Robinson v Hemachandra Holdings (NZ) Ltd
[2006] NZCA 89
•17 May 2006
IN THE COURT OF APPEAL OF NEW ZEALAND
CA152/05
BETWEENROBERT LESLIE ROBINSON
Appellant
ANDHEMACHANDRA HOLDINGS (NZ) LIMITED
Respondent
Hearing:17 May 2006
Court:William Young P, Hammond and Robertson JJ
Counsel:T J Shiels and S K Wilson for Appellant
B A Gibson and J G Cain for Respondent
Judgment:17 May 2006
JUDGMENT OF THE COURT
AWe allow the appeal and dismiss the cross appeal.
BWe set aside the judgment of the High Court.
CMr Robinson is entitled to costs in the High Court on the 2B basis, along with disbursements.
DWe make an order the specific performance to the contract between the parties, reserving leave to the parties to apply to the High Court, should that be necessary, as to implementation of this Order.
EMr Robinson is awarded costs of $6,000 and usual disbursements.
REASONS
(Given by William Young P)
Introduction
[1] This is an appeal from a judgment of Fogarty J delivered in the High Court at Dunedin on 17 June 2005 in which he dismissed a claim by the present appellant for specific performance of what the appellant claimed was an agreement for the purchase of land.
[2] There is a cross-appeal by the respondent associated with the Judge’s factual findings which, on a number of issues, were in favour of the appellant.
The facts
[3] The case concerns land at 270 Taioma Rd, North Taieri, near Dunedin. At all material times it was owned by the respondent. Mr Kirthi Hemachandra is a shareholder (although not the only one) in the respondent and also a director. He is a Sri Lankan national who has lived in New Zealand since 1995 and has a background in stockbroking.
[4] Mr Robinson made an approach to buy the land in September 2003 in response to an invitation by Mr John Lagan. Mr Lagan is a real estate agent associated with Harcourts. He has had some 35 years of experience as an agent. Mr Robinson made an offer for the property for $387,500 which was not accepted. Mr Hemachandra subsequently mentioned $435,000 to Mr Lagan as a possible purchase price and Mr Lagan passed that on to Mr Robinson. It soon became apparent that Mr Hemachandra would not pay Mr Lagan commission and Mr Robinson agreed to pay Mr Lagan a reduced fee which would net him approximately $1,000 if the deal went through.
[5] The upshot was that in early November 2003, Mr Robinson, through Mr Lagan, submitted the written offer to the respondent to purchase the land. The proposed purchase price was $435,000 and the deposit to be paid was $43,500. The possession date was 22 December 2003. The proposed agreement was to be conditional upon the purchaser obtaining sufficient finance by 4pm Saturday, 22 November 2003.
[6] Mr Hemachandra, signed the offer. He dated the agreement the first page and backing sheet as “10 December 2003”. Beside his signature he wrote “10/12/03”.
[7] Mr Hemachandra then posted the agreement back to Mr Lagan, who received it on or about 17 November 2003. There was no covering letter or note indicating that the agreement was other than it seemed or that it was to be held as an escrow. Mr Lagan forwarded a copy of the contract to Mr Robinson’s solicitor, Mr Ian Douglas and the original to the respondent’s solicitor, Mr John Cain. Mr Douglas assumed that the references in the agreement to December were by mistake and that Mr Hemachandra had meant to correctly date the agreement as having been signed on 10 November 2003. Mr Douglas noted this in a letter which he sent to Mr Cain on 19 November. Mr Cain responded in these terms:
Thank you for your fax dated 19 November, the contents of which we have discussed with our client.
We are instructed that the parties are in discussion through the real estate agent with a view to entering into a new contract and the request for an extension of the finance condition will be redundant.
[8] It seems reasonably clear that Mr Hemachandra was advised by his solicitor, Mr Cain, that the document he had signed either would be or might be construed as a binding contract and that he was anxious, if he could, to extricate himself from any such commitment. There is nothing in the correspondence to suggest that Mr Cain thought, or was prepared to advance the argument, that the way the contract was dated meant that there was no contract in place.
