North Holdings Development Limited v Fernley HC Auckland CIV 2010-404-4254

[2010] NZHC 2210

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-4254

BETWEEN  NORTH HOLDINGS DEVELOPMENT LIMITED

Plaintiff

ANDEDWARD JOHN FERNLEY Defendant

CIV-2010-404-4255

AND BETWEEN            NORTH HOLDINGS DEVELOPMENT LIMITED

Plaintiff

ANDIAN KENNER JACOB Defendant

Hearing:         1 December 2010

Appearances: Mr R B Stewart QC and Ms D Wong for plaintiff

Mr D Grove for defendants

Judgment:      9 December 2010 at 12 noon

JUDGMENT OF LANG J

[on applications for summary judgment]

This judgment was delivered by me on 9 December 2010 at 12 noon, pursuant to Rule

11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

R Bruce Stewart QC, Auckland Mr D Grove, Auckland Heimsath Alexander, Auckland

Alexander Dorrington, Auckland

Date……………

NORTH HOLDINGS DEVELOPMENT LTD V FERNLEY & JACOB HC AK CIV-2010-404-4254  9

December 2010

[1]      North Holdings Development Limited (“North Holdings”) is the developer of a ten hectare parcel of rural land situated near Marsden Point in Northland.   It is developing the property in stages from farmland into industrial sites.   The development is located near the port at Marsden Point.

[2]      In December 2007 the defendants, Mr Fernley and Mr Jacob, entered into agreements to purchase four of the sections in the development.   North Holdings called upon Mr Fernley and Mr Jacob to complete the purchase of their sections in April and June 2010 when titles to the new sections had become available.  To date, however, they have refused to comply with that request.

[3]      Mr  Fernley  and  Mr  Jacob  say  that  they  have  validly  terminated  the agreements, and that they are no longer bound to complete the purchase of the four sections.  They contend that North Holdings’ director, Mr Oliver Scott, misled them regarding material facts about the proposed development during the negotiations that took place before they entered into the agreements.  They say that this entitled them to cancel the agreements in terms of the Contractual Remedies Act 1979. They also say that North Holdings engaged in misleading and deceptive conduct in terms of the Fair Trading Act 1986, and that they are entitled to relief under that Act.

[4]      North Holdings rejects these claims.  Mr Scott denies that he has misled Mr Fernley and Mr Jacob in any way.   North Holdings says that the defendants are contractually bound to complete the purchase of their sections, and that there is no reason why they should not be held to their obligations under the agreements.  For that reason it now seeks summary judgment against both defendants.   It asks the Court to make an order requiring Mr Fernley and Mr Jacob to complete the purchase of the four sections.

Relevant principles

[5]      The  principles  to  be  applied  in  determining  an  application  for  summary judgment were not in dispute.  They have been clearly established through decisions of the Court of Appeal such as Pemberton v Chappell [1987] 1 NZLR 1 (CA); Grant v New Zealand Motor Corporation Ltd [1989] 1 NZLR 8 (CA); Westpac Banking

Corporation  v  M  M  Kembla  New  Zealand  Ltd  [2001] 2 NZLR 298 (CA); and

Krukziener v Hanover Finance Ltd (2009) 9 NZBLC 102,862 (CA).

[6]      In considering the applications for summary judgment, the Court is required to apply the following general principles:

a)       North Holdings must satisfy the Court that Mr Fernley and Mr Jacob have no arguable defence to the claims brought against them.    The issue is whether there is a real question to be tried.

b)It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise.      Issues  of  law,  even  though  they  may  be  complex,  can, however, be determined in an application for summary judgment.

c)      Although the Court should adopt a robust approach, nevertheless summary judgment may be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence.

[7]      The allegations that Mr Fernley and Mr Jacob make regarding Mr Scott’s conduct lie at the heart of their resistance to North Holdings’ applications for summary judgment.  For that reason it is appropriate to set those allegations out in greater detail before considering the discrete issues that the application raises.

