Mangawhai Developments Limited (in rec) v Mark Robinson Limited HC Auckland CIV-2009-404-005617

[2011] NZHC 144

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-005617

BETWEEN  MANGAWHAI DEVELOPMENTS LIMITED (IN RECEIVERSHIP) Plaintiff

ANDMARK ROBINSON LIMITED Defendant

CIV-2009-404-005989

AND BETWEEN            MANGAWHAI DEVELOPMENTS LIMITED (IN RECEIVERSHIP) Plaintiff

ANDLANCE STEWART BENNETT AND ARLENE TERESA PAKI

Defendants

CIV-2009-404-007920

AND BETWEEN            MANGAWHAI DEVELOPMENTS LIMITED (IN RECEIVERSHIP) Plaintiff

ANDMDJ PROPERTIES LIMITED Defendant

Hearing:         2-5 August 2010

Counsel:         P L Rice for the Plaintiff

G Satherley for the Defendants

Judgment:      16 February 2011 15:30:00

JUDGMENT OF WOODHOUSE J

Thisjudgment was delivered by me on 16 February 2011 at 3:30 p.m. pursuant to r 11.5 of the High Court Rules 1985.

MANGAWHAI DEVELOPMENTS LIMITED (IN RECEIVERSHIP) V MARK ROBINSON LIMITED HC AK CIV-2009-404-005617 16 February 2011

Registrar/Deputy Registrar

……………………………………

Counsel:

Mr P L Rice, Barrister, Auckland Mr G J Mercer, Barrister, Auckland Mr P J Andrew, Barrister, Auckland

Solicitors:

Mr C Taylor, Christopher Taylor Lawyers, Solicitors, Auckland

Mr B Johnson, Corban Revell, Solicitors, Waitakere City
Mr Liam Mason, Securities Commission, Wellington

Cont …

CIV-2009-404-005989

AND BETWEEN            MANGAWHAI DEVELOPMENTS LIMITED (IN RECEIVERSHIP) Plaintiff

ANDLANCE STEWART BENNETT AND ARLENE TERESA PAKI

Defendants

CIV-2009-404-007920

AND BETWEEN            MANGAWHAI DEVELOPMENTS LIMITED (IN RECEIVERSHIP) Plaintiff

ANDMDJ PROPERTIES LIMITED Defendant

Introduction

[1]      The plaintiff developed a subdivision of residential lifestyle blocks on land near Mangawhai.   In separate proceedings against Mr Robinson, MDJ Properties Limited, and Ms Paki and Mr Bennett, the plaintiff seeks orders for specific performance of agreements for sale and purchase of a number of sections entered into with each of the defendants.

[2]      Part of the subdivision proposal was to provide what are referred to in the agreements as ―communal facilities‖ on lot 51 in the subdivision, an area of approximately 22.5 hectares surrounded by the individual lifestyle blocks.   These communal facilities are the land itself and a lake and there were proposals for further facilities such as tennis courts and a boat ramp.

[3]      The defendants’ resist the applications for orders for specific performance principally on the basis that the plaintiff was bound to provide a substantial number of identified individual facilities, was bound to have completed all of the specified facilities ―prior to settlement‖, and failed to do so.  In consequence, the defendants contend they were entitled to cancel the agreements, and did so.   These defences raise issues relating to construction of the agreements, implication of terms, whether particular representations were made which became terms of the agreements, and whether there were misrepresentations.

[4]      There are further defences of estoppel and under the Fair Trading Act.   In large measure these stand or fall on the outcome of the arguments founded on breach of contract and misrepresentation.  There is a separate issue raised by the defendants under s 37 of the Securities Act. And Mr Robinson and Ms Paki also contend that, if orders for specific performance would otherwise be justified, the orders should not be made against them because they do not have the money to settle.  I note that Ms Paki and her former partner, Mr Bennett, entered into an agreement with the plaintiff as joint purchasers.   Mr Bennett took no part in the proceeding, although a joint statement of defence was filed for Ms Paki and Mr Bennett.

Facts

[5]      In the first half of 2005 the plaintiff entered into an agreement to purchase a block of approximately 125 hectares of rural land at Devich Road, Mangawhai.  The plaintiff’s intention was to proceed with subdivision in two stages.  The first stage involved subdivision of part of the land into 47 residential sections, described as rural lifestyle blocks.   It was also proposed that purchasers of the sections would have access to lot 51 to use the lake and any other facilities within lot 51.

[6]      The  plaintiff  had  a  proposed  plan  of  subdivision  completed.     It  then proceeded with the necessary application under the Resource Management Act 1991. At about the same time the plaintiff proceeded with marketing the sections identified in the proposed plan of subdivision.  For the purposes of marketing the plaintiff did two things relevant to this case.  One was to appoint two sales agents.  The other was to get a standard form agreement for sale and purchase completed as the document to be presented to prospective purchasers.

Sales agents

[7]      The plaintiff engaged two sales agents.  One was an agent with the real estate agency Barfoot and Thompson.  Some advertisements from Barfoot and Thompson were put in evidence for the defendants.  However, there is no evidence that any of the defendants saw these advertisements or had any dealings with a Barfoot and Thompson agent.  For that reason it is unnecessary to refer further to this evidence.

[8]      The  other  sales  agent  was  Matthew  Blomfield.    Around  mid-2005  Mr Blomfield  was  engaged  as  a  sales  agent  through  his  company,  M  J  Blomfield Limited.   Mr Blomfield’s company was engaged for a period of six months on a monthly retainer of $10,000.  His company was to be paid $5,000 per sale provided it met a minimum of two sales per month averaged over the six month period, with provision for reduction of the retainer if the target was not met.

[9]      Mr  Blomfield  produced  a  marketing  brochure  of  five  pages.     It  had photographs of the land and the adjoining area.  One of the photographs is an aerial

photograph with the proposed subdivision superimposed on the photograph, being the proposed subdivision at June 2005.  There is a limited amount of text.  The only text of relevance is a heading ―Common Areas‖ under which are the words: ―tennis court, jogging/walking track, picnic tables, childrens playground, basketball courts, boat ramp‖.

[10]     Darren Wallbank was a director of the plaintiff.  He gave evidence that the plaintiff’s sales agents were instructed that they could market the sections using the brochure produced by Mr Blomfield and the standard form, draft agreement for sale and purchase.  Mr Wallbank’s evidence was not contradicted in any material way by Mr Blomfield, being the only witness who might have challenged this evidence.  I regarded Mr Wallbank as a credible and reliable witness and I accept his evidence on this point.   In this context it may be noted that Mr Blomfield was the only agent appointed by the plaintiff who dealt with any of the defendants, and his dealings were with Mr Robinson and MDJ Properties.

The standard form agreements for sale and purchase

[11]     It is also of some significance in this case that Mr Blomfield was asked by the plaintiff to arrange preparation of a standard form agreement for sale and purchase. The instructions to the plaintiff’s solicitors were given to the solicitors by Mr Blomfield on behalf of the plaintiff.  The standard form, draft agreements for sale and purchase are the ones that were completed by the defendants in this case.  As a result, Mr Blomfield, as a sales agent, had knowledge of the terms of the agreements that would be sought by the plaintiff as vendor in the course of the marketing he undertook.

[12]     The agreement may conveniently be considered as having five main sections.

REINZ/ADLS standard terms

[13]     The first section has the standard terms contained in the 7th edition (2) of the

REINZ/ADLS  form  of  agreement  for  sale  and  purchase  of  real  estate.    In  the

completed agreements the first page, in the conventional way, describes the property being sold by identifying the particular section, or in some cases sections, being purchased.   The definition of the property being purchased is not extended in any way.  There was no modification to any of the standard form terms of relevance in this case.

Added terms

[14]     The second part of the agreements contains added terms of sale.  These are recorded under a heading ―special  conditions‖,  but most of these added provisions are not contingent conditions.[1]   Relevant further terms of sale, including all of those relied on by the defendants, are the following:

[1] See Donald W McMorland, Sale of Land (2nd ed, Cathcart Trust, 2000) at [5.01].

17     Vendors Conditions

17.1   This Agreement is conditional upon the Vendor:

(a)    Completing the purchase of the property at Devich Road, Mangawhai described as Lot 3 Deposited Plan 198004 as contained in Certificate of Title NA126A/610, Allotment 356, Allotment 15 and Part Allotment 12 Parish of Mangawhai as contained in Certificate of Title NZ16B/1472 together with Allotment N33 Parish of Mangawhai as contained in Certificate of Title NZ942/7; and

(b)     Obtaining   the   necessary   resource   and   land   consents   to implement the proposed subdivision.

…

22     Vendor to have Survey Plan approved and Deposit Plan

22.1   The Vendor shall, at the Vendor’s expense, promptly as reasonably

possible:

(a)     submit the survey plan to the Territorial Authority for consent; (b)      implement the subdivision consent;

(c)     carry out all work necessary to subdivide the property;

(d)     deposit the subdivision plan in the Land Registry at Auckland

Land Information New Zealand; and

(e)     obtain a separate certificate of title for the Lot.

