Rick Dees Limited v Larsen HC Auckland CIV-2004-404-1357
[2005] NZHC 1741
•29 April 2005
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2004-404-1357
BETWEEN RICK DEES LIMITED
Plaintiff
AND BRETT RONALD LARSEN
Defendant
Hearing: 1-2 March 2005 Appearances: D Wood for Plaintiff
D Wilson for Defendant Judgment: 29 April 2005
JUDGMENT OF WINKELMANN J
This judgment was delivered by me on 29 April 2005 at 2.30 pm, pursuant to Rule540(4) of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors:
Jenny Wang & Associates, Auckland, for Plaintiff Turner Hopkins, Auckland, for Defendant
RICK DEES LTD V LARSEN HC AK CIV-2004-404-1357 [29 April 2005]
Introduction
[1] The plaintiff as purchaser (the purchaser) seeks specific performance of 10 agreements for sale and purchase for 10 properties at 15 Smiths Avenue, Papakura, being units within a single block of apartments. The single issue in respect of the availability of specific performance is whether the defendant (the vendor) was entitled to cancel the agreements on the basis of the non-tender of settlement prior to the expiry of the notice period under a settlement notice.
[2]The issues for determination in this case are, in a remote settlement:
(i)Whether tender of settlement by means of the lodgement by electronic funds transfer of purchase moneys into the vendor’s solicitor’s bank account was a sufficient tender of settlement, when the vendor had agreed to payment into that account by deposit of bank cheque?
(ii)Whether tender of settlement also required facsimile notification to the vendor’s solicitor of the lodgement?
(iii)And if so, whether the facsimile notice was complete when the purchaser’s solicitor attempted transmission of the facsimile to the vendor’s solicitor’s facsimile number, upon transmission or only upon receipt by the vendor’s solicitor?
Factual background
[3] In November 2003 the purchaser entered into 10 agreements to purchase 10 flats at 15 Smith Avenue, Papakura. Each of the agreements was on the “seventh edition(2) July 1999” Auckland District Law Society standard form for Agreement for Sale and Purchase of Real Estate. The agreements were, on their face at least, independent of each other. The consideration for each of flats 1-8 was $100,000 and
for flats 9 and 10, $90,000. The prices were GST inclusive. The written agreements recorded that a deposit of $3,500 for each flat was to be paid upon the agreements becoming unconditional. Settlement was to occur on 10 February 2004. Each agreement incorporated the standard form general terms of sale.
[4] The agreements were subject only to due diligence being conducted by the purchaser in accordance with the further terms of the sale. The agreements became unconditional on 8 December 2003.
[5] Although the agreements provided for the payment of the deposit of $3,500 each, that condition was subsequently varied by agreement between the solicitors for the purchaser and the vendor and reduced to $2,500 for each property. The total deposit of $25,000 on all properties was to be paid by 19 December 2003. On 8 December 2003 the solicitor for the vendor, Mr Newdick of Turner Hopkins wrote to the purchaser’s solicitor, Mr Richards of Jenny Wang & Associates. The letter confirmed that it was acceptable to the vendor that the reduced deposits be paid on the later date. The letter enclosed a copy of Turner Hopkins’ Trust Account slip:
In order that the deposit can be paid directly to our trust account on the 19 December, 2003.
On 19 December the deposit of $25,000 was paid by way of electronic funds transfer to the trust account of the vendor’s solicitors, Turner Hopkins. The purchaser’s solicitor on the same day sent a standard form letter confirming the electronic transfer of funds and an undertaking not to reverse the transaction.
[6] On 2 February 2004 the solicitors for the purchaser forwarded to Turner Hopkins 10 transfer documents for the apartments and requested settlement statements. Although settlement was originally scheduled for 10 February 2004, for reasons that were not before me, the defendant did not deliver settlement statements, through his solicitors, until 17 February 2004. Settlement was then specified for that day. The letter sent by Turner Hopkins on 17 February with the settlement statement for each flat is a critical document in this case. The letter confirms in respect of each flat, the relevant title documents that are held by Turner Hopkins including discharge
of mortgage, memorandum of transfer and copies of proposed correspondence with the tenant advising of the change of landlord. The letter then says:
We further undertake to forward these documents to you together with our receipt without delay on receipt of:
· Your faxed undertaking that a Bank Cheque for the settlement figure … [of amount required to settle] has been credited to our Trust Account in accordance with our settlement statement dated 17th January, (sic) 2004.