The defendants’ allegations regarding Mr Scott’s conduct

[8]      Mr  Fernley  agreed  to  purchase  Lots  157  and  188  of  the  proposed development, and agreed to pay the sums of $666,150 plus GST and $639,000 plus GST for them respectively.  Mr Jacob (through his attorney Mr Fernley) agreed to buy Lot 158 for the sum of $630,900 plus GST and Lot 187 for $622,500 plus GST. They paid cash deposits equivalent to ten per cent of the purchase price for each section immediately after signing the agreements.  The deposits were to be held in trust by a stakeholder until such time as the agreements became unconditional or

were validly terminated.   The agreements required the defendants to complete the purchase of the sections ten working days after they received notice that a search copy of the new titles in respect of each section was available from Land Information New Zealand.

[9]      On  23  March  2010  North  Holdings’  solicitors  advised  the  defendants’ solicitors that search copies of the new titles in respect of Lots 157 and 158 were available.  On that basis they noted that the agreements provided for settlement to take place on 8 April 2010 in respect of those sections.   They issued settlement statements setting out the amount required to settle the purchase of the two sections on that date.

[10]     By  letter  dated  8  April  2010  the  defendants’  solicitors  advised  North Holdings’ solicitors that the agreements were at an end.  The letter set out one of the grounds for terminating the agreements as follows:

5.We have also been told by the Purchaser that when they met with your client, Oliver Scott (prior to entering into the agreements for sale and purchase in December 2007) that they were advised that the rail link to the development would be operational by the settlement date.  The rail link is not operational and will not be for some time, if at all.  The rail link is essential to this development.    The Purchaser is disappointed  that  the Vendor’s  representations  in this  regard  were false.

6.Given the above issues, I am advised that the Purchaser considers the agreements are at an end.

[11]     On 8 May 2010 North Holdings’ solicitors advised the defendants’ solicitors that the new titles for Lots 158 and 188 were available.   They also provided the defendants’ solicitors with settlement statements setting out the amounts required to complete the purchase of those sections on 1 June 2010.

[12]     The defendants’ solicitors responded on 3 June 2010 by stating that, for the reasons given earlier in relation to Lots 157 and 187, the requirement to settle the purchase of Lots 158 and 188 was also in dispute.

[13]     As can be seen from the correspondence, the defendants’ allegations arise out of discussions that occurred between the defendants and Mr Scott prior to the point

at which Mr Fernley signed the agreements.  They concern a proposal by Ontrack, the company responsible for establishing New Zealand’s rail network, to establish a

16 kilometre rail link between Marsden Point  and the main trunk line between Auckland and Whangarei.  The defendants contend that Mr Scott told them that the link would be established and operational before they would be required to complete the purchase of any sections in the development.  It now appears that, if the rail link is established at all, that will not occur until 2015 at the earliest.   The defendants contend that this was a misrepresentation by Mr Scott that entitles them to cancel the agreements.

[14]     Mr Scott responded to the allegations in the first affidavits that he provided in support of the present applications.  In these he deposes:

33.At paragraph 5 of the defendant’s solicitor’s letter dated 7 April 2010 [sic], it is alleged that prior to entering into the Agreement for Lot

157,  I  personally  told  the  defendant  “that  the  rail  link  to  the

development would be operational by the settlement date”.   At the time that the defendant entered into the Agreements, there was no certainty as to when the Agreements would be called for settlement, nor was there any certainty around if and/or when the proposed rail link would be completed, if at all.

34.I was aware that the planning process for the designation of the route does  take,  (and  indeed  has  taken)  one  to  two  years.    The  design process is complex and would be expected to take at least one year and possibly two years.  After that, the actual construction of the rail was expected to take between two and four years.   It would be a physical impossibility for the rail to be up and running before they settled.  I would never have suggested such a ridiculous thing.

35.I was involved in preliminary discussions in 2006 with OnTrack and its consultants, Beca, to discuss whether a rail link would take place, and if it did, where it would be located, and how it would be constructed.  At that time the trail link had not been designated by On- Track, and there was no certainty surrounding it whatsoever.  Indeed the rail was not designated until December 2009, and the process is not completed and is subject to several appeals.

