Sampson Property Investments Limited v DMST Internationals Limited
[2024] NZHC 1699
•25 June 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-483
[2024] NZHC 1699
BETWEEN SAMPSON PROPERTY INVESTMENTS LIMITED
PlaintiffAND
DMST INTERNATIONALS LIMITED
Defendant
Hearing: 6 May 2024 Appearances:
M R C Wolff for Plaintiff
P Morten and M Robertson for Defendant
Judgment:
25 June 2024
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] In this proceeding, the plaintiff claims breach of contract and seeks an order for specific performance of an agreement for sale and purchase of a property at Wigan Street, Te Aro, Wellington, or alternatively damages. The defendant denies any breach of contract and has also counterclaimed against the plaintiff seeking judgment for the amount of the deposit together with interest.
[2] Relevantly, the defendant contends that it was entitled to cancel the agreement for sale and purchase for breach of an essential term, and therefore the plaintiff’s claim cannot succeed. The defendant seeks summary judgment against the plaintiff under r 12.2(2) of the High Court Rules 2016 (HCR). Although the defendant has not sought summary judgment on its counterclaim, it also seeks relief being a declaration that it lawfully cancelled the agreement for sale and purchase and return of the deposit together with interest. The plaintiff opposes the defendant’s application for summary judgment.
SAMPSON PROPERTY INVESTMENTS LIMITED v DMST INTERNATIONALS LIMITED [2024] NZHC 1699 [25 June 2024]
[3] The overarching issue is whether the plaintiff’s claim for breach of contract and specific performance or damages cannot succeed because the defendant validly cancelled the agreement for breach by the plaintiff of an essential term.
What happened?
[4] I adopt the background set out in the judgment of Associate Judge Paulsen in this proceeding relating to an application by the defendant for an order under r 9.75 of the High Court Rules 2016.1
[3] The plaintiff was the registered owner of adjoining unit title properties at 9-11 Wigan Street, Te Aro, Wellington.
[4] On 10 May 2022, the parties entered into an agreement pursuant to which the plaintiff was to cancel the unit plan and subdivide the land into two freehold titles. Once titles issued the defendant was to purchase unit 1, which was a block of bare land, for $2.2 million.
[5] The property had been marketed for sale by Capital Commercial (2013) Ltd and Mr Walker was a licensed real estate agent employed by that agency. He showed the property to the defendant’s director, Jibin [Daniel] Zhang.
[6] The agreement between the parties was conditional on due diligence by the defendant and also upon what was cl 23. The terms of the agreement, and relevantly cl 23, was the subject of further negotiation between the parties’ solicitors as part of the due diligence process. Relevantly for present purposes, the final terms of the agreement contained cls 23.8 and 23.10, which were in the following terms:
23.8 It is not expected that any easements, covenants, encumbrances, rights or interests will be necessary to enable the New Titles to issue. Should this not be the case, the purchaser reserves the right to approve the Title within 5 working days of notice of any requirement of any easements, covenants or encumbrances, rights or interests required to be registered over the new Titles. The purchaser will not unreasonably withhold their approval if such easements, covenants, encumbrances, rights or interests will not affect the purchasers proposed project on the land. This condition is inserted for the benefit of the purchaser. For the avoidance of doubt and notwithstanding anything to the contrary, if the Title has no easements, covenants, encumbrances or rights or interests registered on the Title, the purchaser has no right of approval and is deemed to have accepted the Title. The vendor will meaningfully consult with the purchaser during the cancellation of unit title and subdivision process, including providing the purchaser with the resource consent and draft survey plan.
1 Sampson Property Investments Ltd v DMST Internationals Ltd [2024] NZHC 555.
…
23.10 The Vendor and Purchaser agree that clause 23 is an essential term of the agreement.
[7] On 19 October 2022, the Wellington City Council issued its resource consent decision on the plaintiff’s application to subdivide the property. It contained a requirement for registration of a consent notice upon the title of unit 1 (the terms of which had been suggested by the plaintiff) as follows:
“Lot 1 is not intended for further development at this stage and is un-serviced for water, wastewater and stormwater. When the development of the site is undertaken in the future, it will be the developer’s responsibility to provide the Lot with connections appropriate for the nature of the development.
Advice Note: The work to install the services at development shall be in accordance with the Wellington City Council’s Code of Practice for Land Development. All costs associated with this work will be borne by the developer.
Note:
Upon the issue of the certificate pursuant to section 224 or at such earlier time as may be required, a Consent Notice pursuant to section 221 will be issued. The Consent Notice will specify condition (i) and advice note above to be registered against the Record of Title to issue in respect of Lot 1 of this subdivision.”
