Melco Property Holdings (NZ) Limited v Hall
[2022] NZHC 1180
•25 May 2022
IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKAORIORI ROHE
CIV-2020-485-000040
[2022] NZHC 1180
BETWEEN MELCO PROPERTY HOLDINGS (NZ) LIMITED
Plaintiff
AND
ANTHONY JOHN HALL
Defendant
Hearing: 09 - 13 May 2022 Appearances:
A.C. Beck and J Perry for the Plaintiff
A.L Holloway and T.A Cunningham for the Defendant
Judgment:
25 May 2022
JUDGMENT OF GENDALL J
MELCO PROPERTY HOLDINGS (NZ) LIMITED v ANTHONY JOHN HALL [2022] NZHC 1180 [25 May 2022]
Table of Contents
Introduction.......................................................................................................... [1]
Background Facts................................................................................................ [4]
Caveat Proceedings............................................................................................ [42]
The Supreme Court decision settled the applicable principles to be applied here [47]
Melco’s Claim..................................................................................................... [48]
Issues................................................................................................................... [53]
Relief Sought...................................................................................................... [54]
Discussion........................................................................................................... [56]
Implied terms..................................................................................................... [61]
An implied term in this case?........................................................................... [72]
Breach of implied terms.................................................................................... [82]
Nexus between the default and fulfilment of the condition............................ [96]
Specific Performance....................................................................................... [108]
Second Cause of Action- Misleading and deceptive conduct – breach of s 9 of the FTA........................................................................................................................... [115]
Estoppel............................................................................................................ [134]
Damages Claim................................................................................................ [103]
Result................................................................................................................ [167]
Orders............................................................................................................... [169]
Costs.................................................................................................................. [170]
Introduction
[1] The Plaintiff (Melco) in this proceeding seeks specific performance of an Agreement for Sale and Purchase dated 6 December 2019 (the Contract) of a commercial property at 5 Parliament Street, Lower Hutt (the Property) which contract was concluded between it as purchaser and the Defendant, Anthony John Hall (Mr Hall) as vendor.
[2] The Contract contained a due diligence clause under which Melco had to be satisfied the property was suitable for its requirements or waive compliance. Mr Hall purported to cancel the Contract when, after the close of business on the date for fulfilment of the due diligence condition, Melco had neither given notice of fulfilment nor waived the requirement. Melco did not accept cancellation. Rather, Melco maintained that Mr Hall’s actions at the time put him in default of his obligations under the Contract so that he had no right to cancel it. Melco lodged a caveat against the title to the property to protect its claimed interest. Mr Hall entered into an agreement with a third party to sell the property at a higher price. That agreement came to an end because it was conditional on Melco removing its caveat within 5 working days which did not happen. Instead, Melco purported to waive the due diligence condition and sought settlement under its Contract. Mr Hall refused. Melco then applied to the High Court for an order under s 143 of the Land Transfer Act 2017 that its caveat not lapse. In that application, the issue as to whether the caveat lapsed turned on whether Mr Hall validly terminated the Contract.
[3] In the various caveat proceedings (the Caveat Proceedings) that followed, ultimately the Supreme Court ordered that Melco’s caveat not lapse. I will address those caveat proceedings shortly. In the meantime, the present substantive proceeding addressing Melco’s overall claim under the Contract proceeded to a hearing before me from 9 May 2022 to 13 May 2022. This judgment addresses Melco’s substantive claim opposed throughout by Mr Hall.
Background Facts
[4] Melco is the property owner for a company allied with Black Diamond Technologies Limited (BDT). BDT has for some time imported and distributed amongst other things Mitsubishi electric air-conditioning systems.
[5] The head office for BDT/Melco is at 1 and 3 Parliament Street, Lower Hutt. BDT’s offices, showroom and technical support operate from those premises at both
1 and 3 Parliament Street, Lower Hutt. BDT also has offices, showrooms and warehousing in Auckland and Christchurch, although its main warehousing and distribution centre is in Lower Hutt at Gracefield Road, Seaview.
[6] BDT’s property holding company is Melco. Melco owns the land and buildings at 1 and 3 Parliament Street, Lower Hutt. It says it plans to carry out significant renovations to amalgamate the buildings at 1 and 3 Parliament Street into a modernised office and technical support centre to cater for needed expansion of its operations.
[7] The Property at issue in this proceeding as I note is owned by Mr Hall and is situated at 5 Parliament Street, Lower Hutt immediately adjacent to Melco’s properties.
[8] To accompany BDT’s recent significant growth, (it says its current premises became too small with inadequate parking) around August 2019 BDT engaged real estate agent Kevin Dee (Mr Dee) to approach Mr Hall as the neighbouring owner to see if there was any possibility he would want to sell the Property. Melco and BDT at the time, held the view, that if a purchase of 5 Parliament Street was possible, it would open up numerous potentialities for BDT to expand its operations.
[9] Melco confirmed to Mr Dee he was to get a commission from Melco and not Mr Hall in the event of a successful purchase.
[10] At the time in mid 2019 it seems Mr Hall as the neighbouring owner was not planning to sell the Property. Mr Dee made a first approach to Mr Hall in about August 2019 and, Mr Hall nevertheless invited an offer. Subsequently, significant
negotiations for the sale and purchase of the Property took place. These included Mr Hall in early September 2019 seeking a rental and market price assessment for the Property from Colliers Real Estate which they provided to him. Finally, on Friday, 6 December 2019, Mr Hall accepted Melco’s offer for the property of $1,500,000 (some $500,000 more than Colliers’ had assessed as the market value of the Property) plus a further payment of $2,000 which Melco had offered as a good will gesture and to cover some legal costs to make its offer more attractive.
[11] Under the Contract, a deposit of $100,000 was payable on it becoming unconditional with settlement thereafter on 1 February 2020. The Contract was subject to a special condition cl.19 in the following terms:
19.0Due Diligence
19.1 This agreement is subject to and conditional upon the Purchaser being satisfied that the property is suitable for the Purchaser’s requirements following the Purchaser carrying out due diligence verification of the property, including by way of example without limitation;
(a)the value and condition of the property;
(b) the terms of all encumbrances, rights and interests registered against the property;
(c) The terms and implications of the zoning or permitted use related aspects of the property and any statutory protection notices or designations on the property;
(d) compliance schedule requirements under the Building Act 2004;
(e) the overall financial suitability of the Purchaser’s proposed investment in the property, their ability to obtain necessary finance to complete the purchase and financial suitability of the tenant(s).
19.2The Vendor shall provide the Purchaser upon request with such information (except insofar as the vendor is legally bound to keep such information confidential) which the Vendor has in respect of the property in order to assist the Purchaser to fulfil this condition.
19.3The date of fulfilment is fifteen (15) working days following execution of this agreement.
19.4The parties acknowledge that the conditions in clause 19.1 are inserted for the sole benefit of the Purchaser and at any time prior to this agreement being avoided may be waived by the Purchaser giving written notice of waiver to the Vendor.
[12] It is common ground the date for fulfilment of the due diligence condition in this clause 19 was 9 January 2020. This date of course was shortly after the December 2019 Christmas and New Year period. The 15 working days period it is accepted comprised 9-13, 16-20 and 23 December 2019 and 6-9 January 2020.
[13]Relevant also in the Contract is cl.10.8 which provides:
10.8 If this agreement is expressed to be subject either to the above or to any other condition(s), then in relation to each condition the following shall apply unless otherwise expressly provided:
(1)The condition shall be a condition subsequent.
(2) The party or parties for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.
(3) Time for fulfilment of any condition and any extended time for fulfilment to a fixed date shall b of the essence.
(4) The condition shall be deemed to be not fulfilled until notice of fulfilment has been served by one party on the other party.
(5) If the conditions is not fulfilled by the date for fulfilment, either party may at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this agreement, the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement and neither party shall have any right or claim against the other arising from this agreement or its termination.
(6) At any time before this agreement is avoided, the purchaser may waive any finance condition and either party may waive any other condition which is for the sole benefit of that party. Any waiver shall be by notice.
[14] Following signing of the Contract on 6 December 2019, a number of things occurred. It is necessary to set these out in some detail.
[15] In a 12 December 2019 email, John Ellison (Mr Ellison), Operations Manager for BDT and Melco wrote to Mr Dee on behalf of Melco asking if there was an earthquake report and/or a building report available for the Property. Mr Dee forwarded Mr Ellison’s email to Mr Hall. Mr Dee’s recollection is that Mr Hall advised him he did not have any such reports. This information was passed on to Mr Ellison.
[16] On 13 December 2019, Mr Ellison on behalf of Melco, emailed surveyors, Silvester Clark to see whether they could assist with performing a seismic assessment for the property. The date he gave for this to be achieved was by 2 February 2020. Silvester Clark confirmed that they could and that they could start almost immediately.
[17] Mr Hall it seems was away from Lower Hutt for the week after the Contract was signed. He had the only keys to part of the securely locked Property and effectively required that he be present when any due diligence inspections were undertaken. Access to the Property for the purposes of carrying out due diligence was delayed for those first five days of the due diligence condition as Mr Hall was away from Lower Hutt. On 16 December 2019 however, an initial site visit was arranged. It was attended by Mr Hall and by representatives from Melco.
[18] On 17 December 2019, building and roof inspections of the Property for Melco were carried out. Mr Hall was in attendance for these as well.
[19] Mr Ellison, in evidence before me, acknowledged that, in contacting the engineers Silvester Clark on 13 December 2019 to request a seismic assessment for the Property, initially he had made an error in saying this was required by 2 February 2020. That date was the settlement date for the Property purchase, assuming the due diligence condition was satisfied. About a week after 13 December 2019 Mr Ellison realised his mistake, corrected it, and advised Silvester Clark of the correction. He confirmed seismic assessment was required at the latest by 9 January 2020, the agreed date for fulfilment of the due diligence condition.
[20] In response, on 23 December 2019 Silvester Clark advised Melco that it would not be able to do a physical assessment of the building on the Property until the week of 13 January 2020, with a view to completing a report by 17 January 2020. Then, in an email that day, Mr Ellison no doubt with this in mind, asked Mr Dee to talk to Mr Hall to see if it would be possible to extend the due diligence deadline date to 17 January 2020.
[21] The next day, 24 December 2019, Mr Dee sent Mr Hall an email requesting an extension of the due diligence condition to that 17 January 2020 date.
[22] On 26 December 2019, Mr Hall responded to Mr Dee by email. He said specifically that he “did not see any issues” concerning the request, but that he would need to discuss any changes to the Contract with his Solicitor, Paul May (Mr May), in the New Year. Mr May it seems was expected to return to work after the Christmas vacation period on 9 January 2020, and this date was confirmed later by Mr Hall.
[23] On 6 January 2020, it appears Melco was becoming concerned about the expiry of the due diligence condition. Accordingly, it decided to engage a second structural engineer E.Q. Struc Limited (EQStruc) to prepare a seismic report on the property.
[24] That day, 6 January 2020, Alden Balili (Mr Balili), a structural engineer from EQStruc responded to Melco saying “I think we have time to do an ISA [Initial Seismic Assessment] for the structure. I could do an inspection tomorrow then complete the report on Wednesday [8 January 2020]”. In response to Melco’s next inquiry on 7 January as to whether Mr Balili would be available on 8 January 2020, he responded “Yes, I’m available Wednesday but there might not be enough time to finish it by Thursday [9 January 2020]. Can we extend the deadline to Friday [10 January 2020]?” Later on 7 January 2020, Mr Ellison’s assistant, Jessica Isaacs (Ms Isaacs) asked Mr Balili if it would be possible to get the report before 10 am on Friday “as the deposit is due on Friday”. This statement appears to be incorrect because by Friday, 10 January, the date for responding one way or the other to the due diligence clause (9 January) would have passed. Mr Balili’s response at 2.04 pm on 7 January was that “If we can start tomorrow that is possible. We usually have a delay in final QA [quality assurance] sign-off from our directors but would inform them in advance.” Ms Isaacs replied “that is awesome” and she advised that she was still trying to get an answer on the whereabouts of a key to the Property.
