues the defendant, C1 Gloucester Street Limited, for the recovery of a deposit paid pursuant to an agreement for sale and purchase of real estate entered into between the parties dated 20 June 2007. Mr MacDonald also seeks interest and costs.
[2] C1 Gloucester Street Limited resists Mr MacDonald’s claim. It in turn counterclaims against him, seeking damages. Initially, C1 Gloucester Street Limited sought specific performance, but in opening its case, Mr Smedley advised me that the company has elected to accept what it says is Mr MacDonald’s repudiation of the agreement. He sought an order that Mr MacDonald was liable for damages for breach and a further order that C1 Gloucester Street Limited could come back before the Court if necessary, once it had been able to quantify its losses. C1 Gloucester Street Limited also seeks interest and costs.
[3] There is little or no dispute about the agreement for sale and purchase itself and the issue raised by the proceedings can be shortly stated — was the agreement for sale and purchase varied subsequent to its execution?
The Agreement for Sale and Purchase
[4] Mr MacDonald and C1 Gloucester Street Limited entered into the agreement for the sale and purchase on 20 June 2007. Although Mr MacDonald signed the agreement for himself or his nominee, there is no suggestion that any nomination was made.
[5] The agreement related to two apartment units then to be built on level 21 of a building development being undertaken by C1 Gloucester Street Limited at
166 Gloucester Street, Christchurch, together with four associated carparks. The purchase price was $2.6 million, and the deposit was $195,000.
[6] The properties were described in the agreement as follows:
Two units (being level 21) and 4 car parks (“the Unit”…) being unit 187,
207, 199, 200 together with 2/13 share in unit 191 on the attached plan (“the
Plan”) being a draft unit title subdivision of the building… to be constructed…
[7] The draft unit title subdivision plan was annexed as schedule 1 to the agreement. It showed that one of the two principal units, unit 187, was to comprise
310 square metres and that the other unit, unit 207, was to comprise 110 square metres. The units were shown as separate units on the plan. They were divided by areas of common property, an accessory unit comprising the lift well and a common dividing wall. There was a second schedule comprising the overall plans and specifications for the whole building, and a third schedule containing the body corporate rules.
[8] The agreement was on the standard form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society. However, it was tailored to meet the specific requirements of the parties. It contained various further terms of sale. I note the following:
14 CONDITIONS
14.1This agreement is subject to and conditional upon the Vendor obtaining:
a.Subdivision consent from the local authority and all other consents and authorities reasonably required (“the Consents”) for the proposed building at 166 Gloucester Street, Christchurch (“the Building”) substantially in accordance with the attached plan (“the Plan”) on terms and conditions acceptable to the Vendor in all respects within six months of the date of this agreement;
b. The Issue of a separate certificate of title for the Unit within
36 months of the date of this agreement. Such issue to be evidenced by a search copy within the meaning of
Section 172(a) of the Land Transfer Act 1952 being available. This condition is inserted for the benefit of the
Vendor and the Purchaser and may not be unilaterally waived; and
c.The issue of a Certificate of Practical Completion within 36 months of the date of this agreement.
…
15. SETTLEMENT AND COMPLETION
15.1In this agreement “Settlement” means the parties performance of all their obligations that are required by this agreement to be performed on “Settlement” and are expected to be performed on Settlement Date.
…
15.3In this agreement “Unit” means the property being bought and sold under this agreement, being further described on the front page of this agreement.
…
16. CONSTRUCTION
Construction
16.1The Vendor must complete construction of the Unit and all common areas in the Building in a proper and workmanlike manner substantially in accordance with the plans and specifications attached to this agreement (“the Plans and Specifications”).
…
16.3Subject to clause 16.4, if it becomes necessary or expedient for the Vendor to undertake or incorporate any minor amendment in respect of anything shown or described in the Plans and Specifications then the Vendor may make such minor amendment or may substitute material, finish, product or system of a kind and nature as near as reasonably practicable to the specified material, finish, product or system. If such amendment is not of a minor nature the Vendor may only make such amendment and substitution after consultation and agreement with the Purchaser.
…
20. CONSENTS
20.1The Vendor will at its cost as soon as practicable take all reasonable steps to obtain the Consents and do all other things necessary to obtain the unit titles for the Unit.
…
23. VENDOR’S RIGHTS TO VARY PLAN AND BUILDING ARE
LIMITED
23.1Subject to the requirements of the Consents, the plan that allows the creation of the unit titles for the Unit must not vary from the Plan in any way that substantially and materially alters the boundaries or shape of the Unit.
