Peters v Kafalava
[2022] NZHC 1799
•26 July 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002381
[2022] NZHC 1799
BETWEEN ANDRE JOHN PETERS
Plaintiff
AND
OFA UMU KI SIA TONGA CAMELIA KAFALAVA
Defendant
Hearing: 20 July 2022 Counsel:
Jol Bates for the Plaintiff
No appearance for the Defendant
Judgment:
26 July 2022
JUDGMENT OF MOORE J
This judgment was delivered by me on 26 July 2022 at 2:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar / Deputy Registrar Date:
PETERS v KAFALAVA [2022] NZHC 1799 [26 July 2022]
Introduction
[1] Andre Peters and Ofa Kafalava entered into an arrangement for the purchase of a rental property in Flaxmere, Hastings. Mr Peters claims that Ms Kafalava agreed to obtain finance and purchase the property in her name and hold it on trust for him in exchange for monetary compensation.
[2] Mr Peters says that Ms Kafalava failed to make mortgage payments. He now claims that she:
(a)breached their agreement by failing to transfer the property to him upon request; and
(b)failed to acknowledge his beneficial ownership of the property and transfer the property to him upon request, in breach of trust.
[3] Ms Kafalava did not file a defence to the claim. I am satisfied she has been made aware of Mr Peters’ claim and the remedy he seeks against her but has elected not to defend the claim or in any other way take part in these proceedings. That being the case, the matter was subsequently set down for formal proof before me.
Facts
[4] Mr Peters provided the Court with two affidavits in which he conveys his account of the arrangement between himself and Ms Kafalava.
[5] Mr Peters says that he and Ms Kafalava are family friends. He has known her family, in particular her father, for many years. At one stage he lived with the family for a period.
[6] In May 2013, Mr Peters entered into an agreement to purchase the property in Hastings for $155,000. Attached to his affidavit is a signed copy of the agreement for sale and purchase dated 18 May 2013. He is named as the purchaser.
[7] Settlement was originally scheduled for 14 May 2014. Mr Peters agreed with the vendor to extend the settlement date by one year in exchange for payment of a
further $15,000 non-refundable deposit. The total deposit for the property was
$35,000. This is corroborated by a letter from Mr Peters’ solicitors, Langley Twigg, dated 12 May 2014.
[8] Mr Peters deposed that he was subsequently unable to obtain finance for the property. The reason why is unexplained. This presents as an unusual feature of the case, given that Mr Peters had sufficient funds to pay the deposit, meet mortgage repayments and maintenance costs, and on top of that pay Ms Kafalava $4,000 in cash for her assistance.
[9] In any event, Mr Peters says he and Ms Kafalava orally agreed that she would apply for a mortgage loan and complete the purchase of the property for his benefit. Mr Peters would assume liability for the loan. He would pay her the abovementioned fee as compensation for her assistance.
[10] Around 18 May 2015, Mr Peters and Ms Kafalava went to the Henderson branch of The Co-operative Bank. They sought a loan for $124,000. The amount of
$120,000 was required to pay the balance of the purchase price. The remaining $4,000 was to be paid to Ms Kafalava.
[11] That same day the pair incorporated Rakiraki Investments Ltd (“Rakiraki”). Ms Kafalava was the sole director. The trustees of the Peters Family Trust were the shareholders. Mr Peters cites Companies Office records confirming this. He deposes that their intention was for the property to be held by Rakiraki.
[12] A few days later on 21 May 2015, The Co-operative Bank advised that the loan application was unsuccessful.
[13] The pair applied for a loan from Westpac Banking Corporation (“Westpac”). Mr Peters attaches to an affidavit an email he sent to a Westpac representative. There he requests a loan on Ms Kafalava’s behalf of $124,000, with security title to be in the name of Rakiraki. Westpac provisionally granted the loan subject to Mr Peters obtaining a property valuation.
[14] Prior to settlement, Westpac advised that the loan would require a guarantee from the trustees of the family trust. One trustee was overseas. Mr Peters was unable to obtain his signature.
[15] Westpac advised that if the property was purchased in Ms Kafalava’s name no guarantee would be required. Mr Peters deposes that he and Ms Kafalava agreed that she would purchase the property in her name and hold it on trust for him.
[16] Settlement occurred on 8 June 2015. Westpac reimbursed $1,500 in legal costs, which Mr Peters gave to Ms Kafalava as further compensation. The following day he gave her father a further $1,000. This is to some extent corroborated by a copy of an email conversation which appears to be between Mr Peters and Ms Kafalava. In the emails he refers to the recipient as “Ofa”, but the account is named “Karolinah Tuiwasawasa”. Mr Peters also attaches a copy of a statement from a bank account in his name recording a $1,000 withdrawal from an ATM on 9 June 2015.
[17] A few days later on 12 June 2015, Langley Twigg wrote a letter to Mr Peters and Ms Kafalava. Relevantly, it enclosed a statement of account recording the funds paid by Mr Peters and a record of the title naming Ms Kafalava as the registered owner.