[25] Ms Isaacs had sent a text message to Mr Hall that same day, 7 January 2020, about keys and access to the building. By that point in time, Mr Hall was on a camping
trip in the Wairarapa near the Tararua Ranges for the next day or two, where there was apparently limited cell phone coverage.
[26] During that afternoon on 7 January 2020, Mr Hall spoke to both Mr Dee and Ms Isaacs by mobile phone. He said he would get back to them the next day (8 January 2020) as to whether he could give Melco access to the Property. Later that day, Mr Hall also sent a text to Ms Isaacs confirming he would be in Wellington on 9 January 2020 and would speak to Mr May about Melco’s request for an extension of the due diligence condition.
[27] Early the next day, 8 January 2020, Mr Hall sent Ms Isaacs a text message confirming that he would provide access to the Property for the required inspection that day if Melco’s engineer was available. Importantly, it was arranged then that Mr Hall would meet both Ms Isaacs and the EQStruc engineer at the Property at 12.00 pm for the inspection. This was confirmed around 9.00 am that day.
[28] Shortly thereafter, the position changed, however. At 10.22 am Mr Hall sent a text message to Ms Isaacs saying that “due to an unforeseen delay where I am I will have to postpone the appointment” and he went on to say that he “would be in contact the following day”. Mr Hall in his evidence in the High Court and Court of Appeal Caveat Proceedings suggested that it was after this that he got a phone call, in relation to another buyer, for the Property. However, mobile phone records, which the Supreme Court ruled admissible before it, show that Mr Hall was wrong about that timing. The records confirm he spoke with that other buyer, Shannon Chambers (Mr Chambers) prior to sending the 10.22 am message to Ms Isaacs cancelling the site inspection.
[29]As to that mobile phone call with Mr Chambers, the records are clear that some
20 minutes earlier at 10.02 am, Mr Hall had received the phone call from Mr Chambers expressing his interest in purchasing the Property. This purchase it seems was discussed at a price of $1,600,000 – some $100,000 more than the Melco Contract. From the Joint Chronology of the parties agreed for this hearing, it is confirmed now that this phone call expressing interest in the purchase of the Property did occur before Mr Hall “postponed” the 12 pm inspection appointment agreed for
that day, 8 January 2020. Significantly, I repeat that in the earlier Caveat Proceedings before this Court and the Court of Appeal (the subject of judgements [2020] NZHC 2831 and [2020] NZCA 184 respectively), Mr Hall was adamant in his evidence that, it was only after he had at 10.22 postponed the appointment for the Property inspection, that he had received the phone call from Mr Chambers. Initially his reason given for the meeting postponement was because he maintained he had realised he had told “friends” he had been camping with1 he would be returning to his Wairarapa campsite that day, and that campsite being out of cell-phone coverage, he was unable to contact them to tell them of his changed plans, and they would worry if he had not returned. Later however these explanations changed.
[30] Two further explanations were then provided. In the first, in his evidence before me, Mr Hall suggested that the reason for his change of heart was his reluctance to engage in two long drives that day (some two hours or so each way) to Lower Hutt from the Wairarapa and back, including a last section to the campsite on a gravel road.
[31] And finally, in his second explanation, Mr Hall in cross-examination did acknowledge that Mr Chambers’ 10.02 am phone call that day had “caused me to reflect on my decision to sell the property to Melco.”
[32] The 8 January 2020 message to Ms Isaacs from Mr Hall cancelling/postponing the 12.00 pm appointment that day was the last the purchaser, Melco, its officers, its lawyer, or its agent Mr Dee heard from Mr Hall or his lawyer, Mr May for the next 36 hours.
[33] In the meantime, at 10.25 am on 8 December 2020, Ms Isaacs had replied to Mr Hall’s “postponement” message stating that she “hoped everything was okay” and that she would wait to hear further following Mr Hall’s planned 9 December 2020 appointment with his solicitor, Mr May.
[34] The following day, 9 January 2020 as I have noted, was a critical date. It was the final day for satisfaction (or waiver) of the due diligence condition under the
1 In cross-examination before me, Mr Hall confirmed those “friends” were people he had met at the camp-site only the day before, but that they were fellow caravan-association members.
Contract. At 6.10 am that day, Melco’s solicitor Rhys Williams (Mr Williams) emailed Mr Hall’s solicitor, Mr May and formally requested an extension of time from 9 January 2020 to fulfil the due diligence condition. At 7.22 am that morning Mr May forwarded Mr Williams’ email to Mr Hall and sought his instructions. Those instructions were provided by Mr Hall at 10.55 am that day. They came in an email from Mr Hall to Mr May. Significantly, they instructed Mr May effectively to be unavailable, instructing him specifically not to respond to Melco’s request for an extension of time on the due diligence condition, and for Mr May to cancel the Contract as soon as he was able to do so.
[35] Some communications had also taken place that day 9 January 2020 between Melco and Silvester Clark. At 9.06 am, Mr Ellison of Melco, emailed Silvester Clark to state “unfortunately, we have just been informed that we are unable to obtain an extension as initially hoped”.
[36] At 10.01 am an engineer from Silvester Clark replied asking Mr Ellison to phone him to discuss the preliminary findings of the Detailed Seismic Assessment (DSA) they had prepared thus far.
[37] Earlier that morning it appears Melco had received Silvester Clark’s preliminary seismic report on the property. This report it seems, indicated concerns and said that an inspection of the building was required. But Silvester Clark confirmed it could not carry out an inspection until the following week.
[38] Later that morning (9 January 2020) Mr Williams had telephoned Mr May to follow up his earlier emailed request made at 6.10 am for an extension. He received no answer. Mr Williams left a voicemail which also was not answered. The day rolled on and Melco neither confirmed nor waived the due diligence condition, as it was required to do by 5.00 pm.
[39] AT 5.03 pm that day, Mr May sent a letter to Mr Williams stating that Mr Hall was cancelling the Contract as a result of Melco’s failure to waive or confirm the due diligence condition.
[40] After 9 January 2020 Melco confirmed it did not accept Mr Hall’s cancellation of the Contract noted at [39] above. Its solicitor, Mr Williams wrote to Mr May on 10 January 2020 stating that Melco would enforce its rights under the Contract. On 16 January 2020, Melco lodged its caveat over the title to the Property.
[41] That caveat as I have noted above was the subject of proceedings seeking an order under s.143 of the Land Transfer Act 2017 that the caveat not lapse.
Caveat Proceedings
[42] It is useful at this point to outline brief details of the Caveat Proceedings which I now do. The Caveat issue came before the High Court in October 2020 and was the subject of a judgment from Associate Judge Paulsen on 29 October 2020.
[43] In the High Court, the Associate Judge dismissed Melco’s application and made an order that the caveat lapse.2 Melco’s appeal to the Court of Appeal was unsuccessful in a judgment of that court delivered on 14 May 2021.3 Leave to appeal to the Supreme Court was then granted on the question of whether the Court of Appeal was correct to dismiss the appeal.4 The Supreme Court heard that appeal on 23 February 2022.
[44] On 6 May 2022, the Supreme Court delivered its results judgment in which it allowed the appeal. On 12 May 2022 it delivered its reasons judgement.6
[45] In determining the question before it, the Supreme Court in its reasons judgment said that Mr Hall had a duty to facilitate access to the Property so Melco’s engineer could inspect the Property in undertaking its due diligence. Also, the Court accepted it was reasonably arguable that Mr Hall, by his last-minute cancellation on 8 January 2020 of an appointment that day for access to the Property, did not facilitate access. The principal difference between the parties was as to the effect of the failure
2 Melco Property Holdings (NZ) 2012 Ltd v Hall [2020] NZHC 2831 [HC judgment].
3 Melco Property Holdings (NZ) 2012 Ltd v Hall [2021] NZCA 184, (2021) 22 NZCPR 186 (Collins, Brewer and Dunningham JJ) [CA judgment]
4 Melco Property Holdings (NZ) 2012 Ltd v Hall [2021] NZSC (William Young, O’Regan and Ellen Franc JJ) [SC leave judgment]
5 Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 56.
6 Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 60
to facilitate access and as to the nexus required between Mr Hall’s actions and the ability to comply with the condition. Melco said it was sufficient to show it was reasonably arguable the failure substantially impeded its ability to comply with the condition. Mr Hall said the default must be causative and that, here, the failure had no causal effect. It had no causal effect because, in large part Mr Hall claimed Melco’s own conduct led to the situation in which it found itself.
[46] In addition, Melco relied on what it said was Mr Hall’s equivocal behaviour in response to Melco’s request for an extension of time for fulfilment of the due diligence clause. Mr Hall’s case was that there was no evidence anything that Mr Hall did, or did not do, caused Melco to believe an extension would be given.
The Supreme Court decision settled the applicable principles to be applied here
[47] In allowing Melco’s appeal and upholding the Caveat, the Supreme Court in its extensive judgment set out firmly and in some detail (at paras [32] to [55]) the principles to be applied in a case such as the present. It is useful to repeat these as they are to be applied here. I now do so:
[32] It is not disputed by the parties that it is arguable that, in circumstances, failure to meet the obligation to facilitate access might defeat what would otherwise be Mr Hall’s right to avoid the contract. We agree. There is authority for the proposition that in a case such as the present, a party cannot rely on non-fulfilment of a condition where the non-fulfilment was connected to the default of that party. The position is encapsulated in Burrows, Finn and Todd this way:7
Although the failure of a condition normally operates to terminate any contractual liability, a party to the contract will be able to rely on the failure of the condition only if he or she was under no obligation to achieve fulfilment of the condition or if the condition failed despite the use of sufficient endeavour to achieve fulfilment.
[33]The author goes on to say:8
7 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th edition, LexisNexis, Wellington, 2022) at 278, citing Neylon v Dickens[1977] 1 NZLR 595 (CA), affirmed in Neylon v Dickens [1978] 2 NZLR 35 (PC); Conner v Pukerau Ltd [1981] NZLR 384 (CA); and Moreton v Montrose ltd [1986] 2 NZLR 496 (CA).
8 Todd and Barber , above n 7, at 278, citing New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France [1919] AC 1 (HL); Scott v Rania [1966] NZLR 527 (CA); compare Firestone Tire & Rubber Co New Zealand Ltd v Harvard Construction Ltd (1997) 3 NZ ConvC 192,665 (HC)
A party will not be allowed to assert that the failure of a condition has terminated any contractual liability if the condition has only failed through that party’s own default.
[34] The result is that “a party to a contract may be held to it despite the failure of the condition if the condition has failed because of his or her own default”9 Where the parties are in dispute as to “whether the contractual standard of endeavour has been met, it is for the party claiming such default to prove it”10 Finally, the authors note that where a party fails to meet a condition “not through a default on that party’s own part but because the other party has made performance of it impossible, the condition will be treated as having been satisfied”11
[35]Don McMorland similarly makes the point that:12
It has consistently been held in New Zealand that a party cannot rely on the failure of a condition where that failure was caused by that party’s own default… [The] relevant party is under an obligation to take all reasonable steps to fulfil the condition. A failure to do so bars that party from relying on the failure of the condition to avoid the contract.
