Millbrook Country Club Ltd v S F M Investments Ltd HC Auckland CIV 2009-404-002850
[2009] NZHC 2502
•10 December 2009
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2009-404-002850
BETWEEN MILLBROOK COUNTRY CLUB
LIMITED Plaintiff
ANDS F M INVESTMENTS LIMITED First Defendant
ANDGARRY ALBERT MUIR Second Defendant
Hearing: 16 November 2009
Appearances: C Heaton for Plaintiff
N Gedye for Defendant
Judgment: 10 December 2009 at 9 am
JUDGMENT OF ASSOCIATE JUDGE ROBINSON
This judgment was delivered by me on 10 December 2009 at 9 am,
Pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date…….
Solicitors/Counsel: Morrison Kent, PO Box 10-035, Wellington
Muir Law, Auckland
N Gedye, Auckland
MILLBROOK COUNTRY CLUB LIMITED V S F M INVESTMENTS LIMITED AND ANOR HC AK CIV
2009-404-002850 10 December 2009
[1] In November 2006 Millbrook Country Club Limited (Millbrook) invited
tenders for the purchase of property it intended to develop adjacent to its golf course land at Malaghan Road, Arrowtown. Initially marketing was confined to existing Millbrook Country Club members. The second defendant Dr G A Muir was at that time and still is a member of the Millbrook Country Club. Dr Muir is the sole director of S F M Investments Ltd, the first defendant. S F M Investments Ltd has owned property at Millbrook.
[2] On 21 December 2006 Millbrook accepted the tender from S F M Investments Ltd to purchase lot 305 of the development for $1.4 million with payment of an initial deposit of $25,000. In terms of the agreement Millbrook was to construct a development on the property with reasonable speed in a good and workmanlike manner and in accordance with the plans attached to the agreement. Millbrook was also to proceed with a subdivision. Settlement was to take place following completion of the development and subdivision which it was anticipated would be by 30 December 2008.
[3] The agreement was executed by Dr Muir as sole director of S F M Investments Ltd. The agreement contained the following provisions:
4. Agreement Conditional
4.1 This agreement is conditional upon:
(a) The Vendor notifying the Purchaser in writing on or before
28 September 2007 that the Vendor has obtained all necessary Approvals to carry out the Development on terms and conditions acceptable to the Vendor to enable the
Vendor to develop and subdivide the Land and carry out the
Vendor’s Works in the manner required by the Vendor.
(b) The Vendor being satisfied in its sole discretion on or before
28 September 2007 that the Development and Vendor’s
Works are a viable project.
(c) Title issuing for the property by 30 December 2008,
provided that where the Vendor is delayed in obtaining title by administrative, weather or geological condition delays
beyond the reasonable control of the Vendor the
aforementioned date shall be extended by the period or
periods of such delay and the Vendor’s assessment of the period of delay shall be deemed conclusive.
4.2(a) The Purchaser acknowledges that all property owners at Millbrook must hold membership of the Club in order to use the facilities and exercise the privileges made available by the Club to members of Millbrook.
(b) This agreement is further subject to and conditional upon the approval of the Purchaser as a member of the Club by the Board of Governors of the Club by the date set out in clause
4.2(e). Following execution of this agreement, the Purchaser will apply for membership of the Club, in accordance with the Rules. The Vendor will procure that a copy of the Rules
is given to the Purchaser within 2 working days of the date of this agreement. The Purchaser acknowledges that
membership of the Club is provided on a non-equity and non-participatory basis, and in accordance with the Rules in
force from time to time.
(c) Following approval of the Purchaser as a member of the
Club, the Purchaser undertakes to pay the manager and proprietor of the Club, the non-refundable membership
application fee in the sum of $20,000 plus GST promptly
after receipt of an invoice from the Club.
(d) If the Purchaser is an existing member of the Club, then the condition in clause 4.2(b) is deemed to be satisfied on the date of this agreement. If the Purchaser is an existing member who is bound by the current Rules, then no further payment by the Purchaser is required in respect of membership of the Club.
If the Purchaser is a member who had previously paid a refundable deposit under the old membership scheme, the parties agree that the deposit paid will be refunded and the Purchaser will apply such amount in full satisfaction of the non-refundable application fee. If the refundable deposit exceeds $20,000 plus GST, the Purchaser authorises Millbrook to apply the sum of $20,000 plus GST towards the application fee and refund the difference. In entering into and executing this agreement the Purchaser acknowledges that the Purchaser is bound by the current Rules.
(e) The time and date for the Purchaser’s approval as a member
is 5.00 pm on the tenth (10th) working day following the date of this agreement.
4.3 The conditions referred to in special conditions 4.1(a) and 4.1(b)
have been inserted for the sole benefit of the Vendor, and the conditions referred to in special conditions 4.1(c) and 4.2(b) have been inserted for the benefit of both parties.
13 Settlement Date
13.1 The provisions of general condition 3.12 of this agreement shall not apply. The Settlement date means the fifth working day after the Purchaser (or the Purchaser’s solicitor) is notified of the date on which a search copy as defined in section 172A of the Land Transfer Act 1952 of the certificate of title for the Property has issued.