…
[9] There were conditions in favour of Mr MacDonald as the purchaser. In particular, he was entitled to carry out due diligence and there were finance and valuation conditions in his favour.
Subsequent Developments
[10] The conditions in favour of Mr MacDonald were satisfied on 4 July 2007, and he paid the specified deposit of $195,000 on 10 August 2007. The deposit was paid to C1 Gloucester Street Limited’s solicitors, to be held by them as stakeholder in accordance with the agreement.
[11] C1 Gloucester Street Limited for its part confirmed that it had obtained consent to erect the building in terms of cl 14.1(a) on 14 December 2007.
[12] At this stage, the agreement remained conditional upon:
(a) C1 Gloucester Street Limited obtaining separate certificates of title for the units and a certificate of practical completion within 36 months of the date of the agreement — cl 14.1(b) and (c), and
(b) the conditions set out in s 225 of the Resource Management Act 1991.
They were incorporated in the agreement by cl 8.6.
[13] C1 Gloucester Street Limited completed construction of the building. It initially retained a company known as AMC Construction Limited to undertake the design and construction of the building. AMC Construction Limited got into financial difficulties. It was placed into voluntary liquidation on 3 October 2008. The building works were completed by another entity — South Island Construction Limited.
[14] A Mr Anton Summerfield was a director of both AMC Construction Limited and South Island Construction Limited. He is also Mr MacDonald’s brother-in-law.
[15] C1 Gloucester Street Limited did not construct two separate apartments on level 21. Rather, it completed the construction of level 21 as a single apartment, having a floor area of 420 square metres. The apartment has a single certificate of title.
[16] Titles to the various units in the building issued on 7 December 2009. A certificate of practical completion issued on 10 January 2010, and a code compliance certificate issued on 16 March 2010.
[17] On 17 March 2010, C1 Gloucester Street Limited called for settlement in terms of the agreement with a settlement date of 24 March 2010. On 23 March
2010, Mr MacDonald gave notice of cancellation of the agreement. A further notice of cancellation was given on 5 July 2010.
[18] C1 Gloucester Street Limited did not initially accept either cancellation, and issued settlement notices, on the basis that the agreement for sale and purchase was still on foot.
The Competing Positions
[19] Mr Matthews, appearing for Mr MacDonald, asserted that C1 Gloucester Street Limited breached the agreement, because it did not construct, nor obtain titles for, the two units described in the agreement and shown in the draft unit plan attached to the agreement. He argued that the construction of the single unit at level 21 did not fulfil C1 Gloucester Street Limited’s obligations pursuant to the agreement. He submitted that C1 Gloucester Street Limited repudiated the agreement, making it clear that it did not intend to perform its obligations under the same, and that accordingly, Mr MacDonald was entitled to, and did, exercise his right to cancel the agreement. Further, Mr Matthews argued that in accordance with s 225 of the Resource Management Act, the agreement was conditional upon C1 Gloucester Street Limited as vendor making reasonable progress in submitting a survey plan to the territorial authority for its approval, or depositing the survey plan within a reasonable time after the date of its approval. He noted that resource consent for the proposed development was obtained by 14 December 2007, and
argued that C1 Gloucester Street Limited failed to make reasonable progress in the deposit of a survey plan required to create the titles to units 187 and 207 in accordance with the agreement. Mr Matthews asserted that MacDonald was also entitled to, and that he did, give notice of cancellation pursuant to s 225(2)(b) of the Resource Management Act. He further argued that the agreement was conditional upon the issue of separate certificates of title for each of the units being purchased under the agreement within 36 months of the date of the agreement, (that is, no later than 19 June 2010) and that as at that date, C1 Gloucester Street Limited had not obtained separate certificates of title for either unit 187 or unit 207. He also asserted that Mr MacDonald had given notice of cancellation for non-fulfilment of cl 14.1(b) noted above.
[20] Mr Smedley, for C1 Gloucester Street Limited, asserted that in or about May 2008, Mr MacDonald requested that the design be changed from two units to one unit, and that the agreement was varied as a result. He said that it was agreed by the parties that the plan should be amended at the instruction of Mr MacDonald, provided that the amendments did not increase the cost of construction on level 21. He argued that the plan was amended on Mr MacDonald’s instructions on several occasions, and that the main effect was to change the design from two units to one unit. Mr Smedley submitted that it was agreed that the definition of “unit” was varied by agreement between the parties to include the one unit constructed on level 21, and not the two units specified in the agreement. He said that Mr MacDonald instructed the building architect, a Mr Rob Campbell, to alter the design of the unit to create one single apartment instead of two separate apartments, and that C1 Gloucester Street Limited constructed the unit as a single apartment, and fitted it out as a single apartment, in accordance with Mr MacDonald’s instructions. He submitted that Mr MacDonald was not entitled to cancel the agreement and that C1 Gloucester Street Limited was entitled to damages for Mr MacDonald’s breach for failing to settle the agreement in its terms.
