Ngoi v Wen
[2017] NZCA 519
•17 November 2017 at 11.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA404/2016 [2017] NZCA 519 |
| BETWEEN | KOK ANN NGOI SUNLINE ESTATE LIMITED |
| AND | GUIRONG WEN |
| Hearing: | 12 October 2017 |
Court: | Kós P, Woolford and Collins JJ |
Counsel: | D J Goddard QC and O C Gascoigne for Appellants |
Judgment: | 17 November 2017 at 11.00 am |
JUDGMENT OF THE COURT
AThe appeal is allowed.
BThe judgment and costs order made in the High Court is set aside.
CThe contract is to be performed within 30 days of the date of this judgment or on such other date agreed to by the parties.
DThe respondent is to pay the first appellant costs for a standard appeal on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Collins J)
Introduction
The gravamen of this appeal can be reduced to the following question: did the High Court err when it concluded no binding contract was entered into by the first appellant (Dr Ngoi) and the respondent (Ms Wen) for the sale and purchase of a property for $5.28 million?
Both parties signed the sale and purchase agreement (the agreement) and their initials were next to the price. Dr Ngoi’s initials were, however, placed on the agreement adjacent to a blank space for the price before the price of $5.28 million was inserted, and subsequently initialled, by Ms Wen.
Dr Ngoi says a binding contract was formed when he confirmed to Ms Wen’s real estate agent, Mr Ngai, that he accepted Ms Wen’s offer to sell the property for $5.28 million. Ms Wen says that she only intended to be bound if Dr Ngoi re-initialled the contract and, in any event, she withdrew her offer before it could be accepted.
We have reached a different conclusion from that of Edwards J. Although we have not departed from key factual findings made by Edwards J we have had the benefit of evidence that was not before the Judge.
We allow the appeal and set aside the judgment and costs order made in the High Court. We direct that because there is a binding contract, it is to be performed no later than 30 working days from the date of this judgment or on such other date agreed to by the parties.
Background
Ms Wen is a successful businesswoman with extensive property interests in Auckland. In June 2004, she purchased 36 Oakland Road, Karaka (the property) for $2.5 million. The property is a 4.355-hectare site with a single dwelling. On 9 February 2007 Ms Wen listed the property for sale with Mr Ngai, a real estate agent at Barfoot & Thompson Ltd. The asking price was between $5 million and $6 million. Only one offer was received, in November 2013, for $3.5 million. That offer was rejected.
On 1 December 2013 Dr Ngoi, a property developer from Singapore, contacted Mr Ngai and expressed his interest in purchasing the property.
On 2 December 2013 Mr Ngai and Dr Ngoi exchanged emails in relation to a draft agreement offering to purchase the property for $3.9 million. On 12 January 2014 Mr Ngai presented Ms Wen with an offer from Dr Ngoi to purchase the property for $3.9 million. The offer was recorded in a standard ADLS/REINZ agreement. Dr Ngoi also inserted a condition that provided a due diligence period of 120 days after the date of the agreement, during which time Dr Ngoi was to satisfy himself the property was suitable for his intended use. The settlement date was to be 12 December 2014. The terms of the agreement included an acknowledgement that if the property was sold through a licensed real estate agent named in the agreement, then that agent was appointed by the vendor to affect the sale on their behalf.[1]
[1]Barfoot & Thompson Ltd was named in the agreement as the vendor’s agent.
On 12 January 2014 Ms Wen counter-offered to sell the property for $5.6 million. This was affected by Mr Ngai crossing out $3.9 million and inserting $5.6 million. Ms Wen initialled the change. She also initialled each page of the document and each condition, including the due diligence condition. Ms Wen also signed the back page of the agreement. Mr Ngai then emailed Dr Ngoi and told him Ms Wen had counter-offered at $5.6 million.
Over the ensuing days further counter-offers were exchanged. Dr Ngoi increased his offer to $4.28 million. Ms Wen lowered her sale price to $5.35 million. Dr Ngoi then increased his offer to $4.5 million and Ms Wen counter-offered to sell at $5.3 million. Each counter-offer was made by Mr Ngai inserting the new figure and having the person making the counter-offer initial the new price. Aside from the price, all other terms and conditions in the original agreement remained the same.