· A faxed copy of the Bank Cheque, endorsement and stamped deposit slip.
Our Trust Account deposit slip is attached. The original of this letter will be remitted to you once you have complied with the above.
Please acknowledge receipt of the enclosed documents by signing and returning the duplicate copy of this letter.
[7] Settlement did not take place on 17 February 2004. On 18 February 2004 the vendor issued settlement notices for settlement to be effected in terms of the special conditions of the contract. There is no issue between the parties that the settlement notices expired at 5.00pm on 5 March 2004. If settlement was not tendered before the expiry of that period, the vendor was entitled to cancel the agreements.
[8] It was the evidence of Mr Abdulrahman, the director of the purchaser, that by 25 February 2004 he had obtained sufficient funding to enable the purchase of 4 of the properties. He instructed the purchaser’s solicitors to settle to that extent earlier than the 5 March 2004 expiry of the settlement notices. On 25 February 2004 Mr Richards telephoned Mr Newdick requesting settlement of 4 properties. The vendor refused to settle. By letter dated 25 February 2004 Mr Newdick confirmed that the vendor was not agreeable to partial settlements taking place, nor was he agreeable to an extension. The letter recorded:
The agreements when drawn up by the agent provided for the sale of units as one sale of $1,000,000 with each unit to be noted as $100,000.
Our client requires settlement to take place in full.
[9] Mr Newdick was cross-examined in relation to his statement that the agreements provided for one sale of the 10 units for $1,000,000 when that was not recorded in the agreements. Mr Newdick said:
… my instructions are the arrangements for separate agreements was to satisfy the purchaser’s need to make separate applications for finance to different institutions which would lower the amount borrowed from each institution. My clear recollection is my client accommodated this request at the time the agreements were signed on the understanding that the purchaser would honour the arrangement to settle all agreements for sale and purchase contemporaneously.
[10] Mr Richards evidence was that he did not accept that view of the agreements but his instructions were not to pursue the matter as the purchaser believed that settlement in full would be able to take place on 5 March 2004 and did not wish to enter into a dispute over this issue.
[11] 5 March 2004 was the last day for settlement before the expiry of the settlement notice period. Mr Newdick stated under cross-examination that his instructions on that day were that if the opportunity arose, to cancel the contract. Commencing at 10.58 am on 5 March 2004, Turner Hopkins faxed through to the purchaser’s solicitors “amended” settlement statements in respect of the units. The documents sent to the purchaser’s solicitor included a copy of the proposed letters to the tenants advising of a new proprietor. Because there were 10 properties involved there was a significant volume of documentation faxed. It appears that the last facsimile transmission of these documents occurred at 12.44 pm on 5 March 2004. The amended settlement statements contained a recalculation of the amount required to settle, taking into account the penalty interest payable for the 17 day delay in settlement, and further rates adjustments. The amended settlement statement made no mention of the proposed method of settlement.
[12] Due to difficulties with one of the purchaser’s financiers, all of the funds needed to settle were not available to the purchaser until after 4.00 pm on that day. Mr Richards gave evidence that this was because there had been an unexpected delay by the mortgagee in calculating the amount to be provided to the purchaser. The mortgagee’s solicitor asked Mr Richards for confirmation that settlement could take place after 4.00 pm. Mr Richards said that that he then telephoned Turner Hopkins at 3.46 pm and asked to speak to Marie Jones, the Legal Executive who had been dealing with the file. He wished to make the enquiry requested by the mortgagee’s solicitors. Ms Jones’ secretary advised that Ms Jones had left for the day, but expected settlement to occur on that day. Ms Jones had apparently left instructions
that settlement after 4.00 pm would incur another day’s penalty interest, and there were no other instructions. That is consistent with clause 3.8 of the agreement for sale and purchase. Mr Richards said that he told the secretary, Ms Amy Cowen, that it was possible that the purchaser would not be able to settle until about 4.50 pm, and asked that she advised penalty interest figures that were to be added to the amount required to settle. He told her that the purchaser would be settling by electronic funds transfer because the settlement would be late in the day. Mr Richards said that he received no demur from Ms Cowen, and therefore assumed it to be an acceptable method of settlement because there was no other means of settling at such a late stage. Further, he gave evidence he thought that there would be no difficulty with this, because Turner Hopkins had previously accepted payment of the deposit by means of electronic funds transfer. Ms Cowen told Mr Richards that she would phone him back with the amended settlement amount.