Operation of conditions
If this agreement expressed to be subject either to the above or to any condition(s) then in relation to each such 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
inserted must 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 be fixed date shall be 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 condition 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 return of the deposit and any other moneys paid by the purchaser and neither party shall have any right or claim against the other.
(6) At any time before this agreement is avoided the purchaser may
waive any financial condition and either party may waive any condition inserted for the sole benefit of that party. Any waiver must be by notice.
[4] On 5 August 2007 Millbrook wrote to all the purchasers of units in the proposed development asking for an extension of time for the obtaining of title and settlement from 30 December 2008 to 31 May 2009. The defendants were amongst the purchasers who refused to consent to an extension of time. Consequently, on 27
August 2007 Millbrook withdrew its request for an extension of time and confirmed conditions 4(a) and 4(b) had been satisfied. As a result the balance of the deposit being 10 % of the purchase price less $25,000 already paid by S F M Investments Ltd became payable. S F M Investments Ltd duly paid the balance of the deposit.
[5] According to Millbrook delays caused by the weather and unanticipated difficulties in excavation together with administrative delays in receiving consent from the Otago regional council delayed the completion of the certificate required by
s 223 of the Resource Management Act 1991 and approval of the survey plan. The
s 223 certificate was issued on 9 October 2008 and the certificate required by s 224(c) Resource Management Act 1991 was issued on 12 November 2008.
[6] On 8 December 2008 Millbrook wrote to the solicitors for S F M Investments
Ltd as follows:
We refer to previous correspondence.
We write to advise that our client’s subdivision known as “land to the west”
is nearing completion and that it expects to be in a position to lodge for new titles shortly.
We further write to inform you that there has been significant delay in obtaining title due to administrative and other factors outside the control of our client. Therefore we give notice on behalf of our client pursuant to clause 4.1(c) of the agreement that the date specified therein is extended to
31 May 2009.
Our client informs us that a number of purchasers have expressed concern at the possibility of having to settle during the Christmas/new year break. We are instructed by our client to advise that it will not under any circumstances require settlement to be completed prior to 12 January 2009.
[7] The solicitors for S F M Investments Ltd sought further information as to the reasons for the delay. That information was supplied by the solicitors for Millbrook
in their letter of 23 December 2008. The solicitors for S F M Investments Ltd immediately responded stating that their client would not agree to an extension of time. As title was not available by 24 December 2008 the solicitors for S F M Investments Ltd correctly concluded that such title would not be available by
30 December 2008 and consequently advised Millbrook’s solicitors that S F M Investments Ltd was cancelling the contract.
[8] Millbrook now brings these proceedings for orders requiring the first and second defendants to specifically perform their obligations under the agreement or in the alternative if for any reason specific performance cannot be granted an inquiry into damages together with interest and costs. As Millbrook believes the defendants have no defence Millbrook seeks relief by way of summary judgment.
[9] The defendants oppose the application for summary judgment claiming to have a defence based on the following:
a) That because Millbrook did not arrange for title to be issued for the property being purchased by 30 December 2008 as required by clause
4(1)(c) of the agreement S F M Investments Ltd was justified in cancelling the agreement.
b)That as S F M Investments Ltd is a limited liability company it is not qualified to become a member of the Millbrook Country Club and consequently the condition contained in clause 4.2(a) could not be satisfied.
c) That as S F M Investments Ltd has insufficient funds it cannot settle the purchase of the property and consequently the Court should not order specific performance.
d)That there is no contract between Millbrook and Dr Muir; the contract being between Millbrook and S F M Investments Ltd.
Defence based on delay in issuing title
[10] Although the computer title states it was issued on 17 December 2008 the title in fact was not available at that date nor was it available by 30 December 2008. The copy of the title produced at the hearing of these proceedings records it was printed on 9 February 2009 at 2.19 pm. Millbrook maintains that pursuant to paragraph 13 of the agreement settlement of the sale was to be on the 5th working day after S F M Investments Ltd or its solicitor is notified of the date on which a search copy of the title as defined by s 172(a) Land Transfer Act 1952 is issued. According to Millbrook that date was 9 February 2009. By letter delivered to S F M Investments Ltd dated 9 February 2009 Millbrook advised the search copy of the title was available and called for settlement on 16 February 2009.