[18] The letter also enclosed a formal written declaration of trust for Mr Peters and Ms Kafalava to execute. An unsigned copy is attached to Mr Peters’ affidavit. He deposes that Ms Kafalava subsequently refused to sign it. He says that she never gave a satisfactory explanation for her refusal to do so.
[19] On 18 and 19 June 2015, Mr Peters was in Tonga with Ms Kafalava’s father. He made two withdrawals of Tongan Pa’anga from an ATM, equivalent to approximately $2,000. He gave this to Ms Kafalava’s father in recognition of the agreement.
[20] Mr Peters deposes that the property was tenanted. Rental payments were collected by a property manager and used to meet mortgage repayments and outgoings. The tenant then absconded. Mr Peters paid into the rental account to reduce the overdraft facility. Whenever the rental account became overdrawn,
Ms Kafalava would contact him seeking payment. He also paid rates invoices after he became aware that they were unpaid.
[21] Mr Peters says he maintained the property. In 2016, he repaired the gate and fence and arranged for the replacement of a lock. Around May 2017, he cleaned the property before new tenants moved in.
[22] Mr Peters then arranged for monthly rental payments to be deposited into his account. He said he would arrange for the payment of rates and transfer funds to Ms Kafalava to meet mortgage and insurance payments. She failed to make payments around October 2017. Mr Peters says she told him that the rental account was in overdraft and that she had spent some of the rental income.
[23] On 17 September 2021, Langley Twigg became aware that a Property Law Act 2007 notice had been served on Ms Kafalava. They contacted Westpac by email. Westpac’s solicitors responded. They advised that the notice was to expire on 8 October 2021 and that $10,604.24 was due. Mr Peters paid the amount owing in two instalments on 24 September 2021.
[24]Mr Peters commenced his claim on 10 December 2021.
Did Ms Kafalava fail to transfer the property to Mr Peters upon demand in breach of their agreement?
[25] The first basis upon which Mr Peters advances his claim is that Ms Kafalava breached their agreement by failing to transfer the property to him upon request.
[26] Mr Bates, for Mr Peters, submits that it is clear that the nature of the oral agreement was contractual. He submits that the agreement included an implied term that Ms Kafalava would transfer the property the property to Mr Peters when required. He submits that the evidence shows that Mr Peters met all costs associated with the property and was intended to benefit from the property absolutely.
Was there an agreement between Mr Peters and Ms Kafalava?
[27] In my view Mr Peters’ evidence establishes that there was an agreement between himself and Ms Kafalava. His uncontradicted account is that he and Ms Kafalava orally agreed that she would purchase the property in her name but that he would assume liability for the outgoings and would pay her a fee as compensation. His account is corroborated by the contemporaneous documents annexed to his affidavits. Those include the agreement for sale and purchase of the property, the record of title, the correspondence with Langley Twigg (who acted for him and Ms Kafalava), his bank records and his email correspondence with Ms Kafalava. How each document supports his account has been described above.
[28] I am satisfied that the agreement was contractual in nature. The acquisition of the property was a commercial investment for Mr Peters. That is consistent with engaging a property manager and tenanting the property. He paid Ms Kafalava and her family a total of approximately $8,500 in consideration for her assistance. As noted by Mr Bates, whether that is a commercially savvy deal is peripheral. Ms Kafalava would no doubt have expected to hold Mr Peters to his side of the bargain if he ceased meeting the outgoings for the property.
Is Ms Kafalava obliged to transfer the property to Mr Peters under the agreement?
[29] The agreement is silent as to the circumstances in which it may end. Mr Bates properly accepted that Mr Peters could not depose to the specific circumstances in which the property would be transferred from Ms Kafalava to Mr Peters. He advised that the parties had not discussed this eventuality in the necessary detail. The question is therefore whether there was an implied term of the agreement that Ms Kafalava would transfer the property to Mr Peters in any circumstances.
[30] The Supreme Court recently set out the following principles governing the implication of terms in Bathurst Resources Ltd v L & M Coal Holdings Ltd:1
“(a)The legal test for the implication of a term is a standard of strict necessity, a high hurdle to overcome.
1 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [116].
(b)The starting point is the words of the contract. If a contract does not provide for an eventuality, the usual inference is that no contractual provision was made for it.
(c)While the task of implication only begins when the court finds that the text of the contract does not provide for the eventuality, the implication of a term is nevertheless part of the construction of the written contract as a whole. An unexpressed term can only be implied if the court finds that the term would spell out what the contract, read against the relevant background, must be understood to mean.
(d)As with the task of interpreting a contract, the inquiry for the court when considering the implication of a term is an objective inquiry — it is the understanding of the notional reasonable person with all of the background knowledge reasonably available to the parties at the time of contract that is the focus of this assessment. The court is tasked with the role of constructing the understanding of that reasonable person.
(e)Thus, the implication of a term does not depend upon proof of the parties’ actual intentions, nor does it require the court to speculate on how the actual parties would have wanted the contract to regulate the eventuality if confronted with it prior to contracting.