[8] The defendant’s position is that it was not until 19 April 2023 that the plaintiff’s solicitors provided the defendant’s solicitors with a copy of the resource consent decision and that there had been no consultation, meaningful or otherwise, with it during the resource consent and subdivision process.
[9] The defendant’s solicitors purported to cancel the agreement on its behalf on 23 May 2023. The grounds for doing so were stated as:
“We are instructed to advise there has been no meaningful consultation between the parties during the cancellation of the Unit Title and the subdivision process including providing our client with a draft resource consent.
We are further advised our clients proposed project on the land is severely impacted by the Consent Notice deeming the Developer responsible in providing the Lot with connections to install services at the development.
Our client entered into the contract with the understanding that Lot 1 will be a fully serviced Fee Simple property, not a piece of land with no services. …
Therefore pursuant to Clause 23.8 of the above agreement, our client does not approve the Consent Notice to be registered over the new Title and the contract is at an end.”
[10] There was correspondence between the parties’ solicitors concerning the validity of the defendant’s cancellation of the agreement prior to these proceedings being issued, but the parties maintained conflicting views on the matter. The plaintiff commenced this proceeding on or around 23 August 2023.
[11] The defendant responded on 27 September 2023 with a statement of defence and a counterclaim (for return of a deposit) as well as an application for summary judgment. The summary judgment application was accompanied by the application under r 9.75, which is being dealt with as a preliminary matter before the summary judgment application is set down for hearing.
[5] In addition to the background set out above, there are further provisions of the agreement which are relevant to the defendant’s application for summary judgment.
[6]Clause 23 of the agreement provided that:
Clause 23 is a condition of this sale and as such the agreement shall be deemed conditional until satisfaction of this clause.
[7]Clause 11.4 of the agreement (Operation of conditions) provided:
If this agreement is expressed to be subject either to the above or any other condition(s), then in relation to each such condition the following shall apply unless otherwise expressly provided:
(1)The condition shall be a condition subsequent.
(2) …
(3) Time for fulfilment of any condition and any extended time for fulfilment to a fixed date shall be of the essence.
(4) …
(5) If the condition is not fulfilled by the date of fulfilment, either party may at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this agreement, the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement and neither party shall have any right to claim against the other arising from this agreement or its termination.
…
[8]The following additional provisions were added to clause 23:
1. Clause 23 – Cancellation of Unit Plan and subdivision
The following wording is added:
“The due date for satisfaction of this condition is the date that is 12 months after the date that the purchaser has confirmed in writing to the vendor that the condition at clause 24 (purchaser due diligence) is satisfied.”
2. Clause 23.12
A new clause 23.12 as follows is inserted:
“Should Clause 23 not be satisfied by the Vendor on the agreed date, the Purchaser has the right to cancel the agreement and any deposit paid by the Purchaser is returned to the purchaser in full. This condition is included for the benefit of the Purchaser. Neither party shall have any claim against the other under the agreement whatsoever.”
Legal principles — summary judgment
[9]Rule 12.2(2) of the High Court Rules 2016 provides that:
(2)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.
[10] In Stephens v Barron, the Court of Appeal summarised the long-standing Court of Appeal authority on defendants seeking summary judgment, Westpac Banking Corp v NM Kembla New Zealand Ltd,2 as follows:3
[9] …This Court’s decision in Westpac Banking Corp v M M Kembla New Zealand Ltd makes it clear that a defendant seeking summary judgment has a considerable burden to discharge. Elias CJ delivering the judgment of the Court, made the following points:
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(b)An 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 able to be properly arrived at only after a full hearing of the evidence.
(c)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 is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
2 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
3 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [9] (footnotes omitted).
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
[11] Regarding proof and the onus of proof, the Court of Appeal in Westpac Banking Corporation Ltd stated:4
[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 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 … to force on the plaintiff’s case 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.
[12] In Jones v Attorney-General, the Privy Council held that summary judgment “… should not be given for the defendant unless [the defendant] shows on the balance of probabilities that none of the plaintiff’s claims can succeed. That is an exacting test, and rightly so since it is a serious thing to stop a plaintiff bringing his claim to trial unless it is quite clearly hopeless”.5
[13] An application for summary judgment by the defendant is similar to a striking out application in that the defendant has to show that the plaintiff’s claim is clearly untenable and the plaintiff cannot succeed. The difference between the two types of application is that an application for summary judgment allows for affidavit evidence to be provided. It will therefore be possible to obtain judgment on the basis of material
