Milne v Thompson
[2025] NZCA 375
•31 July 2025 at 9.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA699/2024 |
| BETWEEN | GRAHAM ALLAN MILNE, REX BRUCE SWENSEN, JENNIFER MARIE MILNE AND TONY ROY MILNE AS TRUSTEES OF THE GREAT CHELSEA GARDEN TRUST |
| AND | PHILIP CAMPBELL BROWNLEE THOMPSON AND PARIN RAFIEI THOMPSON |
| Hearing: | 17 June 2025 |
Court: | Katz, Lang and Downs JJ |
Counsel: | A R B Barker KC and C R Fu for Appellants |
Judgment: | 31 July 2025 at 9.00 am |
JUDGMENT OF THE COURT
A The appeal is dismissed.
B The appellants must pay the respondents costs for a standard appeal on a band A basis together with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Downs J)
In the High Court, Johnstone J held an agreement between the appellants and respondents “was void from its inception and of no effect” as it contravened the Unit Titles Act 1972.[1] The appellants appeal that determination. They argue the agreement was not contrary to that Act, or if it was, it and a related agreement comprise an illegal contract warranting (discretionary) relief in their favour. The respondents contend the Judge decided the case correctly.
Background
[1]Thompson v Milne [2024] NZHC 2826 [judgment under appeal] at [55(a)].
No real dispute attaches to the facts.
The appellants are trustees of the Great Chelsea Garden Trust (the Trust), which was established in 2009. As its name implies, the Trust exists to acquire property or property rights near the Chelsea Estate Heritage Park and Rawene Reserve, and there, establish a garden of international significance. Central to this purpose was 4/45 Rawene Road (the property), which borders Rawene Reserve.
The property is one of four properties comprising 45 Rawene Road, and as with those properties, a unit title. The property has one home, and a large area of land behind the home of more than 5,000 m2 (the land). The Trust’s interest lay in the land, not the home.
The property became available for sale, by auction, scheduled for 31 May 2010. On behalf of the Trust, Graham Milne bid at that auction. So too did the respondents, Philip and Parin Thompson. Unlike the Trust, the respondents were interested in buying the home, to facilitate their return to New Zealand.
The Trust offered the winning bid of $502,000. A 10 per cent deposit was due within 10 days, settlement within 90 days.
Mr Milne then contacted the respondents to see whether they were interested in buying the home for $485,000. They were. But the respondents wanted to buy the home only after the Trust had subdivided the property into two titles: one for the home (including, of course, its underlying land), and the other for the land.
On 27 April 2010, Mr Milne sent the respondents an email saying why that was not practicable from the Trust’s perspective. The email assured the respondents that the Trust would carry “all of the risks” in connection with the subdivision, with the Trust’s “only protection … [being a] caveat” against the property. We say more about the email later, as it is important.
Consequently, the parties agreed the Trust would nominate the respondents as purchasers of the property in terms of the auction sale; the respondents would sell a subdivided portion of the property to the Trust for $17,000; and the appellants would pay that sum, in advance of the subdivision, to the respondents.
The parties have differing recollections of some terms, but nothing turns on this as two written agreements were entered, and it is common ground these prevail. Like Johnstone J, we call these the Nomination Agreement and the Partial Sale Agreement. The Nomination Agreement was entered or on about 21 May 2010, the Partial Sale Agreement on or about 26 June 2010.
As the former is so brief, we capture it in full:
WHEREAS:
1.By a written Sale and Purchase Agreement dated 31 March 2010, the Purchasers agreed to purchase the property at 4/45 Rawene Road, Birkenhead from [the vendor] at a price of $502,000.00.
2.The Purchasers have agreed to nominate the Nominees under the Agreement.
THE PARTIES AGREE:
1.The Purchasers hereby nominate the Nominees as the Purchasers under the Agreement.
2.The Nominees covenant with the Purchasers that they will henceforth observe and perform those covenants, terms and conditions expressed or implied in the Agreement which are to be observed and performed by the Purchasers under the Agreement.
3.The Purchasers covenant with the Nominees that up to and including the date of this Agreement, the Purchasers have complied with all the covenants, terms and conditions expressed or implied in the Agreement which are to be observed and performed by the Purchasers under the Agreement.
