Rhodes v Shaw
[2015] NZHC 1530
•2 July 2015
IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY
CIV-2014-406-000063 [2015] NZHC 1530
BETWEEN ANNE RHODES
Plaintiff
AND
WILLIAM HENRY SHAW First Defendant
AND
JUNE ANN BOYS Second Defendant
Hearing: 23 June 2015 Appearances:
C Lawes for Plaintiff
D J Clark for DefendantsJudgment:
2 July 2015
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[1] On 31 May 2007 the plaintiff, Mrs Rhodes, signed an agreement for sale and purchase of a property at 3256 Queen Charlotte Drive, Picton. The vendors were the defendants, Mr Shaw and Ms Boys. Mrs Rhodes says that in breach of a warranty contained in this contract, building consent had not been obtained for an exterior deck and doors opening onto it, and that in breach of a separate warranty in the contract, unauthorised building works have been carried out. Mrs Rhodes says that both the non-consented work and the unauthorised works have caused water ingress resulting in substantial damage to the dwelling on the property, requiring repairs estimated to cost over $500,000, but yet to be quantified. She claims damages for breach of a warranty and undertaking in the sale and purchase contract.
[2] Mr Shaw and Mrs Boys say that the claim is barred by the provisions of the Limitation Act 1950. They apply for summary judgment in their favour dismissing the claim. It is common ground that, as the claim is based on alleged breaches of
contract, the relevant limitation period within which the proceeding must have been
RHODES v SHAW [2015] NZHC 1530 [2 July 2015]
issued is six years from the date on which the causes of action accrued.1 The proceeding was issued on 18 December 2014. Therefore, it was filed out of time if the causes of action accrued before 18 December 2008.
[3] Mrs Rhodes settled the purchase on 7 January 2009, but had occupied the property since 2007. The issue on this application distils down to whether Mrs Rhodes occupied the house from 2007 as a purchaser in possession, or whether she occupied the house as a tenant until 7 January 2009 when she settled the purchase, because the clause of the contract, on which Mrs Rhodes’ claim is based, provides for the relevant warranties at the giving and taking of possession. In the former circumstance, the claim was filed out of time, in the latter, it was not.
Law relating to summary judgment
[4] Rule 12.2 of the High Court Rules provides that the Court may give judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed. The principles to be applied by the courts are set out in Westpac Banking Corporation v M M Kembla New Zealand Ltd:2
[60] Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure because a defendant can apply to strike out the claim under r 186. Rather, r 136(2) permits a defendant who has a clear answer to the plaintiff which cannot be contradicted to put up the evidence which constitutes the answer so that the proceedings can be summarily dismissed. ...
[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim. ...
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. ...
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be
1 Limitation Act 1950, s 4(1)(a).
2 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff’s claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit) to force on the plaintiff’s claim prematurely before completion of discovery or other interlocutory steps and before the plaintiff’s evidence can reasonably be assembled.
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
The contract and the titles
[5] The contract signed by the plaintiff and the defendants comprises in part the standard agreement for sale and purchase of real estate approved by the Real Estate Institute of New Zealand and the Auckland District Law Society, and in part a number of further terms.
[6] In the contract, the property purchased by the plaintiff is described as 3256
Queen Charlotte Drive, Picton. The estate is fee simple. The area is described as “subject to survey” but without any actual reference to an area. The following further description of the property follows:
Being a subdivision of Lot 1 DP 1882 and Lot 1 DP 8918 (both lots presently under CT 8/5B/503) into two new separate lots and titles, the higher (southern) lot including the existing residence and being the lot subject to this offer.
In fact, the correct title reference for the land thus described is MB5B/503, but nothing turns on the point. This land was all owned by the vendors, and it was their intention to subdivide it into two lots. The one intended to be sold to the plaintiff had a house on it, and the other was bare land on which the vendors would later build a house for themselves.