What did the Agreement for Sale and Purchase Require?
[21] The agreement for sale and purchase in its terms required C1 Gloucester
Street Limited as the vendor to provide two units, in accordance with the description
of the property set out in the agreement and the draft plan annexed as schedule 1 to the agreement. Although the agreement used the word “unit” in the singular, it is clear from the description of the property being bought and sold, and from cl 15.3, both of which are set out above, that separate titles to the units detailed in the description were to be provided on settlement.
[22] Under the agreement, it was C1 Gloucester Street Limited’s obligation to complete construction of the units in accordance with the plans. While it could make minor amendments if it was necessary or expedient for it to do so, if any amendment was not of a minor nature, then it had to consult with and obtain the agreement of Mr MacDonald as purchaser — cl 16.3.
[23] It was the company’s responsibility to obtain titles for the two units — cl 20.1. It had to do so within 36 months of the date of the agreement and this provision could not be unilaterally waived by either party — cl 14.1(b). The plan allowing for creation of the unit titles was not to vary from the plan annexed to the agreement in any way that substantially and materially altered the boundaries or shape of the units — cl 23.1.
[24] Settlement could be required only when the parties performed all of their obligations under the agreement — cl 15.1.
[25] Mr Duval, who is the sole director of C1 Gloucester Street Limited, accepted in his evidence that the agreement in its terms provided for the “sale [and purchase] of two separate units with their own certificates of title”. He did however go on to assert that the agreement for sale and purchase was varied and that Mr MacDonald requested that the design should be changed from two units to one unit.
Variation
[26] A contract once made can be varied by agreement between the parties. However, a unilateral change by one party without any agreement by the other party,
cannot be a variation,1 except where the agreement provides for such a power in that party.2
[27] In the present case, cl 16.3 of the agreement gave C1 Gloucester Street Limited the power to make minor and inconsequential changes or variations to the agreement. It could not, however, unilaterally make a more significant change.
[28] Here, there is no suggestion that the construction of one unit rather than two units on level 21 is a minor amendment. Indeed, Mr Smedley expressly accepted that this was not the case.
[29] Since a variation involves an alteration as a matter of contract of the contractual relationship between the parties, the agreement for variation must itself possess the characteristics of a valid contract.3 The parties must be ad idem and negotiations for a variation that do not result in agreement have no effect.4 Further, any agreement for a variation must generally be supported by consideration or made by deed.5
[30] When a contract is varied, it operates according to the variation.6 A variation may be by express agreement or may be implied by conduct, but where a contract is required by law to be evidenced in writing, it cannot be varied by an oral agreement.7
However, if a variation is not in the required form, the doctrine of part performance
may render it enforceable by a decree of specific performance.8
1 McCombie v Waihi Extended Gold-Mining Co Ltd [1920] NZLR 333 (SC) at 335
2 Yeo v Stewart [1947] 2 All ER 28 (KB).
3 McCombie v Waihi Extended Gold-Mining Co Ltd, above n 1, at 335.
4 Ibid; Woodhouse AC Israel Cocoa Ltd SA v Nigeria Produce Marketing Co Ltd [1972] AC 741.
5 McCombie v Waihi Extended Gold-Mining Co Ltd, above n 1, at [335]; a variation which benefits only one party will not, however, fail for want of consideration if it is freely agreed — Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23 (CA) at [93]; and see discussion in Ross
Bindon Ltd v PB & CS Property Ltd (in liq) (2006) 7 NZCPR 850 at [36] and Willcocks v Teat
HC Rotorua CIV 2008-463-784, 27 September 2010 at [57].
6 Laws of New Zealand Contracts at [334].
7 Jackson & Co Ltd v Co-operative Freezing Co of South Canterbury [1922] NZLR 2 (CA) at
[336].
8 Boviard v Brown [1975] 2 NZLR 694 (SC) at 702.
Was the Agreement Varied?