4.This Deed of Nomination and consequential settlement of the purchase by the Nominees of the property at 4/45 Rawene Road, Birkenhead is contemporaneous with and interdependent with an Agreement for Sale and Purchase between the Nominees as Vendors and the Vendors under this Agreement as Purchasers, in respect of Lot 1 of a subdivision of AU4 on Unit Plan 123976 — (“the contemporaneous Agreement”).
5.If the contemporaneous Agreement comes to an end for any reason then this Deed of Nomination will also come to an end and vice versa. In either event, all payments made by either party to the other will be returned and neither party will have any recourse against the other.
6.The parties acknowledge that the Purchasers have paid $52,000.00 to Bayleys Real Estate Limited as the deposit on the purchase of 4/45 Rawene Road, Birkenhead. Upon the execution of this Deed of Nomination by both parties, the Nominees will pay $35,000.00 to the Purchasers by way of reimbursement of a portion of the deposit paid by the Purchasers. The Nominees will then settle the balance of the purchase of 4/45 Rawene Road on the date of settlement to the intent that the portion of the deposit in the sum of $17,000.00 paid by the Purchasers will constitute settlement by them of the purchase under the contemporaneous Agreement.
It is not necessary to set out the much longer Partial Sale Agreement; it is sufficient to record it addressed, in detail, the subdivision.
The respondents settled the auction sale on 8 July 2010 by paying $485,000: the purchase price less $17,000 for the anticipated subdivided portion. The Trust later registered a caveat against the property, pending subdivision, to protect its position.
We now jump ahead to observe that despite the passage of 15 years, the anticipated subdivision has still not come to pass. To achieve the garden, the Trust needed to lease Rawene Reserve from its owner, Auckland Council. Residents opposed that, and the Council declined to lease Rawene Reserve to the Trust. In 2017, Rawene Reserve suffered a significant slip. To remediate it, the Council has sought to acquire a portion of the land compulsorily from the respondents. There is evidence the Trust’s purpose appears to have broadened too: its 2022 subdivision application (to the Council) includes an anticipated home and access utilising the respondents’ driveway. However, Mr Barker KC’s position on behalf of the appellants is that a garden may still be possible, and the Trust hopes to achieve that using the land.
This factual sketch brings us to the litigation. Frustrated by the lack of progress in relation to subdivision, the respondents applied to remove the caveat by summary judgment. The High Court dismissed their claim, concluding the Trust had an arguable interest in the property.[2] The respondents then applied to remove the caveat by ordinary claim, a claim Johnstone J upheld. We say more about that after first explaining the significance of the Unit Titles legislation to the case.[3]
Unit Titles legislation, and the Judge’s decision
[2]Milne (as trustees of the Great Chelsea Garden Trust) v Brownlee [2022] NZHC 937, (2022) 23 NZCPR 207.
[3]We gratefully adopt Johnstone J’s summary of the legislation with some light editing: see judgment under appeal, above n 1, at [8]–[15] and [24]–[26].
The Unit Titles Act 1972 (1972 Act) and its successor, the Unit Titles Act 2010 (2010 Act), provide for fee simple land to be subdivided into two or more principal units, accessory units and common property.[4] Accessory units are units:[5]
… designed for use with any principal unit (whether as a garden, garage, car parking space, storage space, swimming pool, laundry, stairway, passage, or other like purpose) and … shown on a unit plan as an accessory unit.
Put broadly, common property is the remainder of the (divided) land.[6]
[4]Unit Titles Act 1972 [1972 Act], s 3(1); and Unit Titles Act 2010 [2010 Act], s 16(1)–(2). Estates under registered leases, or registered Crown leases or licences, may also be put into unit titles. For the sake of simplicity, such estates are not addressed here.
[5]1972 Act, s 2 definition of “accessory unit”; and 2010 Act, s 5(1) definition of “accessory unit”.
[6]See 1972 Act, s 3(1)(b); and 2010 Act, s 5(1) definition of “accessory unit”.
Unit title subdivisions require a deposited unit plan “specifying the units in their relation to” buildings on the land.[7] Such a plan creates a stratum estate in each unit, comprising:[8]
(a)the fee simple estate or “underlying estate”;
(b)an interest in the common property: the “beneficial interest”;[9] and
(c)an undivided share in the fee simple estate in the units to which the relevant unit owner is contingently entitled: the “contingent interest”.