…

25     Sunset Clause

25.1This agreement is conditional upon the certificate of title for the Lot having issued by 24 December 2007.

…

30     Communal Facilities

30.1 The Purchaser together with the Purchasers of other lots in the subdivision shall be entitled to use the area which is approximately

22.5151 hectares being Lot 51 outlined in blue on the plan attached hereto being a part of the subdivision contemplated herein.

30.2The area referred to in this clause shall include the lake, land and facilities such as tennis courts, walking track, children’s playground, basketball courts, picnic tables and boat ramp.   Such lake, land and facilities shall be known as the ―Communal  Facilities‖  and shall be maintained by the Lake View Estate Residents Society Incorporated referred to in clause 31.

31     Lake View Estate Residents Society Incorporated

31.1The  Purchaser  acknowledges  that  the  Vendor  has  established  the Society for the  purpose  of  the ownership  and  maintenance  of  the Communal Facilities.   Attached as Schedule One is a copy of the Constitution and Rules of the Society.

31.2The Purchaser acknowledges that the Communal Facilities are part of the  subdivision  contemplated  by  this Agreement  (―Development‖). The Purchaser shall not be entitled to seek or recover from the Vendor or Society and damages  or compensation arising from the Vendor incorporating the Society and requiring the Purchaser, by virtue of this Agreement,  to  become  a member  of  the  Society and  observe  and perform the obligations of a member as set out in the Constitution.

31.3The  Purchaser  acknowledges  that  the Vendor  in  incorporating  the Society, and that the Purchaser as owner of a Lot within the Development must become and remain a member of the Society and fulfil the obligations of a member of the Society as set out in the Constitution, including paying any levies set by the Society from time to time and complying with the directions of the Society, including the directions of the manager of the Society.

31.4   The Purchaser acknowledges that:

(a)     the Society may own and/or operate (as the case may be) the

Communal Facilities;

(b)     the Society may appoint a manager to administer and maintain the Communal Facilities; and

(c)     residents  within  the  Development  will,  as  members  of  the Society, be entitled to the use and enjoyment of the and [sic] Communal Facilities in accordance with the Constitution.

31.5   The  Vendor  agrees,  prior  to  the  Settlement  Date,  to  transfer  any

Communal Facilities within the Development to the Society.

31.6The Purchaser, for the Purchaser and the Purchaser’s successors in title, covenants with, and for the benefit of the Society, the Vendor and the Vendor’s successor in title so as to bind the Lot in favour of the Society and, at the Vendor’s discretion, the Development (or any part thereof) that the Purchaser shall:

(a)     Join as a member of the Society and remain a member while owning the Lot, and fulfil and continue to fulfil the obligations of a member of the Society as set out in the Constitution (including ensuring that the Purchaser itself and any proposed transferee of the Lot executes a deed of covenant in favour of the Society (at the cost of the Purchaser) agreeing to be bound by the Constitution as a member of the Society).

(b)     If required by the Society, before granting any mortgage or charge over the Lot, procure the intended mortgagee or chargeholder to enter into a deed of covenant with the Society (at  the  cost  of  the  Purchaser)  covenanting  to  observe  and perform all the rules of the Constitution upon exercising any power as mortgagee or chargeholder.

31.7The  Vendor  shall  grant  to  the  Society  and  register  against  the certificate of title for the Lot prior to the Purchaser taking title to the Lot a memorandum of encumbrance securing to the Society the obligations of the Purchaser and its successors in title to be and remain a member of the Society and to observe and perform the rules in the Constitution.  The Purchaser shall take title to the Lot subject to the registered restrictive covenants and the memorandum of encumbrance without requisition, right to compensation or set off.

The Constitution of the Society

[15]     The third part of the agreement is the Constitution and rules of the Society referred to in clause 31.1 and attached to and forming part of the agreements for sale and purchase. The Constitution has the following relevant provisions:

“Communal Facilities” means all the land, buildings, plant, equipment, facilities and amenities owned, leased, licensed or otherwise held or operated by the Society (as the Society may determine) from time to time including but not limited to gates, roads, walkways and lakes within Lake View Estate, being initially those facilities transferred to the Society by the Developer pursuant to the deed of transfer attached as Schedule 3 to this Constitution.

…

3.1The Society is formed to promote the following objects for the benefit of Members:

…

(d)     The maintenance of the boat shed, jetty and tennis court as part of the Communal Facilities and the promulgating of Rules for the use of the same.

…

4.3Until the development of Lake View Estate (including any adjoining land owned by the Developer) is fully completed, the Developer shall be the controlling member (―Controlling Member‖) of the Society, regardless of whether the Developer is at any time a Member.   The Controlling Member shall have only the rights specified in this Constitution,  and  shall  have  no  other  rights  or  obligations  of  a Member.  No reference in this Constitution to a Member shall be taken as including a reference to the Controlling Member.    Upon development  of  Lake  View  Estate  (including  any  adjoining  land owned by the Developer) being completed, the Developer shall be deemed to have resigned as Controlling Member, and thereafter, there shall be no controlling Member in respect of the Society.

…

6.6The Members acknowledge that Lake View Estate is to be developed in stages, with new Owners becoming Members as each stage is completed.

…

7       MEMBERS’ ASSISTANCE TO DEVELOPER

Future Development

7.1The Members acknowledge that development of Lake View Estate is ongoing, and that the Society is required to allow the Developer such access to, and interests in, the Communal Facilities as are necessary or desirable for the development to proceed, and to allow the Developer to add, remove or alter structures and services forming part of the Communal Facilities, and to procure that its Members amend  this Constitution if such amendment is necessary or desirable for the development to proceed.  Each Member agrees:

(a)     not to prevent, hinder or obstruct the use by the Developer of the Communal Facilities, the addition, removal or alteration of structures or services forming part of the Communal Facilities by the Developer, or the granting of any interests in the Communal Facilities by the Society to the Developer.

(b)     that neither the Member nor the Society shall oppose, or take part in any opposition to the development of Lake View Estate or any land adjoining the same owned by the Developer;

(c)     to  support  any  resolution  to  amend  this  Constitution,  where  the Society is bound by agreement with the Developer, to procure such amendment.

…

9.2The Society shall ensure the proper operation, maintenance, repair, renovation and replacement of the Communal Facilities and shall undertake  such  Capital  Improvements  as  are  necessary  for  this purpose.

Deed of transfer of the communal facilities

[16]     The fourth part of the agreements is a draft of the deed of transfer of the communal facilities from the plaintiff to the Society.   The transfer includes the following provisions:

1.      Definitions

1.1     In this deed, unless the context otherwise requires:

―Communal Facilities‖ means all road, accessways and such other land and facilities as are intended for common use by all residents within Lake View Estate, as initially shown on the plan annexed to the constitution of the Society and otherwise as determined by the Developer.

―Development‖  means  the  construction of Lake View  Estate as a

complete residential development.

2.      Reservation

2.1The  Society  acknowledges  that  whilst  it  is  the  intention  of  the Developer to construct the Communal Facilities, the Developer reserves  the  right  to  not  proceed  with  the  construction  of  the Communal Facilities, to vary those facilities designated as Communal Facilities, and to vary the location and specifications of the Communal Facilities.

2.2This deed shall oblige the Developer only to assign such Communal Facilities as it completes, and shall not oblige the Developer to construct any Communal Facilities, or to construct any Communal Facilities to any particular specification or in any particular location.

…

3.      Transfer

3.1The Developer shall, as each stage of the Development is completed, transfer to the Society any Communal Facilities constructed which are

intended to be used by residents of properties within that stage, subject to such encumbrances as the Developer sees fit.

…

4.2     The Society hereby grants to the Developer the right to:

(a)     access  and  remain  on  the  Communal  Facilities  with  such vehicles, machinery and tools as the Developer may desire;

(b)     temporarily close any Communal Facilities; and

(c)     add, remove or alter structures or services forming part of the

Communal Facilities,

as required to further the Development.

…

5.      Society’s Obligations

5.1Until the Developer certifies to the Society that the Development is complete, the Society shall:

(a)     cause the Communal Facilities to be maintained to the standard specified by the Developer; and

(b)     enforce any covenants granted by any resident of Lake View Estate in favour of the Society, when called upon to do so by the Developer.

Subdivision plan

[17]     The fifth and final part of the agreement is two copies of the plaintiff’s proposed plan of subdivision.  The plans are identical, except that one copy has the sections being purchased outlined in red, and lot 51 outlined in blue.  The copy with the red and blue outlining is referred to in the front page definition of the property (individual lot or lots) being purchased and in clause 30.1 referring to lot 51.  The other copy is a schedule to the Constitution and is also referred to in the transfer (in the   definition   of   ―communal   facilities‖).      These   duplicate   plans   were,   in consequence, also part of the agreements for sale and purchase in this case.   The points of relevance from the plans are the following:

(a)      Five individual facilities are identified in writing and by letters superimposed on lot 51 as follows: A two tennis courts; B pergola; C childrens playground; D jetty; E boat ramp.