Variation not in Writing
[31] Mr Matthews noted that the agreement for a sale and purchase had to be in writing to comply with s 24 of the Property Law Act 2007. He submitted that any variation also had to comply with s 24, to be enforceable.9 He argued that if the variation did not comply, it had to be disregarded and the original contract enforced.10
[32] Section 24 of the Property Law Act 2007 provides as follows:
24Contracts for disposition of land not enforceable unless in writing
(1) A contract for the disposition of land is not enforceable by action unless—
(a) the contract is in writing or its terms are recorded in writing;
and
(b) the contract or written record is signed by the party against whom the contract is sought to be enforced.
(2) In this section, disposition does not include—
(a) a short-term lease; or
(b) a sale of land by order of a court or through the Registrar.
[33] Here, there is no written record of the alleged variation that complies with s 24.
[34] Normally, a contract required by law to be in writing can only be varied in writing, and an oral variation is unenforceable.11
9 Abis Properties Ltd v Orion New Zealand Ltd HC Christchurch CIV 2004-409-659, 3 August
2004 at 48–49; Home Buyers Ltd v Mu (200) NZCPR 822 (HC) at 38–42.
10 Tennyson Motor Inn (2003) Ltd v Wallace HC Napier CIV-2007-441-739, 19 November 2007 at
25–26.
11 John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th ed, Lexisnexis, Wellington, 2012) at 19.3.1.
[35] The difficulty, however, from Mr Matthews’ perspective is that this issue was not pleaded and Mr Smedley submitted that the failure to plead s 24 was fatal to this matter being raised on Mr MacDonald’s behalf.
[36] I agree with Mr Smedley. Where contracts for the disposition of land that are required to be in writing are in issue in proceedings, the relevant statutory provisions requiring that the contract be in writing must be expressly pleaded before they can be invoked.12 This is because an oral contract breaching the relevant provisions is not void. Rather, it is unenforceable. A party who does not expressly plead the relevant statutory provisions cannot invoke their terms.13
[37] As noted above, this rule can yield to the equitable doctrine of part performance. Section 26 of the Property Law Act 2007 makes it clear that s 24 does not affect the law of part performance.
[38] Mr Smedley discussed the doctrine of part performance in some detail. I am not persuaded that it is relevant. Section 24 was not pleaded on Mr MacDonald’s behalf and whether or not there was part performance does not seem to me to be in issue. Rather, I have to ask myself whether Mr MacDonald agreed to the variation, either personally or through Mr Summerfield as his agent.
Did Mr MacDonald agree to the Variation?
[39] It is common ground that Mr MacDonald and Mr Duval did not meet or speak to each other about the agreement for sale and purchase of the units or unit on level 21 at any stage. Rather, Mr Summerfield played the key role throughout.
[40] The agreement for sale and purchase was initially procured by Mr Summerfield. In 2007, he told Mr MacDonald that his company, AMC Construction Limited, had secured the contract to build the building at
166 Gloucester Street for C1 Gloucester Street Limited. He asked Mr MacDonald if
12 Whiting v Diver Plumbing & Heating Ltd [1992] 1 NZLR 560 (HC) at 19.
13 Boviard v Brown [1975] 2 NZLR 694 (SC) at 700–702.
he was interested in buying two of the apartment units that were to be constructed on level 21.
[41] AMC Construction Limited had been appointed as agent by C1 Gloucester Street Limited to sell units in the proposed development on its behalf and the construction contract AMC Construction Limited had with C1 Gloucester Street Limited was conditional on a certain level of sales being achieved. AMC Construction Limited was paid a “finder’s fee” for each agreement for sale and purchase it procured on C1 Gloucester Street Limited’s behalf.
[42] It was not altogether clear from the evidence whether or not Mr MacDonald was aware that AMC Construction Limited was C1 Gloucester Street Limited’s agent, but nothing turns on this. As already noted, Mr MacDonald did agree to purchase the two apartment units on level 21.
[43] Mr MacDonald was originally from Christchurch. He now resides in Bulgaria. He is the Chief Executive Officer of a company that is a major property developer in that country and elsewhere in Europe. He entered into the agreement to buy the units because he thought that they might be a good investment and because he thought that he and his family might be able to use them on the occasions when they visited Christchurch.
[44] When Mr MacDonald signed the agreement on 20 June 2007, it was proposed that levels 16, 17, 18, 19, 20 and 21 would all be to the same design.
[45] AMC Construction Limited’s contract with C1 Gloucester Street Limited required it to not only build the building, but also to design it. To this end, AMC Construction Limited had retained the services of Foley Design Limited to prepare the detailed design of the building. The architect responsible for the design was Mr Campbell.