[7]1972 Act, s 4(1); and 2010 Act, s 17(1). On the deposit of a unit plan, the pre-existing certificate of title is cancelled, and a new certificate of title issued for the stratum estate in all units shown on the unit plan: 1972 Act, s 8(1); and 2010 Act, s 43(1).
[8]1972 Act, s 4(2); and 2010 Act, s 18. See also Thomas Gibbons Unit Titles Law and Practice (2nd ed, LexisNexis, Wellington, 2015) at [2.5].
[9]Under the 1972 Act, unit owners had an interest in the common property as tenants in common in shares proportional to the unit entitlement in respect of their respective units: 1972 Act, s 9. The 2010 Act vested the ownership of the common property in the body corporate, with unit owners having a beneficial interest in the common property as tenants in common in shares proportional to the ownership interest in respect of their respective units: 2010 Act, s 54.
Each stratum estate may “devolve or be transferred, leased, mortgaged, or settled” as if it were an estate in fee simple.[10] However, the fee simple estate:[11]
… shall not be capable of devolving or being dealt with in any way, and none of the component parts of a stratum estate shall, except as provided [elsewhere in the 1972 Act], be capable of devolving or being dealt with independently of the others.
[10]1972 Act, s 4(3). See also 2010 Act, s 50(a).
[11]1972 Act, s 4(3). See also 2010 Act, s 50(b)–(c).
As Johnstone J observed, the “1972 Act thus introduced, and the 2010 Act maintains, a statutory mechanism by which real property might be held, and dealt with, in a novel, fragmented form of registered ownership”.[12]
[12]Judgment under appeal, above n 1, at [13].
This case is governed by the 1972 Act. It requires a “unit entitlement” be assigned to every principal unit and every accessory unit before the unit plan is deposited. Unit entitlement is fixed by a registered valuer according to the value of the unit “in relation to each of the other units on the unit plan”.[13] Unit entitlements are important because they establish an owner’s rights and liabilities, in relative terms, to those of other unit owners.[14] The 1972 Act precludes any change to unit entitlement after the plan is deposited unless:[15] (a) an existing unit passes into common property;[16] or (b) redevelopment is undertaken by the sole owner of all units or on the unanimous resolution of all owners.[17]
[13]1972 Act, s 6(1). Sections 38(1)–(2) of the 2010 Act provides for assignment, similarly, of an “ownership interest”.
[14]1972 Act, s 6(3). The 1972 Act refers to “proprietors” rather than “owners”. We use the term “owners” for convenience.
[15]Section 6(2).
[16]Section 19(5)(d).
[17]Section 44.
Most important in all this is s 10 of the 1972 Act:
10 Independent dealings with accessory units restricted
(1) Except where it is transferred to the proprietor of a principal unit shown on the same unit plan, no accessory unit or any interest in it may be sold, leased, mortgaged, or otherwise disposed of or dealt with except as part of a sale, lease, mortgage, disposition, or other dealing which includes a principal unit or a corresponding interest in a principal unit:
provided that the proprietor of a principal unit included in the same certificate of title as an accessory unit may let the accessory unit on a weekly tenancy or on a tenancy determinable at the will of either of the parties by 1 month’s notice in writing.
(2) No certificate of title relating to an accessory unit shall be issued except as part of a certificate of title relating to a principal unit.
(3) No principal unit which is for the time being included in the same certificate of title as an accessory unit (not being a certificate of title issued under paragraph (a) of section 8(1)), and no interest in any such principal unit may be sold, leased, mortgaged, or otherwise disposed of or dealt with except as part of a sale, lease, mortgage, disposition, or dealing which includes the accessory unit or a corresponding interest in the accessory unit, as the case may be, or where there is a concurrent sale of the accessory unit in accordance with subsection (1).
(4) Where any accessory unit is being transferred independently of a principal unit to a person who is the proprietor of a principal unit shown on the same unit plan, the instrument of transfer in respect of the accessory unit shall contain a request to the Registrar for the accessory unit to be included in the certificate of title for the principal unit; and upon registration of the instrument of transfer the accessory unit shall become subject to all mortgages and charges then affecting the principal unit.
(5) Where an accessory unit is for the time being included in the same certificate of title as a principal unit the accessory unit may not be transferred apart from the principal unit while it remains subject to any mortgage or charge.