4 Westpac Banking Corporation Ltd, above n 2, at [63]–[64].
5 Jones v Attorney-General [2003] UKPC 48, [2004] 1 NZLR 433 at [10].
other than that contained in the pleadings.6 The two types of application are not necessarily interchangeable. If the dispute is essentially a legal question, striking out is likely to be the appropriate course of action.7
[14] As a general rule, the Court in determining summary judgment applications will refrain from attempting to resolve genuine conflicts of evidence or to assess the credibility of the parties’ statements in their affidavits. However, as noted by the Court of Appeal in Krukziener v Hanover Finance Ltd:8
[26] … The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable … . In the end the Court’s assessment of evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it …
[15] Further, summary judgment may be given where the interpretation of a contract is an issue. In Jowada Holdings Ltd v Cullen Investments Ltd, the Court of Appeal stated:9
[29] This present appeal is concerned with a contract based claim in circumstances where both parties seek to rely on evidence of circumstances said to form part of the relevant context in which the contract is to be interpreted. Their evidence is in conflict. That, however, does not preclude the Court from giving summary judgment in a contract claim if it is satisfied that resolution of the factual matters in dispute is not necessary to provide the Court with such contextual background as is necessary to resolve the claim. This is simply an application of the principle that where, despite differences on factual matters, the lack of a tenable defence to a cause of action is plain on the material before the Court, and the Court is sure on that point, summary judgment will normally be entered. In such circumstances there is no reason why a contract should not be interpreted and applied in summary judgment proceedings …
Issues to be determined
[16] The defendant’s argument is of narrow ambit. The defendant seeks summary determination that the plaintiff’s claim cannot succeed because the defendant validly
6 Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR 12.2.07(1)].
7 Body Corporate 207624 v North Shore City Council [2012] NZSC 83, [2013] 2 NZLR 297 at [4].
8 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
9 Jowada Holdings Ltd v Cullen Investments Ltd CA 248/02, 5 June 2003 at [29].
cancelled the agreement for sale and purchase on 23 May 2023 on the basis that the plaintiff failed to comply with the obligation to consult in cl 23.8 which the defendant says was an essential term of the agreement. The defendant contends that as a result of this breach it was entitled to cancel the agreement under either s 37 of the CCLA or cls 23.12 or 11.4(5) of the agreement, and is therefore entitled to the return of the deposit. This is pleaded as an additional or alternative allegation of breach of contract in the defendant’s statement of defence and in its counterclaim.
[17]This argument raises a number of sub-issues including:
(a)What was the scope of consultation required under cl 23.8?
(b)Whether the plaintiff complied with the obligation to consult?
(c)Was the performance of the obligation to consult, in and of itself, essential to the cancelling party and/or what was required to “satisfy” cl 23?
[18]I now turn to consider these issues.
Scope of consultation required
[19]The last sentence of cl 23.8 states:
The vendor will meaningfully consult with the purchaser during the cancellation of unit title and subdivision process, including providing the purchaser with the resource consent and draft survey plan.
[20] Mr Morten, for the plaintiff, submits that the “unit title and subdivision process” must also include obtaining a resource consent. He refers to the definition of “process” in the New Zealand Law Dictionary:10
A series of actions or steps taken in order to achieve a particular end, for example, serving a summons requiring a person to appear in Court.
10 Peter Spiller The New Zealand Law Dictionary (9th ed, Lexis Nexis, Wellington, 2022) at 245.
[21] Mr Morten submits that the plaintiff was under an obligation to meaningfully consult throughout the entire process including the resource consent process. He notes that the resource consent the plaintiff applied for and obtained was a “Subdivision Consent”. He submits that the phrase “including the resource consent and draft survey plan” is non-exhaustive and the obligation cannot be construed as only requiring provision of the resource consent once it has been obtained rather than requiring consultation in relation to the draft consent and/or proposed conditions of the consent. Mr Morten submits that there would be no point in consulting once the resource consent was issued with the relevant conditions. He submits that the purpose of the consultation provision was to ensure “meaningful consultation” with regard to any easements, covenants, and encumbrances, rights or interests which may be registered over the new title.
[22] The plaintiff contends that the proper interpretation of the consultation provision is that consultation was only required “during the cancellation of unit title and subdivision process” and this did not include consultation during the resource consent process. The plaintiff contends that this is supported by the fact that the consultation obligation specifically included providing the defendant with the resource consent, and this could only occur after the resource consent had been obtained. The plaintiff contends that the obligation to consult on “the cancellation of unit title and subdivision process” commenced from the point the cancellation of the unit plans was lodged, which coincided with the provision of the resource consent to the defendant, on 19 April 2023.
My assessment
[23] The issue turns on the proper interpretation of cl 23.8. The approach to contractual interpretation in New Zealand was confirmed by the Supreme Court in Bathurst Resources Ltd v L & M Cole Holdings Ltd.11 The Supreme Court confirmed that the decision in Firm P1 Ltd v Zurich Australian Insurance Ltd can be regarded as settling the general approach to contractual interpretation as follows:12
11 Bathurst Resources Ltd v L & M Cole Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [40]– [49].
12 Firm P1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, 1 NZLR 432 at [60]–[61].
[60] … the proper approach is an objective one. The aim being to ascertain ‘the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract’. This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as ‘background’, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning.
