Quayside Trustee Limited v West, Trustee of the West Family Trust HC Tauranga CIV 2010-470-190

[2010] NZHC 1517

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV 2010-470-000190

BETWEEN  QUAYSIDE TRUSTEE LIMITED Plaintiff

ANDIAN TREVOR WEST, TRUSTEE OF THE WEST FAMILY TRUST

Defendant

Hearing:         16 June 2010

Appearances: G Grant and R Robertson for Plaintiff

D O'Neill for Defendant

Judgment:      16 June 2010

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

16 June 2010 at 3 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date..............

Solicitors:

QUAYSIDE TRUSTEE LIMITED V IAN TREVOR WEST, TRUSTEE OF THE WEST FAMILY TRUST HC TAU CIV 2010-470-000190  16 June 2010

[1]      The plaintiff applies for summary judgment upon its claim and seeks specific performance of the agreement for sale and purchase (the agreement) dated 29 June

2006. The agreement was about the purchase of an apartment at the Quayside Apartments complex development in Whakatane. Mr West as trustee for the West Family Trust agreed to buy the apartment. Mr West is also the director of Ceilings Unlimited  Limited  (CUL).  As  part  of  the  agreement  CUL was  nominated  as  a preferred sub-contractor in the development. A letter dated 18 May 2006 and signed by Quayside director Mr J McColl was given to Mr West (nomination letter). That letter stated:

Dear Ian

Congratulations on the purchase of apartment 308, “Quayside”, Whakatane. In  kind,  we  confirm  that  we  will  instruct  MTD  Limited  (architects)  to

nominate your company, CUL, as preferred sub-contractor for all suspended ceilings and steel stud partitions for the “Quayside” development. This position will be set out in all tender-contracted documents.

To ensure a competitive price for these items, we reserve the right to obtain comparative pricing for this work but with the ultimate opportunity reserved for CUL to match or negotiate a final figure.

The opportunity also exists for you to also price the fixing of plaster board wall linings and stopping if desired.

Yours Faithfully

John McColl (Trustee)

[2]      On 29 June 2006 plaintiff presented Mr West with the agreement setting out all the conditions binding the parties. The purchase price was noted at $885,000 including GST.

[3]      The agreement was conditional on:

a)       Preliminary  approval  by  the  plaintiff’s  board  of  directors  before

31 March 2007.

b)        The  plaintiff  to  obtain  resource  and  development  consent  by  31

August 2007;

c)        Approval  of  the  plaintiff’s  board  of  directors  in  all  respects  by

31 August 2007; and

d)       Title issuing by 31 March 2010.

[4]      By clause 14.4 Mr West acknowledged that he had not been induced to execute the Agreement by any representation, verbal or otherwise, made by or on behalf of the vendor, which was not set out in the Agreement.

[5]      The Agreement contained the standard provisions in respect of a failure to settle,: the issue of a settlement notice;  allowing the vendor to sue for specific performance; and the payment of default interest.

[6]      The plaintiff satisfied the aforementioned agreement sale and conditions by the specified dates.

[7]      CUL received an invitation to tender dated 17 January 2007 it stated that the head contractor Hawkins was not obliged to accept the lowest tender. On 8 February

2007 and after the tender closing date CUL provided a tender to Hawkins. By email of same date CUL sent an email which did not attach its pricing schedule.

[8]      Hawkins says it was shown the nomination letter. It took the view that it was a factor in the tendering process.

[9]      By email dated 19 September 2007 CUL was advised that its tender was unsuccessful. Subsequently CUL asserted its purchase agreement was conditional on its  being  awarded  the  sub-contract.  The  plaintiff  responded  by  asserting  the agreement was not conditional on the ceiling tender being let to CUL. In response and by letter dated 22 April 2008 the defendant’s solicitors asserted that CUL had not been given an opportunity to match the successful tender price. By a letter dated

18 March 2009 Mr West asserted he had been induced to enter into the contract by a misrepresentation and that the ceiling contract would be let to CUL.

[10]     Following fulfilment of the purchaser’s obligations a letter from its solicitors advised that settlement was scheduled to take place on 16 November 2009. When the defendant failed to settle the plaintiff served a settlement notice but Mr West refused to take steps to complete the purchase.

The Issues

[11]     Mr West claims pre-contractual misrepresentation. He says the nomination letter amounted to an undertaking that CUL would be appointed as contractor for the ceiling work for the development.

[12]     The  plaintiff  says  that  the  nomination  letter  represented  that  it  would nominate CUL as a preferred sub-contractor but did not guarantee that CUL would be awarded the sub-contract. Regardless, if the matter did amount to representation (which is denied) clause 14.4 of the agreement applied to exclude such a claim.

Legal Principles

[13]     There is no dispute about these. The plaintiff must show there is no defence but where there is evidence to show there is no defence the defendant has an onus to show a tenable defence.

