Sagar Properties Limited v Tropical Origin Limited
[2014] NZHC 1771
•29 July 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2014-404- 001326 [2014] NZHC 1771
BETWEEN SAGAR PROPERTIES LIMITED
Plaintiff
AND
TROPICAL ORIGIN LIMITED Defendant
Hearing: 28 July 2014 Appearances:
M S Sahu Khan for the Plaintiff
D J King for the DefendantJudgment:
29 July 2014
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
29.07.14 at 4:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
SAGAR PROPERTIES LIMITED v TROPICAL ORIGIN LIMITED [2014] NZHC 1771 [29 July 2014]
[1] The plaintiff applies to support its claim to a caveatable interest in the subject property. The plaintiff seeks to protect claimed equitable rights to purchase the property in terms of an Agreement for Sale and Purchase dated 2 May 2014 (the Agreement).
[2] The front page of the Agreement indicated that a Building Report was required (by the purchaser), within five working days i.e. by 5:00pm, 9 May 2014.
[3] Clause 9.3 of the Agreement stated:
If the purchaser has indicated on the front page of this agreement that a building report is required, this agreement is conditional upon the purchaser obtaining at the purchaser’s cost… a report on the condition of the buildings and any other improvements on the property that is satisfactory to the purchaser, on the basis of an objective assessment. The report must be prepared in good faith by a suitably-qualified inspector to the property at all reasonable times upon reasonable notice for the purposes of preparation of the report. The building inspector may not carry out any invasive testing in the course of inspection without the vendor’s prior written consent. If the purchaser avoids this agreement for non-fulfilment of this condition pursuant to sub-clause 9.8(5), the purchaser must provide the vendor immediately upon request with a copy of the building inspectors report.
[4] Clause 9.8 of the Agreement provides:
…
(4) The condition shall be deemed to be not fulfilled until notice of fulfilment has been served by one party on the other party.
…
[5] Clause 1.3 of the Agreement provides:
The following apply to all notices between the parties…:
(1) All notices must be served in writing.
…
(3) All other notices, unless otherwise required by the Property Law Act
2007, must be served by one of the following means:
…
(b) On the party or on the party’s lawyer:
…
(iii) by facsimile, or by email:
…
(4) In respect of the means of service specified in subclause 1.3(3)(b), a notice is deemed to have been served:
…
(d) In the case of email, when acknowledged by the party or by the lawyer orally or by return email or otherwise in writing, except that return emails generated automatically shall not constitute an acknowledgement;
…
[6] On 9 May 2014 at 1:16pm the plaintiff/purchaser’s solicitor notified the defendant/vendor’s solicitor by email that a Building Report had been obtained that found several issues with the property which the plaintiff required to be completed “in a proper workman like manner prior to settlement”. The email added that in the event the vendor did not wish to attend to those issues then the purchaser would agree to a $2,000 price reduction.
[7] The plaintiff ’s solicitors responded by email on 9 May 2014 at 4:53pm noting that the vendor would think about the issues raised over the weekend and would let his solicitors know on Monday, 12 May 2014.
[8] One minute later the plaintiff’s solicitors emailed the vendor’s solicitors with
advice:
We are instructed to advise the building report condition is satisfied.
[9] That email was not acknowledged by or on behalf of the vendor.
[10] At 11:19am on 12 May 2014 the defendant’s solicitor faxed the plaintiff’s solicitor to advise the vendor was not willing to “repair any of the matters raised and this agreement is now at an end”.
[11] The plaintiff does not accept the defendant’s purported cancellation of the
Agreement.
[12] For determination in this dispute they include:
(a) Did either email sent by the plaintiff ’s solicitor on 9 May 2014 constitute satisfaction of the Building Report Condition and confirmation that the Agreement was unconditional in accordance with the terms and conditions of the Agreement?
(b)Was the Building Report Condition satisfied and the Agreement for Sale and Purchase dated 2 May 2014 made unconditional within the condition timeframe, i.e. prior to 5:00pm on 9 May 2014?
(c) Was the defendant entitled to cancel the Agreement on the basis that the Building Report Condition was not satisfied within the timeframe stipulated in the Agreement?
(d) Did the defendant cancel the Agreement by its facsimile of 12 May
2014?
Legal principles
[13] The principles for sustaining a caveat are set out in Botany Land
Development Limited v Auckland Council1:
1.The burden of establishing that the applicant has a reasonably arguable case for the interest claimed is upon the caveator;
2.The caveator must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission, or of any trust expressed or implied as set out in s 137 Land Transfer Act 1952;
3.The summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact; and an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so;
1 [2014] NZCA 61.
4.When an applicant has discharged the burden upon the applicant, there remains a discretion as to whether to remove the caveat, which will be exercised cautiously;
5.The Court has jurisdiction to impose conditions when making orders.
The plaintiff ’s case
[14] It is that the only condition as to the requirement of the Building Report was that the plaintiff had to obtain same by 5:00pm 9 May 2014; that such was obtained by 7 May 2014, a copy of which was then provided to the vendor’s real estate agents and as well at 1:16pm on 9 May 2014 a copy was emailed to the defendant’s solicitors. The plaintiff said it was not obliged to send a copy of the Building Report, merely to obtain one within the time required; that its purpose was solely for the benefit of the purchaser to enable a decision whether or not to proceed with the purchase.