[46] Some of the purchasers subsequently asked for changes to be made to the original design. Mr Duval said in evidence that most of the changes sought were
inconsequential, and that C1 Gloucester Street Limited’s response was to agree, as
long as the changes did not increase the cost of the building.
[47] After executing the agreement for sale and purchase, Mr MacDonald thought that the initial design was unsuitable for him and his family. He had discussions with Mr Summerfield during early to mid 2008 regarding possible changes which could be made to the units. He discussed matters relating to fit out, and whether the layout of level 21 could be altered, so that “practically”, the whole floor could be used as one apartment. He said in evidence that the discussions were between him and Mr Summerfield only, and that he did not instruct anybody to prepare any amended plans. He also said that the discussions regarding the changes were not concluded, and that no agreement was reached in relation to any of the issues that he discussed with Mr Summerfield. He was adamant that he did not agree to any changes, and that the matters he discussed with Mr Summerfield did not go beyond the point of discussion. He asserted that there was never any suggestion that the title configuration for the floor was to be changed, (that is, there would be one title, rather than two titles).
[48] Mr Duval said that some time during May 2008, Mr Summerfield contacted him and told him that:
(a) Mr MacDonald wanted to change the design of level 21 from two units to a single unit;
(b)Mr MacDonald was a high net worth individual who had decided that he wanted to make some changes to his life, which included having an apartment in Christchurch that he and his family could use;
(c) Mr MacDonald and his wife had visited the apartment and wanted changes to the design of level 21 to enable them to have a maid or home help on the premises to assist with their children when they visited;
(d)Mr MacDonald wanted direct access from the lift lobby so that a nanny/home help could come and go directly into her suite without the need to come through the main living area;
(e) Mr MacDonald wanted a home theatre room; and
(f) that he (Mr Summerfield) was in regular contact with Mr MacDonald and would discuss the changes directly with Mr Campbell.
Mr Duval said that he told Mr Summerfield that C1 Gloucester Street Limited would consent to the changes being made, as long as they did not add to the cost of the design and build. He says that it was “abundantly clear” to him that Mr Summerfield was acting on Mr and Mrs MacDonald’s instructions, and that Mr Summerfield made it clear to him that he had authority to make the changes to the units and that he was acting on Mr MacDonald’s instructions.
[49] Mr Campbell gave evidence in relation to the design changes. He explained that Foley Design Limited was contracted by AMC Construction Limited to design the building and the fit out for floors 2 through to 21, and that when that company went into voluntary liquidation, he was retained by its successor, South Island Construction Limited. He said that Mr Summerfield was his main point of contact for both companies. He stated that in May 2008, Mr Summerfield arrived at his office with a hand-drawn plan and that he stated that he had instructions from Mr MacDonald to make substantial amendments to the design. In broad terms, the amendments required that the whole of floor 21 be redesigned as one apartment. He prepared new plans on this basis and he provided them to Mr Summerfield.
[50] Mr Campbell confirmed that he never spoke to Mr MacDonald and that all instructions he received regarding the changes to the design were given to him by Mr Summerfield.
[51] Mr Summerfield also gave evidence. He agreed that in his capacity as a director of AMC Construction Limited, he had discussions in or about May 2008 with Mr Duval about the possibility of changes to the design of the units that
Mr MacDonald had agreed to purchase. However, he denied advising Mr Duval that he was authorised by Mr MacDonald to make any changes, or that he discussed the potential changes with Mr Duval on that basis. He also denied that he acted as Mr MacDonald’s agent. He says that Mr MacDonald never authorised him to act as his agent, either personally or as a director of either AMC Construction Limited or South Island Construction Company Limited. Mr Summerfield further denied instructing Mr Campbell to change the design to a single apartment with one title, and he said that he had several discussions with him about the need for there to be two titles.
[52] While there are clear conflicts in the evidence, some matters are clear:
(a) Mr MacDonald discussed changes to the design of the two units on level 21 with Mr Summerfield. He was looking for a design which could “practically” be used as one apartment;
(b) Mr MacDonald did not discuss those changes with either Mr Duval or
Mr Campbell;
(c) Mr Summerfield discussed the proposed changes with Mr Campbell; (d) Mr Campbell prepared amended drawings and made them available to
Mr Summerfield;
(e) Mr Summerfield also discussed the proposed changes with Mr Duval. [53] At this point, in my judgment, there had been negotiations about a
prospective variation, but nothing had been finally agreed. There was no sufficient agreement to vary the agreement for sale and purchase.
[54] C1 Gloucester Street Limited was also of this view.