[11] The process by which titles to land are issued by Landonline pursuant to the
Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act
2002 is described in some detail in Sicilian Estates Ltd v Deavoll (2007) 8 NZCPR,
561. In summary the process involves the survey plan from which titles are to be issued being allocated a unique identifier number on lodgement with the date of lodgement and assignment of the unique identifier number being recorded as the date
of issue of the title pursuant to s 29 and 30 Land Transfer (Computer Registers and
Electronic Lodgment) Amendment Act 2002. The new title however does not exist
on Landonline for a purchaser until the District Land Registrar makes the decision and registers it. The process in issuing new titles is described at paragraph 12 of the Sicilian Estates Ltd’s case as follows:
Thereafter, it is placed in a queue until LINZ’s property rights analyst (PRA) pulls the dealing into his computer, checks the documents and the plan to ensure that all statutory requirements are being completed to deposit the plan, and the documents are legally correct. The PRA then creates new titles, cancels the old titles, and authorises the dealing. Then, the computer runs the automatic validation rules over the dealing and if nothing is wrong, the PRA decides whether to register, requisition, or reject the dealing. As the computer validation rules are not comprehensive enough to deal with all the variations in new title dealings, all new title dealings go to the quality control coordinator (QCC) for a further check. After the QCC has checked and agreed that the dealing is correct, the QCC validates the dealing by pressing the validation key, at which point the plan is deposited, the documents are registered, and the new titles are issued in the computer.
[12] It follows that the title is not available for search by a purchaser until it has been validated by pressing the validation key which will be some days after the assignment of a date of issue and unique identifier number.
[13] In the present case the survey plan was lodged with LINZ at the latest on 17
December 2008, the title for lot 305, DP 404025 being the title to the property being purchased by S F M Investments Ltd was assigned a unique identifier number
413745 and the date of issue recorded as 17 December 2008. It was not until 9
February 2009 that the process was validated and the system produced the title recording the title was issued on 17 December 2008.
[14] Counsel for Millbrook contends that although the title was not available for search until 9 February 2009 it was in fact issued on 17 December 2008.
Consequently, the title had been issued by 30 December 2008 and condition 4.1(c) has been satisfied. In this respect counsel relies on the decision of Sicilian Estates Ltd and s 30(1) Land Transfer (Computer Registers and Electronic Lodgments) Amendment Act 2002 which provides:
The registration of an instrument or other matter under this Act is effected when a unique identifier for the instrument or matter is entered in the relevant computer register.
[15] It is also pointed out by counsel for Millbrook that had the parties required the title to be physically available for search by 30 December 2008 then clause 4.1(a) should have contained wording similar to the condition contained in clause 13.1 namely that a search copy of the title as defined by s 172(A) Land Transfer Act 1952 is to be available by that date.
[16] In reply counsel for the defendants points out that in fact the title did not exist prior to 30 December 2008. It is emphasised that from the defendants point of view issuing of the title means the ability to have the title transferred to the defendant and
to settle the purchase. According to the evidence of Dr Muir:
At the time of signing the Agreement the First Defendant wanted to have title as soon as possible so it could start building or explore other options in relation to the property. Until title was produced the First Defendant had in effect just made an unsecured loan of $140,000 the Plaintiff with no right to demand repayment or any ability to sell the underlying asset because of “no dealing” restrictions that the Plaintiff had insisted on. I refer to special condition 12.1, clause 12.2 of the Agreement.
[17] It is also pointed out on behalf of the defendants that Millbrook has not adduced any evidence as to when the deposited plan and supporting documents were lodged and when the LINZ computer assigned a unique identifier.
[18] Following the hearing pursuant to leave granted for that purpose counsel for the defendant has filed and served supplementary submissions. In those submissions counsel for the defendant claims that a review of the statutory provisions demonstrates there is no power to treat or deem the date of issue of title as the lodgement date and that any LINZ practice of doing so is ultra vires. He emphasises there is no specific provision in the Land Transfer Act 1952 or Land Transfer (Computer Registers and Electronic Lodgement) Amended Act 2002 which deems
registration to be retrospectively operative or which gives LINZ the authority to represent that registration occurred on a date other than when it did occur.
[19] It is pointed out on behalf of the defendants that a search copy of the computer register for Lot 105, being the lot which is the subject of the agreement for sale and purchase in this case, is dated 9 February 2009. The search copy also records a unique identifier was issued on 17 December 2008 in the instrument lodged for registration resulting in computer production of a freehold title.
[20] It is further claimed that the effect of s 34 Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act 2002 is that the search copy is evidence the plaintiffs have title from the date of the search copy namely 9 February 2009 and has no relevance to determining the date that the title was issued. Counsel also pointed out that LINZ had not complied with s 68 Land Transfer Act 1952 which requires that every certificate issued pursuant to any dealing under the Land Transfer Act shall bear even date with registration of that dealing. It was conceded that the Registrar was entitled to enter a memorial on the title showing the date and time the instrument was presented for registration in order to determine priorities but that date is not the date on which registration occurs and the title is transferred.
[21] In conclusion, counsel pointed out there was no evidence as to when the validation key effecting the deposit of the documents resulting in the issue of the title was depressed but it was clear that this did not occur on 17 December 2008 or before 30 December 2008.
[22] In reply counsel for the plaintiff points out that prior to the enactment of the
Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act
2002 that whilst registration of an instrument was not complete until the instrument
is entered and signed registration was deemed to have occurred at the time of presentation. Thus in Bradley v Attorney-General [1978] 1 NZLR 36 O’Regan J held
a solicitor who did not search the journal but relied on the register was guilty of negligence. In Bradley’s case at the time of search the registrar had not entered into the register details of a mortgage. Consequently, details of the mortgage did not
appear on the certificate of title. However, such details were contained in the daily journal and available for search by the solicitor.