(b)Devich   Road,   being   the   public   road   providing   access   to   the subdivision, is shown in part.  Below the words ―Devich Road‖ is the word ―metalled‖.

The agreements with Mr Robinson and MDJ Properties

[18]    Mr Blomfield was directly responsible for procuring seven of the eight agreements for sale and purchase in this case.  Those are the agreements for sale of five lots to MDJ Properties Limited and the agreements for sale of two lots to Mr Robinson.

[19]     Mr  Robinson  and  Mr  Blomfield  were  at  school  together.    In  2005  Mr

Robinson was living in the United Kingdom.  Mr Robinson said that in May or June

2005 he was contacted by Mr Blomfield who told him about the Devich Road development and encouraged him to ―buy into it‖.   He said that as he was overseas he relied entirely on what he was told by Mr Blomfield.  He said the following:

4Matt explained to me that the development was to be one of the very high quality that would set it apart from other developments in the area, particularly in relation to the kinds of communal property that would be available to those who participated in the development.  He told me that it was to be an exclusive development that would have a grand entrance way, a lake with a jetty and a boat ramp, a path for jogging and walking, a tennis court, toilets, swimming pool and a communal building.   I was told that the developers were going to create  a  development  that  of  [sic]  would  be  very  upmarket,  high quality and high class and that everything would be built to a high specification including the roading and the gateway.  The concept that I was told of was a development that would be attractive when completed, fully landscaped and suitable for the building of nice looking and good quality holiday homes.  Matt was very clear that this would be a good investment as the quality of the communal aspects of the development would be such that they would make it a desirable development that would hold its value and be very saleable.

Mr Robinson said that, ―purely on the basis of what‖ Mr Blomfield told him, he agreed to buy two sections and in June 2005 transferred $20,000 to the trust account of the plaintiff’s solicitors for this purchase.

[20]     Mr Robinson said he was contacted again by Mr Blomfield in August 2005 and he then agreed to purchase five more sections with Mr Blomfield through a company and forwarded a further $50,000 to the plaintiff’s solicitors as the deposit for those five sections.  In relation to these sections Mr Robinson said:

7The idea I discussed with Matt was that we would be able to sell off some of these sections prior to the settlement date and to use the proceeds  from those  sales  to  fund  one  or  two  remaining  sections which would be kept.  We could then build houses on the sections and rent them out and also benefit from the future growth in their value. …

[21]     Mr Robinson also said that when he sent the $50,000 the company was still to be formed.  He said this was to be organised by Mr Blomfield.  He continued:

9… Matt was dealing with these matters on my behalf.  It was initially intended that Matt and I would be joint shareholders in the company. More recently [in relation to the brief of evidence prepared in August

2010], and after the sale and purchase agreements had to be cancelled,

the entire shareholding of the company was transferred to me …

[22]     I am satisfied from Mr Robinson’s evidence, which was not challenged in any way by Mr Blomfield, that Mr Blomfield was actively involved in the purchase of the five sections, through the company, as a principal, although the entire deposit came from Mr Robinson.  This is clear from the evidence just quoted, and amplified in a similar way in cross-examination.  In addition, Mr Blomfield was a director of the company that was formed, the defendant MDJ Properties.

[23]     MDJ Properties entered into five separate agreements, one for each section, with three dated 24 August 2005 and two dated 10 November 2005.  Mr Robinson entered into two agreements, one for each section, and both dated 11 November

2005.

[24]     The defendants Ms Paki and Mr Bennett entered into one agreement with the plaintiff to buy two sections. The agreement is dated 24 August 2005.

[25]     The only evidence given by or for the defendants in the claim against Ms Paki and Mr Bennet was evidence from Ms Paki.  There was no evidence from Mr Bennett, or from any other person, relating to the circumstances in which the agreement was made, or in respect of any other positive defence to the claim against Ms Paki and Mr Bennett.

[26]     In May 2005 Ms Paki and Mr Bennett were living in a de facto relationship. They were approached by Mark Maxwell.  Mr Maxwell was introduced to them by Ms Paki’s cousin.  Mr Maxwell and Ms Paki’s cousin were in a relationship at the time.  Ms Paki acknowledged in cross-examination that she knew Mr Maxwell had no connection with the plaintiff.

[27]     Ms Paki said, in respect of Mr Maxwell’s approach to her and Mr Bennett:

2… I was told that a friend and associate of Mark Maxwell, Matt Blomfield,  was  selling  sections  on  behalf  of  Mangawhai Developments Ltd (MDL), however I only engaged with Mark throughout the process and he dealt directly with Matt.   The development was described to me as:

2.1    33  lot  exclusive  gated  farm  park  type  subdivision  situated around six hectare lake;

2.2    Fenced and gated entranceway into subdivision for exclusive access and safety;

2.3    All  roading  complete  to  vehicle  entranceways  compliant  to local authority standards;

2.4    Completed walkway around lake perimeter;

2.5    Shared boat ramp and jetty, included trout fishing;

2.6    Shared   clubhouse   complete   with    swimming   pool    and tennis/basketball courts at northern end of lake;

2.7    All owners to have common share in facilities.

4Other selling points were that the sub-division would be a safe and secure place to raise a family, it had a rural aspect and was a 45 minute  commute  to  the  North  Shore.    Lance  and  I  contemplated moving to the sub-division and finding work either on the North Shore or north of Auckland.  It was also stated to me that one of the owners behind the development planned to build a 300sq/m+ dwelling with glass side swimming pool adjacent to the lake and this very elaborate dwelling would increase values of surrounding properties.  I was also told   that   a   number   of   professional   business   people   (such   as accountant, property valuer, real estate agents and lawyers) associated to the developers were purchasing sections as an exclusive offer in this elite Mangawhai Development subdivision.   Purchasing a section in the development was sold to me very much on the basis that the development would be high class and exclusive.

[29]     Ms Paki said that before she and Mr Bennett signed the agreement they inspected the proposed subdivision on two occasions.   On the first occasion they went with Mr Maxwell (and Ms Paki’s daughter).   On the second occasion Mr Maxwell’s business partner, Mr Gavin Riley, and Mr Blomfield were present as well as Mr Maxwell.  There was no evidence from Ms Paki of any representations made by Mr Blomfield, or anyone else, about the property on that occasion.

[30]     Ms Paki said that before the agreement was signed she saw two documents (in addition to, as is implicit, the draft agreement).  One was the plan of subdivision, forming part of the agreement: see [17] above.  Ms Paki expressly confirmed that she had looked at this plan.  The second document she saw was the brochure, or at least part of the brochure, prepared by Mr Blomfield: see [9] above.

Subdivision work from around November 2005

[31]     By around November 2005 the plaintiff had agreements for sale and purchase for 31 sections out of a total of 47 sections to be sold in stage one.  On the basis of these sales, in November 2005 the plaintiff obtained an initial loan of $4 million to proceed further with the subdivision.  The loan facility was extended to a total of

$9,175,000 in March 2006.

[32]     Resource consent was obtained from the Kaipara District Council in March

2006, subject to a number of conditions.   Infrastructure NZ Ltd was engaged to

undertake the physical works and also to act as project manager.  Mr Blomfield is a

director of that company.

[33]     Work on the subdivision was slower than the plaintiff had anticipated.   Mr Cotton and Mr Wallbank, for the plaintiff, said that there were a number of reasons for this, including delays by Infrastructure NZ Ltd and imposition of subdivision consents more onerous than had been anticipated.   There was some evidence of a dispute between the plaintiff and Infrastructure NZ Ltd relating to outstanding payments owed to Infrastructure NZ Ltd.   There were differences between the plaintiff’s witnesses and Mr Blomfield as to who was responsible.  It is unnecessary to go into the detail of that dispute.

28 September 2007 : Mr Blomfield’s effort to acquire the plaintiff’s land and

subdivision works : purported cancellation by MDJ Properties and Mr Robinson

[34]     On 28 September 2007 Mr Blomfield sent a draft of an agreement for him to purchase the plaintiff ’s land.  A draft offer was copied to the plaintiff, but there were also communications with the finance company which had provided the plaintiff with the facility for over $9 million and which, of course, had security over the plaintiff’s land.  On the same day notices of purported cancellation of the agreements with MDJ Properties and Mr Robinson were issued by solicitors.  I am satisfied that Mr Blomfield  was  responsible for  the  instructions  to  the  solicitors  to  issue  the notices of cancellation.   I am also satisfied that this was done when there was no justification for doing it to seek to put pressure on the plaintiff, and on the finance company, to further Mr Blomfield’s efforts to acquire the plaintiff’s land.