(a) In early 2009, its solicitors requested full plans and specifications so that they could get Mr MacDonald to formally approve and accept them. In a monthly project report prepared in March 2009, it was
recorded that “level 21 apartment ownership issues” needed to be
“confirmed”. This concern was repeated in the April report.
(b)In May 2009, a Mr Wilkinson, who was the project manager retained to supervise the development, approached Mr Campbell to see whether there were any instructions from Mr MacDonald requesting the various changes to the level 21 layout. When Mr Campbell advised Mr Wilkinson that the only instructions were verbal instructions from Mr Summerfield, Mr Wilkinson replied indicating that he “guessed that was the case”.
(c) Its solicitors wrote to Mr MacDonald’s solicitors on 22 June 2009.
The letter had attached to it replacement plans showing the one apartment to design. The letter recorded that the replacement plans had been prepared to record the variations which it was asserted Mr MacDonald had negotiated direct with the builder. It requested that the documents should be initialled by Mr MacDonald and then went on to record as follows:
The result is that (once the new plans have been initialled by your client) the Agreement is varied so that the existing schedules 1 and 2 of the Agreement are deleted and replaced with the enclosed plans and specifications.
The letter went on a little later as follows:
As mentioned, we understand that all of these changes (other than those to other parts of the building listed in paragraph 2 above) were requested by your client. They are being made at no cost to your client. Presumably he will have no problem confirming that the above replacement plans and specifications reflect his understanding.
If that is the case please have your client initial every page of the A4 copy of the new… plans and return that copy to us when you confirm his approval. That will record the variation of the Agreement.
[55] This letter, and the plans were sent direct by Mr MacDonald’s solicitors in
Christchurch to Mr MacDonald in Bulgaria on 24 June 2009.
[56] Unfortunately, at the time, Mr MacDonald was seriously ill. He had been hospitalised, and he was receiving significant medical treatment. His personal assistant responded on his behalf, advising that he was ill but indicating that she should be able to make contact with him and hopefully get some answers in the near future.
[57] As time passed without the matter being resolved, C1 Gloucester Street Limited’s solicitors became increasingly anxious to progress matters. They contacted Mr MacDonald’s solicitors again and on 22 July, Mr MacDonald’s solicitors sent an email to their client advising him that it was imperative that he respond without delay, as construction was reaching the stage where the requested changes needed to be made. The email recorded that if a response was not received within the next couple of days, the construction would have to proceed under the original plans and specifications. This email was copied to C1 Gloucester Street Limited’s solicitors.
[58] Mr Duval personally tried to advance matters. He sent an email to Mr MacDonald’s personal assistant on 23 July 2009. Inter alia, he advised as follows:
In essence we just need his confirmation to proceed with the altered plans or does he wish to revert to the original?
[59] Mr Duval also sent a further email to Mr MacDonald’s personal assistant
stating as follows:
Do you have any idea when [Mr MacDonald] may be discharged and are you in contact with him? As you may be aware we are well advanced in building the C1 Residential Tower Penthouse Apartment which Richard has signed up to buy. He initiated some changes to the layout through a local architect which have been integrated into the constructions plans and we need his confirmation of these plans quite soon otherwise we may have to revert to his original plan.
[60] Mr MacDonald did not recover from his illness until about October 2009. He could not recall when he first saw the correspondence from C1 Gloucester Street Limited’s solicitors, but in cross-examination, he accepted that his personal assistant may have given him the correspondence when he recovered. However, he stated that
when he recovered, he went back to work at a time when there was a recession “in full flow in Europe”. His property development company had suffered significant losses as a result of the decline in property values. He had to merge four companies with 200 staff and cut costs by cutting about half the staff. He said that there were a lot of things “[on] his plate” at that particular time, and he could not recall whether or not he had looked at the letter of 22 June 2009.
[61] In the event, there was no response to the 22 June 2009 letter until
Mr MacDonald’s solicitors sent a letter cancelling the agreement on 23 March 2010.
[62] There was nothing in the evidence to suggest that Mr MacDonald personally agreed to vary the agreement for sale and purchase. The only thing that C1 Gloucester Street Limited can point to is that Mr MacDonald did not take issue with the changes until his solicitors cancelled the agreement for sale and purchase by letter dated 23 June 2009.
[63] Mr Smedley submitted that Mr MacDonald’s silence was telling. He argued
that Mr MacDonald elected not to dispute the assertion made in the letter of 22 June
2009 that he had negotiated the variations to the plans and specifications for the apartment directly with Mr Summerfield, or to tell anybody that he wanted two apartments rather than one, until 23 March 2010.