[36] In discussing the proposition that a party cannot effectively take advantage of the party’s own wrong in considering the ability to terminate a contract, there is frequent reference to New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France.13 That case dealt with the effect of a provision in a ship building contract which said that if the ship was not ready by a certain date, the contract “shall become void”. Disruptions due to World War I meant the shipbuilders could not build the ship by the specified date. The shipbuilders argued the contract was at an end but the purchaser’s case was that the contract was voidable at the option of the purchaser. The approach taken relevantly for present purposes is captured by Lord Finlay’s observation that “ [it] is a principle of law that no one can in such case take advantage of the existence of a state of things which he himself produced”14 However, on the facts, it was
9 Todd and Barber, above n 7, at 280.
10 At 280, citing Ansley v Prospectus Nominees Unlimited [2004] 2 NZLR 590 (CA). The authors note also, “[a]s stated there, if there is anything suggesting the insufficient efforts were made by a party, that party may have an evidential onus to show what steps it did take”: at 280, n 8.”
11 At 280, citing Mahoney v Lindsay (1980) 33 ALR 601 (HCA).
12 Don McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at 203-204, citing New Zealand Shipping CO Ltd, above n 8; Barber v Crikett [1958] NZLR 1057 (SC); Eastmond v Bowis [1962] NZLR 954 (SC); Mulvena v Kelman [1965] NZLR 656 (SC); Scott v Rania, above n 8 Valley Ready Mix Ltd v Utah Finance and Development (NZ) Ltd [1974] 1 NZLR 123 (HC); Connor v Pukerau Store Ltd, above n 7; Innes v Mars [1982] 2 NZLR 68 (HC); Hay v Laurent Construction Ltd (1990) 1 NZ ConvC 190,387; Cadman v Buttelman HC Auckland CP 3013/88, 20 December 1990, Thorp J, noted in Don McMorland “Conditional on sale of purchaser’s existing property — Last-minute offer by vendor to buy existing property” (1991) 5 BCB 291; United Realty World Ltd v Ordeal Enterprises Ltd (1992) 2 NZ ConvC 191,288 (CA). To similar effect, see Hugh G. Beale (ed) Chitty on Contracts (34th ed, Sweet & Maxwell, London, 2021) vol 1 at [15–113] and [25–069]; and Peter Blanchard A Handbook on Agreements for Sale and Purchase of Land (4th ed, Handbook Press Ltd, Auckland,1988) at [1205].
13 New Zealand Shipping Co Ltd, above n 8.
14 At 6. See Also Lord Atkinson at 9; and Lord Shaw at 12. The “taking advantage” principle was referred to by the Court of Appeal in Wallace v Herron [2017] NZCA 346 at [49] and [52]. Wallace
found that there had been no such default on the part of the shipbuilders and so they were not precluded from claiming that the contract was void.
[37] The question arising in this case is as to the circumstances in which default by the party seeking to take advantage of non-fulfilment of a condition will defeat the right to avoid the contract. The parties were asked to address this question in the judgment granting leave to appeal.15
[38] Melco’s approach is that it is sufficient to show that the actions of the defaulting party substantially impeded the other party fulfilling the condition. Melco relies in this respect, amongst other matters, on Australian authority which draws in aid the principle that a party must not engage in conduct preventing the other party from enjoying the benefit of the contract.16 Melco also relies on Nopera Log House Ltd v Godsiff where a similar argument about the effect of the vendor’s failure had been made but failed on the facts.17
[39] Mr Hall’s case is that while the principle commonly associated with New Zealand Shipping has “broad remedial potential”, it needs to be applied “with rigour” especially where, as here, Melco as the caveator has the onus. Mr Hall’s position is that there is a need for a direct causal link in that Melco has to show the alleged default was a substantial cause of the failure to fulfil or waive the condition. His argument is that Melco must fail because, at best, Melco’s case is that it has lost the chance of a different outcome.
[40] It is apparent from our discussion of the judgments in the Courts below that those Courts proceeded on the basis that the right to avoid the contract was only lost if Melco would have either confirmed or waived the condition if granted access on 8 January. We see this as requiring a direct causal link as envisaged by Mr Hall. The Court of Appeal does not give any authority for that approach. The High Court referred to Nopera Log House but, as we read Nopera, did not apply it.
[41] It is the case that the High Court in Nopera refers to the need for a causal link and discusses the extent to which the vendors, the Godsiffs, had responsibility for the position in which the purchaser found itself. But, when assessing whether the link had been established, the Court also considered whether the vendor’s actions “materially affected the prospect” of fulfilment of the relevant condition, namely obtaining consent from the Overseas Investment Office (OIO).18 Nopera said that the Godsiffs delayed in providing the information necessary for Nopera to lodge its application with the OIO. There was no challenge to the principle relied on by Nopera, that is, that a party could not rely on non-fulfilment of a
v Herron was referred to by this Court in Savvy Vineyards 4334 Ltd v Weta Estate [2020] NZSC 115, [2020] 1 NZLR 714 at [84].
15 Melco Property Holdings (NZ) 2012 Ltd v Hall [2021] NZSC 108 (William Young, O’Regan and Ellen France JJ) [SC leave judgment], at [1(a)]
16 For example, Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69. Bensons is a case where the Court refers to the “prevention principle”, that is, the conception that a party to a contract must not act in such a way as to prevent the other party from enjoying the benefit of the contract: at [101]–[102] citing, Mackay v Dick 1881 6 App Cas 251 (HL) and Butt v M’Donald (1896) 7 QLJ 68 (QSC).
17 Nopera Log House Ltd v Godsiff [2014] NZHC 639, (2014) 15 NZCPR 144.
18 At [37].
condition and then terminate the contract on that ground where the non- fulfilment was a result of its own default. But Nopera’s claim failed on the facts where Nopera had not indicated any element of urgency for a response to the requests for information until very late in the piece. At most, the element of delay that could possibly be sheeted home to the Godsiff’s was minimal and “the evidence [did] not establish an arguable case that this period of time materially affected the prospect of consent being granted in time”19
[42] It is difficult to discern from the cases a clear pattern as to the nexus required. In some cases, the language of “but for” causation or something very close to that is used. In New Zealand Shipping itself, for example, Lord Finlay referred to the fact that non-completion of the building of the ship was not “brought about” by the shipbuilders.20 In that situation, there was no reason why “void” did not mean that the contract was automatically at the end.21
[43] In Noble Investments Ltd v Keenan the Court of Appeal saw the common law rule that a party does not benefit from its own wrong as underlying the requirement that a party must be ready, willing and able to proceed to complete the contract in order to be able to validly cancel the contract.22 The Court gave two illustrations of when a party could be seen as benefiting from its own wrong. The first of these was where the party sought:23
… by cancellation to deprive the other party of the benefit of the contract in circumstances where the other party’s breach is a direct result of breach committed by the party seeking to cancel the contract.
[44] The other illustration was where the party was “unable or unwilling to perform its obligations under the contract and seeks to avoid liability for its own breach” by cancelling on the basis of the other party’s breach.24
[45] Noble Investments involved an agreement for the sale and purchase of land. At the time the purchasers purported to cancel, they were in breach of the agreement themselves as they had not paid the deposit. The Court in addressing the effect of that breach, made the point that non-payment of the deposit “had no causative effect” on the alleged breach by the vendor of its obligations (in relation to title).25 In that situation, non-payment did
19 At [37] (emphasis added).
20 New Zealand Shipping Co Ltd, above n 8, at 8. Lord Atkinson and Lord Shaw also use the language of having “brought about” the event: at 10, 12 and 13. Similarly, Cooke J in Moreton v Montrose, n 7, referred to a party disqualifying himself or herself from relying on a condition if that party had “brought that state of affairs about” by the party’s own default: at 503.
21 At 8.
22 Noble Investments Ltd v Keenan [2006] NZAR 594 at [44] and [47]. This Court in Ingram v Patcroft Properties Ltd [2011] NZSC 49, [2011] 3 NZLR 433 at [40] endorsed the proposition in Noble Investments as to the purpose of the common law rule and that the rule survived the passage of the Contractual Remedies Act 1979 but did not apply where the cancelling party did not so benefit.
23 At [47] (emphasis added).
24 At [47].
25 At [48].
not affect the purchasers’ ability to cancel, provided there were valid grounds for cancellation. The difference between the current case and Noble Investments is that here the claim is that the right to avoid has been lost. In Noble Investments the Court dealt with the situation where party A purported to cancel for breach by party B of its obligations where party A was also in breach.
[46] Other cases deal with the other side of the equation from the present situation, that is, where a purchaser has not complied with the condition requiring reasonable endeavours. For example, Barber v Crickett dealt with a contract conditional on the purchaser raising a mortgage. The Court held that the purchaser could assert the condition’s non-fulfilment “only where it occurs without any default on his part”.26
[47] It seems to us that the situation in Nopera is more analogous to the present case. A similar approach to that adopted in Nopera can be found in a number of Australian cases dealing with the effect of failure to register a subdivision plan or similar. Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Inc illustrates the approach taken in this line of cases.27 The New South Wales Supreme Court observed that earlier cases have tended to see things “very starkly” on the basis that there was a blameworthy party and a blameless party.28 However, the Court noted that “life is not always that simple and often the non-registration of a plan or non-fulfilment of a condition comes about through a variety of factors”.29
[48]Accordingly, the Court concluded that:30
… one does not have to see that the default was the whole cause of non-fulfilment of the condition, not must the opposing party necessarily be blameless. One has got to look at whether the person seeking to rescind the contract materially contributed to the non-performance of the condition on which it now bases its rescission.
[49] The parties in Sanctuary Investments entered into a sale and purchase agreement that was conditional on registration of a plan of subdivision within six months. Both parties contracted to use best endeavours to achieve this. When this condition was not met, the vendor purported to rescind the contract. The purchaser sought specific performance.
[50] Applying the test set out above, the Court stated it was necessary for the purchaser to show that there was a material default on the part of the vendor To determine this, it was necessary to consider why the condition was not met and in doing so, the entire six month period was relevant. The Court considered that there was much delay on the purchaser’s side in organising the registration of the plan. The purchaser had taken a “fairly leisurely” approach to registration for about the first
26 Barber v Crickett, Above n 11, at 1060.
27 Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Inc (1998) 9 BPR 16,823 (NSWSC).
28 At 16,826.
29 At 16,826.
30 At 16,826 (emphasis added). The Court makes it clear that this material contribution test is based on the principles in New Zealand Shipping: at 16,825 and 16,829.
four months with several delays on their side.31 When the plan was prepared and delivered to the vendor, there was “insufficient time for the many unexpected things that happen in registration of plans to be dealt with completely before the deadline”.32 Therefore, it had not been shown the vendor had materially contributed to the condition’s failure.33
[51] Other cases dealing with contracts conditional on the registration of certain plans have adopted a “material contribution” or a, similar, “deprivation of a chance” test.34
[52] Against this background, there plainly has to be some nexus between the default and the prospect of fulfilment of the condition in a case such as the present. If the default was not material there would be no basis to defeat the right to avoid. Further, as Mr Hall says, such an approach would cut across the law relating to repudiation.
[53] We consider the strength of the nexus required in a case such as the present should reflect the underlying policy considerations. A requirement that there is evidence that the default materially affected the prospect of fulfilment of the condition is a principled approach in that, consistently with the underlying New Zealand Shipping principle, it puts the risk where it belongs, namely, on the party in default. For present purposes, what is important is the conduct of the party avoiding the contract. A party whose breach of the contract has contributed materially to non-fulfilment of the condition may not rely on such non-fulfilment to avoid a contract. When considering the situation where both parties have contributed to some extent in the non-fulfilment of a condition, in other words the contribution to the non-fulfilment is shared, it will be necessary to construe “material” as meaning “substantial and operating”.
[54] we also see our approach as having practical advantages in that it is realistic and avoids a counterfactual analysis which may well be speculative. The move away from such a speculative analysis would also better accommodate Mr Hall’s concerns about commercial and contractual certainty.
[55] We turn to apply this approach to the present case.