[35]     Mr Robinson said that he had no involvement in preparation of the two letters of purported cancellation.  It is implicit in Mr Robinson’s evidence, which I accept, that the instructions to the solicitors on matters of detail – specific grounds for cancellation – came from Mr Blomfield.   Each letter alleges breach of contract in seven identical respects.  It is unnecessary to set out the detail.  It is sufficient to note at this stage that  I am  satisfied that none of the grounds provided  grounds for cancellation and some of the grounds were contrived to say the least.  Some aspects of this  are  discussed  later.    It  may also  be noted that  the notices  of purported

cancellation were issued just under 13 weeks before the sunset clause in clause 25 of the agreements and without any preceding settlement notice making time of the essence in respect of the alleged defaults.[2]    The claimed right of cancellation was rejected on behalf of the plaintiff.

[2] On the question of cancellation without a prior notice see the Supreme Court’s recent discussion in Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 90 at [20] ff. And see Donald W McMorland, Sale of Land (2nd ed, Cathcart Trust, 2000) at [5.07].

Compliance with subdivision consent conditions : issue of titles

[36]     On a date which does not appear to be in evidence, but which is not material, the plaintiff applied to the District Council for issue of a s 224C certificate to enable an application to be made for issue of certificates of title for the sections being sold. For this purpose the Council carried out an inspection and determined that some works had not been completed in accordance with the subdivision consent.   The evidence for the plaintiffs is that they had understood from Infrastructure NZ Ltd that all necessary works had been completed.  In the result the Council effectively varied the conditions of consent by accepting a bond to cover the cost of completion of the outstanding work. The bond was provided in a sum in excess of $500,000.

[37]     On  4  December  2007  the  plaintiff’s  solicitors  advised  the  defendants’ solicitors that titles had issued and provided requisite copies and other information. On 5 December 2007 the plaintiff’s solicitors forwarded settlement statements for settlement on 11 December 2007.

[38]     On 12 December 2007 the solicitors for Ms Paki and Mr Bennett advised by letter to the plaintiff ’s solicitors that they contended that the vendor was in breach of contract in three respects:

(a)      The vendor had failed to complete by the date of settlement all of the communal facilities ―specified in clause 30.2 of the agreement‖.   The communal facilities said to be specified in clause 30.2 and ―nowhere near complete‖ were ―the community clubhouse, tennis courts, pool,

walking track, children’s playground, basketball courts, picnic tables

and  boat  ramp‖.    It  was  also  said  that there were representations relating to the location in lot 51 of the swimming pool and tennis courts.

(b)A second breach was said to arise from proposals of the vendor to operate a dairy farm on ―the  adjacent land‖.    This allegation is in terms  essentially  the  same  as  an  allegation  in  the  letters  of  28

September 2007 from the solicitors for Mr Robinson and MDJ Properties, who were not the solicitors for Ms Paki and Mr Bennett. There was no foundation for this allegation and it was not borne out by any evidence.

(c)      The third alleged breach was recorded as follows:

Your client represented to our client that Devich Road would be tarsealed up to the subdivision.   Your client assured our client that there would be no unsealed road between the main road and their lot.

These breaches were said to have resulted in a substantial diminution of the value of the lots being purchased by Ms Paki and Mr Bennett.   There was then a without prejudice  proposal  that  the  parties  agree  to  cancel  the  agreement  for  sale  and purchase and that the deposit be refunded.

[39]     Ms  Paki  and  Mr  Bennett’s  contentions  were  rejected  in  a  letter  of  13

December 2007 from the plaintiff’s solicitors, as follows:

Our  client  denies  having  misrepresented  the  type  of  facilities  to  be completed for this development.  The facilities will be those referred to in the Agreement for Sale and Purchase except one of the tennis courts has been replaced with a swimming pool.   This was at the request of many purchasers.  This is more costly to the vendor but is seen as an improvement to the development.  The walking track and boat ramp have been completed. The swimming pool has been contracted for and a deposit paid.   The playground equipment has been made and is ready to be transported to the subdivision.  Our client is obtaining quotes for the balance of the Communal Facilities to be completed in accordance with the Agreement for Sale and Purchase.

Our client is not operating a dairy farm.  Currently the neighbouring lot has been used to graze cattle and our client has a conditional agreement to sell that lot.

Our client denies making the representations regarding the tar sealing of the roads.   Our client had to contribute to the Council’s roading fund for the upgrade  of  the  road  and  infrastructure  but  it  is  up  to  the  Council  to administer any contribution of funds.  The road may be sealed in the future due to further blocks along Devich Road being subdivided but this is not within the control of our client.   Our client has bonded with Council to complete work on the intersection of the subdivision in Devich Road and carry out some upgrading.   The commencement and completion of the upgrading is dependent on whether an application for Transfund subsidy is granted to our client.

Our client does not accept that there has [sic] been any misrepresentations regarding the development and does not accept your client’s suggestion that the agreement be cancelled.

These contemporaneous statements were borne out by the evidence of Mr Cotton, the director of the plaintiff most directly involved in overseeing the physical development of the land, and whose evidence on these matters I accept.

[40]     By letter dated 14 December 2007 to the plaintiff’s solicitors, Mr Robinson’s solicitors also disputed the contention that the plaintiff was ready, willing and able to settle. They said:

Leaving aside our client’s cancellation of the contracts we take the view that this is not the case.  Your client has not completed the public amenities as was promised by it.

We now have instructions to sue for the recovery of the deposits paid.

[41]     No further steps were taken by or on behalf of any of the defendants until statements of defence and counterclaims for the deposits were filed between November 2009 and January 2010.

[42]     After 12 December 2007 the plaintiff’s directors decided that, although they considered  that  the  plaintiff  was  not  bound  to  have  completed  the  communal facilities by the date of settlement, they would nevertheless defer settlement and complete all the facilities intended to be installed.   The evidence of Mr Cotton, which was not challenged in any substantial way, was as follows:

(a)      The lake had been formed when the plaintiff purchased the land. (b)      The walking track had been completed by 12 December 2007.

(c)       Playground equipment was installed in September 2008. (d)   A tennis court was completed in mid October 2008.

(e)       Picnic tables and park benches were constructed in September 2008 and completed in October 2008.

(f)       The boat ramp was completed in December 2007.

(g)      The swimming pool (substituted for a tennis court) was completed in

October 2008.

(h)      A jetty was completed in October 2008.

[43]     On 10 October 2008 the plaintiff’s solicitors wrote to the solicitors of the defendant purchasers requesting settlement on 20 October 2008, and forwarding the requisite information and settlement statements.  The defendants failed to settle. The plaintiff issued further settlement notices. The proceedings then followed.

Valuation evidence

[44]     The plaintiff called expert evidence from a registered valuer and property consultant, Matthew Taylor.   There was no material challenge to Mr Taylor’s expertise.

[45]    The main purpose of this evidence was to counter an argument for the defendants that a failure to complete various communal facilities had, or would have, reduced the value of the individual lots being purchased by each of the defendants. This in turn was directed to the affirmative defence of the defendants that they were entitled to cancel for breach of a term of the contract, or a misrepresentation on an equivalent point, which resulted in the benefit of the contract to the defendants being substantially different  from  what  was  contracted  for or  represented:  Contractual Remedies Act 1979, s 7(4)(b)(iii).

[46]     Mr Taylor was asked to express his opinion on value relating to completion, or  non-completion,  at  an  assumed  settlement  date  of  December  2007,  of  the following communal facilities: (1) lot 51 itself together with the lake; (2) walking track; (3) picnic tables; (4) children’s playground; (5) tennis and basketball court; (6) boat ramp; and (7) swimming pool.   Mr Taylor was also asked to assume that the lake, walking track and boat ramp had been completed by December 2007, and I find as a fact that that was the case.

[47]     Mr Taylor was asked to provide his opinion of market value of each of the lots on three bases:

(a)      The  value  of  the  lots  in  December  2007  if  all  of  the  communal facilities had been completed by the settlement date.

(b)The value of the lots in December 2007 with the lake, walking track and boat ramp completed, as was the case, and on the assumption that it  was  likely  that  the  developer  would  complete  the  remaining facilities in due course following settlement.

(c)      The value of the lots in December 2007 with the existing communal facilities being the lake, walking track and boat ramp and on the basis that no further facilities would be completed by the developer following the assumed settlement date in December 2007.