According to Dr Ngoi, on 13 January 2014 he met with Mr Ngai and asked him to convey to Ms Wen that he was prepared to accept any price below $5.3 million. To facilitate this offer he initialled the agreement next to a space for Ms Wen to insert a price below $5.3 million. Mr Ngai confirmed this aspect of Dr Ngoi’s evidence.
Mr Ngai went to Ms Wen’s home shortly before 5.00 pm on 14 January 2014. There is considerable dispute about what followed thereafter. Mr Ngai said in evidence he informed Ms Wen of Dr Ngoi’s counter-offer to purchase at a sum less than $5.3 million and that she said she was willing to sell the property for $5.28 million. Mr Ngai then telephoned Dr Ngoi at 5.09 pm. Both Mr Ngai and Dr Ngoi say that they spoke to Ms Wen on two occasions by speaker phone and that their conversations were conducted in Mandarin for the benefit of Ms Wen. They say that it was during the second of these conversations at 5.16 pm that Ms Wen agreed to reduce her price to $5.28 million. Dr Ngoi says he accepted that price. Mr Ngai says that he explained the terms of the agreement to Ms Wen and inserted the figure of $5.28 million next to Dr Ngoi’s initials and that Ms Wen then wrote her initials next to Dr Ngoi’s.
Mr Ngai then left Ms Wen’s home and phoned Dr Ngoi from his car to confirm the contract and to congratulate him. This phone call was made at about 5.30 pm. They arranged to meet at McDonalds in Botany so that Mr Ngai could hand Dr Ngoi a copy of the agreement and to enable them to discuss other property deals that Dr Ngoi was interested in pursuing.
Ms Wen denies participating in a three-way telephone conference with Mr Ngai and Dr Ngoi at any stage. Although Ms Wen acknowledges placing her initials next to the sale price of $5.28 million, she denies being told by Mr Ngai that Dr Ngoi would accept any price below $5.3 million, or that Dr Ngoi had pre‑initialled the agreement next to a blank space. During cross-examination, Mr Ngai accepted he had not told Ms Wen about the pre-initialling when he met with Ms Wen, but said in his evidence in chief that he pointed out Dr Ngoi’s initials to her when the $5.28 million figure was entered.
What is not disputed, however, is that at about 5.30 pm Mr Ngai left Ms Wen’s home with a contract that was signed by both parties and that Ms Wen had agreed to sell the property for $5.28 million and had initialled that sum adjacent to Dr Ngoi’s initials in the agreement. It is also beyond dispute that Mr Ngai telephoned Dr Ngoi at about 5.30 pm to inform him, confirming Ms Wen had initialled the agreement and that there was a binding contract.
Ms Wen telephoned Mr Ngai at 5.37 pm. There is also a conflict between Ms Wen and Mr Ngai about what was said at this time. Mr Ngai said that Ms Wen told him she had discussed the agreement with her son and that they wanted the period of due diligence to be reduced. Mr Ngai said he would discuss this with Dr Ngoi. Ms Wen denies this version of events and says she told Mr Ngai that she was revoking her counter-offer and instructed him not to present her counter-offer to Dr Ngoi. Mr Ngai disputes this and says he told Ms Wen that she and Dr Ngoi had a binding agreement.
Dr Ngoi and Mr Ngai met at McDonalds at Botany around 5.45 pm at which time Mr Ngai presented Dr Ngoi with a copy of the agreement. Dr Ngoi asked Mr Ngai if he needed to re-initial the contract adjacent to the $5.28 million purchase price. Mr Ngai said that was not necessary because there was already a binding agreement. Mr Ngai raised the possibility of a shorter period to complete due diligence. Dr Ngoi said he would need to talk to his lawyers about that request. Mr Ngai said he spoke to Ms Wen by telephone on at least two occasions between 6.26 pm and 7.17 pm and endeavoured to phone her on other occasions during this period. He says he told Ms Wen that Dr Ngoi would not agree to a shorter due diligence period. During the conversations they had, Ms Wen says she reiterated to Mr Ngai that she did not want to sell. Other aspects of their conversations are disputed.