[9] Mr Douglas, sensing that Mr Hemachandra might be experiencing vendor remorse, confirmed finance by letter of 21 November.
[10] That night Mr Hemachandra sent the following fax to Mr Cain:
Sale and Purchase Agreement of 270 Taioma Rd.
Received your message left in my mailbox re above, and according to my understanding, the contract comes into effect only on the 10th of December 2003.
The original understanding between the Real Estate Agent and myself was for me to sign a copy of the agreement postdated until such time I sort out my affairs. If in case I run into any sort of difficulty in going ahead with the sale, he was to return the document and call it a day. Therefore, to make my intention clear, I dated three places in my own handwriting in two styles. Two dates with the word ‘December’, and the other in numerals. The Agent assured me that there was no necessity to worry about the 22nd November 2003 which is a typographical error, and as the signature with the date 10th of December overrides it, that which reserves me the right to withdraw prior to that date similar to stopping a postdated cheque.
After I retrieved your message this evening I got in touch with the Agent. His explanation was that it was a misunderstanding, and as I mentioned to you on two previous occasions, that he would be sending the fresh agreement signed and dated 21st November 2003 with appropriate changes as promised, which I should receive by Monday as his client has gone off station.
I hope the above explains the current status. Will ring you no sooner I receive the fresh agreement on Monday.
(Underlining in original)
[11] The following week a replacement offer was sent to Mr Hemachandra which was identical to the first, save that the deposit was to be reduced to $25,000 (something which had been agreed with Mr Hemachandra) and the finance condition had been deleted. Mr Hemachandra signed the offer but before he did so, added two additional conditions:
19.The parties acknowledge that the agreement between them purporting to be dated 10.12.03 is and always was a nullity.
20.This agreement is subject to the approval in their sole discretion of the director and shareholders of the vendor company by 10.12.03.
[12] This attempt to renegotiate “the contract” and for Mr Hemachandra to secure the option of withdrawing from the earlier agreement led nowhere. The respondent refused to settle and Mr Robinson sought specific performance.
[13] This claim was initially defended on grounds which reflected the account of events given by Mr Hemachandra in his fax. It was not pleaded or alleged that the externalities associated with the execution of the agreement meant that there was no agreement. Indeed, the primary thrust of the defence was that there was an agreement but that it had been procured by misrepresentation and had been sent to Mr Lagan as an escrow.
The approach of the Judge
[14] The question whether there had been a concluded agreement was raised by the Judge in the course of the hearing.
[15] In his judgment Fogarty J referred to a number of decisions of this Court, Mechenex Pacific Services Ltd v TCA Air Conditioning (New Zealand) Ltd [1991] 2 NZLR 393, Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 and, Reporoa Stores Limited v Treloar [1958] NZLR 177.
[16] He then went on:
[21] … I formulate the question as being: whether a reasonable person in the position of the plaintiff, upon receiving the original agreement for sale and purchase [not the photocopy] would conclude that Mr Hemachandra, on behalf of the defendant, was accepting without any reservation the offer that had been submitted to him.
[22] I emphasise the need to consider the original document. That was the document sent by Mr Hemachandra to the plaintiff’s agent. It is not Mr Hemachandra’s fault that the office assistants of the agent sent only a photocopy of the document to the solicitor for the Robinsons and sent the original to the solicitor for the defendant. Mr Hemachandra clearly communicated the defendant’s response to the offer when he posted it back to the plaintiff’s agent.
[23] At the very least the acceptance was odd. That was the word used to describe the dating of the document by Mr Douglas, the solicitor for the plaintiff. It was particularly odd that Mr Hemachandra had repeated the date of 10 December immediately alongside his signature. The oddity put the plaintiff on enquiry. On the first occasion that Mr Douglas had to write to the solicitor for Mr Hemachandra he averted to it in the first sentence, and that was in the nature of a query. Mr Douglas’ response to the dating is a guide to the position of the reasonable man. Mr Douglas thought it was just a mistake. But it is not at all clear that Mr Douglas would have noted from the photocopy the date alongside the signature. On the photocopy presented in the agreed bundle of documents before the Court the signature and the date were indistinct. On the original the signature and date are clear, very clear.