[48]     Mr Taylor concluded that there would be no difference in value between any of those assumed circumstances.  Mr Taylor’s estimate of value compared with the agreed purchase price for each lot was recorded in various tables.  Combining these, and with some re-arrangement and added headings, the combined table is as follows:

Lot #	Size s.m.	Sale Date	Price incl. GST	Assumed value in December 2007 on the three scenarios
3	13,042	June-05	$240,000	$260,000
10	5,957	Aug-05	$240,000	$240,000
20	5,761	Jun-05	$240,000	$260,000

Lot #	Size s.m.	Sale Date	Price incl. GST	Assumed value in December 2007 on the three scenarios
30	5,501	Aug-05	$290,000	$300,000
31	6,450	Nov-05	$290,000	$300,000
32	6,219	Nov-05	$295,000	$300,000
40	5,226	Nov-05	$300,000	$300,000
45	5,373	Aug-05	$155,000	$180,000
46	4,678	Aug-05	$155,000	$170,000

[49]     Mr Taylor did acknowledge that it could be argued that there could be some reduction in value on the third scenario.  He said if there was it would not exceed 5% of his assessed value and for that purpose he produced a further table taking a mid- range of between 2.5% and 2.78%.   Nevertheless, at first blush Mr Taylor’s conclusion that there would be no reduction, or no material reduction, in value on the third assumption might appear surprising.   However, he provided reasons for this conclusion  which  I  was  prepared  to  accept  subject  to  any  modification  of  the position on cross-examination or evidence for the defendants challenging the conclusions on reasonable grounds.  There was no material challenge in cross- examination to Mr Taylor’s opinion.

[50]     There was evidence called for the defendants which in fact supported Mr Taylor’s opinion.  Evidence for the defendants was given by Craig Mathieson.  Mr Mathieson is a real estate agent who had at the date of the hearing been a real estate agent  for  10  years.     He  specialised  exclusively  in  selling  real  estate  in  the Mangawhai area and had acted as an agent for sale of sections and subdivisions in the district since 2001.  There was no challenge to Mr Mathieson’s expertise in this regard.

[51]     Mr Mathieson’s evidence-in-chief was not in fact concerned with value, but with his opinion on the general quality of the plaintiff’s subdivision.  He had been approached by the plaintiff in 2007 to sell sections in the subdivision.  Mr Mathieson provided some evidence of his opinion as to the best course of action for the plaintiff at that date to achieve further sales and said that he did not secure any sales.  I do not consider that this evidence provides any assistance on the matters I have to decide,

although I am not intending to express any criticism of Mr Mathieson in that regard. The  relevance  of  Mr  Mathieson’s  evidence  is  that,  in  cross-examination,  he concurred, in essence, with the opinion of Mr Taylor that provision of the communal facilities made no material difference to value. There was the following:[3]

[3] Notes of evidence p 99 ll 15-28.

Q.      Essentially Mr Taylor says that of the communal facilities that were intended for this development, the main driver, as he terms it, of value would be the lake, that was the predominant communal facility that would influence value, do you agree with that?

A.     Not really, no.

Q.      What else do you say would be the – well if that isn’t the main driver of value, what is?

A.      I would think the sites there that have got a view across the lake and out to the ocean.

Q.      Yes, I see where you’re coming from.  I accept that, Mr Matheson, I agree with you that – and Mr Taylor says much the same thing, that the value of the lots in the subdivision corresponds largely with their views, how elevated they are, you’d go along with that?

A.     Yeah.

[52]     In relation to communal facilities specifically, Mr Mathieson did not agree with Mr Taylor’s opinion that the lake was the most valuable feature.  Mr Mathieson considered that the owners of sections would be ―more interested in having the playgrounds, the hall, the tennis courts, and things like that‖.   In the course of that answer he then said, unprompted:[4]

[4] Notes of evidence p 100 ll 7-25.

A.      … I don’t know whether this is getting a bit off the line, but, in the – I've worked on more than 30 plus subdivisions in and around that area. There are a number of them that have some of these communal facilities and to be quite honest in all of them they are a complete waste of time.  The people either never or rarely use them, they are more interested in, I think, their land and what they can see from it, um, proximity to facilities like Mangawhai Golf Club, beaches, I think that's probably more of driver than other things.  I mean for instance, let’s use the Truffle Farm, beautifully presented, roading all finished nicely,  there's  millions  of  dollars  been  spent  in  there,  all  weather tennis   court,   Olympic   quality  equestrian   centre  and   equestrian whatever you call it, fields, stables, it never gets used, it never sold. Most of the subdivisions I've done, the rural ones we’ll talk about rather than the residential ones, the ones that have sold the best are the ones with no covenants, no facilities, bare land, do what you like with

it.  It seems to me that the ―Kiwi psyche‖ if you want is, ―It's my piece of dirt, I want to do what I like and I don't want someone telling me what I can or can’t do with it,‖ and that seems to come through loud and clear to me in 10 years of working there.

Discussion

Summary of defence arguments

[53]   The defendants challenged the plaintiff’s claim to an order for specific performance on a number of grounds common to all defendants.   The principal grounds are that the defendants were entitled to cancel the agreements, and did so, for breach of contract or for misrepresentations.   The main elements of these contentions in outline were:

(a)      Mr Mercer said that he advanced two overarching propositions for the defendants.  The first was that the plaintiff was bound to complete a substantial number of specific facilities on lot 51 prior to settlement. The obligation to complete the communal facilities ―prior to settlement‖ was said to arise on one of four alternative grounds: (1) it was an express term of the contract, and on this basis it was a contingent condition justifying cancellation on non-fulfilment ―prior to settlement‖; (2) the obligation may be implied from the express terms of the written agreements; (3) the obligation should be implied to give the agreements ―business efficacy‖; (4) it was represented that the facilities would be provided prior to settlement and such representation became a term of the contract or was part of a collateral contract.

(b)The  second  overarching  proposition  was  that  the  extent  of  the obligations in respect of the facilities – the particular facilities to be provided – was to be found not in the written agreements, but in contractually binding pre-contractual representations.

(c)      Based on those two propositions, Mr Mercer submitted that the defendants  were entitled to cancel the agreements pursuant to the Contractual Remedies Act 1979 under either s 7(4)(a) or s 7(4)(b)(iii).

[54]     The relevant provisions of s 7 of the Contractual Remedies Act 1979 are:

7       Cancellation of contract

(1)     Except as otherwise expressly provided in this Act, this section shall have effect in place of the rules of the common law and of equity governing  the  circumstances  in  which  a  party  to  a  contract  may rescind   it,   or   treat   it   as   discharged,   for   misrepresentation   or repudiation or breach.

…

(3)     Subject to this Act, but without prejudice to subsection (2) of this section, a party to a contract may cancel it if—

(a)     He has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to that contract; or

(b)     A [term]  in  the  contract is  broken  by  another  party  to  that contract; or

(c)     It is clear that a [term] in the contract will be broken by another party to that contract.

(4)     Where subsection (3)(a) or subsection (3)(b) or subsection (3)(c) of this section applies, a party may exercise the right to cancel if, and only if,—

(a)     The parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the [term] is essential to him; or

(b)     The effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be,—

(i)      Substantially to reduce the benefit of the contract to the cancelling party; or

(ii)     Substantially  to  increase  the  burden  of  the  cancelling party under the contract; or

(iii)    In relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.

…

(6)     A party who has substantially the same interest under the contract as the party whose act constitutes the repudiation, misrepresentation, or breach may cancel the contract only with the leave of the Court.

(7)     The Court may, in its discretion, on application made for the purpose, grant leave under subsection (6) of this section, subject to such terms and conditions as the Court thinks fit, if it is satisfied that the granting of such leave is in the interests of justice.

[55]     There were the further affirmative offences noted in the introduction to this judgment: estoppel; breach of the Fair Trading Act, ss 9 or 14; and breach of the Securities  Act  1978.     And  there  is  the  argument  that  an  order  for  specific performance should be declined because performance by Mr Robinson and Ms Paki would be impossible because they do not have the financial resources.

Community facilities required prior to settlement? An express term of the agreement?

[56]     The heart of Mr Mercer’s submission for the defendants was as follows:

In the context of the contract document as a whole, special condition 31.5 cannot mean anything other than that prior to the settlement date the vendor must complete and then transfer to the Society all the community facilities. There  is  nothing  in  the  contract  that  contemplates  or  caters  for  the completion or transfer of facilities at any other time.   Fundamentally the bargain expressed in these conditions is that on the settlement date in exchange for a completed development including communal facilities the purchasers would pay the purchase price.  This is an exchange of value for value.

[57]     Mr Mercer did note some other provisions.   These were, from the added terms, clauses 22.1, 25.1, 30.1, 30.2, 31.2, 31.4 and 31.5; from the Constitution of the Society, the definition of ―Communal Facilities‖, and in particular the meaning of the expression in the penultimate line ―being initially those facilities transferred to the Society …‖; and, in the draft deed of transfer, clause 3.1.

[58]     It is, of course, necessary to have regard to all provisions of the written agreements.   I am satisfied that, when the written agreements are construed as a whole, including the annexures which form part of them, the plaintiff as vendor was not contractually bound to have completed any particular communal facilities by the date of settlement.