36.I am an experienced developer with more than 20 years’ experience in commercial development.   I understand the importance of providing potential purchasers with correct information and would never have made a representation when I knew it to be false.  The fact is that at the time that the purchaser entered into the Agreements, given that the rail link was outside my control, and there was no certainty about when settlement would occur, it is simply nonsensical to suggest that I would  have  made  such  a  representation.    Whilst  discussions  with

OnTrack in the early days were positive about the rail, there has never been a certainty about it occurring.

37.It is my belief that the allegation has been raised by the defendant in an attempt to avoid the Agreements.

38.Contrary to what the defendant through his solicitors alleges in their letter, the rail link is not essential to the Development.  There was no term in the contract that made the Agreements conditional upon the rail being completed.  If the defendant considered the completion of the rail link to be an essential term then I would have expected him to include the term in the Agreements, or at the very least, raise the matter with me earlier.

39.There are ongoing public consultations with OnTrack concerning the rail link.  The link has been widely publicised.  Newspapers articles back in late 2006 show that the rail link was under consideration, but clearly show it was nowhere near finalised.   … In addition, all purchasers at the Development have been kept informed on progress concerning the Development and the Marsden Point rail designation. For example, in December 2008 and October 2009 the plaintiff’s solicitors sent promotional material concerning the status of the rail link to the defendant’s solicitors.   … The material refers to the rail designation, and records that the Northland Regional Council and OnTrack had signed a joint venture agreement and made excellent progress with the land designation process for the rail corridor.  The defendant was specifically made aware of what progress had been made at that time by this material.

[15]     The defendants dispute Mr Scott’s evidence regarding what he told them before they entered into the agreements.  Mr Fernley says that he became interested in the development after talking to an acquaintance, Mr Mark Granger.  He says that Mr Granger suggested that they should meet with Mr Scott to discuss the possibility of investing in the development. He and Mr Granger then met with Mr Scott in September or October 2007 at Mr Granger’s apartment.  He deposes:

8.     At this first meeting, Mr Scott told us in detail about his development.

He told us that the whole project stemmed from two factors being:

(a)     The existing port at North Port was to be transformed into a “Super Port”, creating a deep water port where the largest of international container vessels would be able to load and unload cargo.  He also noted that this port was the closest port in New Zealand to Australia.

(b)     He said that the entire plan and development was being built around a rail link that was to be built between Oakleigh and North Port (approximately 16 kilometres).   He said that this would create an environmentally friendly platform for the container land passage and would also reduce trucking on the roads significantly.

…

10.Mr  Scott  showed  us  a “marketing plan”.   This  is attached to the agreement.  The plan showed the development was centred around the rail link and that there was to be a “proposed town centre” directly opposite the road and railway distribution precinct.  He said that these lots were not for sale as he would get a higher price for them closer to completion.

11.We listened to Mr Scott’s sales pitch for approximately 1 hour.  After he left Mark and I discussed the proposal and agreed that if the port was redeveloped and the rail link was also completed now would be a good time to invest.  Although I did not know the area very well, we both agreed that the only basis upon which the development would be successful would be if the port and promised rail link was completed. If  these  were  not  completed,  the  lots  were  basically  useless  for anything apart from grazing stock.

12.During the next couple of days after looking at the plans, Mark and I identified lots 157 and 188 on the marketing plan as having potential as they had dual road access.  We then arranged to meet Mr Scott at Marsden Point to look further at the proposed development.

13.This meeting took place in approximately November 2007.  I cannot recall the exact date. There was not much to look at the time however, and indeed all there was at that time was farmland.  However, I clearly remember Mr Scott on several occasions at this meeting stating that the rail link was going “straight through his development”.   We discussed when the development would be settling and he said approximately two years.  It was both clear from the material provided to us and our discussions that the rail link was critical and Mr Scott said that the rail link would be completed prior to the agreements being settled.

[16]     Mr Fernley says that following the meeting at Marsden Point, he spoke to Mr Jacob, who at that time was living in Singapore.  He says that he told Mr Jacob that Mr Scott had advised him that the rail link to the development would be completed prior to the point at which purchasers would be required to complete the purchase of sections in the development.