Mr Ngai met with Ms Wen at her home at about 9.15 am on 15 January 2014. He provided her with two proposed variations to the agreement, namely a proposed “escape clause” and an earlier settlement date. Ms Wen signed both documents but on being told that Dr Ngoi could still insist on purchasing the property for $5.28 million she ripped up the “escape clause” variation to the contract.
On 16 January 2014 Ms Wen instructed Mr Ngai to contact Dr Ngoi to cancel the contract. Mr Ngai sent a text to Dr Ngoi later that day, saying “she changes mind again, wants to cancel and proposes to compensate you”. Ms Wen says she never offered to compensate Dr Ngoi.
Later that day Ms Wen telephoned Mr Ngai from her solicitor’s office and recorded their conversation. The transcript of that conversation contains no reference to the three-way telephone conferences said to have occurred between 5.09 pm and about 5.20 pm on 14 January 2014. Ms Wen then instructed her solicitors to attend to cancellation of the agreement.
On 20 January 2014 Dr Ngoi lodged a caveat against the title to the property.
On 24 January 2014 Ms Wen’s solicitors wrote to Dr Ngoi’s solicitors, erroneously saying that Ms Wen had signed her counter-offer at about 9.00 am on 14 January 2014 and that about 10 minutes later she instructed Mr Ngai that she wished to withdraw her offer as the “due diligence time was too long”. Ms Wen’s solicitor said that in these circumstances there was no binding agreement. That letter was not received by Dr Ngoi’s solicitors until 30 January 2014. On 31 January 2014 Dr Ngoi’s solicitors wrote to Ms Wen’s lawyer saying that Ms Wen’s account was “implausible”, particularly in the light of her signing the variations on 15 January 2014 and her subsequent “willingness to pay compensation to achieve a mutual termination of the agreement”.
In February 2014 Ms Wen lodged complaints about Mr Ngai with Barfoot & Thompson and with the Real Estate Agents Authority (REAA). In his response to the REAA Mr Ngai made no mention of the three-way telephone conferences said to have occurred between 5.09 pm and about 5.20 pm on 14 January 2014.
On 12 June 2014 the contract was declared unconditional and Dr Ngoi paid the deposit of $528,000 to Barfoot & Thompson. On 20 June 2014 Ms Wen’s new solicitors wrote to Dr Ngoi’s solicitors disputing the existence of a binding contract. On 7 July 2014 Dr Ngoi applied for an order that his caveat over the property not lapse. There was no mention of the three-way telephone conferences in that application. In August 2014 the REAA Complaints Assessment Committee found Mr Ngai had engaged in unsatisfactory conduct by failing to provide an updated agency agreement and an updated market appraisal for Ms Wen.
On 11 August 2014 Dr Ngoi commenced this proceeding in the High Court and applied for summary judgment. The same day Dr Ngoi nominated the second appellant, Sunline Estate Ltd (Sunline), to complete the purchase. In his affidavit in support of his application for summary judgment, Dr Ngoi refers to a telephone conversation conducted in Mandarin between himself, Ms Wen and Mr Ngai soon after 5.00 pm on 14 January 2014. He said that he and Ms Wen discussed her offer of $5.28 million during that conversation. Mr Ngai also swore an affidavit in support of the application for summary judgment in which he explained that Dr Ngoi and Ms Wen discussed the sale price of $5.28 million and that at the conclusion of the telephone conference “(at approximately 5.22pm) Ms Wen signed the agreement at $5.28 [million]”. In her affidavit in opposition to the summary judgment application Ms Wen maintained she did not participate in any telephone conference with Dr Ngoi and Mr Ngai on 14 January 2014.
The summary judgment application was heard and declined by Heath J in a judgment delivered on 1 December 2014.[2] Summary judgment was declined primarily because of the factual dispute about what, if anything, Ms Wen had said to Dr Ngoi and Mr Ngai on 14 January 2014. On 12 December 2014 Dr Ngoi’s solicitors sent a letter to Ms Wen’s solicitors stating that Sunline was ready to complete the settlement of the purchase. That proposal was rejected by Ms Wen’s solicitors who maintained there was no enforceable contract between the parties. The substantive proceeding was heard by Edwards J in late April 2016 and the judgment delivered on 18 July 2016.[3]
High Court judgment
[2]Ngoi v Wen [2014] NZHC 3027.