[59]     Contrary to Mr Mercer’s submission, the express contractual obligation on the plaintiff at the date of settlement was not to provide ―a completed development including communal facilities‖ but to convey the designated section or sections.  The obligation of the plaintiff as vendor is spelled out in clause 3.7(2) of the standard form part of the agreement.  The obligation on the plaintiff was (and is) to hand to the purchaser the memorandum of transfer of the property, with further obligations associated with that primary obligation.  The ―property‖ to be conveyed, as earlier noted, was the individual section or sections.

[60]     There is no other provision in the agreement which says that, in addition to conveying title to the sections being purchased, the vendor must on settlement have completed, or installed on lot 51, particular communal facilities.

[61]     I do not agree with Mr Mercer’s submission that clause 31.5 means, by necessary implication, that the communal facilities referred to by the defendants had to have been transferred to the Society prior to the settlement date.  Clause 31.5, read in isolation, requires only that ―any‖ communal facilities that may have been on lot

51 at the date of settlement were required to have been conveyed to the Society before settlement with the defendant purchaser.   This falls well short of the defendants’ contention in relation to the wide range of communal facilities referred to in the pleadings.  What is more, I am satisfied that clause 31.5, and some other provisions, are directed to the obligation on the vendor under the Securities Act

1978, not to contractual obligations owed to the purchasers of the sort contended for. The Securities Act issues are discussed in due course.

[62]     In  any  event,  the  further  provisions  of  the  agreement,  including  those contained in the Constitution of the Society and the transfer, make abundantly clear that there was no obligation on the plaintiff as contended for.  This conclusion arises from all of the provisions that I earlier recorded in full.  In particular:

(a)      The use of the expression ―any Communal Facilities‖  in clause 31.5 indicates a conclusion contrary to that argued for the defendants.  For the reasons earlier noted, if the defendants’ contention was correct, this clause would have said something along the following lines: ―The

vendor agrees, prior to the settlement date, to transfer the following communal facilities within the development to the Society, namely:‖ followed by a list of the particular facilities.

(b)Clause 7.1 of the Constitution gave the plaintiff as developer express power ―to add, remove or alter structures and services forming part of the Communal Facilities‖ and subclauses in that clause gave the plaintiff rights of access to that end.  There are similar provisions in clause 4.2 of the transfer.

(c)       Clauses 2.1 and 2.2 of the deed of transfer are provisions expressly

contrary to the defendants’ contentions.

[63]     Mr  Mercer  submitted,  for  all  defendants,  that  the  alleged  obligation  to complete all of the specified communal facilities prior to settlement was a condition to which the agreements were subject in the sense contemplated by the REINZ standard  clause  8.7;  that  is  to  say,  if  the  condition  was  not  satisfied  prior  to settlement the purchasers were entitled to cancel pursuant to clause 8.7.   The submission at this point was, therefore, that this contended for provision was what is

conveniently referred to as a ―contingent condition‖.[5]    Because I have concluded that

[5] See Donald W McMorland, Sale of Land (2nd ed, Cathcart Trust, 2000) at [5.01].

it was not a term of the agreements that any particular facilities be completed prior to settlement, it necessarily follows that there was no contingent condition to this effect. It is nevertheless relevant to note that it appears that the contingent condition argument was advanced to support a submission that the purported cancellation of the agreements on behalf of Mr Robinson and MDJ Properties, by the letters on 28

September 2007, and long before the sunset date, were justified.  The conclusion I have reached  also  means  that  the purported  cancellation  in  those  letters  on  the grounds of failure to have completed particular communal facilities some months before  settlement  was  not  justified.    I am  also  satisfied  that  the  other  grounds recorded in those letters did not provide grounds for cancellation.   There is no satisfactory evidential foundation for the allegations contained in the letters.  Some

of them border on the fanciful.

Community facilities required prior to settlement? Implied contractual term?

[64]     As noted in Burrows, Finn & Todd, Law of Contract in New Zealand,[6]  the

[6] Burrows, Finn & Todd, Law of Contract in New Zealand (3rd ed, LexisNexis NZ Ltd, Wellington 2007) at 178-179.

New Zealand Court of Appeal has subdivided implied terms into two types:

[There] are … terms deduced by implication or interpretation from the express terms of the contract; and terms held to be implied to give business efficacy to the contract.[7]

Mr Mercer relied on both categories of implied terms.

[7] Rod Milner Motors Ltd v Attorney-General [1999] 2 NZLR 568 at 579 (CA) per Salmon J. And see the further cases noted in Burrows, Finn & Todd above, n 6, at n 170, at 179.

[65]     It follows from the preceding discussion that the obligation contended for by the defendants – an obligation to provide the facilities prior to settlement – cannot be implied on either basis.   The express words of the contracts in this case clearly indicate intentions contrary to those the defendants contend are implied by those words.   In respect of the second type of implied term Mr Mercer relied on the

decision of the Court of Appeal in Devonport Borough Council v Robbins.[8]    Both

[8] [1979] 1 NZLR 1.

judgments in that case[9]  refer to the five conditions listed in the majority judgment delivered by Lord Simon of Glaisdale in BP Refinery (Westernport) Pty Ltd v Shire of  Hastings.[10]    Two  of  those  conditions  are  not  satisfied  for  reasons  already discussed; that the term contended for is so obvious that it goes without saying and that the term does not contradict express terms of the contract.   I am  also not persuaded that implication of the term would be necessary to give business efficacy to the agreements.   The agreements themselves record that the contractual arrangements  relating  to  communal  facilities  are  to  be  between  the  plaintiff  as

developer on the one hand and the Society on the other.

Communal facilities required by settlement? Contractually enforceable representation?

[9] Cooke J at [23] and Richardson J at [29].

[10] (1977) 16 ALR 363.

[66]     A  further  argument  for  the  defendants  was  that  there  were  collateral agreements effectively arising from representations made to the defendants to the effect that all of the communal facilities specified would be completed prior to settlement.  There is no evidence sufficient to support this argument.  If there was evidence that representations to this effect had been made, and made by agents of the plaintiff  with  actual  or  ostensible  authority sufficient  to  bind  the  plaintiff,  it  is doubtful that such could give rise to an enforceable collateral obligation because it would be plainly inconsistent with the contrary express provisions of the written

agreement.[11]

Conclusion to this point

[11] See AM Bisley & Co Ltd v Thompson [1982] 2 NZLR 696 (CA) at 701-702

[67] These conclusions are sufficient to dispose of the defences to the application for specific performance based on alleged breach of contract and misrepresentation. Having regard to my conclusions in respect of these defences, the defendants were not entitled to avoid settlement on the grounds that the plaintiff had failed to provide all the particular facilities specified in the statements of defence, or any particular facilities, prior to or at least by the date of settlement. However, I will consider the second essential contention for the defendants in respect of the alleged breach of contract, being the contention summarised at [53](b) above. The contentions in this regard are also relevant to the defence under the Fair Trading Act.

Alleged representations and misrepresentations

[68]     Mr Mercer submitted, as the second of the two overarching propositions for the defendants, that:

The extent and quality of the subdivision and the communal facilities that the plaintiff was bound to complete is not found in the contract alone, which is vague as to the nature of what was to be provided.  This vagueness is in contrast to the representations made to the defendants prior to entering into

the contracts on which they relied.  These representations have contractual effect as collateral terms or implied terms, or have legal effect as actionable misrepresentations.

[69]     Contentions about representations allegedly made before the contracts were entered into were put forward in a variety of ways.  In this case the only evidence which in the end requires consideration in relation to alleged representations is the evidence of Mr Robinson and Ms Paki.

[70]     I will come to the evidence of Mr Robinson and Ms Paki in a moment. Before doing so it remains appropriate to consider other allegations, put forward in various ways, for at least two reasons.   One is that they are contentions that were advanced on behalf of Mr Robinson and Ms Paki.  The other is that they also have some bearing on the defences under the Fair Trading Act.

(a)      There were some contentions, rather generalised, relating to roadways within the subdivision and alleged failure to complete them in accordance with representations.  The internal roadways were in fact all tarsealed at least by 20 July 2007.  This is recorded in a registered valuer’s report dated 20 July 2007 which was produced in evidence for the defendants.

(b)There were allegations, in the end not pursued with any vigour, that there were representations that the public road leading up to the subdivision, Devich Road, would be sealed.  Apart from the fact that the plaintiff had no control over the sealing of the road, which was the responsibility of the District Council, the plan attached to all of the agreements expressly records Devich Road as a ―metalled‖.

(c)      There were numbers of allegations in the statements of defence not borne out by evidence of Mr Robinson or Ms Paki.

(d)Evidence from Mr Blomfield as to what he said to Mr Robinson is of no  assistance  to  the  defendants  unless  this  was  confirmed  by Mr Robinson.