[17]     Mr Fernley says that Mr Jacob needed to know more detail about the rail link and the port development before he was prepared to commit himself to the purchase of sections in the development.   For that reason Mr Fernley and Mr Granger met with Mr Scott again, this time over lunch at an Auckland restaurant.   Mr Fernley describes this meeting in the following terms.

18.I arranged a meeting at Soul Bar & Restaurant with myself, Mark and Mr Scott to meet over lunch.  The entire lunch was spent discussing the development at Marsden Point.

19.I raised several questions on behalf of Ian.  The first was whether the rail link and deepwater port were definitely going ahead.   Mr Scott stated again what he had told Mark and myself earlier.  He said “Yes, the rail link will be in before you settle and work is to begin on the Port shortly, otherwise the development would only be worth farming prices.”  Mr Scott then began to laugh and assured us that an adjacent industrial site was being developed at the same time and that both developers would have rocks in their heads to try and set up two industrial parks in the middle of nowhere.

[18]     Mr Fernley says that he signed the agreements for the purchase of all four sections in December 2007 on the basis of these discussions with Mr Scott.

[19]     In January 2008 Mr Fernley attended a further meeting with Mr Scott, this time  with  Mr  Jacob  also  being  present.    The  meeting  took  place  at  the  same restaurant where the earlier meeting had been held.  Mr Jacob’s recollection of this meeting is as follows:

12.At  this  meeting,  Mr  Scott  confirmed  again  the  importance  of  the railway and the fact that it would be completed prior to settlement.

…

14.We discussed the marketing plan and the proximity of the proposed sections to the rail link.   He said everything around the link had already sold.  He said that the Labour Government had approved the rail link and feasibility and construction would commence shortly to coincide with the development.

15.Mr Scott made it clear in no uncertain terms that the rail link would be completed prior to the settlement of the agreements for sale and purchase.

16.I specifically remember Mr Scott saying that without the rail link the development would only be worth farming prices.

17.There was no question in my mind after that discussion that the rail link was part of the development and central to it.  I would never have had the agreements for sale and purchase signed unless Mr Scott had committed, as he did, to the fact that the rail link would be completed and operating prior to settlement.

[20]     Mr Granger has also filed an affidavit in which he confirms the accuracy of the events described by Mr Fernley and Mr Jacob in their affidavits.  In particular, he deposes:

7.      I specifically confirm that Mr Scott said that the deep water port was underway and the rail connection would be completed prior to the agreements for sale and purchase settling.  Both Mr Fernley and Mr Jacob specifically noted that there was no point in making the investment unless that was the case.

[21]     Mr Scott disputes the accuracy of the evidence of Messrs Fernley, Jacob and

Granger.  In his affidavit in reply he deposes:

6.I agree that I discussed the proposed Marsden Point rail link at my meetings with Messrs Fernley and Jacob.   However, I did not give assurances  that  the  rail  link  would  be  completed  prior  to  the agreements  being  settled.     My  reasons  for  this  are  set  out  at paragraphs 33 to 39 of my first affidavit.

7.Both the defendants allege that I stated work would begin on the Port and that if the Port and rail link did not go ahead, the development would only be worth farming prices.  (Fernley affidavit paragraph 19, Jacob affidavit paragraph 16).

8.I discussed the development of the deep water port at Marsden Point and spoke with them about the views regarding the eventual success of  the  Development.     However,  I  did  not  give  any  assurances regarding the development of the deep water port.  The development of a resource as large as a port is not something within my control and requires government/ local authority support to succeed.

9.Nor did I say without the rail link and Port, the Development would “only be worth farming prices”.  Apart from being untrue, it would be ridiculous for me to speak so disparagingly about my own Development.

[22]     There is clearly a significant factual dispute in respect of the statements that Mr Scott is said to have made regarding the timeframe within which the rail link would be completed.  The completion of the rail link was entirely outside Mr Scott’s control.   He also clearly knew that the rail link would take at least four years to complete, and that it was likely that title to the sections would be available within approximately two years. For those reasons I accept that it seems inherently unlikely that he would make the categorical statements that the deponents for the defendants attribute to him.