(f)The BP Refinery conditions are a useful tool to test whether the proposed implied term is strictly necessary to spell out what the contract, read against the relevant background, must be understood to mean. Whilst conditions (4) and (5) must always be met before a term will be implied, conditions (1)—(3) can be viewed as analytical tools which overlap and are not cumulative. The business efficacy and the ‘so obvious that “it goes without saying”’ conditions are both ways, useful in their own right, of testing whether the implication of a term is strictly necessary to give effect to what the contract, objectively interpreted by the court, must be understood to mean.”
(footnotes omitted)
[31] The starting point is typically the words of the contract. Here, however, the agreement was formed orally and the precise words used to do so are unknown. In particular there is no evidence that the parties discussed Ms Kafalava’s obligation to transfer title of the property to Mr Peters at any given point.
[32] The usual inference is that if a contract does not provide for an eventuality, no contractual provision was made for it. In this case, however, viewing the contract in light of the relevant background inevitably results in such a term being necessary. The purpose of the agreement between Mr Peters and Ms Kafalava was to facilitate Mr Peters’ purchase of the property while obviating the need for him to personally obtain finance. Mr Kafalava knew this to be the case and accepted monetary
compensation in consideration. It was not open ended in the sense that the arrangement would continue indefinitely.
[33] The agreement would fail to achieve its purpose if there was no term governing how the arrangement would come to an end with the transfer of the property from Ms Kafalava to Mr Peters. Without such a term, Mr Peters would simply be purchasing the property for Ms Kafalava and paying her a premium on top. The contract would not make business sense.
[34] The presence of such a term also goes without saying. Ms Kafalava was purchasing the property in her name for Mr Peters. Self-evidently, the contract did not permit her to retain title to the property indefinitely. An officious bystander would interject that she must be obliged to transfer it at some point.
[35] The difficulty is defining the precise nature and content of the obligation, that is in what circumstances is Ms Kafalava obliged to transfer the property to Mr Peters? I consider Mr Peters’ obligations instructive here. Beyond paying Ms Kafalava compensation, his only other obligation under the contract is to meet her liability for mortgage repayments and outgoings associated with the property. It follows that on performing that term, Mr Peters will have met his obligations under the contract. In my view it is at this point that Ms Kafalava’s obligation to transfer the property must be triggered.
[36] I am accordingly prepared to find as a matter of fact that there was an implied term in the agreement that Ms Kafalava would transfer title of the property to Mr Peters upon him discharging or taking assignment of her mortgage liability.
Has Ms Kafalva breached the agreement?
[37] Mr Bates then submits that Ms Kafalava has breached the agreement by failing to transfer the property to Mr Peters on request. He accepts that there is limited evidence of the request and Ms Kafalava’s response to it. He submits that it is implicit in the need for proceedings that she was not amenable to Mr Peters’ demand.
[38] Although Mr Peters has not yet paid off the mortgage, the evidence supports the inference that Ms Kafalava refused such a proposition. Performance of the term would necessarily require her co-operation. This failure to facilitate the transfer in circumstances where Mr Peters would meet or take assignment of her mortgage liability must constitute a breach.
What is the appropriate remedy?
[39] Having found that Ms Kafalava has breached the agreement, it is not necessary to determine whether her failure to transfer the property also constitutes a breach of trust. The question is the appropriate remedy.
[40] Mr Bates submits that specific performance is the appropriate remedy. Specific performance is an order issued by the Court which requires a contracting party to fulfil their promise under that contract. It is a discretionary remedy which is normally granted when damages or other financial relief would be inadequate, and vice versa.2
[41] An award of specific performance is usually favoured in cases involving contracts for the sale of land.3 While the agreement in the present case is not a typical contract for the sale of land, it bears sufficient similarities to one. The essential terms involve Mr Peters paying the price for the land pursuant to the mortgage and Ms Kafalava subsequently transferring the property him, in exchange for a fee. In my view it follows that damages would not be an appropriate remedy.
[42]I therefore grant Mr Peters’ application for the specific performance.
Result
[43] I order that Ms Kafalava is to transfer title to the property at 3 Ramsey Crescent, Hastings upon Mr Peters taking assignment of or discharging her liability under the mortgage.
2 Attorney-General for England and Wales v R [2002] 2 NZLR 91 (CA) at [94].
3 See Foreman v Hazard [1984] 1 NZLR 586 (CA) at 594 where Richardson J commented that “[l]and is always treated as being of unique value in respect of which the common law remedy of damages is inadequate”.
[44] I also grant leave to Mr Peters to apply for such further or other orders as may be necessary to give effect to this judgment.
Costs
[45] My preliminary view is that Mr Peters, as the successful party, is entitled to costs. No submissions were directed at the appropriate quantum of costs. The correct course is for this judgment to be served on Ms Kafalava and for the parties to reach agreement as to costs. In that event a joint memorandum may be filed and orders made on the papers. If the parties are unable to agree, leave is reserved to file separate memoranda. Any memorandum/memoranda is to be filed and served within 20 working days of the date of this judgment.
Moore J
Solicitors:
Brown & Bates, Napier
Copy to:
The Defendant
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