[61] The requirement that the reasonable person have all the background knowledge known or reasonably available to the parties is a reflection of the fact that contractual language, like all language, must be interpreted within its overall context, broadly viewed. Contextual interpretation of contracts has a significant history in New Zealand, although for many years it was restricted to situations of ambiguity. More recently, however, it has been confirmed that a purposive or contextual interpretation is not dependant on there being an ambiguity in the contractual language.
…
[63] While context is a necessary element of the interpretative process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the context of the contract as a whole, has an ordinary natural meaning, that will be a powerful, albeit it not conclusive, indicator of what the parties meant. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty.
[footnotes omitted.]
[24] Commencing with the written words, the parties have agreed to the words “cancellation of unit title and subdivision process”. While Mr Morten contends that this must include the resource consent process, there is no express reference to the resource consent process. Further, the parties agreed that the consultation would include providing the resource consent and draft survey plan. It is apparent this is referring to the resource consent as issued, not the draft resource consent or draft proposed conditions. It is also apparent that the resource consent would only be available to be provided to the defendant after the resource consent process was completed. The use of the word “including” means that this provision is not exhaustive as to what is required, but it seems to me that if the parties, who were both legally advised, had intended that consultation required provision of the draft resource consent or proposed conditions then that could readily have been stated.
[25] In terms of context provided by the contract, there is no express reference to the resource consent process in cl 23.8 or indeed in cl 23. The heading of the clause is “Cancellation of Unit Plan and Subdivision”. Clause 23.1 provides that:
The Vendor acknowledges that in order to create the New Freehold Title, Unit Plan 72111 (“the Unit Plan”) must be cancelled in accordance with the Unit Titles Act 2010, and the base land comprising that unit development (being Lot 1 on Deposited Plan 11818) must be subdivided into two new fee simple titles being the Lot 1 New Freehold Title to be conveyed under this agreement, and the balance of unit development which will be separately fee simple titled and retained by the Vendor (“the Lot 2 New Freehold Title”). The cancellation of the Unit Plan and the application for new fee simple titles to issue shall be processed contemporaneously.
[26] Therefore, to the extent that there is any contextual assistance, the only reference to a “process” is to the contemporaneous processing of the cancellation of the unit plan and the application for new fee simple titles to issue. This occurs after the resource consent has been obtained.
[27] It is also necessary to consider the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. Counsel for the parties have not referred me to any specific background knowledge which would reasonably have been available to the parties which would inform the meaning of the relevant provision one way or the other. It seems that the parties had similar levels of knowledge and experience regarding property development. Mr Zhang refers to his “experience as a developer” in his affidavit evidence. Given that knowledge and experience, the parties were clearly aware that the plaintiff would be applying for a resource consent. Yet, the agreed consultation provision does not expressly refer to the resource consent process or to providing the defendant with the draft resource consent or proposed conditions. Mr Morten submits that there would be no point in consulting once the resource consent was issued with the relevant conditions. However, consultation after issue of the resource consent would still allow the defendant to raise any issues or concerns with any conditions which may lead to an application for a change, variation or cancellation of a condition or consent notice.13 There was also presumably the
13 See Resource Management Act 1991, ss 127 and 221.
possibility that the application for cancellation of the unit plan and for issue of the new titles might raise issues which could be the subject of consultation.
[28] There is evidence before me of exchanges between the parties and lawyers for the parties regarding negotiation and finalisation of the agreement.14 This includes the introduction of the consultation provision by the plaintiff’s solicitors in an email to the defendant’s solicitors dated 20 June 2022 as follows:
Clause 23.8 – As discussed, our client does not agree to a right of cancellation. Our client is prepared however to agree to meaningful consult [sic] with your client during the cancellation of unit plan and subdivision process. Hopefully this will mitigate any concerns your client has regarding interests on the title (if any) affecting their proposed project.
[29] Subsequently, the defendant’s solicitors advised in an email to the plaintiff’s solicitors dated 23 June 2022 that:
We are also instructed to advise our client requires the right to cancellation of the agreement, regarding the Title, even though meaningful consultation would be entered into between the parties and our clients consent would not be unreasonably withheld. The new Title may not register without a requirement that will affect our clients project, and this may be beyond either parties control.