[7] The defendants’ entire property is at the end of a long driveway from Queen
Charlotte Drive, and at the time of the contract it enjoyed the benefit of an easement
over a small piece of land owned by a neighbour, which is at the top end of the driveway. In order for the subdivision to proceed, the defendants contracted to purchase a triangular piece of land from that neighbour, part of which was a small portion of the land over which their property held a right of way.
[8] It is not clear on the evidence before the Court on this application whether, in October 2007, they had a binding or a conditional contract to buy that land. The point is important, because although the defendants had obtained title to that land by the time their plan of subdivision was deposited and new titles issued, it is by no means clear that they had full possessory rights over all or any of this land at any time prior to that. They had rights as the holders of an easement over the portion of that land which eventually became part of the land bought by the plaintiff, but the easement document setting out the terms of this right was not produced in evidence. In the absence of evidence to the contrary, I cannot assume that their right under it was any greater than the usual rights given to a dominant tenement which, put briefly, are to pass over the land. That is the only right they were able to pass to the plaintiff prior to their taking title to the land themselves and, on the evidence, the only right they were able to pass to the plaintiff in October 2007.
[9] There is no reference in the contract between the plaintiff and the defendants to the defendants actually selling this piece of land to the plaintiff, as it does not feature in the description of the property being sold, which I have set out. Any reference in the contract, therefore, to the giving and taking of possession of the property does not include reference to the giving and taking of possession of this land, and unless the vendors had in fact taken possession of this area of land from their neighbours, they would not have been in a position to pass possession to the plaintiff anyway. At settlement the vendors did transfer a fee simple estate in this piece of land to the plaintiff as part of the new title issued after the subdivision, but on the face of the documents produced, they were not contractually obliged to do so.
[10] The warranties relied on by the plaintiff are contained in paragraph 6.2 of the printed form. This provides:
The vendor warrants and undertakes that at the giving and taking of possession:
…
(5) Where the vendor has done or caused or permitted to be done on the property any works:
(a) any permit, resource consent or building consent required by law was obtained; and
(b) the works were completed in compliance with those permits or consents; and
…
[11] The purchase price was $900,000 and a deposit of $90,000 was payable, on the agreement becoming unconditional. The contract then provided, in relation to payment of the purchase price:
Balance of purchase price to be paid or satisfied as follows:
(1) By payment in cleared funds on the settlement date which is in accordance with Clause 3.16 but no later than 30 June 2008.
[12] On the front page of the document there is a box titled “Possession”, and the
clause within this reads:
Possession date (clause 3.0);
In accordance with clause 3.16 but no later than 30 June 2008.
[13] Because the defendants intended to subdivide the land sold to the plaintiff from a larger title, cl 3.16 applies. Clause 3.16 is titled “New Title Provision” and provides, to the extent relevant:
3.16 (1) Where –
(a) The transfer of the property is to be registered against a new title yet to be issued; and
(b) a search copy, as defined in s 172A of the Land Transfer Act
1952, of that title is not obtainable by the fifth working day prior to the settlement date – then, unless the purchaser elects that settlement shall take place on the agreed settlement date, the settlement date shall be deferred to the fifth working day following the later of the date on which: [followed by references to certain events of no present relevance].
“Settlement date” means the possession date or such other date as the parties
are to perform their obligations under subclause 3.7. …
Clause 3.7 provides that on the settlement day the balance of the purchase price and other required monies are to be paid, and conveyancing documents are to be transferred and relevant fees paid.
[15] The effect of these provisions in the contract is that the parties expressly agreed that possession would be given and taken at the time of settlement, which would be after the issue of a new title to the property, but not later than 30 June
2008.
[16] As the subdivision had not been finalised, settlement did not take place before 30 June 2008, but this deadline was extended by agreement. Title was eventually available in December 2008, and the plaintiffs settled the purchase early in January 2009. If the above terms of the contract were the only references to the giving and taking of possession, that occurred when the contract was settled, and the warranties and undertakings applied at that date.