Melco’s Claim
[48] I turn now to Melco’s position here. It is essentially that Mr Hall was not entitled to cancel the Contract because:
31 At 16,829.
32 At 16,829.
33 See also Gange v Sullivan (1966) 116 CLR 418. In the context of determining the meaning of “void”, Taylor, Menzies and Owen JJ referred to forestalling a party to a contract from achieving an advantage “from his own conduct in securing, or contributing to, the non-fulfilment of a condition bringing the contract to an end”: at 441.
34 For example, Pelley v Tebran Pty Ltd [2006] NSWSC 1072 at [170]; Mitchell v Pattern Holdings Pty Ltd [2002] NSWCA 212, (2002) 11 BPR 20,241 at [56]; Mordue v Kroone [2009] NSWSC 255, (2009) 14 BPR 26,771 at [16]; and Joseph Street Pty Ltd v Tan [2012] VSCA 113, (2012) 38 VR 241 at [47].
(a)At the time of the purported cancellation he was himself in breach of his contractual obligations.
(b)He prevented the due diligence condition from being fulfilled by failing to cooperate in enabling Melco to undertake that due diligence.
(c)He was estopped by his conduct from taking steps to terminate the Contract without first advising Melco that he would not extend the time for due diligence.
(d)He was in any event in breach of s.9 of the Fair Trading Act (the FTA).
[49] Melco contends that Mr Hall’s lack of cooperation, in what became the critical part of the due diligence period, occurred because he had been offered a higher price from the other purchaser, Mr Chambers and he wished to take advantage of that offer.
[50] After Melco had lodged that caveat against the title to the Property, on 16 January 2020, Mr Hall then signed the new Agreement for Sale and Purchase to sell the property to Mr Chambers or his interests at a purchase price of $1,600,000. This price as I have noted was $100,000 more than the nominated price under the Contract with Melco.
[51] Later on 24 January 2020 Mr May on behalf of Mr Hall confirmed to Melco’s solicitors that there was this new third party purchaser. On that date Melco’s solicitors advised Mr May by letter amongst other things that Melco was waiving the due diligence condition and the Contract was now unconditional.
[52] On 28 January 2020 Mr May wrote to Melco’s solicitors confirming that Mr Hall refused to proceed with the Contract and confirming Mr Hall’s position that the Contract had been validly cancelled.
Issues
[53]The issues in dispute between the parties here largely concern:
(a)Whether the Contract contained implied conditions relating to the due diligence condition requiring co-operation by Mr Hall and the provision of reasonable access to the Property,
(b)Whether Mr Hall breached his obligation in relation to providing reasonable access to the Property for due diligence and, by withdrawing co-operation in doing so, he prevented Melco from fulfilling the condition.
(c)Whether Mr Hall was precluded from cancelling the Contract as a result of his breaches.
(d)Whether Mr Hall was also in breach of the provisions of the Fair Trading Act 1986. (On this aspect Melco contends that Mr Hall’s conduct was misleading or deceptive, and that a remedy under the FTA is available to it.)
(e)Whether Mr Hall was also estopped by his conduct from cancelling the Contract. (Melco says that Mr Hall promised he would revert to them regarding an extension of the due diligence period and inspection arrangements and he reneged on those promises. Accordingly Melco contends he was estopped from exercising a right of cancellation.)
Relief Sought
[54] The Property as I note is situated at 5 Parliament Street, Lower Hutt and is a neighbouring property to Melco’s head office operations at 1 and 3 Parliament Street. Melco it seems has a real and present need for further space for these head office operations. The evidence before me indicated that Melco sees this as a critical property for the expansion of its business. Thus, it seeks as its primary remedy an order for specific performance.
[55] Mr Beck, counsel for Melco, says in his submissions that Melco also seeks a separate inquiry into damages, in addition to specific performance. Section 13 of the
Senior Courts Act 2016 confers on this Court the power to award damages in addition to or in substitution for specific performance.
Discussion
[56] For present purposes important events in this case are usefully repeated here. I outline these as follows.
[57] Clause 19 of the parties’ Contract made the purchase of the Property conditional upon Melco as purchaser being satisfied that the Property was suitable for the purchaser’s requirements following the purchaser carrying out due diligence. The clause was said to be for the sole benefit of Melco and at any time it could be waived by Melco. Although there were 15 working days available to complete due diligence, (the parties agreeing this was to occur by 9 January 2020), only two days of access to the property were actually provided in mid-December 2019, these being on 16 and 17 December 2019.
[58] In response to a request on 24 December 2019 for an extension to the date by which completion of due diligence had to be completed, on 26 December 2019, Mr Hall said that he “didn’t see an issue” with that but would talk with his lawyer about a variation to the Contract when the lawyer returned from holiday in the New Year, later accepted as 9 January 2020.
[59] On 8 January 2020, the day before due diligence had to be completed under the Contract, Mr Hall received advice of a likely higher offer for the Property and shortly after that, he “postponed” the meeting that had been arranged that day to provide access. Later he, instructed his lawyer not to communicate in any way with Melco or its agent or lawyer and to cancel the Contract when he could. Shortly after the end of the working day, 9 January 2020 (the day for completion of due diligence) Mr Hall’s lawyer gave notice cancelling the Contract.
[60] The question is whether these events give rise to a breach by Mr Hall of an implied term in the Contract, a breach of s 9 of the FTA, or an estoppel preventing, Mr Hall as vendor, from cancelling the Contract. I will now consider each of these in turn.
Implied terms
[61] I turn first to consider Melco’s first breach of an implied term in the Contract cause of action.
[62]As the authors of Burrows, Finn and Todd Law of Contract in New Zealand
state:
the express terms agreed to by the parties may not be sufficient themselves to constitute a legally valid and practically functional contract. In addition to the terms which the parties have expressly adopted, then, there may be others imported into the contract from its context. These implications may be … inferred by the judges to reinforce the language of the parties and realise their manifest intention.35
[63] An implied term may be excluded either by clear and unambiguous language or if its implication would be inconsistent with an express term of the contract.36
[64] The courts require that the implied term be, as stated by one commentator, “necessary for the reasonable operation of the type of contract concerned”.37 That commentator goes on to note “terms implied in law represent ‘a bundle of rights which have more to do with modes of behaviour which allow work to proceed in a commercially and legally correct manner’”.38
[65] There are two traditional tests for the implication of terms into a contract. The first is the business efficacy test. The test is that a term will be implied “if it is necessary to give business efficacy to the contract.”39 The second test is the officious bystander test. This was expressed by MacKinnon LJ in Shilaw v Southern Foundries (1926) Ltd in the following way:40
35 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [6.4].
36 At [6.4.3(a)].
Elisabeth Peden “Policy concerns behind implication of terms in law” (2001) 117 LQR 459 at
460. See also Todd and Barber, above n 1, at [6.4.3(a)], citing Liverpool City Council v Irwin
[1977] AC 239 (HL).
38 Peden, above n 3, at 460, citing G McCarry “Damages for Breach of the Employer’s Implied Duty of Trust and Confidence” (1998) 26 Aust Bus LR 141 at 145.
39 Todd and Barber, above n 1, at [6.4.4(a)], citing The Moorcock (1889) 14 PD 64 (CA) at 68 and 70.
40 Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 (CA) at 227.
Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common: “Oh, of course.”
The test is usually expressed as requiring a term to be “so obvious that it goes without saying”.41
[66] In BP Refinery (Westernport) Pty Ltd v Shire of Hastings, the Privy Council set out a five-point test for the implication of terms, drawing together the two tests above:42
(1)it [the term to be implied] must be reasonable and equitable;
(2)it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3)it must be so obvious that “it goes without saying”;
(4)it must be capable of clear expression;
(5)it must not contradict any express term of the contract.
[67] Subsequently, in Attorney General of Belize v Belize Telecom Ltd, Lord Hoffmann, delivering the judgment of the Privy Council, noted that the exercise is ultimately one of determining the meaning of the contract as it would be understood by a reasonable person, on which view the two tests simply emphasise “the need for the court to be satisfied that the proposed implication spells out what the contract would reasonably be understood to mean”.43
[68] The Supreme Court has recently settled unanimously the general approach in New Zealand to the implication of terms into particular contracts. In Bathurst
41 Todd and Barber, above n 1, at [6.4.4(a)].
42 BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 16 ALR 363 (PC) at 376.
43 Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988 at [25].
Resources Ltd v L&M Coal Holdings Ltd, the Court incorporated the general principles outlined by Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd as well as the tests from BP Refinery (Westernport) Pty Ltd v Shire of Hastings. The Court concluded with six “principal points” that govern the implication of terms:44
(a)The legal test for the implication of a term is a standard of strict necessity, a high hurdle to overcome.
(b)The starting point is the words of the contract. If a contract does not provide for an eventuality, the usual inference is that no contractual provision was made for it.
(c)While the task of implication only begins when the court finds that the text of the contract does not provide for the eventuality, the implication of a term is nevertheless part of the construction of the written contract as a whole. An unexpressed term can only be implied if the court finds that the term would spell out what the contract, read against the relevant background, must be understood to mean.
(d)As with the task of interpreting a contract, the inquiry for the court when considering the implication of a term is an objective inquiry – it is the understanding of the notional reasonable person with all of the background knowledge reasonably available to the parties at the time of contract that is the focus of this assessment. The court is tasked with the role of constructing the understanding of that reasonable person.
(e)Thus, the implication of a term does not depend upon proof of the parties’ actual intentions, nor does it require the court to speculate on how the actual parties would have wanted the contract to regulate the eventuality if confronted with it prior to contracting.
44 Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [116] (citations omitted).
(f)The BP Refinery conditions are a useful tool to test whether the proposed implied term is strictly necessary to spell out what the contract, read against the relevant background, must be understood to mean. Whilst conditions (4) and (5) must always be met before a term will be implied, conditions (1)–(3) can be viewed as analytical tools which overlap and are not cumulative. The business efficacy and the “so obvious that ‘it goes without saying’” conditions are both ways, useful in their own right, of testing whether the implication of a term is strictly necessary to give effect to what the contract, objectively interpreted by the court, must be understood to mean.
[69] As the Supreme Court in Bathurst noted, the standard for implying terms is one of “strict necessity”, that the implication of a term is “strictly necessary to give effect to what the contract … must be understood to mean.” The process of implying terms that were not expressly agreed has, after all, the potential to alter the parties’ actual agreement, and should therefore be approached with caution.45 As Lord Pearson noted in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board:46
… An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract … a term which, although tacit, formed part of the contract which the parties made for themselves.
[70] The Supreme Court also indicated in its decision, the implication of a term is “part of the construction of the written contract as a whole.” On this view of construction, the implication of a term does not involve adding to the terms of the contract but rather simply drawing out a meaning already implicit in it.47 This is usually based on the express words within a document. As Andrew Robertson has stated:48
The implication of terms deals with issues not directly addressed by a text by drawing conclusions that are based on elements within the text. Those
45 See Todd and Barber, above n 1, at [6.4.4(c)].
46 Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 (HL) at 609.
47 See Todd and Barber, above n 1, at [6.4.4(d)].
48 Andrew Robertson “The Limits of Interpretation in the Law of Contract” (2016) 47 VUWLR 191 at 194–195.
conclusions can therefore be said to be within the spirit of the text, rather than the letter.
[71] Under the Bathurst framework, conditions (4) and (5) of the BP Refinery test are necessary before a term will be implied, whereas conditions (1) to (3), rather, are useful in determining whether it should. In particular, it is clear from Bathurst that the business efficacy and officious bystander tests are analytical tools rather than cumulative requirements.49
An implied term in this case?
[72] In the present case, I am satisfied there is a serious argument to be made that a term is to be implied into the parties’ Contract and this is either:
(a)that the vendor Mr Hall is to make available to the purchaser Melco reasonable access to the property in order to conduct due diligence (as Melco is entitled to do under the Contract); or
(b)that the vendor Mr Hall is not to obstruct the purchaser Melco from completing due diligence on the property (as Melco is entitled to do under the Contract).