[23] Counsel for the plaintiff points out that pursuant to s 36 Land Transfer (Computer Registers and Electronic Lodgement) Amended Act 2002 s 68 of the Land Transfer Act 1952 does not apply to computer freehold registers and consequently cannot apply to the title issued to the plaintiff which was a computer freehold title. In conclusion counsel submits it is to be inherent in the legislative scheme and fundamental to the working of the Torrens system that registration does not occur only at some indeterminate time when all the double checking has been done but when the person claiming the interest or seeking registration first lodged an instrument which is subsequently found to have been valid.
[24] The title to the property which is the subject of the agreement for sale and purchase in this case records that it was issued on 17 December 2008. Pursuant to s
34 Land Transfer (Computer Registers and Electronic) Amendment Act 2002 which pursuant to s 34(1) must apply to the freehold register under the Land Transfer Act
1952:
34 When instruments deemed registered
(1) Every grant and certificate of title shall be deemed and taken to be registered under the provisions and for the purpose of this Act so soon as the same have been marked by the Registrar with the folium and volume as embodied in the register.
(2) Every memorandum of transfer or other instrument purporting to transfer or in any way to affect land under the provisions of this Act shall be deemed to be so registered so soon as a memorial thereof as hereinafter described has been entered in the register upon the folium constituted by the existing grant or certificate of title of the land.
[25] In the Sicilian Estates Ltd’s case the agreement contained the following provision:
15.2 This agreement is subject to and conditional upon deposit of the Vendor’s plan of subdivision and issue of a separate Certificate of Title to the property. Subject to sub-clause 15.3 below if the Vendor’s plan of
subdivision has not deposited by 1 December 2005, either party has a right
to cancel this agreement.
[26] In the Sicilian Estates Ltd’s case the parties agreed to an extension of time
for the deposit of plan of subdivision for six months to 31 May 2006. The documents including the deposited plan required for the issue of the title were lodged with the District Land Registrar on 17 May 2006 but the title, although stating it had been issued on 17 May 2006 was not processed and available until 9 June 2006.
[27] In the circumstances of that case it was held that the condition contained in clause 15. 2 had been satisfied. In coming to that conclusion Associate Judge Christiansen stated:
By the first sentence of that clause the vendor is required to deposit the plan
of subdivision and to issue a separate certificate of title. A vendor is in a position to control the process of deposit, but not necessarily the process of
issue of title. Perhaps that explains why in the ordinary course when the
deposited plans have not been rejected or requisitioned, the register discloses the date of issue of title as being the date the plans were deposited in accordance with the “deeming” provisions.
[28] I am satisfied that the scheme of the Land Transfer (Computer Registers and Electronic Lodgement) Amended Act 2002 is to enable interests in land to be effective as from the time the electronic instrument is in order for registration as provided by s 23 of that Act and the registrar has provided a unique identifier for the instrument pursuant to s 29 and 30 of that Act. Such a finding is consistent with the decision of Sicilian Estates Ltd. It is the computer equivalent to the entry of the instrument in the journal referred to in the decision of Bradley v Attorney-General. As noted by the learned authors of Adams Land Transfer (NZ) in the commentary to s 34 under s 34.3:
Returning to s 34 itself, should the section be applicable, subs (1) provides that the registration of Crown grants and certificates of title is deemed to have occurred when they have been marked by the Registrar with the folium and volume as embodied in the register. In regard to instruments, the deemed date is when the appropriate memorial has been entered: see subs (2). Pursuant to s 40(2), however, the Registrar is required to endorse on an instrument so registered the date and hour on which the memorial was so entered “being the day and hour of the production of the instrument for registration”. Section 39 also provides that the day and hour of the production of the instrument for registration is to be entered upon the memorial.
The result is that while registration of an instrument is not complete until the memorial is entered and signed, registration is deemed to have occurred at the time of presentation. For this reason, in Bradley v Attorney-General [1978] 1 NZLR 36, O’Regan J held that a solicitor who did not search the journal but relied on the register was guilty of negligence. See also ReJackson’s Claim (1890) 10 NZLR 148.
[29] Thus the procedure referred to in Sicilian Estates Ltd where the date of original lodgement of plan of such division can be treated by LINZ as the deemed registration date which predates the time and date when the computer records the transaction resulting from such lodgement is consistent with the legislative provisions which applied prior to the computer freehold register. I am also satisfied that for the reasons set forth in the Sicilian Estates Ltd case that the title in this case was issued on 17 December 2008 being the date the District Land Registrar assigned a unique identifier to the instrument notwithstanding the fact that the computer generated documents were not accepted by the pressing of the validation key sometime after that date.
[30] In the present case counsel for the defendant relies on the evidence of
Dr Muir as justifying an interpretation of clause 4.1 which involves the issuing of the title including the transferring of the title with the defendant’s name and settling the purchase as at that time. However, as pointed out by Fisher J when delivering the Court of Appeal’s judgment in Potter v Potter [ 2003] 3 NZLR 145 at para 34, page 157:
With the exception of known unilateral mistake, non est factum, and rectification, the subjective intentions of the parties are irrelevant.