[30] It is not apparent from this exchange that there was a common mutual understanding as to whether consultation was required during the resource consent process. In the end the parties agreed that consultation would include providing the defendant “with the resource consent and draft survey plan” which indicates, if anything, that there would not be consultation during the resource consent process. It is apparent from the exchanges between the lawyers that there was at least one telephone discussion between the lawyers on 27 June 2022 prior to cl 23.8 being finalised. It may be that evidence will be required from the lawyers involved in the negotiation so that the Court can properly determine whether there was a common mutual intention with regard to the scope of the consultation obligation and how this informed the final agreed provision.
14 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [6.3.4(e)].
[31] Overall, in my view, the plaintiff has a tenable argument that the consultation obligation in cl 23.8 did not encompass consultation during the resource consent process.
Did the plaintiff fail to consult in breach of cl 23.8?
[32] If the plaintiff was required to meaningfully consult prior to April 2023, then a factual issue arises as to whether there was adequate consultation during the relevant period, being October 2022 until April 2023. The plaintiff alleges in its statement of claim that during this period it orally updated the defendant as to progress on the cancellation of unit title and subdivision process through its real estate agent, Mr Walker.
[33] There is no material issue between the parties as to what is meant by “meaningful consultation”. Consultation requires that the person consulted is given relevant information and the reasonable opportunity to have input, and that the decision maker should give genuine consideration to that input.15 In this case the requirement is for “meaningful” consultation. Meaningful consultation requires sufficient information that the other party may have “intelligent and useful” input.16
[34] The defendant’s position is that the uncontradicted evidence is that there was no consultation, let alone meaningful consultation, in the relevant period. The defendant has adduced documentary evidence of the resource consent process including exchanges between Cameron de Leijer of Spencer Homes Ltd (SHL) (on behalf of the plaintiff) and the Wellington City Council and between SHL and Ari Chait, sole director of the plaintiff. The evidence is that during the resource consent process, SHL proposed a change to the draft consent conditions put forward by the Council in respect of Lot 1 which ultimately resulted in the consent notice on the title for Lot 1. The resource consent was issued on 19 October 2022.
[35] The defendant says that the plaintiff has not produced evidence of any email communications in relation to the resource consent process during the relevant period
15 Hirequip Holdings Ltd v City Hire Centre (1973) (2005) 2 NZCCLR 899 (HC) at [46].
16 Wellington International Airport Ltd v Air New Zealand [1993] 1 NZLR 671 (CA) at 676.
between SHL and the plaintiff’s real estate agent, Mark Walker, or between SHL and Mr Zhang of the defendant, or between Mr Walker and Mr Zhang. Mr Zhang deposes that he has never spoken to or received any email communications from Mr de Leijer at SHL about correspondence with the Wellington City Council and the resource consent process. The defendant says that it was not provided with the resource consent until 19 April 2023, when it was forwarded by the plaintiff’s solicitors.
[36]Mr Chait deposes that:
On or around 21 October 2022, Mark Walker of Bayleys was provided with a copy of the correspondence regarding the consent conditions. …. I had also verbally conveyed to Mark, on behalf of SPIL, any progress on the Property and the subdivision process as it was taking place. I understood Mark was relaying this information on to DMST as he was having ongoing discussions on separate projects too and had been having in-person meetings with the director of DMST.
[37] Mr Chait adduces a copy of an email from Mr Walker to him dated 21 October 2022 in which Mr Walker states “[s]eems to be all good news”. This appears to be a response to Mr Chait forwarding the resource consent conditions to him.
[38] Mr Zhang deposes that Mr Walker did not relay any information about the cancellation of unit title and subdivision process to him. He states that he has checked all emails and messages between Mr Walker and him and there is no correspondence from Mr Walker providing updated information as to the status of the subdivision, the sunset clause extension, and the resource consent. Mr Zhang says that he has also spoken to Mr Walker on a number of occasions since May 2023 and Mr Walker has told him that he did not orally update him as to progress on the cancellation of unit title and subdivision process.
[39] However, Mr Zhang acknowledges that he met with Mr Walker a number of times during the relevant period because Mr Walker was the listing agent for another commercial property that the defendant had purchased. He acknowledges that Mr Walker “mentioned in passing” during one of their meetings that the plaintiff was looking for an extension of the sunset clause under the agreement, but that nobody contacted him about that.
[40] On 19 April 2023, the plaintiff’s solicitors emailed the defendant’s solicitors advising as follows:
We understand that our clients have been liaising regarding progress of the unit plan via the agent. However, we thought it timely to touch base with an update.
We are making good progress with the cancellation of the unit plan and the application for fee simple titles. We have lodged the cancellation of the unit plans with LINZ a couple of weeks ago. We expect to receive confirmation of the registration within the next week or two.
A copy of the Resource Consent decision is attached.
We understand that our clients have mutually agreed to extend the date for fulfilment of further term of sale 23 by 3 months, to 28 September 2023. Can you please confirm this is correct.