[64] There are two difficulties with this argument. First, it overlooks the email Mr MacDonald’s solicitors sent to him on 22 July 2009. That email advised that if there was no response, the construction would have to proceed under the original plans. That email was copied to C1 Gloucester Street Limited’s solicitors. They did not take issue with that assertion. Moreover, a similar assertion was made in the email sent by Mr Duval direct to Mr MacDonald, noted above. Secondly, and in any event, it is trite law that in a contractual context, silence is not deemed to be consent.
I refer to Felthouse v Brindley.14
14 Felthouse v Brindley (1862) EWHC CP J35.
[65] I am not persuaded that there was any agreement by Mr MacDonald whether orally or otherwise, varying the agreement for sale and purchase, and permitting C1 Gloucester Street Limited to construct one unit only.
Agency
[66] C1 Gloucester Street Limited asserted that the instructions from Mr MacDonald to alter the design of level 21 were given through Mr Summerfield. Mr Duval in particular, appeared to consider that Mr Summerfield was acting as Mr MacDonald’s agent.
[67] Mr MacDonald’s response to this proposition was to assert that he gave neither actual authority, nor apparent or ostensible authority, to Mr Summerfield to act on his behalf.
[68] Any representation of apparent authority conferred on an agent must come from the principal. The classic statement for this proposition came from the judgment of Lord Diplock in Freeman and Lockyer v Buckhurst Park Properties (Mangal) Limited.15 His Lordship there stated as follows:
An “apparent” or “ostensible” authority… is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted on by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the “apparent” authority, so as to render the principal liable to perform any obligations imposed on him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation... The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.
[69] This statement has been approved by the Court of Appeal.16 It is clear that it
is the principal’s representation that creates the authority, and not the agent’s
assertion that he has that authority. It is not enough for the other party to show that
15 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503.
16 Cromwell Corp Ltd v Sofrana Immobilier NZ Ltd (1992) 6 NZCLC 67,997 (CA); Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 (CA) at 272; affirmed by Privy Council in Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 319 (PC).
he relied on the agent’s representation that he had the authority of his principal. He must show that he relied on the representation of the principal that the agent had the necessary authority.17
[70] Here, there is nothing in the evidence to suggest that any representation was made by Mr MacDonald to Mr Duval or to C1 Gloucester Street Limited that Mr Summerfield had either Mr MacDonald’s general or particular authority to negotiate a variation to the agreement for sale and purchase. Such representations as are relied on have come from Mr Summerfield himself. Whatever Mr Summerfield may have said to Mr Duval, or whatever instructions he may have given to Mr Campbell, cannot create apparent authority in him to act on behalf of Mr MacDonald.
One Unit — The Least Risky Option
[71] C1 Gloucester Street Limited was aware through Mr Duval that Mr MacDonald had investigated a one-apartment design. Ultimately, it had to decide whether to build the two units shown in the plans annexed to the agreement for sale and purchase, or the single unit, in accordance with the redesign prepared by Mr Campbell.
[72] On 28 July 2009, an email was sent to Mr Wilkinson, and copied to Mr Duval, indicating that a call needed to be made “re which L21 we are building”. Mr Duval replied recording that he had emailed Mr MacDonald again asking for confirmation. Mr Duval went on to say as follows:
We could say that we are building L21 based on the revised plans unless we hear to the contrary?
[73] Mr Wilkinson, the project manager, replied as follows:
That’s the best and cheapest call for the build cost, preventing redesign and re-costing of the additional kitchen etc so long as the potential exposure is not too serious.
17 Savill v Chase Holdings (Wellington) Ltd, above n 16, at 305 per McMullin J.
[74] Mr Wilkinson tried to find out from Mr Summerfield whether or not he had any correspondence on file recording Mr MacDonald’s agreement.
[75] A contractor’s report prepared by Mr Summerfield dated 5 August 2009, recorded that authorisation to proceed with level 21 was required urgently, and that it was affecting the development programme.
[76] In minutes prepared of a property contract group meeting held on 19 August
2009, it was recorded that in the absence of approval from Mr MacDonald, it had been determined that the “least risky option” was to proceed with level 21 as a single unit. It was noted that that was the highest value return, and that it complied with the resource consent which had been issued for the building.