[13] When Mr Richards had not heard further from Ms Cowen by 4.15 pm he called her again. He says he was told the penalty interest figures on each of the units. He said that he told her that he expected to settle the whole transaction in one settlement amount by electronic funds transfer. She responded that the firm required that payment should be carried out individually for each unit.
[14] At 4.25 pm the solicitors for the purchaser received a fax from Turner Hopkins. It was from Mr Newdick, the partner responsible for the file. In material part the letter stated:
We acknowledge your advice that you may be in a position to settle the above transactions this afternoon.
For the sake of clarity, we require settlement to be completed in person.
[15] Mr Richards said that settlement by this method was impossible at that late stage on a Friday afternoon, or on any other day for that matter. The offices of Jenny Wang & Associates are in Manukau, whilst the vendor’s solicitor’s offices are situated at Takapuna. I observe that the distance between Manukau and Takapuna is approximately 30-40 kilometres. Mr Richards again called the offices of Turner Hopkins and spoke to Amy Cowen. Ms Cowen told him that the decision for the face to face settlement referred to had been taken by Mr Newdick. When Mr
Richards asked to speak to Mr Newdick immediately, he was told that he was too busy to speak with Mr Richards. Mr Richards left a message for him to ring him back.
[16] At 4.38 pm the solicitors for the purchaser received notification that the settlement of funds from the financier had been deposited into the firm’s trust account. Mr Richards therefore rang to speak to Mr Newdick again but again was told that he was too busy and would not speak with him.
[17] Accordingly the purchaser proceeded to settle. All of the transaction sums for the settlement were processed electronically through the ASB Bank Ltd system into the trust account of Turner Hopkins at 4.50 pm. This included the additional interest figures on each purchase. The transmissions were completed and the transmission reports printed immediately thereafter. By no later than 4.54 all the moneys required to settle were in the trust account of Turner Hopkins, having been electronically transferred there by the purchaser’s solicitor.
[18] The principal of Jenny Wang & Associates, Jing Yan Wang, then signed an undertaking and faxed a confirmation along with the batch reports to Turner Hopkins that the funds had been lodged. The fax was dialled twice but was met with an engaged signal. Mr Richards was anxious that the confirmation be made by 5.00 pm and continued the fax on redial. He also attempted another fax transmission, keying the numbers in himself. In error he entered the wrong facsimile number. That fax was transmitted at 1700 hours, but not to the offices of Turner Hopkins. Mr Richards phoned Turner Hopkins and was told by the receptionist that a fax was coming through. He assumed it was the confirmation fax, but was mistaken. The original fax continued on redial and was ultimately transmitted to and received at Turner Hopkins offices at 5.07 pm. At 5.03 pm the solicitors for the purchaser received a faxed letter from Turner Hopkins purporting to cancel the contract. The letter recorded simply that the purchaser had failed to settle in accordance with the terms of the settlement notice. Mr Richards telephoned Turner Hopkins and this time managed to speak to Mr Newdick. Mr Newdick confirmed that in his view the cancellation was valid.
[19] On 8 March 2004 the purchasers’ solicitor received a letter from the vendor’s solicitor confirming that the funds paid on Friday 5 March 2004 had been redeposited to their trust account by electronic funds transfer.
[20] Mr Richards gave evidence that most of the settlements undertaken by his firm are by electronic funds transfer and that it would be rare that settlements are otherwise. In particular settlements are undertaken in person (face to face settlements) only if there would be difficulties with respect to the settlement documentation. He states that from the records of his firm, the last settlement that was undertaken with Turner Hopkins was by electronic funds transfer conducted in exactly the same manner as was this settlement.
Issues
[21] The vendor says that the purchaser should not be entitled to an order for specific performance because the vendor’s cancellation was valid. It has several alternative bases upon which it says that the vendor was entitled to cancel. These are:
1.The vendor had stipulated for face to face settlement and was entitled to insist upon it. The vendor says that any prior arrangement regarding remote settlement in respect of the first proposed settlement date of 17 February 2004 was no longer in place. The effect of the settlement notices was to rescind all prior arrangements in that regard, so that the usual arrangement for settlement applied, being face to face settlement.
2.If it is not accepted that face to face settlement was required, then the purchaser was required to comply strictly with the form of remote settlement previously agreed. That form of remote settlement was deposit of a bank cheque into the vendor’s solicitor’s trust account. It was not an electronic funds transfer into that account.