We look forward to hearing from you.
[41] Mr Zhang states that this was the first communication he or his solicitors had received from the plaintiff about the resource consent and cancellation of the unit plan and application for titles since correspondence in July 2022. Mr Chait states that the plaintiff’s solicitors did not receive any reply from the defendant’s solicitors or the defendant.
[42] On 17 May 2023, the defendant’s solicitors emailed the plaintiff’s solicitors again as follows:
Further to our email below, we are touching base with a further update.
The cancellation of the unit plan has now been registered. A copy of Record of Title 1126868 is attached. The plan and title documents for the subdivision were lodged with LINZ on 15 May 2023. A copy of the relevant title lodgement document is attached.
Accordingly, a new title for Lot 1 will issue with the unique identifier 1127861 with a recorded date of issue of 15 May 2023.
We will let you know as soon as the search copy of the title is available.
[43] The defendant has also put forward evidence from Costas Varuhas, the solicitor for the defendant.17 He deposes that he had a meeting with Mr Walker on 28 August
17 The defendant changed solicitors from Steve Gill Law to Costas Varuhas & Co around 14 June 2023.
2023. During that meeting, Mr Varuhas states that Mr Walker told him the allegation in the plaintiff’s statement of claim at [10], that between October 2022 and April 2023 the plaintiff orally updated the defendant on the cancellation of the unit title and subdivision process through Mr Walker was “a bit of a stretch”. Mr Varuhas states that Mr Walker expanded on that comment during the subsequent conversation and told him that “he did not update Mr Zhang as to progress on the cancellation of unit title and subdivision process”.
[44] The defendant, through its solicitor, requested Mr Walker on at least three occasions to provide an affidavit but, after obtaining advice from within Bayleys, he stated he had been advised not to sign “any affidavit” and declined to do so. The defendant then applied for Mr Walker to be examined under r 9.75 of the High Court Rules. That application was opposed by the plaintiff. The application was declined.18
Assessment
[45] It is apparent that there was some consultation by the plaintiff during the cancellation of unit title and subdivision process, being the emails from the plaintiff’s solicitors to the defendant’s solicitors in April and May 2023.
[46] The issue between the parties seems to come down to whether there was adequate consultation by the plaintiff, through Mr Walker, in the period between October 2022 and April 2023. There is no suggestion by the plaintiff that anyone other than Mr Walker was providing information to the defendant during this period.19
[47] Mr Morten relies on the evidence of Mr Zhang and Mr Varuhas to establish the absence of any meaningful consultation. However, Mr Morten acknowledges that the evidence of Mr Zhang and Mr Varuhas as to what Mr Walker has told them about the allegation that he orally updated the defendant in the relevant period is not adduced as evidence of the truth of what Mr Walker told them.
18 Sampson Property Investments Ltd, above n 1.
19 I understand from the affidavit of Mr Chait that the plaintiff accepts that Mr Walker was its agent for this purpose. See also Sampson Property Investments Ltd, above n 1, at [16].
[48] Mr Morten submits that the plaintiff has failed to put forward any credible evidence to respond to the defendant’s evidence regarding consultation. He submits that Mr Chait’s evidence as to his understanding that Mr Walker was relaying information to the defendant is hearsay and inadmissible. However, I do not consider that Mr Chait’s evidence is hearsay. It is evidence of his understanding or belief as to what was happening at that time. That was also the understanding of the plaintiff’s solicitors as recorded in the email dated 19 April 2024 (above at [40]) over a month before any issue was raised by the defendant about the lack of consultation. A court may accept such evidence if it is in the interests of justice and there are grounds for the belief.20 Mr Chait has put forward grounds for his understanding being that Mr Walker was having in-person meetings with Mr Zhang during the relevant period. This is confirmed by Mr Zhang in his evidence. Mr Zhang also acknowledges that at one of the meetings Mr Walker raised the issue of extension of the sunset clause for completion of the subdivision process.
[49] Therefore, while Mr Chait’s evidence and the evidence of the plaintiff’s solicitors is not direct evidence of the fact that consultation occurred, it seems to me that it should be given some weight for the purposes of this application for summary judgment and determining whether the plaintiff’s claim “cannot succeed” and is “hopeless”.
[50] As to the evidence of Mr Varuhas, as noted above, it is not adduced to prove the truth of what Mr Walker told him. Further, the evidence as to what Mr Walker told Mr Varuhas is somewhat equivocal. Mr Walker’s initial comment on the allegation that the plaintiff was orally updating the defendant through him, was that this allegation was “a bit of a stretch”, not that it was wrong. Then, in subsequent conversation, Mr Varuhas says that Mr Walker stated that “he did not update Mr Zhang as to progress on the cancellation of unit title and subdivision process”.