Thus in interrupting this contract Dr Muir’s intentions at the time he entered into the contract cannot be relevant.
[31] There is no evidence of any pre-contractual negotiations which can assist in the interpretation of this contract as the contract was formed following the acceptance by Millbrook of S F M Investments Ltd’s tender to purchase the property.
If the words of paragraph 4.1 are to be given their plain ordinary every day meaning then the condition has been met as the title was issued prior to 30 December 2008. In this respect it was Millbrook’s obligation to have all documents lodged with the
District Land registrar in time for the title to be issued prior to 30 December 2008. Millbrook clearly complied with its obligations in this regard.
[32] If as Dr Muir and S F M Investments Ltd maintains settlement was to take place following the issue of the title and consequently the title must be physically available when issued, then the parties could very easily have provided for settlement to occur on the fifth working day after the title had issued. The agreement however provides for settlement to be on the fifth working day after the purchaser or the purchaser’s solicitor is notified of the date on which a search copy as defined by
s 172(a) of the Land Transfer Act 1952 of the certificate of title for the property has issued. S 172(a) has the following definition of search copy:
Search Copy; In relation to any grant or certificate of title, means a search copy of that grant or certificate of title prepared and issued by the registrar under and for the purposes of this section.
[33] I therefore conclude that condition 4.1(c) has been satisfied as the title to the property was issued prior to 30 December 2008, namely, on 17 December 2008.
[34] Clause 4.1(c) provides for an extension of time resulting from delays in obtaining title caused by “administrative, weather or geological condition delays beyond the reasonable control of the vendor”. Counsel for Millbrook submits that if the title is found not to have been issued by 30 December 2008 then Millbrook would be entitled to an extension of time because the delay in the issue of title was caused by weather, geological conditions, and administration which were beyond Millbrook’s reasonable control. The reasons for the delays were explained by Millbrook’s solicitors to the solicitors for S F M Investments Ltd in a facsimile transmission of 12 January 2009. In paragraph 4 of that facsimile transmission Millbrook’s solicitors advise as follows:
4. Our view and our client’s view is that the contract remains on foot. Administrative delays and weather and geological delays of the kind necessary pursuant to the proviso in clause 4.1(c) have occurred as set out in our facsimile to you of 23 December 2008. We have taken further instructions in relation to delays so as to give even greater details to you and your client, whilst again not traversing every single detail. We set these further details out below:
(a) The resource consent application was lodged in November 2006
with a forecasted five months to obtain consent. Administrative delays in the
processing of the consent and in the consent process outside the control of our client resulted in the consent taking some four months longer than originally anticipated. The original programme that was used to forecast the completion date of late 2008 was based on obtaining resource consent by late April 2007 (as noted in the sales brochure). Resource consent was not obtained until late August 2007 which in turn delayed the commencement of works and subsequently the issue of the 224(c) certificate which is required
to be lodged with the subdivision. For the avoidance of any doubt, we again state that the delays in obtaining the resource consent were beyond the control of our client and were administrative, being, the processing time in respect of the attainment of affected neighbours approvals and the local authority’s assessment of our client’s application;
(b) The vast amount of documentation required for the subdivision and the number of parties that were required to sign the documents held up lodgement of the subdivision dealing and subsequently the issue of the required titles. The complexity of the 70 odd documents which were to be registered, the availability of parties required to sign the documents (due to certain parties being overseas permanently or temporarily) and the time it took to get each document executed (not all parties required to sign each were in one place at one time) were administrative factors which held up the subdivision dealing being lodged at LINZ;
(c) Further delays relating to the issue of the section 224(c) certificate required for the subdivision were in relation to geological conditions. The R2 type rock encountered caused significant delays in respect of the works. Our client had dug test pits and had its engineers make geological assessments to forecast the amount of different sub-grade material likely to
be expected. In our client’s tender quantities it had scheduled 16,000m3 of R1 type rock and no R2 type rock to be encountered. Our client ended up encountering 14,305m3 of R1 type rock and 45,295m3 of R2 type rock, which had to be excavated. Obviously that took much longer than was anticipated by the original programme and is clearly a geological delay. The excessive ground water encountered also caused some further delay in works being completed. Our client had expected to encounter some ground water near the existing wetland area, however substantial ground water was encountered in large lengths of trenches. This in turn required extensive de- watering work and the use of trench shields, which were not anticipated by our client again causing further delay which again is clearly geological;
(d) There were some major weather related delays to our client’s work programme, which again due to construction and completion delays held up the issue of the 224(c) certificate required for the subdivision. First, the top soil was stripped in very wet weather conditions and was then substantially rained upon. This significantly slowed the top soil screening operations and the mounds never dried sufficiently to be able to screen efficiently. The weather conditions, while generally acceptable for the bulk earthwork operations, were not suitable for the top soil screening process which was drastically slower than anticipated. Our client made every effort to speed up the top soil screening process by turning piles over at extra cost to our client. Delays in getting enough top soil back in road swales held up the issue of the section 224(c) certificate required for the subdivision as the specific conditions of consent could not be complied with until this work was finished.