[24] It is my judgment that “a reasonable man” looking at the original document would have been put on enquiry as to whether or not Mr Hemachandra was accepting the offer. The reasonable man would have been left in no doubt that it was not a mistake that Mr Hemachandra was repeatedly dating the document 10 December 2003 rather than a November date. He would not have been in any doubt that the date had been inserted not by the land agent on receiving the acceptance (as is customary) but had been inserted by Mr Hemachandra. A reasonable man would have formed the conclusion that it was some kind of intended acceptance, but with some kind of qualification. He would not “suppose” that Mr Hemachandra was assenting to the offer, without any qualification.
[25] As soon as the inference is drawn that the acceptance is in some degree qualified there is no contract. In the absence of a simple acceptance of an offer the parties are not of the same mind (ad idem). That was the situation here. So there is no contract to be enforced.
For the sake of completeness the Judge then addressed other issues in the case. In effect, he found that Mr Hemachandra had acted genuinely; that he genuinely assumed or believed that the way in which he had executed the agreement meant that he would not be bound if he so elected prior to 10 December 2003. The Judge also took the view that it was likely (more probable than not) that Mr Lagan did say something which led Mr Hemachandra to form the belief which the Judge held he had but he accepted Mr Lagan’s evidence that he would not have suggested post-dating the agreement. In his view Mr Lagan said nothing other than what would be standard. He went on to say:
[42] Mr Hemachandra misunderstood Mr Lagan. In addition, Mr Hemachandra did not take legal advice as to how to qualify an acceptance. Mr Hemachandra said he did not take legal advice because he did not yet have a contract. So the peculiar way by which Mr Hemachandra signed the offer, postdating it, was Mr Hemachandra’s solution to his problem. It was not pursuant to advice from Mr Lagan. It was made without the benefit of taking professional advice from Mr Hemachandra’s solicitor. If contrary to Mr Hemachandra’s intention it amounts to an acceptance of the offer so that there was a contract immediately, such consequence is essentially of Mr Hemachandra’s own making. It is not a consequence of advice given by Mr Lagan.
[17] Further, and for essentially the same reasons, he acquitted Mr Lagan of misleading and deceptive conduct under the Fair Trading Act, 1986. As well, although he did not expressly address the escrow argument, he implicitly rejected it.
Our approach to the case
[18] We propose to address the issues raised by the case in reverse order, that is to address first the factual findings made by the Judge which are the subject of the cross appeal and then to address the question whether there was a concluded agreement between Mr Robinson and Mr Hemachandra’s company.
The challenge to the Judge’s findings of fact
[19] At trial Mr Hemachandra maintained that he was told by Mr Lagan that he should sign, but post-date, the agreement and that Mr Lagan would hold it, in effect as an escrow, until the date to which it was postdated and that Mr Hemachandra’s company could withdraw at any time before then. If this is what Mr Lagan had said to Mr Hemachandra, then it would plainly amount to a defence to the claim for specific performance, on the basis either that the agreement was procured by misrepresentation and/or was executed only as an escrow.
[20] Mr Gibson sought to persuade us that the Judge’s factual findings were wrong. But he was unable to point to any tangible error which the Judge made. Moreover, the Judge’s finding seem to us to be at least consistent with the probabilities of the case. It is most implausible to assume that any real estate agent acting honestly could have acted as Mr Hemachandra asserted that Mr Lagan had. In reality, Mr Hemachandra attributed to Mr Lagan conduct which was either fraudulent, or close to it – that is tricking Mr Hemachandra into signing the agreement.
[21] His motive for supposedly doing this was trivial, a net $1,000 or so from what was payable by Mr Robinson on a concluded agreement. Equally plausible (and indeed more plausible to our way of thinking) is the conclusion of the Judge, that Mr Hemachandra simply misunderstood what he was told.
[22] Accordingly we reject the cross appeal.
Was there a concluded agreement?
[23] The issue whether there was a contract is a narrow one.