[14]     The Court does not normally resolve material conflicts of evidence or assess the  credibility  of  the  deponents  upon  the  summary  judgment  applications.  But, neither need it accept uncritically evidence that is inherently lacking in credibility, if such is inconsistent with undisputed contemporary documents or is inherently improbable:

Eng Mee Yong v Letchumanan [1980] AC 331

[15]     The Contractual Remedies Act 1979 (CRA) provides:

(73)     Subject to S to this Act,...a party to a contractor may cancel it if –

(a)It  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;

[16]     To provide grounds for cancellation the representation relied upon must be a false statement of fact or law made by or on behalf of a party to the contract. A statement of an intention to undertake specified future actions may carry an implied representation  in  that  respect.[1]   A  statement  of  present  intention  may amount  to representation of an existing fact. Such a statement will be actionable as a misrepresentation only if it can be shown that the statement of intention was not genuinely held at the time the statement was made. [2]

The Plaintiff’s Case

[1] Manderson & Violich [1992] 5 TCLR 124, 131/line 9

[2] Buxton v Birches Timeshare Resort Limited [1991] 2 NZLR 641-646/line 47

[17]   It is that the defendant cannot show a tenable defence on the basis of misrepresentation.  The  plaintiff  says  the  parties  freely  negotiated  an  agreement which specifically contemplated that, in the event or failure to settle, the defendant might be liable to an application for an order for specific performance.

[18]     It is the plaintiff’s evidence that it became aware the defendant was the owner of CUL which installed ceilings and the gib stopping. It was aware Mr West had previously purchased a development property in exchange for CUL being awarded a works sub-contract. An employee of the plaintiff contacted the defendant and later reported back that the defendant might be interested in a deal which offered him the opportunity to sub-contract for the plaintiff. The plaintiff’s interest was in the possibility of selling an apartment unit to the defendant and in making contact with a potential sub-contractor for the complex.

[19]     The plaintiff’s then assert the nomination letter was a genuine statement of intention at the time not whether the intention was fulfilled. The plaintiff says the nomination letter says it was the plaintiff’s intention that CUL be the preferred sub- contractor and that that position was to be set out in the tender documents. The plaintiff says this in fact occurred. A list of preferred sub-contractors was attached to

the tender  document  which  invited  CUL to  tender.  Therefore the intention  was fulfilled and this confirms the earlier genuine statement of intention. Likewise there is no evidence that it was not the plaintiff’s genuine intention to provide CUL with the final opportunity to match or negotiate a final figure. The plaintiff asserts there was no promise that CUL would be the sub-contractor, only that it had the opportunity to match or negotiate a final figure. The plaintiff asserts that the nomination letter says in effect that the contract was subject to agreement with Hawkins because the letter says that while CUL was the preferred sub-contractor that position would be set out in the tender (as it was) along with other terms including that the lowest tender would not necessarily be accepted. However, the tender documents allowed for the lowest price to be accepted upon a competitive tender.

[20]     The plaintiff’s assert that the opportunity to CUL to match or negotiate a final figure with a tenderer did not contain a suggestion that a contract would be with anyone other than Hawkins.

[21]     For the plaintiff Mr Brant notes that the CUL tender was due by 30 January

2007  but  not  received  until  8  February  2007.  It  referred  to  “my  normal  sub- contractor conditions” and did not mention the opportunity to match or negotiate a final figure. The email from CUL of 8 February 2007 noted “I am happy to provide a schedule of items price”. That email although purportedly attaching the schedule did not include such.

[22]     Mr Brant says the evidence is that Hawkins had been provided with a copy of the nomination letter. A letter from Mr Kingi of Hawkins says he treated the letter as he would any other tenderer’s submission and would negotiate with the tenderer. The opportunity to negotiate existed until CUL submitted its contract price of $135,000 on 7 September 2007.

[23]     It is claimed by Mr West that he spoke to Mr Mongston of Hawkins and asked  for  the  pricing  of  competitive  tenders.  The  fact  that  Hawkins  would  not provide that is not, Mr Brant, said relevant to the original intention as set out in the nomination letter. The fact that Hawkins would not provide a competitors price did not alter the plaintiff’s agreement to allow for CUL to match or negotiate a final

figure. Mr Brant submits that CUL was provided with an opportunity to negotiate with  Hawkins.  That  is  what  occurred  notwithstanding  that  Hawkins  would  not provide details of competitors pricings.

[24]     Mr Brant said by not supplying its own pricings CUL was not doing what was necessary to win the tender. Therefore there was no pricing from CUL which could be compared with other tenders; CUL was mistaken in waiting for competitors pricings.

[25]     In   short,   Mr   Brant   submits   the   nomination   letter   did   not   suggest exclusiveness. The opportunity to match or negotiate a final price when such an opportunity was provided.