(6) Notwithstanding anything to the contrary in the Land Transfer Act 1952, any purported sale, lease, mortgage, disposition, or dealing with any unit in contravention of subsection (1) or subsection (3) shall be void and of no effect:
provided that nothing in this subsection shall affect the devolution of any unit upon the death of the proprietor thereof to the administrator of that proprietor.
It and the equivalent provision of the 2010 Act[18] protect the integrity of each unit title, by precluding dealings that would otherwise undermine the validity of the unit entitlements of each unit. Unsurprisingly then, a precluded dealing is, thus, “void and of no effect”.[19]
[18]2010 Act, s 53.
[19]1972 Act, s 10(6).
We return to the anticipated subdivision, which was to be achieved by the Partial Sale Agreement. By it, a significant portion of the land would be severed and passed to the Trust, with the respondents retaining ownership of the home (and balance of the land). The land, however, comprises an accessory unit. It is, therefore, subject to the restrictions created by the 1972 Act, including those in s 10.
The respondents argued the Partial Sale Agreement contravened s 10(1) as it constituted a dealing with an accessory unit, other than by transfer to them (“the proprietor of a principal unit shown on the same unit plan”). The Judge accepted that contention:
[48] In short, the property the subject of disposition by way of Partial Sale Agreement was that specified in the Attached Plan: a part of Accessory Unit 4 only. As entry into the Partial Sale Agreement amounted to a disposal of, or dealing with, an interest in Accessory Unit 4 except as part of a disposition or dealing with a corresponding interest in Unit D, and except by transfer to the proprietor of any of Units A to C, the Partial Sale Agreement was indeed void and of no effect.
The Judge accepted the respondents’ allied contention that the Trust could not have an interest in the property, as that interest was based exclusively on the Partial Sale Agreement, which, by s 10, was void and of no effect.
The respondents acknowledged they should repay the Trust the $17,000 it had paid them in anticipation of the subdivision, an acknowledgment the Judge accepted:
[52] That said, the Thompsons observe, and I agree, that they owe the Trustees a sum of money. When they accepted their nomination as purchaser of the Property under the Nomination Agreement, they acknowledged that the Trustees had paid a deposit under the Auction Agreement of $52,000, and they promised to pay the Trustees $35,000 by way of partial reimbursement. In light of those things, when the parties entered the ineffective Partial Sale Agreement, they did so contemplating that the Trustees would obtain the part of Accessory Unit 4 shown on the Attached Plan at an effective cost of the difference between the two figures — $17,000. Indeed, the sum of $17,000 appeared in the Partial Sale Agreement as the price of that sale.
[53] The upshot is that the Trustees paid the Thompsons $17,000 under an ineffective agreement. They have been entitled to its return since 27 May 2010, the day the Thompsons signed the Attached Plan, binding themselves to the Partial Sale Agreement they had signed the day before.
[54] I note for the sake of thoroughness that it is impossible to unwind the Nomination Agreement because of the failure of the Partial Sale Agreement. The Thompsons paid the then Trustees $35,000, in accordance with the Nomination Agreement, on 1 June 2010. And they proceeded to accept their nomination as purchasers under the Auction Agreement, by settling that purchase, becoming registered owners of the Property on 9 July 2010.
The result is that the property remains the respondents’, without the appellants having an interest therein. But the respondents must return the $17,000, with interest.
A précis of the appellants’ case
The appellants contend they have an interest in the property, and the High Court was wrong to conclude otherwise. They also contend, in the alternative, the property should be transferred to them utilising discretionary relief in relation to illegal contracts under s 76 of the Contract and Commercial Law Act 2017.
First argument
The appellants contend the Judge erred by focusing exclusively on the Partial Sale Agreement in the context of s 10 of the 1972 Act. They say the correct approach is to assess the Partial Sale Agreement and the Nomination Agreement, which, taken together, comprises the relevant dealing under s 10. Relatedly, the appellants contend that dealing does not contravene s 10 because the Nomination Agreement involves a dealing with the principal unit, the home, and the Partial Sale Agreement involves a dealing with the accessory unit, the land. Or, as Mr Barker’s written submissions put it:[20]
3.3 The Trust’s objection to the finding by the Court is that it did not properly identify the dealing at issue. It focused solely on the Subdivision Agreement and ignored the Deed of Nomination which was an integral part of that transaction. They were both parts of the one transaction; a subdivision of the Property to give part of the AU (Lot 1) to the Trust, and the House to the Thompsons. The agreements themselves express their interdependence and contemporaneous nature. The one cannot be understood without reference to the other.