3.Finally, even if the electronic funds transfer was a valid method of performance of the purchaser’s payment obligations, the purchaser’s obligations to tender settlement were not completed until facsimile confirmation had been received by the vendor’s solicitor. Confirmation was not received until after 5.00 pm and after the cancellation was notified and effective. There was therefore no valid tender of settlement by the purchaser.
Contractual framework
[22] Much was said in submissions and in evidence concerning common conveyancing practice in relation to the mode and the method of settlement. However, common practice is not the starting point when determining the obligations of the parties. The contractual obligations that the vendor and purchaser have undertaken pursuant to the agreement for sale and purchase provide that starting point. If there is any ambiguity or uncertainty as to the meaning of the terms of the agreement, or if issues arise as to the need to imply a term into the agreement, then resort may be had to common practice, in so far as that bears upon the factual matrix within which the contract was formed (in terms of interpreting the provisions of the contract) or as a basis for the implication of a term, on the basis of custom or business efficacy. Common practice or custom will not overtake the obligations of the parties arising from the express lanaguage of an agreement: Les Affreteurs Reunis Societe Anonyme v Walford [1919] AC 801.
[23] In this case, the contractual framework is provided by the 7th Ed. (2) of the Auckland District Law Society form for Agreement for Sale and Purchase of Real Estate. In relation to the settlement, clause 3.7 of the agreement provides:
On the settlement date:
(1) The purchaser shall pay or satisfy the balance of the purchase price, interest and other monies, if any, due as provided in this agreement (credit being given for any amount payable by the vendor under sub-clause 3.9 or 3.10); and
(2)The vendor shall concurrently hand to the purchaser:
(a) A memorandum of transfer of the property provided by the purchaser under sub-clause 3.5, in registerable form; and
(b) All other instruments in registerable form required for the purpose of registering the memorandum of transfer:
(c)All instruments of title -
the obligations in sub-clauses 3.7(1) and 3.7(2) being interdependent.
Face to face or remote settlement
[24] The obligation of the purchaser under clause 3.7 is to pay or satisfy the balance of the purchase price, interest and any other monies due. The vendor’s obligation, which is interdependent with the purchaser’s obligation, is to concurrently hand all necessary documentation to the purchaser to effect the transfer of property. The language of these provisions clearly contemplates a face to face settlement. Other than these provisions there is little in the Auckland District Law Society form of agreement as to how settlement is to occur.
[25] As to common practice in relation to face to face and remote settlements the purchaser called evidence from Mr Timothy Jones. Mr Jones is well qualified to give expert evidence upon common practice in relation to the settlement of property transactions. In addition to his experience as a solicitor specialising in commercial property work, he has also served on various committees concerned with property law issues for both the Auckland District and New Zealand Law Societies. In conjunction with ASB Bank Limited’s technical banking department he was responsible for drafting the ASB Bank’s electronic funds transfer settlement protocols. No expert evidence was called by the vendor.
[26] Mr Jones gave evidence that common and accepted practices have developed around the mechanics of settlement. The New Zealand Law Society publishes guidelines as to the procedures to be adopted for face to face and remote settlements. These guidelines capture current common practice where appropriate and also attempt to lead best practice. A copy of the November 2004 New Zealand Law Society Property Transactions Practice Guidelines was produced into evidence.
These replaced the guidelines published in August 1988. They were not current at the time of the events the subject of this proceeding and I accept counsel for the defendant’s submission that care needs to be taken in attaching significance to the provision of those Guidelines.
[27] Mr Jones gave evidence that the following conventions apply in relation to where and how settlements take place:
(i)In the absence of other agreement between the vendor and purchaser (their solicitors in reality), the settlement takes place face to face. This is consistent with the provisions of clause 3.7. ‘Money goes to title’, so that with a face to face settlement, the purchaser’s solicitor attends at the vendor’s solicitors office, unless another venue is agreed (such as the mortgagee’s solicitor’s office).
(ii)Face to face settlements are typically utilised where the purchaser’s solicitor is within walking distance of the office, or if it is a complex settlement for example, involving a large number of documents to be handed over.
(iii)Settlements at a distance, usually referred to as remote or fax settlements are now common because of considerations of distance and the growth of sophisticated means of communication. If the vendor’s solicitor agrees, remote or fax settlement may be utilised.
