Miharo Farm Limited v Allen

[2014] NZHC 2623

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-001926 [2014] NZHC 2623

UNDER	the Declaratory Judgments Act 1908
BETWEEN	MIHARO FARM LIMITED Plaintiff
AND	WAYNE ALLEN Defendant

Hearing:	23 October 2014
Appearances:	R O Parmenter for the Plaintiff N R Campbell QC for the Defendant
Judgment:	24 October 2014

[RESERVED] JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie on 24 October 2014 at 3.00 pm

Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

MIHARO FARM LIMITED v ALLEN [2014] NZHC 2623 [24 October 2014]

Introduction

[1]      The plaintiff, Miharo Farm Limited (“Miharo”) seeks by way of summary judgment a declaration that it has the right to cancel an agreement for sale and purchase  that  it  entered  into  with  the  defendant,  Mr Allen,  on  18  March  2013. Miharo claims that the right of cancellation derives from a settlement notice that it served on Mr Allen on 18 June 2014.

Pleadings

[2]      The statement of claim sought a declaration pursuant to s 3 of the Declaratory

Judgments Act 1908.

[3]      At the start of the hearing, I queried with counsel whether or not that section conferred jurisdiction on the Court to make the declaration sought.  I observed that there did not, on the papers, appear to be any issue between the parties in relation to the construction or validity of the agreement for sale and purchase, or a subsequent variation to that agreement which was entered into on 2 August 2014.  Rather, the dispute between the parties seemed to turn on questions of fact.

[4]      Mr Parmenter, appearing on behalf of Miharo, accepted that this was the case, and advised that he had made an error in drafting the statement of claim.  He said that the statement of claim should have referred to s 2 of the Declaratory Judgments Act.  He sought leave to amend.  Mr Campbell QC, appearing on behalf of Mr Allen, did not oppose the amendment, and accepted that the Court has jurisdiction under s 2 to make the declaration sought.

[5]      Accordingly, and by consent, I granted leave to Miharo to alter the statement of claim, by deleting the reference to s 3 of the Declaratory Judgments Act 1908 in [15] and substituting therefore a reference to s 2 of the Act.

The Agreement for Sale and Purchase/the Variation

[6]      Miharo is a farming company.  It owns approximately 81 hectares of land in

Whitford.

[7]      On 18 March 2013, Miharo entered into an agreement for sale and purchase with Mr Allen, whereby it agreed to sell him part of the land.  It wished to retain the house, and an area of land surrounding the house.   To this end, the agreement recorded that the land would be subdivided.  Miharo was to retain the home block – lot 1 – and Mr Allen was to purchase the balance of the land – lot 2 comprising some

78  hectares.    A scheme  plan  of  the  proposed  subdivision  was  attached  to  the agreement.  The agreement provided in cl 20.1 that the subdivision would generally be in accordance with that scheme plan of subdivision.   The purchase price was

$7.5 million, and a deposit of 10 percent was payable once due diligence had been completed.  The settlement date was 16 January 2014, or five working days after the issue of title.   There was a due diligence clause which had to be fulfilled by the fortieth working day after the date of execution of the agreement.

[8]      Miharo already had resource consent for the proposed subdivision depicted in the scheme plan of subdivision attached to the agreement for sale and purchase.

[9]      The agreement was subsequently varied in writing on 2 August 2013.  The variation reduced the deposit, altered the settlement date, and inserted a new cl 23 into the agreement.  Clause 23 read as follows:

The vendor shall consult with the purchaser regarding the change to the boundaries  for  the  vendor’s  2  lot  subdivision  from  those  shown  in  the scheme plan attached to the agreement to those shown on the plan attached to this variation.

Notably, the variation did not delete cl 20.1 to the agreement.

[10]     The  plan  attached  to  the  variation  was  an  alternative  scheme  plan  of subdivision which had been obtained by Mr Allen from a firm known as Candor3. At the hearing, it was referred to as plan “WA4”.  I adopt that description.

[11]     Plan WA4 showed the eastern boundary of lot 1 being retained by Miharo as being  moved  to  the  west,  to  allow  more  land  between  the  adjoining  road (Brownhill Road) and the eastern boundary of lot 1.  A right of way serving lot 1 over the land being purchased by Mr Allen was moved so that it was contiguous with lot  1’s  eastern boundary.   To  compensate for  the loss  of land arising  from  the

relocation of its eastern boundary, the western and northern boundaries of lot 1 were also adjusted.

Negotiations between the Parties

[12]     The  variation  was  prepared  by  Mr Allen’s  solicitors.    It  was  signed  by Mr Allen and forwarded to Miharo’s solicitors on 26 July 2013.  It was only signed by Miharo on 2 August 2013 and it was then forwarded by its solicitors back to Mr Allen’s solicitors by facsimile sent at 1:12 pm on that day.