[15] For the plaintiff it is submitted that the 1:16pm email on 9 May 2014 contained no condition of settlement that the defendant had to satisfy the building issues referred to in the Building Report; that rather that email contained proposals i.e. that the vendor carry out the repairs that the Building Report identified, or alternatively that the vendor agreed to reduce the purchase price by $2,000.
[16] The plaintiff said when the defendant’s solicitors by email at 4:53pm on 9
May 2014, indicated consideration would be given to the issues raised by the plaintiff’s solicitors by reference to the Building Report, the plaintiff’s solicitors immediately responded, by email, confirming that the Building Report Condition “is satisfied”.
[17] The plaintiff’s position is that it fully complied with the condition requiring the obtaining of a Building Report by 9 May 2014, indeed earlier by 7 May 2014. The plaintiff challenges the defendant’s purported cancellation of the Agreement on
12 May 2014 by facsimile at 11:19am. The plaintiff makes it clear that it was not requiring repairs to be done, only suggested that they be done or a variation to the contract price be considered. The plaintiff rejects the defendant’s position, stated by its Notice of Opposition that “it did not accept either option for remedying the
Building Report concerns and therefore the [Building Report] Condition was not
satisfied”.
[18] Regarding the reliance of the defendant upon its claim that the 4:54pm 9 May
2014 email from the plaintiff’s solicitor was not received by the defendant [because its receipt was not acknowledged], the plaintiff says that the contract provisions regarding service of notice does not include correspondence and communication between the parties but only to notices provided to be given by formal requirement of the parties’ Agreement. In that regard it is submitted for the plaintiff that the defendant’s solicitors, as they acknowledge, had been advised that the plaintiff had obtained a Building Report.
The defendant’s case
[19] In short it is that the defendant validly cancelled the contract on 12 May2014. [20] The defendant’s case focuses upon the lawful requirements for service of
notices as they are contained in ss 352-354 of the Property Law Act 2007, and was provided by clause 1.3 of the parties Agreement.
[21] For the defendant Mr King submits that s 354(3) provides that the Property Law Act requirements of service do not apply if the parties, by their agreement have agreed service be affected in some other manner. Further and because clause
1.3(3)(b) enabled service by email clause 1.4 provided that email service was effected usually when acknowledged by the party or by the lawyer orally or by return email or otherwise in writing.
[22] Mr King notes that clause 9.8 required that any time for fulfilment of any condition “shall be of the essence”; that a condition shall not be deemed to be fulfilled until notice of fulfilment has been served on the other party; that if not fulfilled by a date for fulfilment that either party may waive or avoid the Agreement by giving notice to the other; and that any waiver shall be by notice.
[23] Mr King summarises the position for the defendant as follows:
(a) The deadline for fulfilling the Building Report Condition was 5:00pm
Friday, 9 May 2014.
(b)The purchaser/plaintiff purported to declare that condition fulfilled or waived by an email sent at 4:54pm on Friday, 9 May 2014.
(c) By clause 1.3(4)(d) of the Agreement, that email of 4:54pm on 9 May
2014 was not deemed to be served until acknowledged by the Vendor/defendant or its solicitor orally or by return email or otherwise in writing.
(d)Before the email of 4:54pm on 9 May 2014 was acknowledged orally or by return email or otherwise in writing (and therefore before it was served), the Vendor/defendant cancelled the Agreement by facsimile sent at 11:15am on Monday, 12 May 2014.
(e) In terms of clause 1.3(4)(c) of the Agreement, the faxed notice of cancellation was deemed served at the time of the transmission of that facsimile.
(f) Therefore, the Agreement was cancelled at 11:15am on Monday, 12
May 2014 before the Purchaser/plaintiff fulfilled the Building Report condition in terms of clauses 9.8(4) and 9.8(5), the purported email notice of 4:54pm on Friday, 9 May 2014 having not been validly served as of 11:15am on Monday, 12 May 2014 as the vendor/defendant had not acknowledged receipt of that email notice prior to 11:15am on Monday, 12 May 2014.
[24] Mr King submits that because the defendant did not agree to the plaintiff’s request for repairs in relation to the Builder’s Report, or for a reduction in the purchase price, it was entitled to cancel the Agreement, which it did after the expiry of the condition date.
Considerations
[25] The Building Report clause was primarily for the benefit of the purchaser. Its purpose was to allow the purchaser the opportunity to have a professional inspect the building.
[26] However the condition was deemed not to be fulfilled unless notice was given to the vendor that it had been fulfilled (cl 9.8(4)). This contrasted with the LIM condition where if the purchaser said nothing the condition was deemed to be satisfied (cl 9.2(2)).
[27] Clause 9.8(5) allowed either party to cancel if a condition was not fulfilled, provided it had not been waived by the party whose benefit the clause was for.
[28] Thus if the Building Report Condition was not fulfilled either party could avoid the Agreement. But, the absence of fulfilment within five days did not automatically avoid the Agreement. It was still open for the parties to complete either by waiving or fulfilling the condition at a later date.