[73] The first is a positive obligation to act to facilitate Melco’s rights under the Contract; the second is a negative obligation not to obstruct fulfilment of the condition by Melco exercising its rights.
[74] The argument is that such an implied term, in either formulation, is necessary, in order to make the Contract here a practically functional and working contract.
[75] I turn now to the requirements for the implication of a term. An implied term of this kind has certainly not been excluded here by clear and unambiguous language in the Contract, nor could it be said it is inconsistent with an express term of the Contract. In fact, in my judgment arguably it is “necessary for the reasonable operation of the type of contract concerned” here. Such an implied term would also
49 See Todd and Barber, above n 1, at [6.4.4(e)].
allow this Contract to “work and to proceed in a commercially and legally correct manner”.
[76] The Court in Bathurst said conditions (4) and (5) of the BP Refinery conditions must always be met. The implied term here as I see it is reasonably capable of clear expression (as I have expressed it above, albeit in two different forms). It does not appear too that it would contradict any express term in the Contract. Both of these requirements in my view, pose no problem here.
[77] Whether the term would be “strictly necessary” however might be seen perhaps as less clear. But, a reasonable argument exists in my judgment to conclude that in all the circumstances here, without such an implied term, due diligence would not have been possible. This would also have been counterproductive to the entire Contract and to the purpose of cl 19. In this respect, I am satisfied an appropriate implied term fairly could be said to be “strictly necessary”. Without it, in my view, the right contained in cl 19 would be meaningless. Moreover, it does not in any way alter the parties’ actual agreement, and in my judgment, it could be said to have “formed part of the contract which the parties made for themselves”, in terms outlined by Lord Pearson.50
[78] Clause 19 in the Contract, when reasonably interpreted, involves the making available of the Property in order to carry out due diligence. The words of the Contract, by implication at least, make this clear. Those words provide for Melco as the purchaser to conduct due diligence. Access to the Property clearly in my view, is necessary in order to conduct that due diligence. In circumstances where as here, Mr Hall as the other party to the contract is the only one who is able to provide access to the Property to facilitate the exercise of Melco’s right to conduct due diligence, such a term is reasonably implied. Mr Hall as vendor being required to provide access (or at least not to hinder the purchaser’s access) is a conclusion that can be drawn as a matter of construction of the Contract based on elements of the text.51
50 Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board, above n 46, at 609.
51 Robertson, above n 14, at 194–195.
[79] Finally, as stated in Bathurst, business efficacy and the officious bystander tests in my view are both fulfilled here. In terms of the business efficacy test, without access from a commercial perspective as I see it, the Contract would not give proper effect to the due diligence clause.
[80] In terms of the officious bystander test too, a term requiring reasonable access to the Property in order for Melco as purchaser to conduct due diligence could be regarded, in my view, as “so obvious that it goes without saying”. As I have mentioned, such a term is essential for Melco to be able to carry out its due diligence entitlement. If the parties had specifically turned their minds to this, in my judgment they would have said at the time of concluding the Contract, “of course Mr Hall as vendor will have to make sure he provides access to the Property”. If the parties had not said that at the time, there would have been serious questions asked by Melco of Mr Hall as to whether he really meant for Melco to be able to conduct a proper due diligence exercise. This is because, full access to the Property was clearly necessary in order for Melco to do what they were entitled to do under cl 19.
[81] In conclusion, I am of the clear view that the implication of a term along the lines set out above, arises here. This is either as a positive obligation on Mr Hall as vendor to provide to Melco reasonable access in order to complete due diligence, or otherwise as a negative obligation on Mr Hall not to obstruct Melco from completing due diligence on the Property (which may then require actively providing reasonable access.) The test and overall requirement for the implication of a term in this Contract along the lines I outline above is clearly met here.
Breach of implied terms
[82] As I note above, my clear conclusion here is that terms are to be implied in the Contract requiring Mr Hall as vendor, first, to provide reasonable access to the Property for Melco to carry out its due diligence requirements (including specifically to carry out internal inspections of the building for seismic and other purposes) and secondly, by implication not to do anything to prevent Melco from either satisfying the due diligence clause and performing its obligations under the Contract or to delay such actions on the part of Melco.
[83]As to these implied conditions Melco contends that Mr Hall:
(a)First, breached his obligations under these implied conditions prior to the 8 January 2020 meeting by:
(i)simply not being available for the first five working day week of the already difficult due diligence period from 9 to 13 December 2019.
(ii)not responding to the request from Mr Dee to clarify whether a seismic report for the property was available.
(iii)failing to clarify to Melco that Wholesale Cars Direct, Mr Hall’s tenant, only had a key to their tenancy of one-half of the property.
(iv)having advised officers of Melco that he would be staying in Wellington during the due diligence period, he then absented himself to a remote area in the Wairarapa without cell phone reception, without any thought to Melco needing further access and further, making no other arrangements for access in the meantime despite the fact that he had the only key to the premises in question and insisted he must be present at any inspection.
(v)not providing keys to all the Property and instructions to his tenant Wholesale Cars Direct to enable access reasonable to be available to Melco
(vi)failing to make arrangements with Wholesale Cars Direct for them to open up their tenancy within the building for the arranged meeting with Melco’s experts.
and-
(b)Secondly and importantly, after he (Mr Hall) had received an indication that Mr Chambers would make a higher offer for the Property, behaved in such a way that any previous cooperation from Mr Hall ceased entirely. Melco says that instead, particularly from 8 January 2020 Mr Hall became entirely uncommunicative. He also instructed his solicitor to act likewise so as to put himself in a position whereby he could purport to issue a notice cancelling the Contract on expiry of the due diligence condition. This further breach, Melco claims is evidenced particularly by:
(i)firstly, his postponing at very short notice the agreed meeting for inspection of the Property by Melco and its expert engineer on 8 January 2020.
(ii)secondly, despite his repeated assurances he would respond to the requests for an extension of time after speaking with his lawyer on 9 January 2020, Mr Hall deliberately failed to do so.
(iii)thirdly, making no attempt to set up a new meeting time for Melco’s engineer on the last day for due diligence, 9 January 2020, despite assurances to Ms Issacs from Melco that he would be back in touch, this evidencing his flagrant decision not to assist here.
(iv)fourthly, instructing his lawyer in explicit terms not to respond to Melco or its lawyer in any way on updates of their earlier request for an extension of time for the due diligence condition, and to cancel the contract as soon as he could
[84] The breaches on the part of Mr Hall alleged by Melco here are said to be widespread. Whilst I accept there is some force in many of the complaints Melco has raised regarding Mr Hall’s position and behaviour, for present purposes, I turn broadly to what I consider to be the principal matters of complaint against Mr Hall. These relate to his actions on 8 and 9 January 2020.
[85] From the evidence before me, it is clear that, early on the morning of 8 January 2020 Mr Hall had agreed to facilitate access to the Property that day at 12.00 pm for what he understood was to be Melco’s expert engineering and seismic inspection. He then postponed that meeting and inspection at short notice at 10.22 am that morning. This occurred only after he had received the indication of a higher offer for the Property from Mr Chambers.
[86] In his evidence, Mr Hall put forward four different explanations for this decision to postpone the 8 January 2020 inspection appointment for the Property:
(a)His text message to Ms Isaacs said he needed to postpone “due to an unforeseen delay”.
(b)In part, his evidence before me was that he needed to return to the Wairarapa campsite before nightfall as his “friends” were expecting him and would worry if he had not returned.
(c)Later in cross-examination, he said his motivation for his decision to cancel the meeting and to head back to the campsite and not proceed to Lower Hutt was because of the long drive over the Remutaka Hill and the hazardous gravel road to the campsite that he would need to encounter on his return. This was despite there being more than enough time for him to have travelled from the Wairarapa, where he had the earlier call with Mr Chambers, to attend the meeting in Lower Hutt at
12.00 pm and return well before the evening that day in early January (one of the longest mid-summer days of the year).
(d)Also in his evidence under cross-examination, Mr Hall endeavoured to explain that he had “forgotten to call Ms Isaacs” on 9 January 2020 about access arrangements when he had promised the day before that he would do so. This was however in the face of his unequivocal instructions at the time to Mr May, that he was to avoid responding to Melco, Mr Dee or its lawyers in any way.
[87] On these and other matters I found Mr Hall’s evidence before me inconsistent, somewhat evasive and contradictory in many aspects. Despite Mr Hall’s insistence to the contrary, as I see the position this illustrated in a number of respects Mr Hall’s developing intentions at the time not to comply with his obligations under the Contract and to ensure that he could cancel the Contract and proceed with a sale at a higher price to Mr Chambers.
[88] Mr Holloway urges on me that Mr Hall did comply with obligations he had to provide requested access to the Property with the inspections he arranged for 16 and 17 December 2020. To a limited extent that is clearly true. There is no doubt these actions in December 2020 go some way to assisting Mr Hall’s position here. But in my view they were clearly not enough.
[89] The fact remains, that on all the evidence, Mr Hall retained the only key to a locked portion of the Property for which Melco reasonably in my view wished to gain access. In addition, no arrangements of any other kind were made by him to allow access without him being present. That said, his actions around 8 and 9 January 2020 particularly, in first, cancelling the previously arranged inspection meeting, for what on the evidence might well seem to be spurious reasons, and secondly, not facilitating any other inspection opportunity, which he knew Melco required, were not in any way in furtherance of his reasonable obligations implied in this Contract. This must mean, as I see it, that Mr Hall is in clear breach of his implied contractual obligations here. His evidence before me simply does not stack up with any genuine desire to provide reasonable assistance for Melco to carry out its due diligence enquiries and work under the Contract. This is especially the case here in a situation where Mr Hall insisted, he was to be the only person to control completely all means of access to a significant part of the Property.
[90] Before me, it was suggested too on Mr Hall’s behalf that an external or roadside inspection of the Property was good enough and could have been made by Melco, despite its contentions advanced to the contrary. I disagree. The seismic and any other proper inspections involved here required reasonable access to be provided. This was needed in my view at least, to establish whether the buildings had been built in accordance with permitted plans and had no unconsented additions and also, to
determine the state, quality, and seismic position of all buildings and improvements on the Property.
[91] For all these reasons I conclude that, at the least on 8 and 9 January 2020, Mr Hall was in breach of his implied obligations under the Contract to provide reasonable access to Melco to inspect the Property for the purposes of its due diligence condition.
[92] That said, it is not necessary here for me to address the other matters noted at [83](a) above advanced by Mr Beck for Melco, where he suggests Mr Hall breached other obligations he had under the Contract. I leave those on one side.
[93] Overall I repeat that I am satisfied Mr Hall’s actions here particularly on 8 and 9 January 2020, had the effect of substantially impeding Melco’s ability to carry out due diligence within the timeframe under the Contract expiring at 5.00 pm on 9 January 2020. Had the arranged inspection on 8 January 2020, taken place, Melco would have been in the position of having further engineering information available, and could have either advised satisfaction or waiver of the condition. Because of Mr Hall’s breach of the implied condition in the Contract, they were not in a position to achieve this.
[94] At this point, it is interesting to note that, although the evidence before the Supreme Court was untested, which I accept entirely, nevertheless the Court did made a number of comments which are usefully repeated here:
[58] ….on the current state of the evidence there is support for the proposition that Mr Hall engineered the position in which Melco found itself on 9 January. Certainly, his affidavit dealing with the critical steps appears to have been carefully crafted.
….