(e)      During the hearing some time was spent on the significance of a drawing entitled ―Lake View Estate community facilities‖  (produced as defence exhibit A).   It is apparent that some contentions for the defendants, leaving aside those contained in the evidence of Mr Robinson and Ms Paki, were based on this drawing and some of the contentions were reasonably vigorously pursued  in the case.   The drawing shows a configuration of facilities different from what is on the plan of lot 51 attached to the agreements for sale and purchase. There are some facilities not referred to in any of the contract documents, such as a community building.  This drawing provides no assistance to the defendants because of its date and because of further evidence from Mr Blomfield relating to it.   The drawing put in evidence was not in existence when the defendants entered into the agreements for sale and purchase.  The most recent agreement for sale and purchase is dated November 2005.   The drawing is dated September 2006.  Mr Blomfield, in his evidence-in-chief, referred to a drawing which, from his description of its content, obviously was the drawing subsequently produced as exhibit A.  The evidence-in-chief was to the essential effect that this was a drawing available to Mr Blomfield when he was selling the sections, including to Mr Robinson and to MDJ Properties.  Production of the drawing with its date made clear that this could not have been the case unless Mr Blomfield had seen an earlier version with similar content.  But in cross-examination it was made clear that he could not have seen this drawing, or a larger scale copy of it, before the date of September 2006 recorded on it. What is more, the sales brochure that was actually produced by Mr Blomfield, in existence at the dates of the agreements with the defendants, and which Ms Paki said she had seen, described significantly fewer communal facilities than were shown on the September 2006 drawing.  I am satisfied from this evidence, as well as all other relevant evidence, that many of the allegations advanced in the names of the defendants from and after September 2007 came at the instigation of Mr Blomfield and were not justified.

(f)      There  were   various   allegations   relating   to   the   quality  of   the development.  I am satisfied that Mr Robinson and Ms Paki were told that it would be a subdivision of quality.  But I am not persuaded that this was a false representation.   There is no evidence which comes close to suggesting that the plaintiff, through its directors, did not genuinely  intend   to   produce   a   quality   subdivision   when   they embarked on the project, or at any time up to the entering into of the agreements for sale and purchase with the defendants.  The date the agreements were made is the relevant date.  In any event, there is no evidence sufficient to indicate that, after the agreements were entered into, the plaintiff did not intend to seek to produce a subdivision of quality.

(g)Furthermore, a representation that a subdivision of quality would be produced could not, in my judgment, be actionable on the basis that the representation became a term of the contract.  This is because the expression a ―subdivision of quality‖, or similar expressions, are in light  of  the  evidence  too  vague  to  provide  sufficient  contractual

certainty.[12]

Mr Robinson’s evidence of representations to him

[12] See Burrows, Finn & Todd, Law of Contract in New Zealand (3rd ed, LexisNexis NZ Ltd, Wellington) at 77 ff.

[71]     Mr  Robinson’s  evidence  as  to  the  representations  made  to  him  by  Mr Blomfield relate to the agreements to purchase of Mr Robinson personally and the agreements of MDJ Properties.  Mr Robinson referred to representations relating to a number of facilities to be provided.  One was a ―grand entranceway‖.   Plainly this did not relate to the lot 51 communal facilities, but it is nevertheless a representation relating to the subdivision as a whole.  The remainder would all appear to relate to the lot 51 facilities, namely: the lake, a jetty, a boat ramp, a path for jogging and

walking, a tennis court, toilets, a swimming pool and a communal building.

[72]     I have no reservations as to Mr Robinson’s credibility; I considered him a credible and straightforward witness.  That does not mean that he was not mistaken in  his  memory.    In  that  context  –  a  possible  mistaken  memory  –  I  do  have reservations as to whether Mr Robinson was told about toilets, a swimming pool and a communal building; at least about those matters prior to his entering into the agreement.  The swimming pool, for example, was not in contemplation when the agreements with these defendants were made.  This was made clear in Mr Cotton’s unchallenged evidence.   A swimming pool was substituted for one of the tennis courts, at greater expense to the plaintiff, at the request of another purchaser (or other purchasers), after the agreements had been entered into by the defendants in this case.  The communal building is not referred to in the relevant documents that, on the  evidence,  would  have been  available  to  Mr Blomfield.   These are  his  own brochure and the draft agreement for sale and purchase with all of its annexures, including the plan of subdivision which makes no reference to a communal building. The first documented appearance of a ―communal building‖ on lot 51 is on the concept  drawing  first  produced  in  September  2006;  there  is  a  drawing  of  a

―community building‖.  There are similar reservations in relation to Mr Robinson’s reference to toilets; not as to Mr Robinson’s credibility, but as to when he may have first been told about this.  However, although there are these reservations relating to memory, there was no material challenge to Mr Robinson on this evidence and I will accept that he was told these things by Mr Blomfield.  Although Mr Blomfield had no actual authority to make these representations on behalf of the plaintiff, he had ostensible authority and Mr Robinson, in respect of the claim made against him personally, is entitled to rely on the representations.   This does not assist MDJ Properties, however, because Mr Blomfield was a director of that company.

[73]     Finding the facts in this way, in favour of Mr Robinson, nevertheless does not lead to a conclusion that there were grounds to avoid settlement on the basis of representations which became contractual terms or on the basis of misrepresentation. This is because I am not satisfied that the prerequisites to cancellation in the Contractual  Remedies Act  1979,  s 7,  have been  made out.   The reasons  are as follows:

(a)      To the extent that there may have been misrepresentations by Mr Blomfield in respect of toilets, a swimming pool and a communal building, it is not established that such misrepresentations induced Mr Robinson to enter into the two agreements in his own name.  These particular items were not determinative.  And they could not stand as inducements in the face of all of the terms of the written agreements for sale and purchase, including the annexures.

(b)There was the representation about a ―grand entranceway‖.  A ―grand entranceway‖ was not built.  However, that failure does not mean that there was a misrepresentation.    There would only be a misrepresentation if the plaintiff, directly or through an agent, represented to a purchaser that there would be a ―grand entranceway‖, or something to similar effect, but at the time the plaintiff had no intention of erecting the gates.   The evidence is that the plaintiff in fact did intend to erect substantial gates and made financial provision for it in its budget.

(c)      Most of the representations, if treated as terms of the agreements for sale and purchase, were not in the event broken.  In respect of the lot

51 communal facilities the only items referred to by Mr Robinson that was not completed were the communal building and toilets.

(d)The defendants relied on two provisions for cancellation under s 7(4) of the Contractual Remedies Act.  The first was paragraph (a).  In that regard  I  am  not  persuaded  that  Mr  Robinson  and  the  plaintiff expressly or impliedly agreed that the truth of representations which could be regarded as misrepresentations, or the performance of terms of the contract derived from representations, was essential to him, in his personal capacity or on behalf of MDJ Properties.

(e)      The alternative basis for cancellation was pursuant to s 7(4)(b)(iii).  It is clear from the valuation evidence that the benefit and the burden of

the  contract  for  Mr  Robinson  and  for  MDJ  Properties  is  not

substantially different from what was represented or contracted for.

Ms Paki

[74] As with Mr Robinson, I have no reservations as to Ms Paki’s credibility. She too was a straightforward witness who I consider to have given honest evidence to the best of her recollection, but with the possibility that she could be mistaken on some things. The representations Ms Paki said were made to her by Mr Maxwell are recorded at [27]-[28] above. The lot 51 communal facilities referred to are generally the same as those referred to by Mr Robinson, except that Ms Paki did not say that she was told about a pool or toilets. There was a broadly similar statement about the gates at the entrance to the subdivision. The reference to a ―33 lot‖ subdivision may in fact be an accurate record of what Ms Paki was told by Mr Maxwell, but it is not consistent with the documents she expressly said that she looked at, including, and in particular, the plan of subdivision which assisted her in choosing the lot.

[75]   The conclusions I have recorded as to the legal consequences of the representations in Mr Robinson’s case are, in broad measure, the same as the conclusions I reach in the case of the representations made to Ms Paki.

[76]     There is a further and fundamental difficulty for Ms Paki in respect of a case based on alleged misrepresentations or breach of terms of the contract arising from representations.  This is that there was no representation made to her by any person with the actual or ostensible authority of the plaintiff.   Mr Maxwell was not the plaintiff’s agent and Ms Paki knew he was not the plaintiff’s agent.

Estoppel

[77]     In the statements of defence of Mr Robinson and MDJ Properties there was what was described as an estoppel defence.  This was to the effect that, in entering into the agreements, Mr Robinson relied on an alleged representation of Mr Blomfield, and MDJ Properties relied on an alleged representation of ―the plaintiff‖,

that the defendant in each case would not be required to settle the purchases.  It was contended on this basis that the plaintiff ―ought to be estopped from denying‖ the representation and promise.