(iv)If the vendor’s solicitor agrees to a remote settlement, then it is a valid tender of settlement by the purchaser, if he or she complies with the vendor’s solicitors requirements for the remote settlement.
[28] This evidence was not challenged by the vendor and I accept it accurately captures current practice in relation to some aspects of settlement. As to the arrangements regarding settlement in this case, in the 17 February 2004 letter enclosing the settlement statement, the vendor’s solicitor stipulated for a remote settlement. Settlement did not however occur on that day. On 5 March 2004 the
vendor’s solicitor sent through “amended” settlement statements for settlement that day. There was no mention in the correspondence or its enclosures of an amendment to the prior existing arrangements regarding the mode of settlement.
[29] Mr Newdick, the vendor’s solicitor, gave evidence that he considered that the settlement notices effectively negated all prior arrangements regarding settlement, so that the “default” procedure applied, requiring face to face settlement. I cannot see any logical reason why this should be so. There was nothing in the 17 February letter to suggest that those arrangements described, applied only to settlement on that day. Where the parties have agreed to a different means of settlement than the “default” face to face settlement, any subsequent alteration would require agreement by the parties. The vendor could not act unilaterally to alter the arrangement. There is nothing in the settlement notices that addresses the mode of settlement. Hence, the previously agreed mode of settlement continued to apply. Even were it open to the vendor to unilaterally amend the arrangements regarding settlement, which I doubt, this would have to be communicated to the purchaser. There was no such communication until late in the day of settlement.
[30]The vendor did not rely upon the letter received by the purchasers solicitor at
4.25 pm as effecting a change in arrangements. Nor could he, as any such a late change, with the impossibility of performance caused by the distance, would fall foul of the rule that a contracting party is itself in breach of contract if it engages in conduct which can be said to amount to “of its own motion” bringing about the impossibility of performance. (Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701 at 717).
[31] In summary on this point, I am satisfied the parties agreed to a remote settlement. This arrangement was never effectively varied. Thus, the vendor was not entitled to cancel on the basis that it had stipulated for a face to face settlement. Although the common practices described by Mr Jones are not determinative of the issue, they are consistent with the above contractual analysis.
Was faxed confirmation of the deposit of funds into the vendor’s bank account a necessary part of tender of settlement?
[32] The purchaser argues that settlement was complete on the deposit of the necessary purchase monies into the vendor’s solicitors trust account. Alternatively it says that if faxed confirmation was a part of the purchaser’s required tender of settlement in a remote settlement, then that tender was complete at the time that the plaintiff’s solicitors sent the faxed notification, irrespective of when it was received. In relation to the latter point, the plaintiff relies upon clause 1.2(3)(c) of the agreement for sale and purchase which is the deeming provision as to notice.
[33] The vendor says that faxed confirmation was a necessary part of the tender of settlement and that the tender was not complete until the facsimile notification had been received at the offices of the vendor’s solicitor. As this was after expiry of the settlement notice period, and after 5.00 pm on 5 March 2004 the vendor says he was entitled to cancel.
[34] As to the requirement of a confirmation of deposit of funds and the giving of an unconditional undertaking not to reverse the transaction, Mr Jones gave evidence that it was standard practice amongst conveyancing practitioners that:
In a fax settlement the usual practice is that the vendor issues a settlement statement outlining its faxing and banking requirements. The letter will typically require confirmation of deposit of funds, but of an unconditional undertaking not to reverse the transaction and incorporate a copy of documents proving deposit.
However, where there is a departure from the usual face to face settlements, that must be agreed to by the vendor’s solicitor. (NOE 27)
Mr Jones accepted on cross-examination that faxed confirmation from the purchaser’s solicitor undertaking not to reverse the transaction is important because it is important for the vendor’s solicitor to know when payment has been made.
[35] In this case the vendor agreed to vary the standard face to face settlement requirement. Part of the alternative procedure for settlement agreed upon was receipt by the vendor of the purchasers solicitor’s faxed undertaking that payment
had been made and that it would not be reversed together with a copy of the Bank cheque, endorsement and stamped deposit slip (see 17 February letter). I am satisfied that the parties had thereby agreed that this confirmation was a part of the tender of settlement. This interpretation of what was agreed is consistent with the fact that it replaced the default face to face settlement, and contemporaneous performance by the vendor and purchaser of their obligations on settlement. When a settlement is face to face the vendor’s solicitor is immediately aware of tender of payment by the purchaser. Therefore when the parties agree to a remote settlement and it is stipulated as part of that, that there be confirmation of payment and related undertakings communicated, this stipulation is significant both practically and contractually. The purchaser has not tendered settlement until the agreed confirmation is given in the agreed manner.