[77] It seems reasonably clear from the documentation that C1 Gloucester Street Limited decided to proceed with the single apartment layout, notwithstanding that it was aware that Mr MacDonald had not given any formal approval in this regard, and without any reliance on any apparent agency by Mr Summerfield. In effect, it elected to run the risk that Mr MacDonald would accept the one apartment built simply because he had discussed that possibility with Mr Summerfield and Mr Summerfield in turn had obtained a plan showing a one-unit design from Mr Campbell.
Estoppel
[78] In his opening, Mr Smedley suggested that Mr MacDonald “may be estopped” from asserting that there was no agreement, and he submitted that the circumstances were such that it would be unconscionable to allow Mr MacDonald to rely on his legal rights. Although Mr Smedley did not go on to develop the argument in his closing, I deal with it briefly.
[79] There are two difficulties with this submission from C1 Gloucester Street Limited’s perspective. First, estoppel was not pleaded. Secondly, on the evidence, there were no clear words or conduct by Mr MacDonald which could suffice to create a belief or expectation in C1 Gloucester Street Limited that it was entitled to
proceed with the one unit design. There was no unequivocal representation by Mr MacDonald that he would not rely on his strict legal rights as set out in the agreement for sale and purchase. The documentation which I have set out above, suggests that C1 Gloucester Street Limited did not rely on anything said or done by Mr MacDonald. Rather, it elected to run the risk of building one unit rather than two units, because it thought that that was the most likely to have a favourable result from its perspective. C1 Gloucester Street Limited did not, on the evidence, alter its position in reliance on any representation made by Mr MacDonald.
Summary
[80] In summary, I have concluded that there was no variation to the agreement for sale and purchase. Rather, the agreement was clear in its terms. It required C1 Gloucester Street Limited to construct two units, in accordance with the description of the property set out in the agreement, and in the draft plan of subdivision annexed as schedule 1 to the agreement. C1 Gloucester Street Limited did not do so. It is unable to provide titles for two units. Mr MacDonald was entitled to cancel the contract for C1 Gloucester Street Limited’s breach. He is entitled to a refund of the deposit paid by him, and I so order.
Interest
[81] Mr Matthews sought interest at the contractual rate detailed in cl 1.1(31)(a) & (b) (that is, double the 90-day bank bill rate).
[82] Clause 1.1(31) reads as follows:
(31) Unless a contrary intention appears on the front page or elsewhere in this agreement:
(a) the interest rate for late settlement is double the 90 day bank bill buy rate;
(b) the applicable 90 day bank bill buy rate is that as advised by the vendor’s solicitor’s bank and if more than one such rate then the highest rate during the relevant period;
(c) a party is in default if it did not do what it has contracted to do to enable settlement to occur, regardless of the cause of such failure.
[83] There was no interest rate for late settlement specified on the front page of the agreement, or elsewhere in the agreement.
[84] In my view, cl 1.1(31) does not apply. The clause talks only about the interest rate applicable for late settlement. Here, settlement did not occur.
[85] When I put this to Mr Matthews, he accepted that the circumstances here applicable are not “neatly covered” by cl 1.1(31). He submitted that it is nevertheless reasonable to imply the default interest rate specified in cl 1.1(31)(a).
[86] Again, this point was not pleaded by Mr MacDonald, and I am not, in any event, persuaded that it is appropriate to imply the term suggested by Mr Matthews.
[87] In my view, from the date of payment of the deposit until 23 March 2010, interest should be payable at the actual rate at which interest was earned by C1 Gloucester Street Limited’s solicitors, as the stakeholder. Until that date, no issue had been taken with C1 Gloucester Street Limited’s default and a refund of the deposit had not been sought. The rate or rates of interest applicable from time to time under s 87 of the Judicature Act 1908 should apply as from 23 March 2010, through until the date of judgment. Thereafter, the judgment debt will carry interest at the rate prescribed from time to time under the Judicature Act, pursuant to r 11.27 of the High Court Rules.
[88] I would invite the parties to try and reach agreement on the calculation of interest. If they are unable to do so, then I reserve leave to them to refer the matter back to the Court by way of memorandum, such memorandum to be filed within
10 working days of the date of this judgment.
Costs
[89] Mr MacDonald is entitled to his reasonable costs and disbursements. My preliminary view is that it is appropriate that costs should be fixed on a 2B basis. I
would invite the parties to try and agree costs. In the event that they are unable to do so, I direct as follows:
(a) Mr MacDonald is to file and serve any application for costs within
15 working days of the date of this judgment;
(b)Any reply by C1 Gloucester Street Limited is to be filed and served within a further 10 working-day period.
I will then deal with the issue of costs on the papers, unless I require the assistance of counsel.
Wylie J
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