[51] The defendant contends that an adverse inference should be drawn against the plaintiff because Mr Walker has not provided an affidavit. Mr Morten refers to the following passage in Perry Corporation v Ithaca (Custodians) Ltd:21
20 High Court Rules 2016, r 7.30.
21 Ithaca (Custodians) Ltd v Perry Corporation [2004] 1 NZLR 731 (CA) at [153]
… Neither is it helpful to refer to the “rule” in Jones v Dunkel. There is no rule. Rather, there is a principle of law of evidence authorising (but not mandating) a particular form of reasoning. The absence of evidence, including the failure of a party to call a witness, in some circumstances may allow an inference that the missing evidence would not have helped a party’s case. In the case of a missing witness such an inference may arise only when:
(a)the party would be expected to call the witness (and this can be so only when it is within the power of that party to produce the witness);
(b)the evidence of that witness would explain or elucidate a particular matter that is required to be explained or elucidated (including where a defendant has a tactical burden to produce evidence to counter that adduced by the other party); and
(c)the absence of the witness is unexplained.
[52] Mr Morten also refers to the following passage in Primary Services New Zealand Ltd v Colombo Projects Ltd:22
A realistic approach to the evidence is warranted. There is no correspondence, no file note, no minutes of any meeting, indeed, no written record of any type, which records the representations. The terms of the LFA and the PSSA were drafted by Mr Fonagy’s lawyer. He does not suggest that they were not drafted according to his instructions. There is no evidence from Mr Fonagy’s lawyers that the representations had been made although they were present at the 25 October 2015 meeting. Mr Fonagy does not explain why the LFA and the PSSA are not consistent with the representations. An explanation is called for. As Mr Fonagy is still represented by the same lawyers it could be expected that they would make an affidavit to support his case if they considered they could do so. Their failure to do so is also not explained. A need for explanations is so vital that the only inference that could be drawn from their absence is that the representations were not made.
[53] In the circumstances, I am not prepared to draw an adverse inference against the plaintiff from the absence of an affidavit from Mr Walker. This is not a case where the absence of an affidavit is entirely unexplained. There is evidence from Mr Varuhas that Mr Walker obtained advice from within his company, Bayleys, as to whether he was authorised to provide an affidavit and stated during their conversation on 4 September 2023 that “the advice he’s been given is not to sign any affidavit” (italics added). Subsequently in response to a follow-up email from Mr Varuhas on 8 September 2023 he stated that “[t]he advice I have received is not to provide an affidavit”. The Court then declined an application by the defendant under r 9.75 for Mr Walker to be examined. While there is no evidence before me that the plaintiff
22 Primary Services New Zealand Ltd v Colombo Projects Ltd [2020] NZHC 549 at [59].
also requested Mr Walker to give an affidavit, nor is there any basis to assume that Mr Walker’s response to any request by the plaintiff would have been any different. Mr Walker is not an employee of the plaintiff, nor is he the plaintiff’s lawyer. He is the plaintiff’s real estate agent employed by Bayleys. It is not clear that it was within the power of the plaintiff to produce Mr Walker as a witness.
[54] Mr Morten also criticises the plaintiff for opposing the defendant’s application under r 9.75 HCR. However, it is apparent that the plaintiff took the view that its claim turns on the proper interpretation of cl 23.8 of the sale and purchase agreement rather than the evidence of Mr Walker. Further, the plaintiff contended that orders under r 9.75 are generally inappropriate in summary judgment proceedings. Associate Judge Paulsen noted that neither counsel could refer him to a decision where an order under r 9.75 has been made in connection with an application for summary judgment.23 That is because such orders, particularly where they relate to a matter in direct factual controversy, are likely to give rise to contentious evidence, not readily resolved at a summary judgment hearing.24 In this case, Associate Judge Paulsen noted that even if he had been minded to grant the application, the procedure is not plain and straightforward and there were procedural issues which would have risked the smooth passage of the summary judgment application. The defendant contended that, if the application was granted, Mr Walker should not be cross-examined, but the plaintiff argued that, if an order was made, cross-examination was necessary. If there was no cross-examination, then an issue would have arisen as to whether the parties should be given leave to file further affidavit evidence in response. The defendant also argued that Mr Walker should be ordered under r 9.75 to produce documents, but it was unclear what documents he could produce or whether he would produce all relevant documents bearing on the issue.25
[55] Further, on the basis of the material currently before the Court, there is evidence that Mr Walker met with Mr Zhang a number of times during the relevant period and at least on one occasion raised the extension of the sunset clause. This does not mean that there was “meaningful consultation” by the plaintiff in accordance with
23 Sampson Property Investments Ltd, above n 1, at [38].
24 Host Catering Ltd v Air New Zealand Ltd (1989) 2 PRNZ 126 at 128.
25 Sampson Property Investments Ltd, above n 1, at [46].
cl 23.8 of the Agreement. But it militates against summary determination that the plaintiff’s claim “cannot succeed” and is “hopeless” on the basis of inference without hearing and testing all relevant evidence.