[3]Ngoi v Wen [2016] NZHC 1621.
The reasons for Edwards J’s conclusion there was no binding contract entered into by Dr Ngoi and Ms Wen on 14 January 2014 may be distilled to the following four points.
First, Edwards J was not satisfied the appellants had established a contract was formed at about 5.30 pm on 14 January 2014 because Dr Ngoi could not prove Ms Wen had participated in the three-way telephone conference said to have occurred between 5.09 pm and about 5.20 pm. In describing the issue as to whether Ms Wen had participated in the phone calls as “finely balanced”, Edwards J placed weight on the absence of any reference to those conversations in: the record of the discussion between Ms Wen and Mr Ngai on 16 January 2014; the correspondence exchanged between the parties’ solicitors in the weeks after 14 January 2014; the investigations conducted by the REAA; or, Dr Ngoi’s affidavit filed in support of his application for an order that the caveat not lapse.[4]
[4]At [54].
Second, Edwards J also “found that an agreement was not formed at the time Ms Wen initialled the agreement as she did not know about Dr Ngoi’s pre-initialling of the agreement”.[5]
[5]At [93].
Third, Dr Ngoi’s offer to purchase at any price below $5.3 million:[6]
was not presented as an offer capable of acceptance. The scheme of the evidence pre- and post-Ms Wen’s initialling is that she intended to make a counter-offer when she initialled next to the price of $5.28m.
[6]At [93].
Fourth, Edwards J found “that an agreement was not formed by Dr Ngoi verbally accepting Ms Wen’s counter-offer during the telephone call [he had] with Mr Ngai at 5.30 pm”.[7] The Judge decided the appellants could not “prove that Ms Wen intended to become bound in this manner. Rather, the weight of the evidence suggests Ms Wen only intended to become bound upon Dr Ngoi [re]initialling next to the price of $5.28m”.[8]
[7]At [94].
[8]At [94].
These four findings were made in the context of Edwards J being unimpressed by many aspects of Ms Wen’s evidence.
For example, Edwards J said she “found much of Ms Wen’s evidence regarding the events of 14 January 2014 to be implausible. Ms Wen said she never had any intention to sell the property”.[9] That evidence was “at odds with the objective evidence establishing her engagement in the negotiations”.[10] Similarly, Ms Wen’s evidence “that she only signed next to $5.28m because she wanted Mr Ngai to leave her alone” was also dismissed by Edwards J as “implausible”.[11]
[9]At [36].
[10]At [36].
[11]At [37].
Edwards J said that “in contrast to Ms Wen’s evidence, aspects of Mr Ngai and Dr Ngoi’s evidence about the two telephone calls appear[ed] plausible”.[12] Ultimately, however, Edwards J was persuaded by the absence of references in accounts given after 14 January 2014 to the three-way telephone conferences that Dr Ngoi and Mr Ngai said took place.
New evidence
[12]At [43].
Further evidence obtained since the High Court hearing suggests Mr Ngai did refer to a telephone conference between himself, Ms Wen and Dr Ngoi on 14 January 2014. That evidence is contained in a letter Mr Ngai wrote to his manager on 3 March 2014 setting out his version of events. That letter says Mr Ngai went to Ms Wen’s home at 4.30 pm on 14 January 2014 and that:
a conference call was arranged with the vendor, the buyer and me at 5.09pm for the discussion about the final price. The conference lasted for 6 minutes. I left at 5.30pm and confirmed with the buyer by phone of his acceptance of $5.28m.
On 28 March 2017 this Court granted the appellants leave to adduce on appeal Mr Ngai’s letter of 3 March 2014 on the basis the letter was fresh evidence and cogent as it went “directly to the Judge’s reasons for finding that she had not been satisfied that the respondent participated in the conference call.”[13]
[13]Ngoi v Wen [2017] NZCA 85 at [9].
If Edwards J had had the opportunity to consider Mr Ngai’s letter of 3 March 2014, it is possible she would have concluded Ms Wen did participate in a telephone conference with Mr Ngai and Dr Ngoi as they alleged. We do not, however, consider it necessary to overturn the factual findings made by Edwards J about the three-way telephone conference Dr Ngoi and Mr Ngai say took place between 5.09 pm and about 5.20 pm. This is because, in our assessment, the correct application of contract formation principles leads to the conclusion a binding contract was formed at about 5.30 pm on 14 January 2014.