[78]     These seemingly implausible allegations were not borne out by the evidence of Mr Robinson and could not stand against the express terms.  In this regard I am again not indicating any dissatisfaction with Mr Robinson’s evidence.   He did not seek to present any evidence in support of these contentions.   Understandably this defence was not pursued by Mr Mercer in closing submissions.

Fair Trading Act 1986

[79]     In the amended statements of defence of all three defendants it is alleged that there was breach by the plaintiff of s 9 and s 14 of the Fair Trading Act 1986. Section 9 requires proof that the plaintiff, directly or through an agent, engaged in conduct  that  was  misleading or deceptive,  or was  likely to  mislead  or deceive. Section 14 is a broadly similar provision directed specifically to sale of, and other dealings with, land.  Under s 14, and on the facts of this case, the defendants would need to prove that the plaintiff, either directly or through an agent, made a false or misleading representation concerning ―the existence or availability of facilities associated with the land‖.

[80]     Broadly for the reasons  already dealt  with  in  relation  to  the defendants’ allegations of misrepresentation, I am not satisfied that any defence is made out pursuant to s 9 or s 14 of the Fair Trading Act.  In addition, if there was a sufficient basis to find a breach by the plaintiff of s 9 or s 14, that would not justify an order relieving the defendants of the obligation to complete the agreements for sale and purchase.  At best there would be a possibility of compensation which might be set off against the purchase price.   But there was no application to that effect.   The defences founded on the Fair Trading Act were not pursued with any real vigour.

Breach of the Securities Act

[81]     Section 37 of the Securities Act 1978 provides, so far as is relevant and in essence, that an allotment of a security to the public without a registered prospectus is not to be made, and if there is an allotment in contravention of the provisions of s 37, the allotment ―shall be invalid and of no effect‖.  The defendants contended that the agreements for sale and purchase of the sections, with the requirement that each purchaser become a member of the Society and pay a levy in order to share in the communal facilities, was an allotment of a security.   This was accepted by the

plaintiff.[13]

[13] The particular type of security was a ―participatory security‖: see Securities Act 1978 ss 2 and 2D.

[82]     Section 37 would not apply in this case if the plaintiff complied with the provisions of the Securities Act (Residential Property Developments) Exemption Notice 1999.  The plaintiff was obliged to meet the conditions specified in clause 4 of the exemption notice.  The only question that arises in this case is whether the plaintiff complied with clause 4(d) which is as follows:

No settlement of a sale agreement is completed until–

(i)      If the developer represents or agrees that community facilities will be held by a society, the communal facilities are owned or leased by the society; and

(ii)     If land is included in the communal facilities, the society holds a certificate of title for an estate in fee simple, or a leasehold estate, under the Land Transfer Act 1952 or for a stratum estate under the Unit Titles Act 1972 …

[83]     The Society became the beneficial owner of lot 51, including the lake and any other facilities within lot 51, on 27 July 2007 when the plaintiff and the Society entered into the deed of transfer obliging the plaintiff to transfer such communal facilities as it completed to the Society.  This was over five months before settlement of any of the subdivision sale agreements.   This satisfied the condition in clause

4(d)(i).

[84]     Registration of the transfer of lot 51 to the Society occurred on 13 December

2007.  Consequently, on that date, the Society held a certificate of title in terms of

clause 4(d)(ii).  None of the sale agreements to the defendants have been completed. On the face of it, therefore, condition 4(d)(ii) has been complied with.

[85]     However, it happens that two sale agreements, to purchasers other than the defendants, were completed before 13 December 2007 when the Society obtained title.  Transfers to the third party purchasers were registered on 12 December 2007, the  day  before.    Mr  Rice,  for  the  plaintiffs,  proceeded  on  the  basis  that  this constituted a technical breach of the condition, notwithstanding the fact that the sale agreements that were completed one day early were with third parties in respect of whom no issues arises in this case.  It is not clear that this necessarily constitutes a breach which would result in the agreements with the defendants in this case being declared invalid and of no effect under s 37(4).  However, proceeding on the basis that it would, I am satisfied that this assumed breach is essentially of a technical nature.  Sections 37AA to 37AL make provision for relief.  I am satisfied that the circumstances of this case come within the relevant provisions and relief should be granted  under  s 37AH  of  the  Securities  Act.    I  note  that,  in  accordance  with s 37AK(3) of the Securities Act, the Securities Commission was given notice of the applications for relief and filed helpful submissions.

Impossibility of performance

[86]     The unpleaded defence, or argument in respect of the Court’s discretion, was that neither Mr Robinson nor Ms Paki is in a position to pay for the sections and that this provided grounds for declining to make an order for specific performance. As to the general principles see: Nicholas v Ingram;[14] Equity and Trusts in New Zealand;[15]

Civil Remedies in New Zealand;[16] The Principles of Equitable Remedies.[17]

[14] [1958] NZLR 972.

[15] Butler et al, Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, 2009) at [24.4.4] and

[24.4.12].

[16] Peter Blanchard and Andrew Barker, Civil Remedies in New Zealand (Thomson/Brookers, 2003) at

[7.85] and [7.86].

[17] ICF Spry, The Principles of Equitable Remedies : specific performance, injunctions, rectification and equitable damages (7th ed, Law Book Co of Australasia, 2007) at 128-129.

[87]     There is no evidence sufficient to justify declining an order against MDJ Properties on the grounds of impossibility.  Whether in the end the plaintiff will be

able to enforce orders for specific performance against that company is a separate issue and it is appropriate to make an order granting leave to the plaintiff to apply for appropriate variations if need be.

[88]     Mr Robinson’s evidence on the question of his financial resources was as straightforward as his evidence on other matters.  This evidence was insufficient to establish that Mr Robinson, when he entered into the two agreements in his own name, did not have the financial resources to settle or that, at the date of the hearing, there was a real likelihood that he would be unable to find the money required to settle.   It should also be noted that this evidence would have to be directed to impossibility in relation to both agreements.  In general, in the absence of very clear evidence, a plaintiff who otherwise establishes an entitlement to an order for specific performance is entitled to pursue the order as fully as possible, which might mean completion of one agreement only.

[89]     Ms Paki’s evidence does satisfy me that she does not presently have the money to settle.  This evidence also provides reasonably solid grounds to indicate that she may not be in a position to borrow the money required to settle.   I have sympathy for Ms Paki’s predicament.  This includes difficulties she has encountered since she and Mr Bennett separated.  However, I am not persuaded that the evidence is sufficient to justify refusing an order for specific performance at this stage.  There are three principal reasons.  One is that there is no material evidence to indicate that when Ms Paki and Mr Bennett entered into the agreement they were not in a position to settle.   The second is that Ms Paki is a purchaser with her former partner, Mr Bennett.  Mr Bennett did not give evidence and it appears that he did not participate in any way in substance; there was simply a statement of defence filed in the joint names of Ms Paki and Mr Bennett.   There was some evidence from Ms Paki indicating that Mr Bennett may also be unable to pay for the sections, from his own resources or borrowing, but in the absence of direct evidence from Mr Bennett I would not decline the order.  The third point is the same as the point noted in the case of Mr Robinson; there is an agreement to buy two sections and the plaintiff is entitled to seek to enforce the agreement as far as it reasonably can, which in the end might involve settlement of one sale only leaving the plaintiff to pursue alternative remedies.

[90]     Generally, and in respect of the claims against Mr Robinson and Ms Paki, it may also be that, if they can find the money to settle, or at least to settle the purchase of one of the sections, that may be a better option for them than the alternative.  The alternative, in the light of my conclusion on liability, would be a claim by the plaintiff for damages. Whether damages would be a better option is moot.  However, it is possibly not a matter that has been given full consideration by Ms Paki and Mr Robinson, and making an order for specific performance leaves matters open in that regard  at  least  to  a  limited  extent  whilst  also  meeting  the  plaintiff ’s  primary entitlement.

Result

[91]     There is a relief order under s 37AH of the Securities Act 1978 in respect of the matters dealt with in [84]-[85] of this judgment.

[92]     In each proceeding, in respect of each agreement for sale and purchase, the plaintiffs  are  entitled  to  an  order  that  the  defendant  or  defendants  specifically perform their obligations in accordance with the agreement.

[93]     In respect of each order, the plaintiffs have leave to apply further, including an application to modify or vary the order for specific performance or to vacate the order and grant leave to proceed with a claim for damages and other relief.

[94]     The  plaintiff  is  to  prepare  a  draft  of  the  specific  orders  for  specific performance, including quantification of the total sums to be paid in each case, with the drafts firstly to be submitted to the solicitors for the defendants to endeavour to procure agreement on the terms.  The solicitors for the defendants should respond to the draft within 10 working days after which date, in the absence of agreement, the plaintiff may submit the matter to the Court for determination.

[95]     The counterclaims are dismissed.

[96]     The plaintiffs are entitled to costs.    If the parties are unable to agree the plaintiff should file and serve a memorandum with the defendants to respond within

10 working days.

Peter Woodhouse J