McCaw v Owen

[2021] NZHC 1686

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2020-488-000087

[2021] NZHC 1686

BETWEEN

SUSAN TAHUHU McCAW and JOHN LINDSAY McCAW

Plaintiffs

AND

HINE MARY ELIZABETH OWEN as

trustee of the estate of AKARANA GEORGE WILLIAM OWEN

First Defendant

HINE MARY ELIZABETH OWEN

Second Defendant

Hearing:

28 June 2021

Appearances:

M Nicholls for Plaintiffs

No appearance by or on behalf of Defendants

Judgment:

7 July 2021

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Wednesday, 7 July 2021 at 3:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Martin Nicholls Limited (M Nicholls), Kerikeri

McCAW v OWEN [2021] NZHC 1686 [7 July 2021]

[1]    The plaintiffs, Susan Tahuhu McCaw and her husband, John Lindsay McCaw, seek judgment by way of formal proof against Hine Mary Elizabeth Owen in her capacity as trustee of the estate of her late husband, Akaranga George William Owen, (first defendant) and in her personal capacity (second defendant).

[2]    The defendants own a 33-hectare block of land in Moerewa. It’s legal description is CT 699173, Lot 2 – 4 of Deposited Plan 488039 in the North Auckland Land District. The plaintiffs say that in March 2016 (later varied in August 2016) they agreed to buy, and the defendants agreed to sell, one of the lots described on an agreed subdivision plan as Lot 2, consisting of 14.8 hectares (the property). The plaintiffs moved on to the property in December 2016 and since that time have paid the subdivision costs and made various improvements to the land.

[3]    The plaintiffs say that the defendants have refused to settle the sale and purchase in breach of the contract. They seek specific performance of the contract or, in the alternative, restitution of their loss or damage amounting to $229,600.

[4]    The proceeding has been personally served on Ms Owen. Although she and her late husband have previously been represented by counsel, she has chosen to take no steps to defend the proceeding.

Factual background

[5]    In January 2016, the plaintiffs made a written offer to buy the property from the defendants for $90,000. The offer was said to be subject to the following conditions:

(a)Solicitor approval for LIM and Certificate of Title;

(b)Overall solicitor approval;

(c)Geo-technical assessment;

(d)Approved storm water plan; and

(e)Financial settlement (sale of an asset).

[6]    The plaintiffs proposed paying a deposit of $20,000, with final settlement upon sale of an asset by them. The offer also contained a provision that once the deposit had been paid, the plaintiffs would have the right to enter the property to begin creating driveway access on to the property for a proposed building site.

[7]    The offer was accepted, and the plaintiffs and the defendants signed a written contract for sale and purchase dated 10 March 2016.1 It provided for a purchase price of $90,000 with a deposit of $20,000. It was subject to the following special conditions:

(a)Susan and John McCaw agree that if this land (LT488039) was to be sold from their possession, that it would only be sold to relatives of George and Mary Owen or descendants of Susan McCaw.

(b)Subject to solicitor approval for LIM and Certificate of Title.

(c)Geo-technical assessment.

(d)Approved storm and wastewater plan.

(e)Balance of settlement payment – settlement payment of $70,000 upon the sale of an asset owned by Susan and John McCaw.

(f)Purchase of property (LT488039) is as it is at the time of purchase.

[8]    After they signed the sale and purchase agreement, the plaintiffs engaged a lawyer to act in the conveyance of Lot 2. Their lawyer, however, told them that there was no clear title to the property because it was still held in amalgamation with Lots 3 and 4. A survey of the property had not yet been completed and no resource consent had been obtained to subdivide the property. The plaintiffs inquired of the survey company that had done the preliminary survey work as to what was needed to be done

1      The contract was a CCH New Zealand Limited form NASL-802 (V5).

to complete the subdivision and the costs involved. They were advised that it would cost about $5,000 to $6,000 and take three to six months to complete the subdivision and obtain clear title for Lot 2.

[9]    The parties then negotiated a variation to the sale and purchase agreement. The purchase price was reduced from $90,000 to $85,000 as it was agreed that the plaintiffs would organise and pay to complete the subdivision of the property to obtain clear title for Lot 2. The $20,000 deposit was also to be paid directly to the defendants, instead of their lawyer’s trust account. This change was made because the defendants did not want to wait until clear title had been obtained for the property to receive some of the purchase price.

[10]   Finally, some of the special conditions were deleted because they were no longer required. The following special conditions were deleted:

(a)Subject to solicitor approval for LIM and Certificate of Title.

(b)Geo-technical assessment.

(c)Approved storm and wastewater plan.

(d)Balance of settlement payment – payment of $70,000 upon the sale of an asset owned by Susan and John McCaw.

These changes were made and initialled on the sale and purchase agreement originally signed on 10 March 2016.