[23]     It is impossible, however, to determine that factual dispute in the context of an application for summary judgment.  No fewer than three persons have stated on oath that Mr Scott told them that the rail link would be completed prior to the point at which purchasers would be required to complete the purchase of sections in the

development.  For that reason I proposed to proceed on the basis that it is arguable that Mr Scott made those statements.

The central issue

[24]     The defendants contend that they were entitled to cancel the agreements by virtue of s 7(3) and (4) of the Contractual Remedies Act 1979.  Those subsections provide:

7        Cancellation of contract

…

(3)     Subject to this Act, but without prejudice to subsection (2) of this section, a party to a contract may cancel it if—

(a)     He has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to that contract; or

(b)     A [term]  in  the  contract is  broken  by another  party to  that contract; or

(c)     It is clear that a [term] in the contract will be broken by another party to that contract.

(4)Where subsection (3)(a) or subsection (3)(b) or subsection (3)(c) of this section applies, a party may exercise the right to cancel if, and only if,—

(a)     The parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the [term] is essential to him; or

(b)     The effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be,—

(i)      Substantially to reduce the benefit of the contract to the cancelling party; or

(ii)     Substantially  to  increase  the  burden  of  the  cancelling party under the contract; or

(iii)    In relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.

[25]     The defendants say that they were induced to enter into the agreements to purchase  the  sections  on  the  basis  of  the  representations  that  Mr  Scott  made

regarding the likely date of completion of the new rail link.  They argue that the truth of those representations was essential to them, and that they would not have entered into the agreements if the statements had not been made.   They also say that the effect of the misrepresentation is that the benefit of the agreements has been substantially reduced for them.   This is because the sections are now worth much less than they would have been worth if, as promised by Mr Scott, they were located adjacent to an existing rail link.

[26]     North Holdings contends that, even if Mr Scott made the statements that the defendants   attribute   to   him,   the   applications   for   summary   judgment   must nevertheless succeed.  They say that this follows from the fact that each agreement contained a provision (Clause 5.7) that effectively precludes the Court from having regard  to  representations  made  during  pre-contractual  negotiations.    This  is  the central issue to be determined on the applications for summary judgment.

Does clause 5.7 of each agreement prevent the defendants from relying upon representations made during pre-contractual negotiations?

[27]     Clause 5.7 of each agreement provides as follows:

5.7      No Vendor Warranty

The Purchaser acknowledges that they have entered into this Agreement and are purchasing the Property solely in reliance on their own judgment and not upon any representation or warranty, other than those expressed or implied in this Agreement, made by the Vendor or any agent of the Vendor.

[28]     North Holdings submits that the courts have consistently upheld contractual provisions such as clause 5.7.  By way of example, they point to PAE (New Zealand) Limited v Brosnahan (2010) 9 NZBLC 102,862 (CA).  In delivering the reasons of the Court of Appeal in that case, Harrison J referred at [24] to the following well- known passage from the judgment of McKay J in Brownlie v Shotover Mining Ltd CA 181/89, 21 February 1992 at 31-33:

There can be nothing inherently unfair in such an exclusionary clause.  It is highly desirable that written contracts should be so drawn as to state all the terms of the intended contract, and so avoid the uncertainties which can arise from allegations of verbal representations or collateral warranties.  If parties

have not agreed to include express warranties in their written contract, then it is reasonable for them to state expressly that verbal warranties are excluded.

…

It would be a matter of concern if commercial people acting in good faith could not, in entering into a transaction such as this, achieve certainty by a written contract excluding liability for prior statements by one of them if that is what they wished to do.

[29]     The defendants say that it is arguable that Clause 5.7 does not apply in the circumstances of the present case.   Alternatively, they say that s 4(1) of the Contractual Remedies Act 1979 permits the Court to go behind a clause such as Clause 5.7 where it is fair and reasonable to do so having regard to all the circumstances.

Is it arguable that Clause 5.7 does not apply in the circumstances of the present case?

[30]     This argument relies upon the fact that clause 5.7 does not apply to express and implied warranties given by the vendor in each agreement.   The defendants accept that the representations regarding the date of completion of the rail link did not become an express warranty in any of the agreements.  They contend, however, that it is arguably an implied warranty in each agreement.  They therefore say that Clause 5.7 does not apply to those representations, and that they are entitled to rely upon them as providing a valid basis for terminating the agreements.