3.4 If that is the case, then the “dealing” for the purpose of the UTA does include a dealing in respect of a principal unit. It involved a dealing with the Property. The Trust was nominating the Thompsons as purchaser of the Property, which included both the principal unit and the [auxiliary] unit. A part of that arrangement was that the Thompsons would have to transfer Lot 1 to the Trust after subdivision. But that was part of the dealing only.
3.5 The approach of the High Court was to focus only on that part of the dealing that involved a dealing with the auxiliary unit. It ignored the part of the dealing that involved the principal unit. On this approach a finding of illegality was inevitable. But it does [not] reflect the actual dealing between the parties.
3.6 The arrangement accordingly was not contrary to s 10 of the UTA and was not illegal because once the full dealing between the parties is considered — the Deed of Nomination and the Subdivision Agreement — the transaction involved a dealing with a principal unit.
Second, alternative argument
[20]Footnote omitted.
The appellants contend the Nomination Agreement and Partial Sale Agreement comprise an illegal contract(s), in relation to which they should have discretionary relief under the Contract and Commercial Law Act:[21]
4.15 It is submitted that the degree of connection between the Subdivision Agreement and the Deed of Nomination is as close as two agreements could ever be. They were both parts of the one transaction; the subdivision of the Property to give part of the AU (Lot 1) to the Trust, and the House to the Thompsons.
4.16 More than that, the agreements express their interdependence and contemporaneous nature. The Deed of Nomination describes the Subdivision Agreement as the “Contemporaneous Agreement”.
4.17 It seems clear that the Trust would never have executed the Deed of Nomination unless the Subdivision Agreement was also signed and agreed. More than that, the Trust would never have allowed the Thompsons to become the owner of the Property unless they were themselves to ultimately become the owner of Lot 1.
4.18 The Trust says that, in these circumstances, the Deed of Nomination is itself to be regarded as an illegal contract, in the same way as the Court found in Hickman v Turn and Wave Ltd. To adopt the words of the Supreme Court, the two agreements were “inexorably linked”. The one could not operate “independently” of the other. They were an “integrated package”.
4.19 If that is the case, then the Deed of Nomination is of no effect, and the Thompsons are not “entitled to any property under a disposition made by or under” that agreement. The relevant disposition would be their nomination to the Auction Agreement and ultimate purchase of the Property.
4.20 The result is that the Thompsons are not entitled to be the registered proprietors of the Property. As noted below, an order transferring the Property to the Trust would be required under s 76 of the CCLA.
[21]Footnote omitted.
Mr Barker’s written submissions responsibly acknowledged neither argument was pleaded, or advanced, in the High Court.[22] For reasons that will become apparent, our consideration of the arguments does not prejudice the respondents despite the appellants’ omission in placing them before the High Court.
Analysis
[22]However, we understood Mr Barker to say at the hearing that the appellants’ argument in the High Court had touched on illegality in the context of relief under the Contract and Commercial Law Act 2017. Mr Barker also said the Judge’s award of $17,000 to the appellants must have been made under s 76 of that enactment. We observe the pleadings are silent on illegality in this context, so too the decision. But as we record above, nothing turns on this.
While the arguments are offered as alternatives, a common proposition unites them, namely that the Nomination Agreement and Partial Sale Agreement are so closely connected that they comprise, or should be treated as components of a single transaction comprising: (a) one dealing under s 10 of the Act; or (b) one illegal contract. We, therefore, begin with it.
We acknowledge the agreements are related as they arise from a common set of facts and capture the parties’ initially shared objective of severing the land from the home. Unsurprisingly then, each agreement contemplates the other. So, that the agreements are related, even interrelated, is, we think, plain. However, that does not mean the agreements comprise, or should be understood to comprise, components of a single transaction.
First, the Nomination Agreement did little more than place the respondents in the appellants’ shoes in relation to the auction sale. Primarily, it made the respondents purchasers by that sale.