[11]   The varied sale and purchase agreement was executed in August 2016. The plaintiffs then paid the $20,000 deposit directly to the defendants on 17 August 2016. The defendants also provided their written authority for Mr McCaw to act on their behalf in respect of the subdivision of the property. Mr McCaw then applied to the Far North District Council to complete the subdivision of the property.

[12]   After payment of the deposit, the defendants invited the plaintiffs to move on to the property so that they did not have to pay rent while they waited for the

subdivision to be completed. The plaintiffs then started living on the property in December 2016. They built two small buildings and constructed a driveway to access the buildings. They have also fenced the property and considerably improved it’s condition by removing scrub and gorse and planting grass and native trees.

[13]   On 22 September 2016, the Far North District Council wrote to Mr McCaw, as agent for the defendants, granting resource consent for subdivision of the property. Because there were complications creating proper drainage and Council inspections and survey work took longer than expected, the process of obtaining clear title for the property was drawn out and more expensive than the parties had estimated in April and May 2016.

[14]   In February 2017, the defendants asked the plaintiffs to pay the balance of the purchase price. Because clear title to the property had not yet been registered with Land Information New Zealand (LINZ), the plaintiffs did not pay the balance but paid a further sum of $22,500 to the defendants on 24 February 2017. They have therefore paid one half of the purchase price of $85,000.

[15]   By March 2018, the plaintiffs had completed and paid for all the practical works which were needed to complete the subdivision and they then stood ready, able and willing to settle the balance of the purchase price. The Far North District Council issued a s 224(c) certificate in respect of the subdivision of the property on 2 March 2018. All that is now required for the subdivision to be recorded with LINZ is the defendants’ written consent to the subdivision.

[16]   At some point after the plaintiffs advised the defendants that their signature was required to complete the subdivision, the defendants informed the plaintiffs that they did not want to proceed with the sale. The defendants required the plaintiffs to leave the property by 31 December 2018 and advised them that they would be keeping the plaintiffs’ payments as rental. However, the plaintiffs have not left the property and remain in occupation.

Relevant law

[17]   The general law of contract applies to the making of contracts for the sale of land.2 Generally a binding contract requires:

(a)An intention by the parties to create legal relations.

(b)Capacity of the parties to contract.

(c)Offer and acceptance.

(d)Consideration.

(e)Legality of the subject matter; and

(f)Certainty of essential terms.

[18]   Section 24 of the Property Law Act 2007 (the Act) requires that contracts for sale of land shall be in writing. Section 26 of the Act says that part performance may evidence a contract for the sale and purchase of land. In New Zealand, the general inference is that parties that contract for the sale and purchase of land by way of written agreement do not intend to contract until both sides have executed the written agreement.3

[19]   If a plaintiff elects to pursue specific performance for a breach of contract concerning the sale of land, they can claim equitable damages in the same action.4 Any equitable damages awarded must only cover loss outside the specific relief sought by way of specific performance.5 Equitable damages are discretionary and seek to restore the plaintiff to the position that he or she would have been in but for the defendant’s breach.6

2      DW McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [3.01].

3      Curruthers v Whittaker [1975] 2 NZLR 667 (CA).

4      Neylon v Dickens CA 22/85, 10 June 1987 (CA), at 17-18.

5      McMorland, above n 2, at [12.44].

6      Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [32.3.1](1).

[20]   In cases involving a claim for specific performance, an innocent party needs to demonstrate that he or she stands ready, willing, and able to perform his or her obligations in the contract.7 A vendor does not fall critically into default by failing to tender a transfer and the instrument of title until the purchaser has formally tendered the settlement sum. However, a purchaser can be excused a default if proffering the settlement sum would have been patently futile.8

[21]In a claim for specific performance, the plaintiff must prove:9

(a)The existence of a contract; and

(b)That there is compliance with the requirements of a written record or the document of part performance; and

(c)The breach, or threat of breach, by the defendant; and

(d)That when the pleadings were issued, the plaintiffs were, and still remain, ready, willing and able to perform their part of the contract at the appropriate time.

[22]   Specific performance is a discretionary remedy and it is only appropriate where damages are not a suitable remedy. However, although specific performance is a discretionary remedy, the discretion is to be exercised on principled terms. Transactions involving residential land are generally regarded as unique and an award of specific performance is favoured in contracts for the sale of land.10

[23]   The factors that the Court commonly consider in the exercise of its discretion of specific performance in respect of sale and purchase agreements are outlined below.11 On balance, a Court is likely to refuse to make an order for specific performance where:

7      Nicholls v Tamariki Ltd (in liquidation) HC Auckland CIV-2007-404-86, 25 August 2008 at [27].

8      Jansen v Whangamata Homes Limited, HC Hamilton CIV-2003-419-1511, 22 May 2006 at [31]-[33].

9      McMorland, above n 5, at [12.32].

10     Butler, above n 6, at [24.3.2](1).

11     McMorland, above n 5, at [12.33].

(a)Derogation from prior contract – the order would compel the defendant to breach a prior contract with a third party;

(b)Mutuality – a defendant shows that certain of the plaintiffs’ unperformed obligations might not be susceptible to a later order of specific performance;

(c)Supervisibility of performance – the obligations necessary to be performed pursuant to the contract are not capable of supervision by the Court;

(d)Impossibility of performance – there is a substantial likelihood that it is not within the power of the defendant to comply with an order of specific performance;

(e)Futility of performance – it is unlikely that the making of an order will provide a sufficient benefit to the plaintiff or that an order is just or appropriate in all the circumstances;

(f)Unfairness – the circumstances in which the contract was made or varied, including matters such as unconscionable bargain, undue influence, mistake, misdescription or misrepresentation, are unfair. Inadequacy of consideration is not itself a matter of unfairness, though it may point to unfairness or hardship in conjunction with other matters;

(g)Hardship – the hardship caused to a defendant by the enforcement of the contract outweighs the hardship that would be caused to the plaintiff if specific performance is refused; and

(h)Laches – the plaintiff’s delay in seeking relief has caused a prejudicial change to the defendant’s position. Delay is measured from the time the plaintiff learnt of the facts giving rise to the claim and the commencement of the plaintiff’s proceedings. In the context of the sale of land, the taking of possession or the payment of substantial part of

the purchase price by the purchaser assumes a special significance and the purchaser acquires a beneficial or equitable interest which cannot be lost or destroyed by mere inaction on the purchaser’s part.

Defendant’s position

[24]   The defendants have previously sought legal advice. They waived privilege and provided a copy of that advice to the plaintiffs. It reads:

RE: LOT 2 MOTATAU 3B2B2 KAWAKAWA, 204 NGAWHITU ROAD, MOEREWA

As discussed, Far North District Council have confirmed a Section 224(c) Certificate was issued on 2 March 2018 and we are awaiting confirmation of the next step required for title to issue, from Thompson Survey.

The Agreement

We have reviewed your 2016 instructions to us and note that you had reached an agreement with Mr and Mrs McCaw (the McCaw’s) to purchase Lot 2 at in or around January 2016. This verbal agreement was on the basis that the McCaw’s would assist you to obtain title for a reduction in the agreed purchase price. We understand you signed an agreement for sale and purchase on 3 June 2016 (the agreement), and you may recall that our advice at the time which was that as you had signed an agreement (which we did not have an opportunity to advise on), there was little that we could do.

Despite the above, we are of the view that there is a strong argument that the agreement is void for certainty. We briefly summarise factors to support such an argument:

1.Special condition 1 refers to the land as being sold “as is”, and purports to bind the McCaw’s to a restricted pool of purchasers in any future sale. In our view this condition is unenforceable by you and therefore raises an uncertainty as to the true intention of the agreement, suggesting it was more of a family arrangement for their occupation of the property.

2.Special conditions 3 and 4 make no reference to which party has the right to raise any issues in respect of a geotechnical assessment, and wastewater plan, nor does it set out timelines for the issue of title.

3.Special condition 5 records a proposal for the payment of settlement funds, however this is uncertain as it is on the basis of the ‘sale of an asset’ owned by Susan and John McCaw and therefore there is no final settlement date.

Despite the above, the McCaw’s also have an argument that the agreement is enforceable and binding because:

i.There is a written agreement for sale and purchase of Lot 2 conditional on title for Lot 2 being issued and this indicates there was a mutual intention by both parties to sell and purchase Lot 2 because of Susan’s connection as a whanau member.

ii.Funds in satisfaction of the agreement have been paid to you in the sum of $42,000.00 and the McCaw’s have spent further funds to obtain a Section 224 Certificate to enable title to be issued.

iii.The McCaw’s have occupied and developed Lot 2 and you have not objected to the occupation or activities, nor previously repudiated the agreement.

iv.The terms and conditions in the agreement can be amended to remedy any uncertainty in the meaning of the conditions.

Given the arguments outlined above, in our view, it is likely that the McCaw’s will strongly oppose any attempt to evict them from the property on the basis that the agreement is void. We therefore suggest the next step is to formally notify the McCaw’s that the agreement is void for certainty and that they are required to vacate Lot 2 on the basis of their failure to obtain your consent for their unauthorised activities on the land. However we do note that the best option is to see if a resolution as to a suitable outcome can be achieved between you, as in our view, any Court process will be risky as to its outcome for you, and expensive for both parties.

Given the matters set out above, we suggest that we discuss the next steps with you further and we look forward to hearing from you when you have had a chance to consider the same.