[31]     The defendants argue that the implied warranty arguably arises as a result of two factors.  First, they point to the words that Mr Scott used.  They say that these amounted to an unequivocal representation that the rail link would be in place prior to the point at which purchasers would be required to complete the purchase of their sections.   Secondly, they rely upon items depicted in plans of the proposed development that were annexed to each agreement.   The plans depicted a railway line running alongside the northern boundary of the development.   The plans also depicted a large block of land along the northern boundary as being devoted to a “Road and Railway Distribution Centre”.   Taken together, the defendants contend that these factors make it arguable that the agreement contained an implied warranty

to  the  effect  that  the  development  would  contain  a  rail  link  by  the  time  that purchasers were required to pay for their sections.

[32]     The defendants’ argument on this point depends to a large extent upon their evidence regarding the assurances that Mr Scott gave them regarding the likely date of completion of the rail link.   If that evidence is ultimately accepted, it would establish (as unlikely as it may presently seem) that Mr Scott categorically told Mr Fernley and Mr Granger before Mr Fernley signed the agreements that the rail link would be in place by the time that purchasers would be required to pay for their sections.   On its own, I do not consider that that evidence would be sufficient to establish the arguable existence of an implied warranty to the same effect.

[33]     I accept, however, that the plans confirm the impression that the rail link was an essential part of the proposed development.   The railway line is shown in the plans as being in place, and a significant part of the development revolves around it. Moreover, the existence of the railway line is not expressed in tentative terms.  It is not, for example, described as a “Proposed rail link” in the same way that one of the roads in the development is described as a “Proposed Town Centre Bypass Road”. Rather, it is depicted as something that is already in place.

[34]     The defendants must obviously have known that the rail link would take some time to become a reality.  That is not, however, the point.  The point is whether the agreement contained an implied warranty to the effect that the rail link would be in place before the defendants would be called upon to complete the purchase of their sections.   I consider that the representations by Mr Scott, coupled with the items depicted by the plan, are sufficient to make it arguable that the agreements did contain that warranty.

[35]     That being the case, the defendants have established that it is arguable that clause 5.7 does not apply in the circumstances of the present case.

[36]    It is therefore not strictly necessary for me to consider the defendants’ alternative argument.   In case I am wrong regarding the existence of an implied warranty, however, I will consider it briefly.

Is the Court entitled to go behind clause 5.7?

[37]     In this context the defendants rely upon s 4(1) of the Contractual Remedies

Act 1979, which provides as follows:

4       Statements during negotiations for a contract

(1)If a contract, or any other document, contains a provision purporting to preclude a Court from inquiring into or determining the question—

(a)     Whether  a  statement,  promise,  or  undertaking  was  made  or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or

(b)     Whether,   if   it   was   so   made   or   given,   it   constituted   a representation or a term of the contract; or

(c)     Whether, if it was a representation, it was relied on—

the  Court  shall  not,  in  any  proceedings  in  relation  to  the  contract,  be precluded by that provision from inquiring into and determining any such question unless the Court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to all the circumstances of the case, including the subject-matter and value of the transaction,  the  respective  bargaining  strengths  of  the  parties,  and  the question whether any party was represented or advised by a solicitor at the time of the negotiations or at any other relevant time.

…

[38]     In determining whether it is fair and reasonable to go behind a contractual provision such as clause 5.7, all of the circumstances in which the parties entered into the agreement in question will need to be taken into account.  For this reason, it will usually be necessary for the issue to be determined at trial, when the Court can make an assessment in the light of evidence that has been tested by cross- examination.

[39]     In this case several factors suggest that it may be fair and reasonable for the Court to accept that clause 5.7 is conclusive, and that the Court should not go behind it.   These include the fact that this was a commercial transaction between businessmen.  The defendants were prepared to commit themselves to a transaction in which they were to pay more than $2.5 million plus GST for the four sections. They were also apparently able to fund cash deposits of approximately $250,000

without difficulty.   This suggests that they were men of some experience in transactions such as this.