[60] Moreover, Mr Hall terminated the access arrangement the day before the expiry of the due diligence period, by which time he had a better offer…. Melco was deprived of the access to the building that Mr Hall knew was necessary. Further, Mr Hall was aware that Melco was seeking an extension of time for fulfilment of the due diligence condition. It is reasonably arguable that his response to the request for an extension of time can be seen as an attempt to create uncertainty and then to take advantage of that position in a way which materially affected Melco’s position.
… [Mr Hall] indicating that no issues were seen with an extension at the least added to the uncertainty.
[61] …Whether Melco would have received an oral seismic report or would have waived the condition will ultimately depend on the evidence at trial. While evidence before us is not strong we consider at least there is a reasonably arguable case that Melco could have had a response from EQSTRUC indicating that the building was highly problematic (or otherwise) from the seismic perspective….Melco was prevented from being able to satisfy itself of the integrity of the building and to then decide whether to take the risk. There is a reasonable argument that this undermined the whole purpose of the due diligence period.
[62] In these circumstances, we consider it is reasonably arguable that Mr Hall’s failure to allow access to the property on 8 January 2020 had the necessary material effect on the prospect of fulfilment of the condition.
[95] In a way those overall comments from the Supreme Court have a certain prescience here. The evidence before me as I see it also goes further. In my view it positively confirms and reinforces the conclusions said to be “reasonably arguable” by the Supreme Court. Melco in my judgment has clearly satisfied the onus on it to establish to the required standard a breach by Mr Hall of the implied conditions in the Contract, such that the whole purpose of the due diligence period was largely undermined.
Nexus between the default and fulfilment of the condition
[96] Having found a clear default on the part of Mr Hall in this case, such that he has clearly breached the implied access condition for inspection of the Property, it is clear as the Supreme Court notes at [52] of its decision that there needs to be some nexus between the default complained of and the prospect of fulfilment of the condition in question. If Mr Hall’s default here is not material to the non-fulfilment by Melco of the condition, then there is no basis for Melco’s claim here to succeed.
[97] From other authorities endorsed by the Supreme Court in its caveat decision, a “material contribution” or a similar “deprivation of a chance” test is to be applied.52
[98]The Supreme Court also noted in its decision at [53],
52 As the Supreme Court noted at [51] see for example Pelley v Tebran Pty Ltd. [2006] NSWSC 1072 at [170] and Mitchell v Pattern Holdings Pty Limited [2002] NSWCA 212 [2002]
… the strength of the nexus required in a case such as the present should reflect the underlying policy considerations… For present purposes, what is important is the conduct of the party avoiding the contract. A party whose breach of the contract has contributed materially to non-fulfilment of the condition may not rely on such non-fulfilment to avoid a contract.
…
… When considering the situation where both parties have contributed to some extent in the non-fulfilment of a condition, in other words the contribution to the non-fulfilment is shared, it will be necessary to construe “material” as meaning “substantial and operating”.
[99] In this case I have found that Mr Hall was in clear breach of his obligation to provide reasonable access to the Property at least on 8 and 9 January 2020 for inspection by Melco and its seismic engineer. That was a reasonable request in all the circumstances. Importantly too, Mr Hall had agreed to this request earlier. His last minute postponement of the meeting and later, his failure to get back to Melco in any way, as he had indicated he would, or to let them know that he would not in fact be doing so, meant that no new access arrangements could be made in time. Without question, in my view, this was the cause of Melco’s inability to obtain an engineering inspection within the time period specified under the Contract. This necessarily led to Melco having little or no expert indications (even oral) as to the building’s seismic risk, and affected its information-based ability even to waive the due diligence condition by its expiry.
[100] I am satisfied too that Melco does not need to show here that the fulfilment of the due diligence condition would be impossible because of Mr Hall’s action. As the Supreme Court has confirmed, it is sufficient if, Mr Hall’s conduct in this case has “materially affected the prospect of fulfilment” of Melco’s opportunity to perform the condition.
[101] Notwithstanding this it is useful to turn to the evidence which was before me as to what Melco would have done here if Mr Hall had allowed an inspection of the Property to be carried out on 8 or 9 January 2020 relating to seismic matters.
[102] The chairman of the Board of Directors and majority shareholder of Melco and also BDT, Ronald James Woodrow (Mr Woodrow) gave evidence on this aspect before me. Although from his evidence it seems Mr Woodrow was in Hawaii around
January 9, he indicated he was in regular contact at the time with other officers and employees of Melco and BDT.
[103] In giving this evidence before me, Mr Woodrow impressed as a careful and precise witness. To his credit, in cross-examination his answers were straight-forward, direct and not in any way contrived. In answer to a question from the Court:
If Mr Hall’s lawyer came back to you at 4’o clock that afternoon [on 9 January 2020] one hour before expiry and said “sorry no extension” what would your company have done? Would you have waived the condition or would you have said:
“Look this seismic survey report is so important, we don’t want to buy a lemon. The seismic report is so important, we’re not going to confirm the due diligence condition and therefore if we lose the property so be it”?
Mr Woodrow’s answer, in my view was remarkably frank:
It’s a difficult question. I can’t answer that right now because what I would have done then… I would say that you could get an indicator of what our decision might have been by looking at our decision on the 24th (24 January 2020) I think it was where we did waive the condition basically.53
[104] Additionally, from the evidence before me of Mr Ellison, it is confirmed that any decisions to confirm or not to confirm the Contract would have been made only by Mr Woodrow as Chairman of the Board and major shareholder, and by his fellow director Darryl Michael Rochester (Mr Rochester). In oral evidence given by Mr Rochester, who is the Managing Director of, and also a shareholder in, both Melco and BDT, significantly in my view whilst he was under cross-examination stated:
If we were given access before 5.00 pm on the 9th [9 January 2020] the extension would have become irrelevant to the whole process, we would have been able to make a decision by 5.00 pm on the 9th and the email, it was the one that changed the decision process at the end of the day, if Mr Hall said no extension on the morning or the day before then the decision process of dealing with the sale of that building could have been quite different.54
…also if we had access in that 36 hour period [from 8 January- 9 January 2020] we would have completed our, what we were entitled to our, due diligence under [the] sales contract and been able to make an informed decision at 5.00 pm on the night [of 9 January 2020].55
53 Notes of Evidence page 46 lines 29-35 and page 47 lines 1-8.
54 Notes of Evidence page 91 lines 25-30/
55 Notes of Evidence page 92 lines 23-26
[105] Mr Holloway, in his submissions for Mr Hall, endeavoured to make much of arguments first, that the Interim Seismic Assessment report from Silvester Clark was available to Melco on the morning of 9 January 2020 and secondly, from the evidence of Melco’s alterative engineer, Mr Balili [criticised in some respects by Mr Hall’s expert engineer Nicolas Brooke] that it is suggested no inspection of the Property either on 8 or 9 January 2020 would have made any difference here. I reject these arguments however. They misrepresent the evidence Mr Balili gave in my view. And, as I see the position, they do not in any way cast into doubt other evidence as to the possibility of a better informed Melco on 9 January 2020 being able to either confirm or waive the due diligence condition under the Contract. There is no doubt as I see it that the party in default under the Contract here was Mr Hall first, by failing to take reasonable steps to allow an inspection of the Property to be carried out, and secondly, by arguably misleading Melco in the process.
[106] For the reasons I have outlined, I find too there is a clear nexus between Mr Hall’s default here and the prospect of Melco otherwise fulfilling or waiving the due diligence condition in the Contract. His default was directly material to the performance by Melco of its obligations under this condition, such that Mr Hall’s right to defeat the Contract at 5.03 pm on 9 January 2020 should be avoided. Mr Hall had no right to cancel the Contract at that time. At the very least it remained on foot until 24 January 2020 when Melco confirmed it was waiving the due diligence condition. The Contract then became unconditional.
[107] The attempts by Mr Hall, with his actions here, as I see it, undermine too the whole purpose of the due diligence condition in the Contract. The purported cancellation of the Contract by Mr Hall was wrongful. The Contract remained upon foot, and as I note above, it became unconditional and affirmed by Melco waiving the due diligence condition on 24 January 2020. Melco maintains it is ready willing and able to complete its purchase under the Contract and therefore specific performance should now be ordered. I turn now to consider that question of specific performance.
Specific Performance
[108] In the present case, Melco in submissions from Mr Beck, relies on authorities that support the position that agreements relating to interests in land are generally enforceable by specific performance.56 A traditional view is that money or damages may not be a complete remedy for a purchaser for whom the land in question has a special value.57
[109] Melco’s position is that, from all the evidence, it is clear the Property is a unique one so far as it is concerned. The Property is the only available neighbouring property in Parliament Street, Lower Hutt for Melco’s proposed expansion required urgently for its business purposes. The Property as I note is directly adjacent to Melco’s head office and yard.
[110] Melco contends therefore this is not a case where damages would be an adequate substitute and that in any event there are various difficulties in quantifying damages in this case.
[111] In response, Mr Hall through Mr Holloway’s submissions contends this Court should exercise its discretion against granting specific performance in terms of s. 43 of the Contract and Commercial Law Act 2017. Mr Holloway makes several points. First, he says that specific performance would result in a “winner take all” outcome whereby Mr Hall would have to accept $1.5 million for the Property which he says Mr Hall could have sold in early 2020 for $1.6 million dollars and reinvested the proceeds. Melco meanwhile he contends would have had the use of its money for over two years and would acquire the Property for less than what is claimed to be its current market value. Next, Mr Holloway maintains this case is really one relating simply to a “loss of chance” which should rule out specific performance. Finally, he suggests for Mr Hall that other discretionary factors such as the conduct of the parties here tell against the grant of specific performance.
56 Adderley v Dixon (1824) 1 Sim & St 607
57 See Burrows Finn and Todd above n (7) at [21.4]
[112] On this aspect, I need to say that without question the arguments advanced for Melco must take precedence. I accept that so far as Melco is concerned, the Property here is an entirely unique one being the only possible neighbouring land likely to be available for its expansion plans. The Property itself is bounded by a busy railway at the rear, an established railway station and commercial development on the southern side, and the roadway on the eastern side. The only possible expansion area for Melco and its existing premises at 1 and 3 Parliament Street is the Property in this proceeding at 5 Parliament Street.
[113] On all the evidence before me I find this is not a case where damages would be appropriate, nor would they provide an adequate substitute for specific performance of the Contract which is properly ordered here. An order for specific performance is to follow.
[114] Melco has succeeded in its claim under its first cause of action here. For completeness however I now turn to address the alternative arguments advanced before me on behalf of Melco. In doing so, given my decision upholding Melco’s claim on its first pleaded cause of action, of necessity I will only address the alternative causes of action briefly.
Second Cause of Action- Misleading and deceptive conduct – breach of s 9 of the FTA
[115] In Melco’s Statement of Claim in this proceeding, its second cause of action pleads a breach by Mr Hall of s.9 of the FTA.
[116]That s. 9 provides:
9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[117] Section 9 is worded widely. The authors of Burrows, Finn and Todd on the Law of Contract in New Zealand say it is “as broad as it could possibly be.”58
58 Todd and Barber, above n 1, at [11.3.1].
[118] The section only applies to misleading or deceptive conduct “in trade”. The term “trade” is defined in s 2 of the Act as follows:
trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services, or to the disposition or acquisition of any interest in land.
[119]And, “business” is defined in the FTA as follows:
business means any undertaking—
(a) that is carried on whether for gain or reward or not; or
(b) in the course of which—
(i)goods or services are acquired or supplied; or
(ii) any interest in land is acquired or disposed of— whether free of charge or not
[120] A party whose usual business is not trade can engage in activities which are “in trade” for the purposes of s 9 — it is the conduct rather than any general trading status of a defendant that must be “in trade”.59 The authorities demonstrate that New Zealand courts typically favour a broad approach to the question of “in trade”.60 I am satisfied here that, despite his denial, Mr Hall was acting “in trade” within the ordinary meaning of that expression. From the evidence, Mr Hall clearly was in the business of leasing commercial and residential property and this involved buying and selling property from time to time.