[13]     In the intervening period, there were a number of discussions between a Mr Robertson,   who   was   a   director   of   Miharo,   and   Mr Allen.      Relevantly, Mr Robertson sent an email to Mr Allen on 28 July 2013, asking if he could be more specific about the boundaries shown on plan WA4.  Mr Allen replied, agreeing that the boundaries needed more definition.  At the same time, Mr Allen suggested that the variation should be “locked down conditional on 2 weeks agreement as to boundary alignment”.   Mr Allen indicated that he would then formally engage an engineer to do the necessary calculations to ensure that any new road would meet Council requirements.   Mr Robertson said that did not agree to this request.   He wanted certainty “on the deal” before Miharo would sign the variation and a meeting was set up to this end.

[14]     At this point, the parties’ respective versions of events diverge:

(a)      According to Mr Robertson, the parties and some of their advisors met at a café on 1 August 2013.   Mr Robertson says that he took a copy of plan WA4 plan to the meeting.   He said that the plan was discussed, and that all agreed that the boundaries shown on that plan were appropriate.   He said that the parties parted on the basis that Candor3 would translate the agreement into a further scheme plan, which Miharo would then give to its surveyors, Harrison Grierson.

(b)Mr Allen accepted that he showed plan WA4 to Mr Robertson in the period leading up to the variation, but that Mr Robertson was not

happy with the plan.  Rather, he said that Mr Robertson agreed that it could be a basis for further discussion.

[15]     Before Candor3 could prepare any fresh scheme plan of subdivision, Miharo signed the variation agreeing to consult.  As I have noted, it was returned, signed by Miharo, to Mr Allen’s solicitors, at 1.12 pm on 2 August 2013.

[16]     Shortly  thereafter,  Candor3  produced  a  new  scheme  plan  (the  “Candor3 plan”).  Mr Allen forwarded this plan to Mr Robertson at 1.52 pm on 2 August 2013, and asked him whether he was happy with it.

[17]     Again, the parties’ version of events diverge:

(a)      Mr Robertson said that he accepted that the Candor3 plan was a more accurate representation of the boundaries, and that it followed existing fence lines to provide lot 1 with access.  He said that he signed a copy of the plan and sent it to Miharo’s solicitors.  He said that he also rang Mr Allen and told him that the Candor3 plan was “ok” and that he would send it to Harrison Grierson to use in applying for a fresh resource consent.  He said that Mr Allen was happy with this.

(b)Mr Allen said that after the variation was signed, he obtained further geotechnical advice to the effect that a road to the east of lot 1 (as shown in plan WA4 and in the Candor3 plan) was too expensive to build.  He said that he decided that, as purchaser, he would prefer to take access to the west of lot 1, and “live with” the scheme plan that was initially proposed by Miharo and which was attached to the agreement for sale and purchase.  He said that he rang Mr Robertson and told him this, and that in response, Mr Robertson said that he preferred the Candor3 plan.   Mr Allen said that Mr Robertson gave two reasons for this; first, the Council’s requirements for development contributions had changed and that Miharo would have to pay a lower contribution if it obtained a new resource consent for the Candor3

plan, and secondly, under the Candor3 plan, there would be more useable land for Miharo.

It is not clear from the affidavits when this discussion is said to have taken place.

[18]     On 6 August 2013, Mr Allen’s solicitors confirmed that the due diligence

clause in the initial agreement for sale and purchase was satisfied.

[19]     Mr Allen said that he called Mr Robertson about matters again, and that he was told that Miharo had already applied for a further resource consent.  He asked Mr Robertson  for a copy of the resource  consent application,  but  Mr Robertson refused to provide it.

[20]     It is not clear from the affidavits when this further discussion occurred.   It seems that that application for resource consent was dated 4 November 2013, but it may not have been lodged with the Council at that time.

[21]     The deposit was paid on 17 January 2014.

[22]     Resource  consent  for  the  subdivision  detailed  in  the  Candor3  plan  was granted on 25 January 2014.  A copy was sent to Mr Allen’s solicitors on 3 February

2014.

[23]     Mr Allen said that he was concerned that Mr Robertson had not listened to him about the changes he wanted to the boundaries of lot 1.  He said that he met with Mr Robertson on 14 February 2014 and expressed his concerns.  He further said that on 14 April 2014, he sent an email to Mr Robertson expressing various concerns, including his concerns in relation to the boundaries of lot 1.  He deposed that Miharo ignored his concerns.  Rather, it applied for new titles.  He noted that his solicitors protested, and invited Miharo to withdraw that application.

[24]     New titles for lots 1 and 2 issued on 23 May 2014.  Miharo then asserted that settlement was due on 16 June 2014.   It called upon Mr Allen to settle, but he declined to do so.  A settlement notice was issued on 18 June 2014.  It required that settlement take place on or before 4 July 2014.  By oral agreement, the parties agreed

that the date of the settlement notice would be extended until 11 July 2014.  Mr Allen did not settle on that date.

[25]     Miharo has not, as yet, cancelled the agreement.  It wishes to do so, and to forfeit the deposit paid.  Mr Allen for his part is asserting that Miharo cannot cancel or forfeit, because it failed to consult over the subdivision, and because no agreement was reached in relation to the location of the boundaries to lot 1.