Second, while the Nomination Agreement contemplated subdivision under the Partial Sale Agreement and provided for that by the advance payment of $17,000, the Nomination Agreement did not, and could not, effect subdivision. That, necessarily, lay in the future. Relatedly, the Nomination Agreement contains no machinery in relation to the subdivision, beyond perhaps the advance payment of $17,000; that machinery lies elsewhere, in the Partial Sale Agreement. We pause to observe that Mr Barker argued the mere fact of subdivision does not necessarily contravene s 10. That submission implicitly acknowledges the Nomination Agreement says nothing about the nature of the subdivision, or how it will be brought about; only that it will occur.
Third, the Nomination Agreement contains no dealing, as such, in relation to the property.[23] One dealing arose by the auction sale, on which the Nomination Agreement was based. Another dealing arose by the Partial Sale Agreement, and more particularly, its division of the accessory unit. Expressed more fully then, while the Nomination Agreement anticipates other dealings, that agreement creates none of its own.
[23]See Land Transfer Act 1952, s 2 definition of “dealing”: means every transfer, transmission, mortgage, lease, or encumbrance of any estate or interest under this Act.
Fourth, cl 5 of the Nomination Agreement contains its own remedy if it or the Partial Sale Agreement comes “to an end”. In this respect, the Nomination Agreement is independent of the Partial Sale Agreement.
It follows we accept Mr Latton’s submission on behalf of the respondents that the fulcrum of the appellants’ case is misplaced; the agreements do not comprise, and should not be treated to comprise, components of a single transaction. However, in the event we are wrong about this, we go on to consider the balance of the appellants’ arguments.
We can address the first swiftly. As will be recalled, the appellants’ contention is that “once the full dealing between the parties is considered — the Deed of Nomination and the [Partial Sale] Agreement — the transaction involved a dealing with a principal unit” and, therefore, did not contravene s 10.
This contention misreads s 10. Section 10 does not permit the sale of an accessory unit independently of a principal unit provided there is any dealing with the principal unit. Section 10 precludes the sale of an accessory unit except as part of a corresponding sale of the principal unit. Similarly, s 10 precludes the lease or mortgage of an accessory unit except as part of a corresponding lease or mortgage of the principal unit. In short, s 10 precludes all dealings with an accessory unit unless the dealing also involves a corresponding dealing with the principal unit; no dealing in relation to an accessory unit may decouple it from the principal unit unless the accessory unit “is transferred to the proprietor of a principal unit shown on the same unit plan”.
We explained why this is so earlier:[24] s 10 protects the integrity of each unit title, by precluding dealings that would otherwise undermine the validity of the unit entitlements of each unit. Again, that is why a precluded dealing is “void and of no effect”. The appellants’ contention would, we conclude, frustrate the purpose of the 1972 Act by undermining a critical protection of unit entitlements.
Relief as an illegal contract(s)?
[24]See above at [22].
Here, we assume rather than decide that an agreement infringing s 10 of the 1972 Act is an illegal contract governed by s 76 of the Contract and Commercial Law Act, hence one amenable to any relief the Court “thinks just”. Relevant then is s 78 of that enactment:
78 Matters court must have regard to
In considering whether to grant relief under section 76, and the nature and extent of any relief to be granted, the court must have regard to—
(a) the conduct of the parties; and
(b)in the case of a breach of an enactment, the object of the enactment and the gravity of the penalty expressly provided for any breach of the enactment; and
(c) any other matters that the court thinks proper.
The appellants contend these mandatory considerations favour the property being transferred to the Trust. They argue, albeit not in these terms, that but for the unlawful agreement(s), the Trust would own the property. Relatedly, they contend the respondents should not benefit from any wrong by remaining as owners. The appellants also contend a transfer to the Trust is necessary to avoid the respondents enjoying a “windfall”. Mr Barker notes there is evidence that the portion of the land the Council seeks to acquire compulsorily is worth more than $700,000 (based on an indicative valuation). He observes the respondents paid only $17,000 for the land. Mr Barker accepts if relief were granted, the purchase price of $485,000 would need to be returned to the respondents, with interest.
We begin with the parties’ conduct.[25] The case is unusual in that no one intended to enter an illegal contract or break the law more generally. So, all parties are “innocent”. This aspect is, therefore, neutral.
[25]Contract and Commercial Law Act, s 78(a).
The next matter, and one emphasised by Mr Latton, is not. The respondents wanted to buy the home only after the Trust had subdivided the property. That prompted this response from Mr Milne on behalf of the appellants, the important email we mentioned earlier:
Hi Campbell
Unfortunately the lawyer who was acting for the Trust has been caught up in the … UK and at … Wednesday last week had still not been able to get home. I then asked another lawyer … to act for the trust.