[36] I am therefore satisfied that where confirmation of payment is stipulated for in a remote settlement, although payment may have occurred earlier, tender of settlement by the purchaser under the agreement, is not complete until the fact of payment to the vendor is notified as agreed.
When was confirmation of payment affected?
[37] The letter of 17 February 2004 when describing the vendor’s settlement requirements stipulates for “receipt” of the faxed confirmation and evidence of payment together with the standard form undertaking. In this case the facsimile confirmation was not received at the offices of the vendor’s solicitor until after notice of cancellation had been sent and received at the offices of the purchaser’s solicitor.
[38] Clause 1.2 of the agreement provides that the service provisions in clause 1.2 apply to “all notices relevant to this agreement, whether authorised by this agreement or by the general law”. The agreement provides at 1.2(3)(c) that a notice is deemed to have been served:
… in the case of facsimile transmission, when sent to the facsimile number notified in writing by the party or to the facsimile number of the solicitor’s office;
[39] Both counsel informed me that this clause was included in the form of agreement following on from a decision of Master Kennedy-Grant in Steel Blast & Painters Limited v City Wise Developments Limited (1995) 3 NZ ConvC 192,029. In that case the plaintiff had applied for an order to remove a caveat. The key issue was whether a notice of cancellation had been served when printed out of a fax at a receiving machine or only when the solicitor to whom it is addressed or some person acting on that solicitor’s behalf, took physical control of it. The Master held (p192,037)
… it is at least arguable that the mere printing out of a fax at a receiving machine … is not sufficient to constitute service and that such service occurs only when the solicitor to whom the fax was addressed or, at the very least, some person acting on that solicitor’s behalf physically picks up the document.
[40] The plaintiff argues that notwithstanding the stipulation in the letter that receipt is required, the provisions of clause 1.2(3) of the agreement for sale and purchase apply, and confirmation was complete at the time that the purchaser’s solicitor commenced sending to the correct fax number.
[41] The confirmation of payment agreed between the parties is a notice “relevant” to the agreement and thus clause 1.2(3) would usually determine when the notice is served. However, in this case the 17 February letter stipulated for receipt, rather than service. There is nothing in the provisions of the Agreement that prevent the parties varying the basis upon which notice is to be given and stipulating for actual receipt at the vendor’s solicitor’s office. I am satisfied that they have done so and thereby displaced the effect of clause 1.3(2). I accept counsel for the vendor’s argument that the letter clearly contemplates actual receipt and not some deemed service. The vendor’s requirement is for actual receipt at the vendor’s solicitor’s offices by 5.00 pm. The facsimile was not received at the vendor’s solicitor until
5.07 pm.
[42] In any case even were I to accept counsel for the purchaser’s submissions that clause 1.2(3)(c) governs the situation, I am not satisfied that a facsimile transmission is “sent” to the facsimile number of the vendor’s solicitor simply by reason of the number having been entered and dialled, where the attempted transmission is met
with an engaged signal. In my view that expression must be read to mean “transmitted” to give the clause business efficacy. If all that is required is that the facsimile number is dialled, and transmission attempted once, that would mean that a large number of notices would never in fact arrive at the recipient’s address. Most facsimile machines will not continue redialling a number indefinitely until transmission is established. Further, on the plaintiff’s interpretation of that clause, there would be nothing to prevent a purchaser’s solicitor from dialling and attempting to send the facsimile once, and then relying upon that sending as effective notice, even though the document was then removed from the facsimile machine before transmission. What the clause does do however is provide that once the facsimile is transmitted to the facsimile number it is deemed served. Thus the sender can safely rely upon a report confirming transmission. If no-one picks the facsimile up and reads it for some time after transmission or in the case of newer technologies, if no-one prints out the facsimile for some time, that is immaterial.
[43] Because the facsimile confirmation was not received at the vendor’s solicitor’s office, I am therefore satisfied that the purchaser did not validly tender settlement before such time as the vendor acted to cancel the contract. Even if I were satisfied of the application of clause 1.2.3(c), I also find that the confirmation fax was not ‘sent’ for the purposes of that clause until transmission to the vendor’s solicitor’s fax number occurred. Thus, the vendor’s cancellation of the contract was valid.