Under our client’s original programme the sealing of the roads were scheduled to be completed prior to winter 2008. However, with the excess ground water and extra rock excavation that was required the road construction and sealing necessarily came to a halt throughout the winter. The roading and service installation delays subsequently delayed the completion of the land transfer plan of subdivision and consequentially the sealing of the same under section 223 of the Resource Management Act
1991 which is also needed for the subdivision dealing. This in turn delayed the preparation of the subdivision documentation. Additionally, the landscaping work required for the issue of the section 224(c0 certificate could not be completed until the road sealing work had been done;
(e) The realignment of Mill Stream adjacent to the new 6C fairway also delayed the issue of titles. Consent conditions only permit a small window of opportunity within a year to undertake the realignment work, which is outside the heavy rainfall periods and fish spawning season. Our client’s original programme had the realignment works scheduled at the beginning of the construction programme (Dec 2006 to April 2007). Due to administrative delays in receiving both the resource consent, engineering approval and Otago Regional Council consent this window of opportunity was missed and the realignment of the stream was delayed until August 2007, with reconnection to the main stream in March 2008.
[35] In opposing the application counsel for S F M Investments Ltd points out that
S F M Investments Ltd refused Millbrook’s request for an extension of time made in August 2007. In this respect counsel for S F M Investments Ltd emphasises that the timing of the issue of the titles was squarely in issue as at August 2007 the defendant had declined to grant an extension.
[36] In the circumstances of this case S F M Investments Ltd’s refusal to grant Millbrook’s request for an extension of time in August 2007 is completely irrelevant when considering whether Millbrook is entitled to the extension provided by clause 4.1(C) of the contract the parties entered into in December 2006.
[37] Even if the Court can take into account the subsequent conduct of the parties
in interpreting the contract I do not consider the defendant’s refusal to agree to a variation of the contract by extending the time for obtaining title to 31 May 2009 assists in the interpretation of this contractual provision. If the plaintiff is entitled to
an extension of time pursuant to clause 4.1(c) of the contract to use the evidence of the defendant’s refusal to agree to an extension of time to justify an interpretation sought by the defendant would be to enable the defendant to unilaterally vary this contract.
[38] Counsel for S F M Investments Ltd also refers to reports prepared by Millbrook advising that as at September 2008 Millbrook had been lucky with the weather. The report contains the following:
The very mild weather has allowed progress to continue as planned, and Spring has arrived in time for us to put up the finishing touches to the stage one development ahead of titles being issued in November.
However in that report Millbrook states:
Programme
As stated earlier, we lost some time through the extremely wet conditions in Spring, however with the dry spells we have managed to catch up on the lost time and are still on programme for titles issuing approximately September
2008. Of course this programme is entirely weather dependent.
[39] Mr O’Malley, the property and development manager of Millbrook in his evidence points out construction and weather delays pushed out beyond winter 2008 the date Millbrook could apply for s 223 and s 224(c) certificates (those certificates being issued under the Resource Management Act 1991). Those certificates are prerequisites for the obtaining of new titles. Because of concern as to delays Millbrook, to expedite the issuing of the 224(c) certificate from the Queenstown Lakes District Council, obtained the council’s agreement to registration of a performance bond to cover outstanding landscape work that could not be completed because of weather reasons. Eventually the s 224(c) certificate was issued on 12 November 2008.
[40] Having regard to the complexities of the development the number of documents that had to be prepared which totalled 70 and the need to obtain input from 7 neighbours including their mortgagees and lawyers, the Queenstown Lake Districts Council, Rockgas, Aurora Electricity and the bank, the delay of six weeks from 30 December 2008 to 9 February 2009 cannot be considered excessive and must be within the period of delay contemplated by the parties at the time they entered into the contract. Furthermore, the delay is explained by weather and administration.
[41] In those circumstances I am satisfied that if I am wrong in concluding that the title had been issued in time Millbrook was entitled to an extension of time to 16 February 2009 in terms of paragraph 4(1)(c) of the agreement.
Whether condition contained in clause 4.2(a) of the contract is satisfied
[42] Dr Muir contends that when S F M Investments Ltd entered into the agreement with Millbrook, S F M Investments Ltd was not a member of the Millbrook Club and could not become a member because the Club rules permitted membership only by individuals and not by incorporated companies. Consequently, condition 4.2 could not be satisfied which resulted in the contract not becoming unconditional prior to cancellation.
[43] Dr Muir confirms that at all relevant times he has been a member of the Millbrook Country Club. According to Mr O’Malley who is Millbrook’s project manager, a number of properties at Millbrook are owned by companies or by trusts. Millbrook’s policy on membership is to allow either corporate membership which was available when Dr Muir first joined Millbrook in 1998 or alternatively a nominated individual member. In the later case the Club’s board considers whether the person nominated has a reasonably substantial interest in the relevant entity such as shares in the company or beneficial interest under a trust.