[17] However, in addition to the printed terms of the contract, and the typed description of the possession date to which I have referred, the contract contains 11 further terms of sale. Further term of sale 25 provides:
The vendors agree to rent the property to the purchasers from the 1st of
October untill (sic) the settlement date for a sum of $350 per week.
The purchaser and her family moved into the property on or about 1 October 2007 and paid the defendants’ rent at $350 per week until they settled their purchase in January 2009.
[18] The case for the defendants is founded on the proposition that in moving into the property they took possession of it in terms of the contract and from that day onwards were purchasers in possession. The plaintiff says that is not so; from 1
October 2007 she rented the property and did not take possession of it, under the
contract, until she settled in January 2009. She says it was at that date that the warranties in clause 6.2 took effect.
[19] The defendants say that when a purchaser takes possession of a property, that is, as a matter of law, possession pursuant to the contract to buy the property, and a tenancy is not created. First, the defendants rely on the following proposition in Megarry & Wade:3
Occupation referable to some other relationship. No tenancy will be created if an occupant’s exclusive possession is referable to some other legal relationship. Where a person occupied property because of her appointment as an “almsperson”, there was no tenancy granted: she was the beneficiary of a charitable trust. A trespasser who, on demand, paid sums to the owner for her unlawful use and occupation of the premises was not a tenant. Nor is a purchaser who enters into possession under either a contract for the sale or letting of land or an option to purchase the premises, because his occupation is “ancillary and referable to” his equitable interest in the property arising from the contract. …
[20] The authority cited in Megarry & Wade is Street v Mountford:4
Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the grant of exclusive possession might be referable and which would or might negative the grant of an estate or interest in the land include occupancy under a contract for the sale of the land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office.
[21] The passage cited from Megarry appears in the text as one of three exceptional circumstances in which exclusive possession of premises does not create a tenancy. The learned authors note that the scope of the exceptions has been narrowly construed. The exclusive possession of premises is one of the elements of a lease or tenancy, unless within one of the given exceptions. So the initial premise is that, when the plaintiff went into possession of the defendants’ property, she did so
as a tenant unless her right to do so was as a purchaser.
3 Charles Harpum, Stuart Bridge and Martin Dixon Megarry & Wade: The Law of Real Property
(8th ed, Sweet and Maxwell, London, 2012) at [17-030].
4 Street v Mountford [1985] AC 809 (HC) at 826-827.
Mr Pearce drew attention to the fact that contracts for the sale of land commonly provide ... for the purchaser to be allowed into occupation as a licensee pending completion on terms that he is to pay all outgoings together with interest on the purchase money and is to keep the premises in good repair. The purchaser’s possession is ancillary and referable to his interest in the land created by his contractual right to a conveyance and Lord Templeman acknowledges that such a relationship, although exhibiting the ordinary badges of a tenancy, does not create one.
[23] These authorities, and others, establish that where a purchaser takes possession of property prior to settlement, and the taking of possession is referable to the rights of the purchaser under an agreement of sale and purchase, that party does not take possession as a tenant. The learned authors of Handbook on Agreements for Sale and Purchase, put it this way:6
When the purchaser takes possession pursuant to a right given by the contract he is in occupation as an equitable owner and not as a tenant at will. In such a case he cannot be dispossessed by the vendor unless the contract is validly terminated.
[24] The authority relied upon in this text is Howard v Shaw, where Lord Abinger
CB said:7
While the defendant occupied under a valid contract for the sale of the property to him, he could not be considered as a tenant; the parties could not convert the contract for purchase into a contract of tenancy, nor, while the former was pending, infer another of a different nature.