[29] There was a positive obligation to obtain a Building Report. As the condition could be considered solely for the benefit of the purchaser it was open to the purchaser to waive this condition at any time (cl 9.8(6)). This meant that if the purchaser obtained a Building Report they were required to provide notice of fulfilment of that obligation, and if they should wish to cancel the contract then that advice ought to also be given. If not done within five days the contract does subsist and the vendor is also entitled to cancel.
[30] In this case the defendant says that the purchaser’s purported confirmation by email at 4:54pm on 9 May was deemed not to have been served unless it was acknowledged and that any acknowledgement did not occur before the vendor had, by facsimile, cancelled the Agreement.
[31] The question remains however whether the Building Report Condition had been fulfilled or otherwise was, by the earlier 1:16pm email of the purchaser’s solicitor waived before the vendor purported to avoid the Agreement.
[32] In that regard a closer look is required of the email communication of
1:16pm. For that purpose the Court needs to consider clauses 9.3 and 9.8(4).
[33] Clause 9.3 provided that the Agreement was conditional upon the purchaser obtaining a Building Report that was satisfactory to the purchaser based on an objective assessment.
[34] The clear evidence is that a Building Report had been obtained within the timeframe required. Copies were provided to the defendant’s real estate agents, and advice that the Building Report had been obtained, as well as details of the issues identified by it, were provided by the 1:16pm email, which was acknowledged at
4:53pm.
[35] The position taken on behalf of the defendant is that the Building Report was not met because the plaintiff used its findings for the purpose of endeavouring to negotiate repairs paid by vendor or in the alternative a price reduction.
[36] Implicit in the response of the vendor in adopting that approach is that it had not received notice of the purchaser’s receipt of a Building Report “on the condition of the buildings and any other improvements… that is satisfactory to the purchaser…”.
[37] Although the vendor acknowledges receiving advice of a Building Report had been obtained, that advice was qualified by building concerns and suggestions of a $2,000 price reduction.
[38] The vendor submits the conditional nature of the notice amounted to non- satisfaction with the Building Report’s conclusions and therefore non-fulfilment of a requirement for satisfaction of the Building Report Condition.
Conclusions
[39] The Court disagrees there was an absence of compliance by the purchaser of the requirement of the parties’ agreement to obtain Building Report that was satisfactory to the purchaser. Although its purpose was to enable the purchaser to
cancel the agreement if it was dissatisfied with the report conclusions and whilst arguably it was a condition inserted for the benefit of the purchaser and the purchaser alone, it seems clear by the agreement terms that there was still preserved to the vendor the right to cancel if the building report was not obtained within time and if the purchaser had not provided notification of a building report to its satisfaction had been obtained.
[40] It is the Court’s view in this case that whilst the Building Report identified building issues, the identification of those by notice (a fulfilment notice) which the vendor’s solicitors received [because by their email timed at 4:53pm on 9 May they acknowledged it] does not mean the condition was not satisfied just because the purchaser’s suggested grounds for renegotiating the price, albeit for a modest sum.
[41] Clause 9.8(4) required delivery of a notice of fulfilment. What should comprise a ‘Notice of Fulfilment’ is not defined. Clearly, it should contain advice of a Building Report having been obtained. That advice could be given by email. The clause does not require a purchaser to say that he is happy with the Report. Indeed, except if notice of cancellation is given it could be considered the Report contains all of the information that a purchaser would expect it to have done. Therefore whilst there is a requirement for provision of a satisfactory Building Report it does not require a purchaser to be happy with it.
[42] It is the Court’s view that it is sufficiently clear the purchaser was not exercising any rights of cancellation. To the contrary there is evidence of confirmation in terms of which consideration of modification was being explored.
Result
[43] The email of the purchaser’s solicitors at 1:16pm on 9 May 2014 provided sufficient verification of the obtaining of a satisfactory Building Report as was required by that date as confirmation that the Agreement was unconditional.
[44] Therefore the defendant was not entitled to cancel the Agreement on the basis that the Building Report Condition was not satisfied within the timeframe stipulated in the Agreement.
[45] And therefore, the defendant did not cancel the Agreement by its facsimile of
12 May 2014, same having already been confirmed by the plaintiff solicitor’s email dated 1:16pm on 9 May 2014 and which was confirmed by the defendant’s solicitors emailed timed at 4:53pm on 9 May 2014.
[46] The Court accepts an arguable case for the caveat has been provided. The Court concludes the caveat should remain until the merits of the matter can be tried by a substantive proceeding.
[47] The Court directs the plaintiff to file and serve their substantive proceeding by 12 September 2014. In the circumstances service will be effective if provided at the offices of the defendant’s current solicitors.
[48] Failing the filing and service of the plaintiff’s new proceeding, leave shall be reserved to the defendant to request the discharge of the plaintiff’s caveat. Such a request is to be scheduled for call in the first available caveat list thereafter.
Judgment
[49] Application to sustain caveat granted.
[50] Costs to plaintiff awarded on a 2B basis together with disbursements approved by the Registrar.
Associate Judge Christiansen
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