[44] Mr O’Malley says that S F M Investments Ltd owns a property within the Millbrook resort at 3 Chalmers Close. He claims S F M was an existing member in terms of clause 4.2(d) of the special conditions of the contract and consequently in terms of that provision the condition as to membership was deemed to have been satisfied at the date the parties entered into the agreement for sale and purchase. He also points out that lot 305 was offered for sale at the same time as a number of other lots. The offer at that time was to the existing members of Millbrook. Of the 25 sites offered for sale, all 25 were purchased by existing members within a very short time frame. Consequently, S F M and Dr Muir entered into the agreement following an invitation to them as members of Millbrook to tender for the property.
[45] Having regard to the above circumstances I conclude that clause 4.2(a) is satisfied in the case of a purchaser that is an incorporated company by a director of that company becoming a member of Millbrook. For the purpose of that condition S F M Investments Ltd “holds membership of the Club” where Dr Muir is the person nominated to be the member. As Dr Muir at the time the agreement was entered into was an existing member of the Club then pursuant to clause 4.2(d) the condition as to membership is deemed to have been satisfied.
[46] Such an interpretation is consistent with the evidence that sale of this lot was offered to existing members, that Dr Muir submitted his tender to purchase on that basis, and that following entering into the agreement neither party considered it necessary to take any action to arrange for the purchaser to be a member of the Millbrook Club.
[47] Subsequent conduct of the parties in taking no steps to ensure compliance with condition 4.2 can only be explained on the basis that each accepted the purchaser was an existing member of the Club for the purpose of that condition and consequently the condition was deemed to have been fulfilled.
Whether specific performance would cause great hardship amounting to injustice or be unconscionable
[48] According to Dr Muir’s evidence:
Without external funding, and ignoring the cancellation, the first defendant if now faced with settlement would have insufficient funds or assets with a realisable value sufficient to do so.
[49] Dr Muir also claims:
The first defendant was out of funds and not in a position to commit to other ventures because of the $1.4 million contingent liability. That position continues today.
[50] Based on that evidence it is submitted by counsel for the defendants that S F
M Investments Ltd will be unable to settle the purchase of this property and consequently Millbrook is not entitled to an order for specific performance.
[51] Counsel for Millbrook submits that neither defendant has adduced sufficient evidence to show that specific performance would cause great hardship.
[52] In Ngai Tahu Property Ltd v Dykstra & Ors, HC Christchurch, CIv 2009-
404-000809, decision of Associate Judge Osborne, 29 October 2009 there is a very helpful summary of the legal principles to be applied in connection with an application for specific performance by way of summary judgment. At paragraph 12(e) of the decision Associate Judge Osborne summarises the law as follows:
The onus on the application remains on the plaintiff although, when the plaintiff establishes its contractual entitlement, the evidential onus shifts to the defendants to demonstrate a tenable defence: Auckett v Falvey HC Wellington CP296/86 20 August 1986 Eichelbaum J. Thus, where there is raised an impossibility defence to a summary judgment application for specific performance, the plaintiff must prove that the defendant has no arguable defence that there is a very substantial probability that the defendant will be unable to comply with an order for specific performance.
[53] In Baker v McLaughlin [1967] NZLR 405 at page 414, line 14, McArthur J summarised the legal principles to be taken into account when determining whether specific performance should not be ordered because of great hardship to the defendant.
The relevant authorities are referred to by Hutchison J. in Nicholas v Ingram
[1958] NZLR 972. The learned Judge’s views as to the effect of the authorities may be summarised as follows: (a) the hardship that operates as a defence must, in general, be such as existed at the time of the contract and not such as has arisen subsequently from a change of circumstances; (b)
nevertheless there are exceptional cases in which hardship subsequent to the contract has caused the Court to refuse a decree for specific performance; (c) the hardship that operates as a defence is “great hardship”, i.e. hardship amounting to injustice; (d) in considering whether there is such hardship on the defendant the Court must also consider the hardship on the plaintiff which would result if the decree for specific performance were refused.
[54] In Ngai Tahu Property Ltd v Dykstra & Ors the Court was supplied with a significant amount of evidence as to the defendant’s financial position including details of their income, details of their assets, and details of their liabilities. No such evidence has been supplied in the present case. There is however evidence that S F
M Investments Ltd has acquired another property at Millbrook and that the plaintiff will suffer hardship if an order for specific performance is not made. The fact that all lots available for sale when S F M Investments tendered for the purchase of lot 305
were in fact sold at that time would indicate that the plaintiff if denied the remedy of specific performance will be forced to sell the property on an entirely different market today thereby suffering considerable loss. On the evidence produced the plaintiff has satisfied me that the defendant has no defence to an order for specific performance based on extreme hardship resulting in injustice. Accordingly therefore the plaintiff is entitled to the relief it seeks and there will be an order accordingly.