[121] It is well established that it is not necessary under s 9 to prove an intent to mislead.61 Section 9 focusses on the impact on the recipient rather than any wrongful intention of the party whose conduct is in question. As Cooke P expressed it in Goldsbro v Walker, the test is “the effect on a reasonable person in the shoes of the plaintiff”.62 This was more recently reiterated by the Supreme Court in Red Eagle Corp Ltd v Ellis. As the s.9 provision is so broad and the circumstances in which it
59 At [11.3.2(a)], citing Cridge v Studorp Ltd [2021] NZHC 2077 at [844].
60 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 at [78]; Adventurer Hobson Ltd v Cockery [2020] NZHC 675, [2020] 2 NZLR 544 at [46]–[56].
61 Commerce Commission v New Zealand Nutrionals (2004) Ltd [2016] NZHC 832 at [22], citing Taylor Bros Ltd v Taylors Textile Services (Auckland) Ltd [1988] 2 NZLR 1 (HC); and Bonz Group Pty Ltd v Cooke (1996) 7 TCLR 206 (CA).
62 Goldsbro v Walker [1993] 1 NZLR 394 (CA) at 398.
might be relevant so variable, there is no prescriptive test for liability under the section.63 However, in that case, the Supreme Court put the test in this way:64
The question to be answered in relation to s 9 … is … whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived … It is not necessary under s 9 to prove that the defendant’s conduct actually misled or deceived the particular plaintiff or anyone else. If the conduct objectively has the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9.
[122] Promises about the future cannot generally be categorised as misleading unless the promisor had no intention of carrying them out. According to the authors of Burrows, Finn and Todd Law of Contract in New Zealand, there is older authority that some statements about the future might be deemed misleading if their impact on the recipient has been to mislead them, but there are no recent cases following this line of authority.65
[123] In Premium Real Estate Ltd v Stevens, the Court of Appeal noted too that there had been “some debate” about when an expression of opinion can constitute misleading or deceptive conduct. The Court in that case explained:66
[51] The orthodox or narrow view is that there must be some misrepresentation of a past or current fact to found liability. So, consistently with the common law as to misrepresentation, a person is liable as a result of the expression of an opinion which subsequently proves to be incorrect only where he or she does not honestly hold the opinion at the time it is expressed or (possibly) if there is no reasonable basis for it. That is, an expression of opinion may be said to involve two representations of fact — one that it is honestly held and another that there is a reasonable basis for it. The wider view is that s 9 should be approached in accordance with its terms, untrammelled by concepts such as “misrepresentation” imported from the law of tort or contract. The focus should simply be on asking whether in all the circumstances the impugned conduct was misleading or deceptive.
[124] Silence is actionable under s 9 of the FTA. “Conduct” is defined in the FTA itself as including an omission to act.67 However, simple silence without more is unlikely to be categorised as misleading or deceptive or likely to mislead or deceive.
63 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [26].
64 At [28] (citations omitted).
65 Todd and Barber, above n 1, at [11.3.2(b)].
66 Premium Real Estate Ltd v Stevens [2008] NZCA 82, [2009] 1 NZLR 148.
67 Fair Trading Act, s 2 definition of “conduct”.
As Elias J said in Des Forges v Wright, silence can constitute misleading or deceptive conduct “but whether it does is to be objectively assessed in all the circumstances”.68 As Thomas J has also said, while a defendant’s silence will seldom be an issue of itself, “his or her reticence will be part of the circumstances of the case.”69
[125] Melco broadly contends that, in the course of dealings in the present case relating to the sale of the Property, Mr Hall engaged in conduct that was misleading and deceptive. Specifically, at [27] of Melco’s 12 November 2021 Amended Statement of Claim, it pleads:
[27]The defendant’s conduct was misleading and deceptive in that he:
(a) deliberately and actively avoided allowing access to the plaintiff’s engineer to the property; and
(b) despite advising that he would respond to requests for access and for an extension of time, which the plaintiff relied upon, deliberately did not respond, and instructed his solicitor to deliberately avoid communication with the plaintiff’s solicitor,
thus, enabling him to proport to cancel the ASP and to execute a conditional contrct with another purchaser for a higher sale price of
$1,600,000.
[126] I have addressed Melco’s claim that Mr Hall at least on 8 and 9 January 2020, avoided allowing Melco and its engineer access to the Property in breach of the implied condition in the Contract. That obviously is relevant to [27] (a) above. In relation to [27](b) above, relating to Mr Hall’s promise first, to revert to Melco regarding an extension of the due diligence period and also secondly, with his comments on 8 January 2020 to Ms Isaacs implying that an inspection could be arranged on 9 January 2020 in each case it is clear he either changed his mind or had no intention ever of carrying out his promises. Indeed he deliberately instructed his solicitor, Mr May not to communicate with Melco or its representatives or to let Melco know his true intentions.
[127] Melco says also that Mr Hall decided at some point he did not want to continue with the Contract he had concluded with Melco, and proceeded to withdraw co-
68 Des Forges v Wright [1996] 2 NZLR 758 (HC) at 764.
69 Smythe v Bayleys Real Estate Ltd (1993) 5 TCLR 454 (HC) at 464.
operation with Melco in relation to the due diligence process, if not before, then certainly on 8 and 9 January 2020. Melco suggests that he deliberately concealed from it, that he had no intention of allowing Melco access to the premises from the morning of 8 January 2020 and before the deadline had expired. On the evidence before me there is certainly something in that contention.
[128] Melco contends also that critically, Mr Hall had assured Ms Isaacs that he would get back to her after postponing the 8 January 2020 meeting. That does seem to be the case from all the evidence here. It is presumed that he did so in the hope that Ms Isaacs would believe that he would, yet it seems to be clear that he had no intention of doing so despite by implication suggesting that he would. Instead, the evidence establishes as I have noted that Mr Hall instructed his lawyer, Mr May to ignore any requests from Melco and to cancel the Contract as soon as possible. In cross examination it was put to Mr Hall that he had no intention of reverting back to Ms Isaacs at all on 9 January 2020 and his clear answer was that was not the case and that he “simply forgot”. That seems inconceivable to me however, given especially that Mr Hall’s discussions with her occurred the day before the critical unconditional date under the Contract. As I see the position, an outside observer could also view it as reasonable in these circumstances that Melco and its representatives would assume here that Mr Hall would get back to them on 9 January 2020.
[129] As a result of this conduct on the part of Mr Hall which Melco contends is misleading and deceptive, Melco maintains it has suffered loss. That loss it says is substantial. It involves termination of the Contract for the acquisition of the Property, a property which is unique and of special value to it. For present purposes I accept there is substance in this argument advanced for Melco.
[130] Although relevant remedies under the FTA which are provided for in s. 43 do not provide for the equitable remedy of specific performance, s.43(3) does enable the Court by way of remedy to vary the terms of a contract like the present. Here Melco argues that, in the particular circumstances of this case, an appropriate order under the FTA should be made to extend the time for due diligence under the Contract until 24 January 2020, when this condition was waived by Melco.
[131] In my view that appears not to be an unreasonable request here. I say that despite arguments that Mr Holloway for Mr Hall has endeavoured to advance that, even if Mr Hall’s conduct here has been misleading or deceptive [which is denied] Melco has not actually or reasonably relied on such conduct to change its position here in a situation where Melco knew before the close of business on 9 January 2020 that it wasn’t going to get an extension on the due diligence clause but in any event it had made a decision anyway not to waive that clause 19 condition in the Contract. The real position as I see it and as I have outlined above was significantly more nuanced than this however.
[132] Mr Hall also endeavours to argue that the statements he made which Melco complains about at worst were equivocal and they should not be considered to be misleading and deceptive here. I do not accept this was the case, however.
[133] On all these matters, it is my view that, so far as Melco’s FTA claim against Mr Hall of misleading and deceptive conduct on his part is concerned, the merits generally lie with Melco. Given my conclusion on Melco’s first breach of contract cause of action noted above, I need however make no definitive ruling on this FTA claim.
Estoppel
[134] Melco’s third cause of action in its 12 November 2021 Amended Statement of Claim pleads estoppel.
[135] The doctrine of estoppel developed as an alternative means of holding people to promises in the absence of consideration.70
[136] Modern New Zealand cases emphasise four requirements for a claim of promissory estoppel.71 In Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd, the
70 See generally Todd and Barber, above n 1, at [4.6].
71 See Mitchell v Trustees Executors Ltd [2011] NZCA 519 at [47]; Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44]; Hansard v Hansard [2014] NZCA 562 [5]; and HHR Christchurch NTL Ltd v Crystal Imports Ltd [2015] NZCA 283 at [40]–[63].
Court of Appeal in saying the elements required to establish an estoppel were “not in dispute”, set out the four requirements as applicable in that case as follows:72
(a)a belief or expectation by [A] has been created or encouraged by words or conduct of [B];
(b)to the extent an express representation is relied upon, it is clearly and unequivocally expressed;
(c)[A] reasonably relied to its detriment on the representation; and
(d)it would be unconscionable for [B] to depart from the belief or expectation.
[137] In terms of the first requirement, there must be clear words or conduct by one party which creates a belief or expectation in the other.73
[138] As to the second requirement, if there is a representation it must be clear and unequivocal. The High Court said in Marine Steel Ltd v The ship “Steel Navigator”, “[f]undamentally, promissory estoppel can arise only where the promise made by the party is clear and unequivocal.”74 This is judged objectively “according to the impact that whatever is said may be expected to have on a reasonable representee in the position and with the known characteristics of the actual representee”.75 Sometimes silence, in the light of surrounding circumstances, will be sufficient.76
72 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd at 44, citing Burbery Mortgage Finance & Savings Ltd v Hindsbank Holdings Ltd [1989] 1 NZLR 356 (CA) 361; and Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 (CA) 86. See also Hanover Group Holdings Ltd v AIG Insurance New Zealand Ltd [2013] NZCA 442 at [42] for the same.
73 Marine Steel Ltd v The ship “Steel Navigator” [1992] 1 NZLR 77 (HC) at 83; Burbery Mortgage Finance & Savings Ltd v Hindsbank Holdings Ltd at 361; and see more recently Hickman v Turn and Wave Ltd [2011] NZCA 100, [2011] 3 NZLR 318 at [226].
74 Marine Steel Ltd v The ship “Steel Navigator” at 83.
75 Creative Development Solutions Ltd v Chorus New Zealand Ltd [2021] NZCA 178 at [86], citing Primus Telecommunications Plc v MCI Worldcom International Inc [2004] EWCA Civ 957 at [30].
76 Todd and Barber, above n 1, at [4.6.2]; Infinity Enterprises NZ Ltd v Kinara Trustee Ltd [2020] NZCA 309, [2020] 3 NZLR 626, citing Purewal BS & JK Ltd v Connell Street Ltd [2012] NZCA 42, (2012) 13 NZCPR 108 at [60]-[62]; Official Assignee v Kingston Developments Group Ltd [2016] NZCA 415, (2016) NZCPR 531 at [116]-[120]; and Mega Project Holding Ltd v Orewa Developments Ltd [2020] NZCA 111 at [63].
[139] The third requirement specifies that the party to whom the representation or promise is made must have reasonably relied on it to such an extent that detriment is suffered if the promisor is able to go back on their word.77 Reliance requires that the recipients change their position because of the representation.78 Both the reliance and its reasonableness are considered from the perspective of the representee.79 The representee must have been worse off than they would have been had they not changed their position in reliance upon the representation.80
[140] In Connor v Pukerau Store Ltd, it was held that a purchaser’s intimation to the vendor that he would not insist on a condition in the contract did not create an estoppel when he returned the following day to say he had changed his mind.81 In the court’s opinion, the withdrawal of the representation was sufficiently prompt such that there was no evidence in that case the vendor had relied on it to his detriment.82
[141] It is often said, the basis of the doctrine is unconscionability. As Tipping J outlined in National Westminster Finance NZ Ltd v National Bank of NZ Ltd (Note):83
… the element of unconscionability … runs through all manifestations of estoppel. The broad rationale of estoppel, and this is not a test in itself, is to prevent a party from going back on [their] word (whether express or implied) when it would be unconscionable to do so.