[25] In my view, however, this principle does not apply on the facts of the present case. The occupancy of the plaintiff is not referable to her rights as the purchaser of the property. The combined effect of all the clauses in the contract, except further term 25, is that possession of the property was not to be taken by the purchaser until settlement, and settlement was deferred until title was available. Nowhere in the contract is there any provision that says that the plaintiff was to take possession of the property pursuant to the contract, prior to settlement date. When considering a basis on which the plaintiff and her family might move into the property while the
subdivision process was underway and settlement was pending, it was open to the
5 Essex Plan Ltd v Broadminster (1988) 56 P & CR 353 at 355.
6 Peter Blanchard Handbook on Agreements for Sale and Purchase (4th ed, Handbook Press, Auckland, 1988) at 73.
7 Howard v Shaw (1841) 8 M & W 118 at 122.
parties to provide that, despite all the other relevant clauses of the contract, possession was not to be linked to settlement, but was to be given and taken under the contract at an earlier date. They did not do so. Rather, they provided that, in the meantime, the vendors would rent the property to the purchaser at $350 per week.
[26] The defendants’ position on this application is necessarily based on the proposition that further term 25 contained a new provision for when possession would be given to the plaintiff as the purchaser, which would be in conflict with the express terms which I have discussed. In this circumstance, the Court could admit evidence of the context in which the contract was entered, in order to establish its
correct interpretation.8 In affidavits filed on this application, some evidence on this
is given. Unsurprisingly, the plaintiff and the defendants are completely at odds over the arrangements made, and on a summary judgment I find myself unaided by this evidence as the differences cannot be resolved short of trial. In my view, the issue can be resolved for present purposes by reference to the contract.
[27] While the plaintiff was in occupation, the defendants carried the risk in both the property and the chattels (clause 4.1), and paid the rates and insurance (which were to be apportioned on possession and settlement (clause 3.3). As well, the purchaser retained a right to object or give a requisition in relation to the plan up to five working days after notice of deposit of the plan (clause 5.2(2)) and the purchase was subject to the statutory condition imposed by s 225 of the Resource Management Act 1991, that the survey plan would be deposited under the Land Transfer Office. She retained a right at any time after the expiration of two years from the date of granting of resource consent or one year from the date of the agreement, whichever was later, to give notice to the defendants rescinding the contract if they had not by then made reasonable progress towards submitting their survey plan to the relevant territorial authority for approval, or the plan had not been deposited within a reasonable time after the date of approval.
[28] Thus, throughout the time that the plaintiff was renting the property which the vendors owned (but not the adjacent area which they were to attain from their
neighbour) the defendants carried the risk of the property and the chattels in it, and
8 Gibbons Holdings Ltd v Wholesale Distributors Ltd [2008] 1 NZLR 277.
their rights to require the plaintiff to settle were subject to the two rights she had not to proceed with the contract. In this circumstance, it is at least arguable that possession was not referable to the rights obtained by the purchaser as a purchaser, but was derived from the vendors’ agreement to grant to her an estate as tenant in return for payment of rent.
[29] At trial the Court may take into account subsequent conduct when deriving the correct interpretation of this contract.9 In this respect, evidence points both ways. The defendants paid the rates and insurance premiums on the property right through until January 2009, at which point rates were apportioned on settlement. This supports the plaintiff’s contention. So too does the fact that the defendants replaced a stove which was faulty. On the other hand, the plaintiff and her husband carried out physical alterations to the house, which on their face appear to be of some substance. This tends to support the position of the defendants. In their
affidavits both give explanations in relation to the stove and the house alterations. The extent to which this evidence assists the Court in interpreting the case is also a matter for trial.
Outcome
[30] The application by the defendants for summary judgment is dismissed.
[31] Costs are reserved, in accordance with the principle in NZI v Philpott.10
J G Matthews
Associate Judge
Solicitors:
Wain & Naysmith Lawyers, Blenheim. Wisheart Macnab & Partners, Blenheim.
9 Gibbons Holdings Ltd v Wholesale Distributors Ltd [2008] 1 NZLR 277.
10 NZI v Philpott [1990] 2 NZLR 403.
6
0
0