Liability of Dr Muir under the contract
[55] The agreement for sale and purchase records the purchaser as being S F M Investments Ltd. However, clause 18.1 of the agreement provides:
18 Purchaser Director Guarantees
18.1 If the Purchaser or its nominee is a company it shall if so requested
by the Vendor procure at least two (2) (unless otherwise agreed) of its directors (one of which must be a member of the Club) to enter into a form of guarantee to be provided by the Vendor to the effect that the nominated directors guarantee to perform and observe the conditions and obligations of the Purchaser as set out in this Agreement. Notwithstanding the prior provisions of this clause 18.1, any person who signs this Agreement as a director of or on behalf of
a company shall at all times be jointly and severally liable with the
Purchaser for all obligations of the Purchaser under this Agreement.
[56] The agreement is signed by Dr Muir who adds the following: “As sole director Gary Albert Muir”. Counsel for the defendants relying upon the Court of Appeal decisions in Trotter v Avonmore Holdings Ltd 8 NZBLC 99,590 and Vuletic v Contributory Mortgage Nominees Limited (2006) 22 NZR 20,003 points out that Dr Muir was clearly executing the agreement on behalf of S F M Investments Ltd and was not assuming dual liability. It is submitted the lack of a signature on the contract denoting personal liability on behalf of Dr Muir is fatal to the plaintiff’s claim.
[57] In Trotter v Avonmore Holdings Ltd the agreement executed by the company and its shareholder contained a provision for the shareholders to jointly and severally guarantee performance under the agreement. The Court of Appeal concluded that the directors executed the agreement on behalf of the company. There was provision in the attestation clause for the shareholders to sign in their personal capacity. That
attestation clause was not completed. Consequently, the Court concluded that the directors did not execute the document in their dual capacity but only in the capacity
of a director binding the company. Similarly in Vuletic v Contributory Mortgage Nominees Limited the contract included provision for the agreement to be personally guaranteed by the director and shareholder. The Court of Appeal in granting the appeal and setting aside summary judgment against the appellant concluded that in the circumstances the appellant had a defence in that the evidence could establish that the appellant was not signing the document in her dual capacity as a director and binding herself personally.
[58] In contrast to the provisions contained in the above authorities the provision
in this case specifically provides that where any person signs the agreement as a director of or on behalf of a company that person is to be jointly and severally liable with the purchaser. That provision is similar to the provision provided by the Court of Appeal in Doughty-Pratt Group Ltd v Perry Castle [1995] 2 NZLR 398 where the provision considered by the Court was as follows:
The directors of Associated Sharebrokers Limited namely Denis Peter Lennon and David Craig Wylie agree to guarantee the covenants of Associated Sharebrokers Limited under this agreement and any sub-lease or assignment arising therefrom.
The attestation clause in that agreement did not include provision for the guarantors
to sign in that capacity. However, Mrs Pratt and Mrs Lacey, Lennon and Wylie each initialled each of the handwritten amendments and two additions to clause 15.1. Those amendments included their respective names.
[59] In the circumstances of that case the Court of Appeal concluded that the parties were signing the documents in their dual capacities as directors binding their company and in their personal capacity as shareholders guaranteeing the company’s liability under the contract.
[60] The evidence of Dr Muir is to the effect that he executed the agreement as the sole director of S F M Investments Ltd acting in his capacity as the board of directors. He emphasises there is no written or oral contract of any kind existing
personally between himself as a party and Millbrook in relation to the property. He also states that Millbrook did not ask him to sign a deed of guarantee.
[61] The defendant who is a solicitor if he read clause 18.1 would have realised that by signing the agreement as a director on behalf of S F M Investments Ltd he was assuming joint and several liability. Whilst he says that he signed as director,
Dr Muir gives no evidence as to whether he read the agreement and if so, why he chose to execute the agreement in circumstances where the agreement provides for such execution to result in personal liability.
[62] In the circumstances I conclude that Dr Muir has no defence to the plaintiff’s claim. However, the plaintiff’s claim against Dr Muir must be on the basis of
Dr Muir’s guarantee of the liabilities and obligations of S F M Investments Ltd. At this stage Millbrook cannot obtain an order for specific performance against Dr Muir
as Dr Muir is not the purchaser. Consequently, I conclude that Millbrook may be entitled to summary judgment against Dr Muir on the basis of liability but defer entering such judgment pending the outcome of the order I am making for specific performance.
Conclusion
[63] In summary therefore there will be the following orders and directions:
a) An order that S F M Investments Ltd do specifically perform its obligations under the agreement for sale and purchase bearing date on
or about 14 December 2006 between S F M Investments Ltd as purchaser and Millbrook Country Club Ltd as vendor and shall pay to Millbrook Country Club Ltd the balance required to purchase lot 305 in terms of that agreement. On payment of that sum Millbrook Country Club Ltd shall transfer to S F M Holdings Ltd the property known as lot 305 and more particularly described in that agreement.
b)The application for summary judgment against the second defendant will be adjourned pending the outcome of the order for specific performance made in terms of paragraph “a” hereof.
[64] As the plaintiff has been successful the plaintiff is entitled to costs which I
assess on a 2b basis with disbursements as fixed by the registrar.
Associate Judge Robinson
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