[142] However, while unconscionability underlies estoppel generally and is one of the requirements in the modern formulation of promissory estoppel, it does not supersede the other requirements. The doctrine of estoppel will not be made out if a party fails to meet any of the requirements.84
[143]In Krukziener v Hanover Finance Ltd, the Court of Appeal noted:85
77 Todd and Barber, above n 1, at [4.6.2], citing for example Elkington v Ruruku (2007) 9 NZCPR 97 (HC).
78 Doig v Tower Insurance Ltd [2019] NZCA 107, [2021] 2 NZLR 127 at [44].
79 Creative Development Solutions Ltd v Chorus New Zealand Ltd at [95].
80 At [104].
81 Connor v Pukerau Store Ltd [1981] 1 NZLR 384 (CA).
82 At 386–387.
83 National Westminster Finance NZ Ltd v National Bank of NZ Ltd (Note) [1996] 1 NZLR 548 (CA) at 549, citing Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 (CA); and Gillies v Keogh [1989] 2 NZLR 327 (CA).
84 Todd and Barber, above n 1, at [4.6.2].
85 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [38].
… equity responds to the defendant creating or encouraging an assumption in the plaintiff and its knowledge that the plaintiff will rely on the assumption to its detriment. The plaintiff must have been led to believe that the promise would affect … legal relations …
[144]The authors of Burrows, Finn and Todd on the Law of Contract in New Zealand
suggest that while it is not a separate requirement under the four-part test:86
… the intention that the belief or expectation will be relied upon and the knowledge that it was relied upon and that this reliance was to the detriment of the other party will likely be relevant to the question of whether it would be unconscionable for the party to go back on [their] word.
[145] In terms of a remedy where an equitable estoppel is established, the Court of Appeal in Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd said it was “common ground that the court adopts a flexible approach in determining the appropriate relief”.87 The Court in that case suggested the focus of the inquiry was what was necessary in all the circumstances “to satisfy the equity arising from a departure from the expectation engendered by the relevant assurance, promise or conduct on the part of the defendant.”88 The Court said “[a]n assessment of the nature and extent of the element of unconscionability forms part of the analysis.”89
[146]In the estoppel claim before the Court here, Melco pleads that:
The defendant [Mr Hall] promised the plaintiff [Melco] that he would be in contact prior to the expiry of the Due Diligence Condition timeframe with regard to access and the requested extension.
[147] Melco says this “created a legitimate expectation” that Mr Hall “would not exercise his right to terminate the [ Contract] for non-fulfilment of the Due Diligence Condition without first contacting the plaintiff [Melco] and allowing the plaintiff an opportunity to waive or confirm the condition”.
[148]And, Melco contends finally by way of reliance that
In reliance on the defendant’s [Mr Hall’s] promises the plaintiff [Melco] did not waive or confirm the Due Diligence Condition by the deadline…….
86 Todd and Barber, above n 1, at [4.6.2].
87 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [75].
88 At [73].
89 At [73].
[149] Essentially this estoppel claim Melco says relates to the consequences of Mr Hall’s conduct where he said he would act in a particular way following assurances that he had provided to Melco. In short, it is Melco’s position that, had Mr Hall told them before 5.00 pm on the last day of the due diligence period, that he would:
(a)not grant an extension of time; and
(b)not arrange another time for access to the building,
then Melco would have at least been able to consider its options to waive the due diligence condition and confirm the Contract or to act otherwise.
[150] Melco contends this needs to be considered in terms of the duty Mr Hall had under the general law of promissory estoppel. Melco says that Mr Hall could not go back on his earlier undertaking to revert to Melco in particular regarding the extension of time for due diligence.
[151] On the evidence, clearly on 26 December 2019, Mr Hall told Melco’s agent that he did not “see any issues” with the request to extend the time for due diligence but that he would discuss any changes and confirm after speaking to his solicitor, Mr May in the New Year. Around 8 January 2020, Mr Hall also made an arrangement to allow inspection of the Property at 12.00 noon that day. On this same day he confirmed with Ms Isaacs he would be in contact regarding the extension once he had spoken to his solicitor on 9 January 2020.
[152] As I have noted, that 12.00 noon appointment was “postponed” immediately after Mr Hall received the call from Mr Chambers indicating an interest in purchasing the Property at a higher figure. Once again, it is clearly arguable that Mr Hall gave an assurance to Ms Isaacs of Melco that he would get back to her or Melco when he said specifically “I will as before be in contact tomorrow”.
[153] Melco’s position is there is a pattern here of clear and consistent assurances that Mr Hall would revert to Melco regarding decisions on both the extension of time request to satisfy the due diligence condition, and for arranging Property access for an
expert engineering inspection. Mr Hall however did not get back to Melco as he had promised. Instead from all the evidence it is clear he instructed his solicitor not to make contact with Melco or its representatives until the time for fulfilment of the condition had lapsed and then to simply cancel the Contract. It seems barely questionable here that Mr Hall had deliberately concealed the fact he had changed his mind at this late stage about his willingness to sell to Melco. It can only be concluded that this was in an attempt by him to secure the higher value offer he had subsequently received from Mr Chambers. In his evidence before me, Mr Hall claimed he “forgot” to get back to Ms Isaacs after postponing the 8 January 2020 meeting. In my view this likely shows he considered he had some obligation to get back to her. All this provides a reasonably strong argument, as I see it, that following earlier assurances Mr Hall had given, the situation was one where arguably he had a duty to speak, which he ignored.
[154] Mr Hall arguably in the circumstances he had crafted here, was not able to remain silent in the hope that Melco would simply allow time under the due diligence clause to lapse. By his assurances, in my view, Mr Hall had invited Melco to place confidence in him that he would revert to them to give his decisions regarding the extension sought under the Contract and also to arrange an engineer’s inspection. As to the latter matter, as I have noted, Mr Hall was the only one who could provide access to the relevant part of the locked Property and he must have been aware that his postponement of the planned 8 January 2020 inspection meeting meant that Melco were fully relying on him to get back to them with an alternative inspection time. That did not occur, however.
[155] It seems to be accepted that Melco knew full well that Mr Hall had not unequivocally promised to extend time on the due diligence condition. That, it appears is why Melco and its agents persisted in raising the issue with him. Mr Hall, I accept however, had made an explicit promise that he would get back to them and I accept Melco’s contention that Mr Hall did not act honestly and reasonably in deliberately refusing to revert as promised.
[156] I am satisfied too that Melco relied on the promises Mr Hall had made and the assurances he had given that Melco expected he would abide by.
[157] A reasonable argument follows, as I see it, that Mr Hall in this situation should not be permitted to renege on these assurances. Whilst it is true that Mr Hall was not at any time obliged to extend the time for due diligence, from his 26 December 2019 comments it appears he expressed a reasonably positive view that, subject to his lawyer’s views, he was disposed to do so. A possible argument follows that it was not open to him to change his mind about this, without first informing Melco as he was undertaking to do.
[158] Mr Beck for Melco argues this case presents just the sort of situation where equity will intervene to prevent a party from acting in an unconscionable way. He maintains Mr Hall has acted unconscionably here such that he was required to be estoppel from cancelling the Contract without first informing Melco that he would not be extending time.
[159]That argument in my view however is not without certain problems here.
[160] Mr Hall’s position is that he made no clear and unequivocal promise that he would be in contact prior to the due diligence deadline. If anything, he says it was Melco’s agent Mr Dee who created that expectation. Mr Hall says too that at no time did he give assurances that an extension would be granted. He notes too that Melco in any event always had a specific option to waive cl.19 before the deadline, an option which, it chose not to exercise. Mr Hall also argues that, in the evidence before the Court, Mr Ellison of Melco emailed engineers, Silvester Clark on 9 January 2020 to say, “we are unable to obtain an extension as initially hoped”. Mr Holloway contends, this must indicate at least one person from Melco had some awareness that no extension of time was to be given.
[161] And, Mr Hall’s overall position is that this estoppel argument also must fail because the real reason Melco chose not to confirm the Contract did not relate to anything he had done. He argues it was Melco’s own conduct and not his, which was relevant here, particularly so far as the estoppel argument is concerned.
[162] In light of my decision on Melco’s first breach of contract cause of action, which as I note above has succeeded, I need make no definitive finding on this
strongly-disputed estoppel cause of action. Although I am satisfied in the circumstances here that there is something in Melco’s argument that Mr Hall had a duty to speak on certain important matters I note above, especially in light of his promise to do so, in the estoppel context, and to some extent he went back on this, that estoppel claim otherwise is not without some difficulty. I need say nothing more on that aspect, however.
Damages Claim
[163] In Melco’s Amended Statement of Claim, in addition to specific performance, by way of relief Melco seeks “damages in lieu of or in addition to specific performance” and “interest on such damages under the Interest on Money Claims Act 2016”.
[164] So far as this damages claim is concerned, there is also a suggestion from Mr Holloway for Mr Hall that Melco had indicated these damages were “to be particularised prior to trial.” It does seem from the pleadings and the way this trial unfolded however that this has not occurred, given that the principal remedy sought here by Melco is one of specific performance. As I have noted above, specific performance is to be ordered. In Melco’s pleadings here, no specific formal inquiry into damages appears to have been sought, although before me as I note, Mr Beck did refer briefly to s.13 of the Senior Courts Act 2016 conferring on the Court the power to award damages in addition to or in substitution for specific performance. And, in his final submissions to me, perhaps in the nature of an after-thought, Mr Beck did indicate that Melco does seek here a separate inquiry into damages in addition to its specific performance claim.
[165] In my view regarding the timing of this request, no real opportunity for Mr Hall or Mr Holloway however to comment on this damages question was otherwise provided. In addition, in its present claim, Melco has not particularised in any proper way damages it has suffered nor has any real evidence of any kind relating to damages been presented at the hearing.
[166] In these circumstances and given first, that Melco’s principal remedy largely sought before me was one for specific performance of the Contract, and secondly, that Melco’s claim for damages here has not been properly made out, it must be dismissed.
Result
[167] For all the reasons I have outlined above, Melco’s claim under its first cause of action for breach of contract on the part of Mr Hall, succeeds. An order for specific performance of the Contract follows.
[168] Melco’s further claim for damages in lieu of or in addition to specific performance, as I note above, is dismissed.
Orders
[169] An order for specific performance of the Contract [at its stated price of $1.5 million plus GST [if any] with a settlement date to be 20 working days from the date of this judgment [unless otherwise agreed between the parties hereto] and otherwise in the [stated conditions in the Contract] is now made.
Costs
[170] As to costs, before me counsel submitted these should be reserved for consideration once this substantive matter has been determined.
[171]Costs are therefore reserved.
[172] My preliminary view on costs however is that Melco as the successful party here should be entitled to costs from Mr Hall. Counsel and the parties are encouraged to liaise with a view to settling the issue of costs by agreement between them. In the event this is not achieved, then counsel may file memoranda on costs (sequentially)- with these Memoranda to be no more than five pages each- and these are to be referred to me. I will then decide the issue of costs based upon the memoranda filed and all other material before the Court, unless either party indicates they wish to be heard in person further on the costs issue.
Gendall J
Solicitors: Wotton + Kearney Limited t/a Wotton + Kearney , Wellington Andrew Beck Barrister, South Wairarapa
Gibson Sheat, Wellington
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