Was the electronic funds transfer good performance of the purchaser’s payment obligations?
[44] Although the failure to notify payment means that the vendor’s cancellation was valid, I consider this final issue briefly for completeness. The first matter is the issue of sufficient payment to meet the purchaser’s payment obligations under the sale and purchase agreement. The purchaser must make payment of the outstanding purchase price, together with interest and rates apportionment and other payments of that nature.
[45] The agreement is silent as to the method of payment. Although bank notes are the only legal tender, for obvious reasons they are seldom if ever used to pay the purchase price. In Williams v Gibbons [1994] 1 NZLR 273 the Court of Appeal was prepared to find that in contracts for sale of land there was an implied term that tender of a bank cheque in settlement was good tender of the amount expressed in that cheque. The Court added a proviso that tender by bank cheque could be refused only if the recipient had reasonable grounds for believing that because of insolvency, the bank might not honour it. The Court said at 277:
We are satisfied the time has now arrived … that what has been accepted in practice by all involved in this field for so many years should be formally recognised by the Courts - namely, that in contracts for the sale of land there is an implied term that tender of a bank cheque in settlement shall be good tender of the amount expressed thereon. To cover the remotest contingency we would add the proviso that it may be refused only if the recipient has reasonable grounds for believing that because of insolvency the bank may not honour it.
[46] In reaching this conclusion the Court referred to the decision of Brandon J in The Brimnes [1973] 1 WLR 386. The issue in that case was the meaning of “payment in cash”. The Court of Appeal at 276 noted that Brandon J:
Was prepared against the background of modern commercial practice to construe "payment in cash" in a charter-party as having a wider meaning, comprehending any commercially recognised method of transferring funds, the result of which is to give the transferee the unconditional right to their immediate use. The method of direct credits to trust accounts adopted by solicitors may well be brought within these comments, although we have no evidence of its full implications.
[47] Mr Jones gave evidence that there was a difference in form only between payment undertaken by the deposit of a bank cheque to an account as against payment by means of transferring electronic funds to that account. He said that there is less risk in payment by electronic transfer, rather than payment by a bank cheque, because payment by electronic transfer is payment of cleared funds whereas some banks still require clearance of bank cheques. It was Mr Jones’ evidence, not challenged in cross-examination that:
It is now much more prevalent for parties to settle by using electronic banking methods rather than bank cheques.
[48] That this is now an accepted means of payment is apparent from a reading of the 2004 Law Society Guidelines which deal extensively with settlement where payment is by electronic funds transfer.
[49] Although I am not required to decide the point in this case it may well be that the time has come to imply a term to similar effect to that implied in Williams v Gibbons in relation to payment by electronic funds transfer. They are cleared funds. The evidence before me is that the transfer gives the payee an unconditional right to the immediate use of the funds. I note also that Williams v Gibbons was recently approved by the Supreme Court in Otago Station Estates Ltd v Parker & Ors [2005] NZSC 16. In the Court of Appeal decision in that case, upheld on appeal, the Court repeatedly equated bank cheques with “other forms of cleared funds” (at [43]), “other cleared funds” (at [38]) and “bank transfer in cleared funds” (at [45]).
[50] However, the implication of such a term would in my view not have assisted the purchaser in this case. Counsel for the vendor argues that even if the Court found that electronic funds transfer would in the usual course be payment for the purposes of the agreement for sale and purchase, because the vendor had agreed to deviate from the default position for settlement (from face to face to remote settlement) the vendor was entitled to stipulate for a particular form of settlement and the purchaser was obliged to strictly comply with the vendor’s requirements in that regard. Depositing the funds by electronic funds transfer, rather than by bank cheque was not strict compliance with those terms. Although there is no difference in substance between the two methods of effecting payment there is a difference in form. The matter must be resolved by reference to what the agreement between the vendor and purchaser requires. Accordingly where, as here, the vendor agrees to depart from face to face settlement in favour of a particular form of remote settlement, then it is not a good tender of settlement to attempt payment by some means other than that stipulated for. In my view the purchaser was obliged to strictly comply with the form of settlement stipulated for.
Judgment
[51] Accordingly, the plaintiff purchaser fails in its claim for specific performance. If the parties are unable to agree costs between them they may file memoranda as follows:
Defendant – Friday 27 May 2005 by 5.00 pm. Plaintiff in reply – Friday 10 June 2005 by 5.00 pm.
H D Winkelmann J
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