[Our lawyer] has phoned me this morning to say that he has been in contact with [your lawyer] who has said that you would prefer to wait until we had issued the new titles before you purchased the property.
This raises some problems for the trust. It would be quite a lot more expensive to do it this way and also the trust would then have to raise expensive short term funds to settle the whole purchase. Being a charitable trust the majority of our funding comes by way of grants and donations usually for a specific purposes. We would not qualify for such funding to purchase a property with the objective of selling it again in the future. And apart from difficulties with our deed of trust it is unlikely that the trustees would agree to such a scenario.
Under the Unit Titles Act which applies to this property now, the process that we have to go through is very long winded and expensive it will take probably the best part of 1 year before we would be in a position to issue new titles. The act is being reviewed at the moment and is likely to be replaced later this year making it much easier and financially a better proposition for us to undertake the subdivision then. We should also by then have acquired a number of other properties which could all be processed at the same time.
The process that we had discussed is
1. You being nominated as the purchaser of the whole property under our agreement.
2. You in turn agreeing to sell the trust the subdivided piece of land as per the suggested scheme plan of subdivision (copy of which has been sent to your lawyer) for the sum of $17,000 which we would pay to you at the time of settlement of the head agreement. (effectively paying you in advance for the subdivided land and making your net purchase price $485,000)
3. The trust would pay for and do all things necessary to effect the subdivision.
4. The trust would be carrying all of the risks and its only protection would [be] by way of caveat.
The trust is not able to undertake a sale to you in the method proposed by your lawyer. If you are still interested in purchasing the property by way of some other method that will meet our mutual objectives could you or your lawyer get back to us in the next day or two. I apologise for the short time frame but it is now a month since the Auction and the trust must now make urgent decisions as to settlement. We have been approached by the Agent for Bayleys on behalf of the other bidder at the auction who is interested if we do not conclude with you. … [T]his is not our preferred option because it will involve agent fees.
I have copied this email to the respective lawyers.
Kind regards
As will be apparent from the email, the appellants knew a subdivision was fraught. They undertook, explicitly, to bear that risk. The respondents bought the property with the benefit of that concession from the appellants. We see this aspect as counting very strongly against relief, and as necessarily favouring, equally strongly, the status quo.[26]
[26]Section 78(a).
We consider the 15-year delay commensurate with that position, particularly given the costs in connection with the property which the respondents must have paid throughout, including, for example, rates and insurance. The respondents have also had to deal with the adjacent landslip.[27]
[27]Section 78(c).
We are unable to accept the appellants’ “windfall” analysis. The respondents paid $485,000 for the property (again, $502,000 less $17,000). What they paid the appellants for the land — $17,000 — would of course, be repaid, with interest. Furthermore, the $700,000 plus figure advanced by the appellants as the “windfall” presupposes either the land or the portion of the land the Council seeks to compulsorily acquire can be subdivided. That supposition is just that. We also note the Council offered to pay the respondents $85,000 for the portion of the land it seeks (to address instability), and the respondents made an open offer to the appellants to pay them that sum.
We, therefore, are satisfied the proposed relief would not be just.
Summary of conclusions
The Nomination Agreement and Partial Sale Agreement do not comprise, and should not be treated to comprise, components of a single transaction. But even if they did, s 10 would be contravened by the proposed decoupling of the accessory unit from the principal unit. The appellants’ contention would frustrate the purpose of the Act by undermining a critical protection of unit entitlements. Assuming the agreements are governed by s 76 of the Contract and Commercial Law Act, relief under that provision would not be just.[28]
Costs
[28]These conclusions make it unnecessary to address the respondents’ contention that the relief sought is time-barred.
Mr Latton sought increased costs based on the open settlement offer mentioned at [48]. The appellants paid increased costs in the High Court for that reason. However, we did not understand the respondents to have repeated the offer in connection with the appeal. So, we confine costs to a standard appeal on a band A basis.
Result
The appeal is dismissed.
The appellants must pay the respondents costs for a standard appeal on a band A basis together with usual disbursements.
Solicitors:
Alexander Dorrington Ltd, Auckland for Appellants
Pidgeon Judd, Auckland for Respondents
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