Submissions

[26]     Mr Parmenter  asserted  that  there was  consultation,  that  it  resulted  in  an agreement that the boundaries should be changed from those shown in the plan attached to the sale and purchase agreement, to those shown in the plan WA4 which was attached to the variation agreement, and which were finally recorded in the Candor3 plan.  He said that the subdivision which has occurred is “tolerably faithful” to plan WA4.  He argued that the agreement became unconditional in all respects on

6 January 2014 when Mr Allen’s solicitor confirmed that the due diligence clause

was satisfied, that Mr Allen was obligated to settle, and that he has failed to do so.

[27]     Mr Campbell submitted that there was no or insufficient consultation, that there has been no further agreement, and that the boundaries could not be unilaterally changed by Miharo from those shown in the plan attached to the agreement for sale and purchase to those shown either on plan WA4 or on the Candor3 plan.   He submitted  that  there  is  genuine  dispute  as  to  whether  or  not  Miharo  consulted properly  with  Mr Allen  over  the  changes,  and  consequently  as  to  whether  any agreement was reached to change the boundaries from those shown on the initial plan of subdivision attached to the agreement for sale and purchase.

Analysis

[28]     The proceeding before the Court was an application for summary judgment. It is trite law that, under r 12.2 of the High Court Rules, the onus is on the plaintiff in such cases to satisfy the Court that the defendant has no defence to the claim.1 The

summary judgment  procedure  is  not  appropriate  where  the  dispute  between  the

1      Pemberton v Chapel [1987] 1 NZLR 1.

parties involves matters of fact, and the Court will refrain from resolving genuine conflicts in the evidence, or assessing the credibility of parties’ statements in their affidavits filed in such cases.2

[29]     Miharo has failed to meet the onus which lay on it in this case.

[30]     First, and even accepting Mr Robertson’s version of events, any agreement which was reached in relation to the W4A plan occurred before the variation was entered into.   In its terms, it is arguable that such discussions as took place on

1 August 2013 cannot have been consultation in accordance with the variation.

[31]     Secondly,  there  is  a  dispute  between  Mr Robertson  and  Mr Allen  on  the affidavits as to whether or not any agreement was reached to alter the boundaries of lot 1 to those shown on either plan WA4 or the Candor3 plan.  Mr Robertson says he agreed with both.  Mr Allen denies that.  Mr Robertson in his affidavit in reply does not deny the various statements made by Mr Allen.  The dispute cannot be said to be baseless, equivocal, lacking in precision, or inconsistent with contemporaneous documentation.   Even taking a robust view of the application, the dispute of fact cannot be dismissed as simply raising a hypothetical possibility.    It is a bona fide dispute that cannot be resolved in the context of a summary judgment application.

[32]     Thirdly, I do not agree with Mr Parmenter’s submission that the advice which Mr Allen’s solicitors gave on 6 August 2013 that the due diligence clause had been satisfied is definitive.

[33]     The agreement for sale and purchase recorded that it was conditional upon Mr Allen carrying out a comprehensive due diligence investigation of the property, including in relation to legal and title issues, and the suitability of the property for his intended use.  The date for satisfaction of that condition was the fortieth working day after the date of signing the agreement by both parties.  If the condition was not

satisfied, then the agreement could be cancelled by Miharo.

2      See Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC) at [14]; Pemberton v

Chapel; S H Lock (NZ) Ltd v Oremland HC Auckland, CP641/86, 19 August 1986.

[34]     On  2  August  2013,  Mr Allen  and  Miharo  had  entered  into  a  variation, pursuant to which the parties had added a clause to the agreement agreeing to consult in relation to the boundaries of lot 1.  The added clause was not simply an agreement to agree.  There was an enforcement provision independent of the agreement of the parties which could be resorted to and which would have enabled the sale and purchase agreement to be completed.  The relevant provision was cl 20.1, which the variation had not deleted.  If the parties could not reach agreement in relation to a change to the boundaries of lot 1 following consultation, the subdivision required by the agreement for sale and purchase fell to be carried out generally in accordance with the plan of subdivision which was annexed to that agreement.   Mr Allen, by agreeing that the due diligence clause had been satisfied, did not waive the consultation required.

[35]     I do not consider that there is anything inconsistent in Mr Allen agreeing that the due diligence clause had been satisfied, while at the same time, requiring Miharo to consult in relation to the boundaries of lot 1.

[36]     In  my  view,  there  is  a  bona  fide  factual  dispute  as  to  whether  or  not agreement was reached in relation to the boundaries of lot 1, and whether or not Miharo did consult, as required by the variation dated 2 August 2013.

[37]     Accordingly, the application for summary judgment is declined.

[38]     In accordance with the Court’s usual practice, costs are reserved until the

matter is finally determined at trial.

[39]     Counsel were confident that they can agree on an appropriate timetable.  The matter is to be called in the Duty Judge list at 10.00 am on Thursday, 6 November

2014.

Wylie J