Discussion

[25]   The defendants’ lawyer puts forward three matters as providing “a strong argument that the agreement is void for certainty”. As to the first, there is no reason in principle why the restriction on resale is unenforceable. The second defendant is the aunt of Ms McCaw, the first named plaintiff. The family connection may have motivated the defendants to sell the property to the plaintiffs. The purchase price may also reflect the fact that any future sale may only be made to a restricted pool of purchasers. In affordable house schemes it is not uncommon to place restrictions on resale, such as the need to occupy the property for a number of years, in order to prevent such properties being resold quickly for capital gain. These restrictions can be contained in the agreement for sale and purchase.

[26]   Special conditions 3 and 4 being a geo-technical assessment and wastewater plan were obviously for the benefit of the purchasers but were deleted when the agreement for sale and purchase was varied in August 2016.

[27]   Finally, although there was no settlement date specified, there is an obvious inference that settlement would occur within a reasonably short time period after a separate title was issued by LINZ for the property. The lack of a specific settlement date does not make the agreement for sale and purchase “void for certainty”.

[28]   I am of the view that there is a valid written contract in existence between the parties. The contract was executed by both parties, such that they both have a fully signed copy of the written contract. The contract has certainty of all of its essential terms:

(a)The purchase price of $85,000;

(b)The land being exchanged for the purchase price, being Lot 2 of the agreed subdivision at Motatau, 3B 2B 2 Block, DP488039;

(c)The parties to the transaction; and

(d)The obligations of the parties.

[29]   The contract concerns lawful subject matter, being the sale of general land. There is no restriction on its sale. The parties to the contract had an intention to create legal relations, as evidenced by their offer and acceptance and execution of a written sale and purchase agreement. Up to the point of the defendants’ failure to uplift documents from the Far North District Council and tender a transfer and instrument of title, there had been complete performance of the contract by both parties. I accept that as soon as the defendants tender a transfer and an instrument of title, the plaintiffs are ready, willing and able to pay the balance of the purchase price, being the sum of

$42,500.

[30]   I am therefore of the view that there is no principled reason why the Court should not exercise its discretion and order specific performance of the contract. Damages alone are not an adequate remedy. The land is unique. The plaintiffs now have an emotional attachment to it. The first named plaintiff regards the land as her ancestral home.

[31]   In light of the factors I must consider before ordering specific performance, I find that: the plaintiffs’ obligation to pay the balance of the purchase price would be susceptible to a later order of specific performance; the parties’ remaining contractual obligations are easily capable of being supervised by the Court; there is no impediment to the defendants complying with an order for specific performance of the contract; the making of an order will provide the plaintiffs with what they have contracted for; it is not an exercise in futility and is appropriate in all the circumstances; and the plaintiffs have spent a lot of time and money improving the land at their own expense.

[32]   Although I am of the view that it is appropriate to order specific performance, I will not award any equitable damages. The second named plaintiff, Mr McCaw, states that the plaintiffs have been hesitant to expend more time and money developing the property until the issue of ownership is resolved, which has restricted their ability to earn an income from farming the property. Mr McCaw says that the property was not fit for stock until about May 2018 because it took a long time to bring fencing and pasture up to a suitable standard. He believes that if the plaintiffs had obtained clear title soon after such title was available to be issued around 1 May 2018, they would have stocked the property in order to make an income. He estimates the loss the plaintiffs have suffered as a result of not being able to stock the property at about

$18,000 to $22,000 a year.   He, therefore, quantifies their loss as approximately

$53,000. In support, Mr McCaw attaches a copy of an estimate by a local stock agent, who states:

Came up with the scenario of rearing approximately 40 four day old calves and selling some at 100kg (or three months old) and taking the rest through until yearlings or 12 months. With this scenario all things being equal it could return them $20,000 - $22,000/year.

[33]   This opinion is, however, insufficiently certain to find a claim for equitable damages. It states, “it could return them”. Furthermore, there is no indication whether that figure is a gross return or a net return.

[34]   Mr McCaw also attaches invoices from the survey company and from the Far North District Council, but accepts that the plaintiffs had agreed to pay for the costs involved in finalising the subdivision and the issue of the new certificate of title.

Result

[35]Therefore, there will be:

(a)A declaration that the defendants are bound by the agreement for sale and purchase;

(b)An order that the defendants perform their obligations under the agreement, including the lodgement of the approved subdivision of the property with LINZ and the conveyance of Lot 2 to the plaintiffs in exchange for the balance of the purchase price; and

(c)An order that, if the defendants are unwilling to abide with any order made by the Court, the Registrar of the High Court at Whangarei shall have the authority to execute the documents necessary to subdivide and transfer the property to the plaintiffs.

[36]   There will also be costs in favour of the plaintiffs on a 2B basis to be approved by the Registrar.

Woolford J