Discussion

[26]     In my assessment the nomination letter does more than Mr Brant contends for it. At least, arguably it is so. A meeting between Mr West and Mr McColl in May

2006 examined a bargain by which an apartment would be purchased in return for CUL being nominated as a preferred contractor. Mr McColl and Mr West are not in agreement about what was said in that meeting.

[27]     Mr  West  disputes  Mr  McColl’s  account  of  that.  The  nomination  letter contains the following parts:

a)        That the plaintiff would instruct MTD to nominate CUL as preferred sub-contractor for ceilings and steel stud partitions for the building.

b)The  position  of  preferred  sub-contractor  would  be  set  out  in  all tender/contract documents.

c)        That   the  plaintiff   (not  Hawkins)   reserved   the  right   to   obtain competitive/comparative pricing for the work.

d)CUL had the ultimate opportunity reserved to it to match or negotiate a final figure.

e)        An opportunity existed for CUL price for fixing of other works.

[28]     The nomination letter clearly provided an ultimate/final opportunity to CUL to match any price or negotiate a final figure. Mr West claims the representation about the work for CUL was the inducement to enter into the contract. CUL tender price was not the cheapest but it was always going to have the opportunity to match a lower tender price.

[29]     Mr West never saw any other tenders. He was never invited to match or (arguably) negotiate a final price. His evidence is that he needed plans to price the stopping on the plaintiff’s project, but never received these.

[30]     Mr West asserts he made repeated requests to Mr Mungston of Hawkins about pricing details from competitors but was not given these.

[31]     CUL was on the list of preferred sub-contractors sent in as tenderers. But, Mr West’s position is that Hawkins was unreasonably withholding details of other tenderers’ prices. Also the nomination letter refers to the plaintiff as being in charge of the pricing aspect. It follows that the plaintiff may well have failed to adequately inform Hawkins of the terms of the arrangement with CUL. Certainly Hawkins did not consider it was under an obligation to allow CUL to match a lower price or to negotiate on the basis of other tenders received.

[32]     Mr Tatton on behalf of the plaintiff claimed that he had no control over the tendering process when engaging the sub-contractors because that was within the authority of Hawkins. It seems to me that to maintain this position is to resile from the position expressed by the nomination letter by which the plaintiff would instruct MTD to nominate CUL as a preferred sub-contractor; that the plaintiff reserved the right to obtain comparative pricing...reserving to CUL an opportunity to match or negotiate a final figure.

[33]     By this analysis it is arguable:

a)       The plaintiff was asserting a final say over pricing and that it would obtain a comparison to ensure CUL was proposing a reasonable price.

b)It had to give CUL an opportunity to either match the comparative price or to negotiate a final figure.

c)       Whilst CUL was called the preferred sub-contractor it was actually the exclusive contractor because it had the opportunity to match any price and therefore win the contract.

d)If CUL opted to match a comparative/competitive figure it could do so.  Alternatively  it  could  negotiate  another  price  to  enable  it  to become the subcontractor.

e)       It was incumbent on the plaintiff to ensure that this happened and to instruct Hawkins accordingly but it did not do so.

f)        By  not  doing  so  that  it  had  misrepresented  the  situation  to  the defendant by the terms of the nomination letter.

[34]     Section 6 of the CRA enables damages to be claimed by a party who was induced to enter into a contract by a misrepresentation. If as it appears the plaintiff now claims, it had no control over the selection of sub-contractors then it arguably has failed to ensure that CUL was put in the position of being able to match or negotiate a final figure for the competitive pricing situation. It would follow that if the plaintiffs did not control the selection of sub-contractors it would seem likewise that they did not control the pricing. That might mean the representation in the letter that the plaintiff reserved the right to obtain comparative pricing, was a misrepresentation. In the circumstances that may have been a significant factor for entering into the contract.

[35]     The plaintiff asserts it genuiness is proved by its having done what it said it would do. That assumes it has done all it agreed to do. But that position assumes its

actions satisfied the purpose of the nomination letter. I consider it is arguable the plaintiff has not done all it should have; that CUL was promised the contract subject to the rider that its price had to be competitive; that more was promised than a nomination as preferred contractor. The nomination letter was part of the bargain for Mr West’s purchase. Only at a hearing of evidence will a Court be able to give context to the words. As was held in Awaroa v Commercial Securities   [1976] 1

NZLR, p 30:

Words used in a representation must be considered in the way they would be reasonably understood by the representee. What the representer professes to have meant or intended when making it is wholly immaterial.

Result

[36]     The defendant has established an arguable case in opposition to the plaintiffs summary   judgment   claim.   Therefore   the   summary   judgment   application   is dismissed.

Costs are reserved and should be fixed in the outcome of the substantive proceeding.