[24] On the basis of the Judge’s finding of fact which we have affirmed, the issue whether there was a contract turns on the intentions of the parties as manifested by the externalities of their behaviour. This is to be determined objectively. We say this because on the findings of fact nothing was said between Messrs Lagan and Hemachandra prior to the agreement being signed which is material to this question, cf Fletcher Challenge Energy Ltd v ECNZ Ltd [2002] 2 NZLR 433 at [54] (CA). So the approach taken by the Judge in [21] of his judgment as to the test was correct.
[25] Where we differ, with respect, from the Judge is as to the application of the test. In our view the externalities – the objective indicia – point overwhelmingly to the conclusion that this was an agreement. In this regard, we refer to the features of the document relied on by Mr Shiels for Mr Robinson.
· It states at its head that it is an “Agreement for Sale and Purchase of Real Estate”.
· It refers to the Respondent as ‘Vendor’.
· It refers to the Appellant as ‘Purchaser’.
· It states at the foot of the front page:
“It is agreed that the vendor sells and purchaser purchases the above described property, and the chattels included in the sale, on the terms set out above, and the General and Further Terms of Sale”.
· It refers in Clause 11 to “the sale evidenced by this agreement”.
· It is expressed by a “further term” (and not as part of the printed form) as being conditional on the purchaser arranging finance by 22 November 2003 and that if the agreement is not fulfilled “this agreement will be at an end”.
· It is not expressed as being conditional on any other matter.
· Immediately above the signatures, it states the following:
“WARNINGS (These warnings do not form part of this agreement)
1. This is a binding contract. Read the information set out on the back page before signing”.
· On the backing sheet (and immediately opposite where the Respondent’s agent dated it) it again states that it is a binding agreement and that the parties should seek professional advice before signing if there are any doubts.
· It further states at the foot of the same page:
“THE ABOVE NOTES ARE NOT PART OF THIS AGREEMENT AND ARE NOT A COMPLETE LIST OF MATTERS WHICH ARE IMPORTANT IN CONSIDERING THE LEGAL CONSEQUENCES OF THIS AGREEMENT”.
“PROFESSIONAL ADVICE SHOULD BE SOUGHT REGARDING THE EFFECT AND CONSEQUENCE OF ANY AGREEMENT ENTERED INTO BETWEEN THE PARTIES.”
· The backing sheet is labelled “AGREEMENT FOR THE SALE AND PURCHASE OF REAL ESTATE”.
· The backing sheet describes the parties as ‘Vendor’ and ‘Purchaser”.
[26] In the absence of Mr Hemachandra’s explanation as to why he dated the agreement and his signature as he did, it would never have occurred to anyone that he was, in this way, reserving to himself the right to withdraw from the apparent agreement up to 10 December 2003. Assuming (as we must given the findings of fact) that this is what he intended, he set about communicating this in an absolutely extraordinary way which is simply not consistent with the text of the document which he signed. We might add that the analogy he drew of a post-dated cheque is not sound. A post-dated cheque is of course enforceable; it is only in its character as a mandate to the drawer’s bank that it can be cancelled.
[27] We note that the error in the date of the agreement would not lead to any difficulties in the application of those terms of the agreement which are referable to “the date of the agreement”, see Willmot v Johnson [2003] 1 NZLR 649 (CA).
[28] In that context we do not see Mr Hemachandra’s acceptance as “qualified” or apparently so.
[29] Although the Judge discounted the reaction of Mr Douglas on the basis that he had not seen the original of the agreement, Mr Cain did have the original and the issue relied on by the Judge would appear not to have occurred to him. In saying this we recognise that the issue is to be determined objectively and that this comment is merely by way of an aside.
[30] Accordingly, on this issue and in respectful disagreement with the Judge, we conclude that a contract came into existence when Mr Hemachandra sent the executed agreement to Mr Lagan.
Disposition
[31] We allow the appeal and dismiss the cross appeal. We set aside the judgment of the High Court. Mr Robinson is entitled to costs in that Court on a 2B basis along with disbursements. We make an order for the specific performance of the contract with leave reserved to the parties to apply to the High Court for any orders which may be necessary as to its implementation. Mr Robinson is awarded costs of $6,000 and usual disbursements.
Solicitors:
Race & Douglas, Dunedin for Appellant
Cain & Co, Wellington for Respondent
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