Analysis
A binding contract is normally formed at the time acceptance of an offer is communicated to the offeror. It is sufficient for the acceptance to be communicated to an agent of the offeror who is authorised to receive the acceptance of the offer. This Court explained in Powierza v Daley:[14]
When an owner [of land] signs as vendor a sale and purchase agreement containing, not only all the terms of a proposed agreement and the names of both parties, but also a clause giving the agent authority to effect the sale, by delivering that document to the agent he ordinarily authorises the agent to conclude a contract by obtaining the signature of the other party …
[14]Powierza v Daley [1985] 1 NZLR 558 (CA) at 560.
Thus, where the vendor is the offeror and provides his or her agent with authority to communicate the offer to the purchaser, a binding contract may be formed when the purchaser communicates acceptance of the offer to the vendor’s agent.
Mr Bigio QC, counsel for Ms Wen, submitted that a real estate agent’s authority does not extend to creating the legal and binding contractual relationship for the sale of a property.[15] He suggested it was not within Mr Ngai’s authority to depart from the usual manner of dealing between Ms Wen and Dr Ngoi, which contemplated the acceptance of an offer by an initialling after an offer was made, particularly where that departure would result in a binding contract being formed.
[15]Quirk v Winter [1920] NZLR 98 (SC); and Wragg v Lovett [1948] 2 All ER 968 (CA).
We are satisfied Ms Wen must have intended that Mr Ngai would convey to Dr Ngoi her offer to sell the property for $5.28 million. The only rational reason why Ms Wen would have placed her initials next to the sum of $5.28 million at about 5.20 pm was to convey to Dr Ngoi her willingness to sell the property to him for that sum. When viewed objectively, Ms Wen clearly offered to sell the property for $5.28 million.
We are also satisfied that by appointing Mr Ngai as her agent, and including a clause in the agreement giving Mr Ngai from Barfoot & Thompson the authority to effect the sale, Ms Wen authorised Mr Ngai to receive Dr Ngoi’s acceptance of her offer. This was done when, at about 5.30 pm, Dr Ngoi told Mr Ngai he agreed to purchase the property for $5.28 million. Ms Wen’s apparent “seller’s remorse” soon after Dr Ngoi had confirmed to Mr Ngai his acceptance of Ms Wen’s offer does not undermine Mr Ngai’s authority to have received, on behalf of Ms Wen, Dr Ngoi’s acceptance of her offer at about 5.30 pm.
An alternative approach to examining contract formation is for the court to assess whether, when viewed objectively, all of the relevant exchanges between the parties have resulted in the formation of a contract. This “global approach” recognises that “a mechanical analysis in terms of offer and acceptance may be less rewarding than the test whether, viewed as a whole and objectively, the correspondence shows a concluded agreement”.[16] The global approach will normally involve the Court determining whether or not at a certain point in time the parties have “signified their assent to the same terms by signing and initialling the sale and purchase agreement and leaving it in the hands of an intermediary”.[17]
[16]Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 (CA) at 563 per Cooke J. See also DW McLauchlan “An Obvious Case of Offer and Acceptance?” (2003) 9 NZBLQ 109 at 115.
[17]Powierza v Daley, above n 14, at 563.
Edwards J and Mr Bigio proceeded on the basis that Dr Ngoi needed to re-initial Ms Wen’s offer to sell at $5.28 million before it could be said he had accepted that offer.
There was, however, no prescribed mode of acceptance that required Dr Ngoi to re-initial alongside the sum of $5.28 million. Normally, “[a]n offer which requires acceptance to be expressed or communicated in a specified way can generally be accepted only in that way”.[18] Where, however, there was no specific requirement that Dr Ngoi re-initial alongside the sum of $5.28 million it was open to him to communicate his acceptance of Ms Wen’s offer in other ways. We accept that normally, in the case of sale and purchase of land, parties intend to be bound by a formal document signed by both parties.[19] That is usually in order to avoid subsequent disputes about whether or not a contract was formed.[20] What is important, however, is not the formalities of how Ms Wen’s offer was accepted but whether there was clearly an acceptance of an offer. This point can be illustrated by posing a slight variation to the scenario we are examining. If at 5.30 pm Dr Ngoi had sent a text message to Ms Wen (or Mr Ngai) saying “thank you for your offer to sell the property for $5.28 million. I accept” it could not seriously be argued that it was also necessary for Dr Ngoi to re-initial the agreement next to the sum of $5.28 million in order for there to be a binding contract.