[40]     There can be no suggestion that Mr Fernley was under pressure or at a disadvantage in his dealings with Mr Scott.  He did not sign the agreements until two months after he first met Mr Scott at Mr Granger’s apartment.  During that period he accepts that he discussed the proposed purchase with Mr Granger, and he also had access to solicitors if he needed them.   This period also gave Mr Fernley ample opportunity to make such enquiries as he deemed appropriate of parties directly involved in the proposed rail link.  One would think that enquiries with Ontrack, the party responsible for developing the link, or with the Northland District Council would have given him an accurate idea of when the link was likely to be completed.

[41]     The principal difficulty with this argument for present purposes, however, is the fact that Mr Scott says unequivocally that he has always known that it would take at least four years to complete the rail link.  Both parties have always proceeded on the basis that it would take approximately two years for title to the new sections to become available.   This means that Mr Scott has always known that purchasers would be required to complete the purchase of their sections before the point at which the rail link had been completed.   That fact must be measured against the evidence for the defendants that Mr Scott told them that the link would be completed prior to the point at which they would be required to pay for their sections.  If the Court ultimately accepts that he made that representation, he clearly did so in the knowledge that it had no reasonable factual basis.  This in turn may make it fair and reasonable for the Court to have regard to the representations notwithstanding the existence of clause 5.7.

[42]     The end result is that the factual dispute between Mr Scott and the defendants precludes me from determining the s 4(1) issue at summary judgment level as well.

Would the representations give rise to an arguable right to cancel the agreements?

[43]     As  I have already indicated,  the  defendants  depose  that  the  truth  of  the representations  was  essential  to  their  decisions  to  purchase  sections  in  the

development.  They also say, although they have not provided evidence to support their assertion, that the benefit of the agreements is now substantially less to them than would have been the case if the rail link was in place as they had been led to believe by Mr Scott.

[44]     A contract may be cancelled for misrepresentation where the parties have expressly or impliedly agreed that the truth of the representation is essential to them: s 7(4)(a) Contractual Remedies Act 1979.  The rail link was obviously a matter of considerable discussion with Mr Scott before the agreements were signed, and it was also depicted in the plans attached to each agreement.   Logic also suggests that it may well have been a significant factor in the defendants’ decisions to acquire the sections.

[45]     I also accept that there is evidence to suggest that the proposed rail link was not pivotal to the decision to enter into the agreements.   In particular, Mr Fernley deposes that he and Mr Granger “identified Lots 157 and 158 as having potential on the marketing plan because they had dual road access”.  It would be inappropriate, however, to dismiss the defendants’ sworn assertions regarding the importance of the proposed rail link to their decision to enter into the agreements without having seen and heard them give evidence.

[46]     I therefore accept that the defendants have established this aspect of their case to an arguable standard.

Result

[47]     For these reasons the applications for summary judgment cannot succeed.  It is  not  necessary for  me  to  go  on  to  examine the alternative  arguments  for  the defendants based on estoppel and alleged breaches of the Fair Trading Act 1986. They, too, will turn largely upon resolution of the factual dispute that lies at the heart of this proceeding.

[48]     The applications for summary judgment are accordingly dismissed.

[49]     The  issues  that  the  proceedings  raise  are,  however,  relatively  narrow  in scope.   Interlocutory matters should also be able to be kept within defined limits. For that reason I consider that it ought to be possible to bring the proceedings to trial quickly.  I propose to make interlocutory directions with that object in mind.

Interlocutory directions

[50]     I now direct:

(a)     Affidavits of documents are to be filed and served by 14 February

2011.

(b)     Inspection is to be completed by 28 February 2011.

Next event

[51]     A case management conference, which is to be treated as the second case management conference in this proceeding, is to be held by way of telephone conference on 8 March 2011 at 4.15 pm.

[52]     Issues to be discussed at that conference will be: (a)    Compliance with the above directions;

(b)     Whether any further interlocutory matters need to be disposed of;

(c)     Whether the parties wish to avail themselves of some form of ADR; (d)         The allocation of a trial date.

Costs

[53]     Costs on the applications for summary judgment are reserved.

Lang J