[18]HG Beale (ed) Chitty on Contracts: Volume 1 General Principles (32nd ed, Sweet & Maxwell, London, 2015) at [2–063].
[19]Carruthers v Whittaker [1975] 2 NZLR 667 (CA); Verissimo v Walker [2006] 1 NZLR 760 (CA); and Smada Group Ltd v Miro Farms Ltd [2007] NZCA 568, [2009] NZCCLR 4.
[20]Eccles v Bryant [1948] Ch 93 (CA) at 104.
This analysis is consistent with the requirements of s 24 of the Property Law Act 2007 which provide that in order to enforce a contract for the disposition of land it need be signed only “by the party against whom the contract is sought to be enforced”.[21] In this case that party is Ms Wen, alone. The requirements of s 24 are satisfied.
[21]See discussion DW McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [4.03] and [4.15]-[4.16].
In the present case, we are satisfied Ms Wen and Dr Ngoi intended that Dr Ngoi’s acceptance of the sale price of $5.28 million could be communicated by Dr Ngoi to Mr Ngai, provided Dr Ngoi made it clear he was agreeing to purchase the property for that sum. That was done during the telephone conversation between Dr Ngoi and Mr Ngai at 5.30 pm on 14 January 2014.
Conclusion
Applying traditional offer and acceptance principles to the factual findings made by Edwards J we are satisfied that between 5.09 pm and about 5.20 pm on 14 January 2014, Ms Wen offered to sell the property for $5.28 million. That offer was made by Ms Wen placing her initials alongside the figure of $5.28 million which had been inserted into the agreement document in her presence by Mr Ngoi.
Ms Wen’s offer was accepted by Dr Ngoi at approximately 5.30 pm when he communicated to Mr Ngai his acceptance of Ms Wen’s offer.[22] It was not necessary for Dr Ngoi to wait for Mr Ngai to bring the contract to him and re-initial alongside the sum of $5.28 million in order for there to be a concluded and binding contract.
[22]This is consistent with Edwards J’s factual finding that Dr Ngoi had orally agreed to Ms Wen’s counter-offer during the phone call at 5.30 pm: Ngoi v Wen, above n 3, at [91] and [94].
Applying the alternative global approach, when all communications between the parties and Ms Wen’s agent are looked at objectively, there was by 5.30 pm on 14 January 2014 a written agreement signed and initialled by both parties for the sale and purchase of the property for $5.28 million. The agreement was, by 5.30 pm, complete. No terms were left unresolved.
Whichever approach is taken, there was a binding contract in force by 5.30 pm on 14 January 2014.
The approach we have taken renders it unnecessary to consider whether Dr Ngoi “counter-offered” to purchase the property for a sum less than $5.3 million and whether Ms Wen accepted that “counter-offer” when she placed her initials alongside $5.28 million. That scenario was the focus of a lot of consideration in the High Court, and understandably, Edwards J did not believe it had a great deal of merit.[23]
Result
[23]If Dr Ngoi had made a genuine counter-offer to purchase for any sum less than $5.3 million it is difficult to understand why Ms Wen did not accept that offer by altering the price to $5,299,999. That is to say, we think it is implausible Ms Wen would have foregone $19,999 which is the implicit consequence of the scenario that she accepted a counter-offer to sell for any price less than $5.3 million.
For the reasons we have set out above, the appeal is allowed and the judgment and costs order of the High Court is set aside.
A binding contract was formed at about 5.30 pm on 14 January 2014 that is enforceable under s 24 of the Property Law Act. We direct it is to be performed within 30 days of the date of this judgment or on such other date agreed to by the parties.
The respondent is to pay the first appellant costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Buddle Findlay, Wellington for Appellants
Pidgeon Law, Auckland for Respondent
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