[56] In the end, I am not satisfied that the factual issue as to what, if any, consultation occurred in the relevant period can properly be resolved summarily. It seems to me that full discovery is required, and the evidence of all relevant witnesses, including Mr Walker, needs to be tested by cross-examination at trial. If Mr Walker is not prepared to give evidence for either party, then he can be subpoenaed. If necessary, this could include a requirement for him to produce relevant documentation, or alternatively, an application for non-party discovery could be made in respect of any relevant documents held by Mr Walker and/or Bayleys.
Essentiality of the consultation provision and “satisfaction” of clause 23
[57] Even if the plaintiff breached the obligation to consult, an issue arises as to whether performance of the consultation obligation was essential to the defendant. The plaintiff contends that the alleged lack of consultation, in and of itself, is not sufficient to give rise to the right to cancel under s 37 of the CCLA.
[58] The plaintiff contends that the consultation provision should be read in the context of cl 23.8 and cl 23 as a whole. The plaintiff contends that the purpose of cl 23.8 as negotiated and amended by the parties was to protect the defendant against easements, covenants, and encumbrances, rights or interests registered over the new title which would affect the defendant’s proposed project on the land. The plaintiff submits that performance of the consultation obligation in and of itself was not essential to the defendant. Rather, what was essential was that there were no rights or interests required to be registered over the new title which would affect the defendant’s proposed development. If that occurred, the defendant negotiated for and reserved the right to approve the title and thereby bring the contract to an end. However, the defendant could not unreasonably withhold approval if the relevant rights or interests would not affect their proposed project.
[59] The defendant submits that the consultation provision was specifically put forward by the plaintiff during negotiations as a means of mitigating any concerns the
defendant had regarding interests on the title affecting their proposed project. The defendant submits that performance of the consultation obligation was essential to the defendant because otherwise interests might be registered on the title which would affect the defendant’s proposed project.
Assessment
[60] Clause 23.10 provides that cl 23 is an essential term of the agreement. However, the issue raised by the plaintiff is whether performance by the plaintiff of the discrete consultation obligation in cl 23.8, in and of itself, was essential to the defendant so as to give rise to a right to cancel under s 37(1)b and 2(a) of the CCLA.
[61] The approach to be taken in determining the essentiality of a contractual provision is set out by the Supreme Court in Mana Property Trustee Ltd v James Development Ltd (considering s 7(4)(a) in the Contractual Remedies Act 1979):26
[24]Subsection (4)(a) contemplates that the parties either have expressly agreed that a particular term in their contract is to be regarded as essential (to the cancelling party or to both of them) or must be taken to have impliedly so agreed. In both cases it is a matter of interpretation of the contract. The use of words such as “performance being essential” or “strict performance being required” would plainly fall within the former category, but no special form of words is necessary provided that it can be seen that the parties have indeed agreed that adherence to the provision in question is being treated by them as essential. The latter category, of implied agreement on the essentiality of a term which appears in the contract, may sometimes be more difficult to establish. But, again, it will be a question of interpretation, that is, ascertaining the intention of the parties as to the essentiality of the particular term from its language read in the context of the whole of the contract and the surrounding circumstances when the contract was made. Of particular importance will be what must then have been in the contemplation of the parties concerning the likely effect of a breach of the term. It will include whether a term of the same kind has customarily been treated as a condition or as an essential term under the Act, such as, in relation to a land sale agreement, a requirement for payment of a deposit within a particular time. It will also include a consideration of the type of contract and whether it is one, like a mercantile contract, which normally requires strict performance. The court must ask itself whether, without expressly stating that the term is essential – that is, using a form of words equivalent to the expressions of which we have given instances
– the parties can be seen, in context, to have intended that that should
26 Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 90, [2010] 3 NZLR 805 at [24]-[25] (footnotes omitted).
be the position. Obviously there will be some cases where what is express shades into what must be taken to be implied.
[25]In the end, the preferable approach is to ask whether, unless the term in question was agreed at the time of contracting to be essential, the cancelling party would more probably than not have declined to enter into the contract. That question must be answered by an objective contextual appraisal which disregards what a party may unilaterally have said about its intention in that regard.
[62] The consultation provision was included in cl 23.8 during negotiations regarding whether the defendant would have the right to approve the new title. If the defendant did not approve the new title then this would bring the contract to an end. The plaintiff’s solicitors stated in an email dated 20 June 2022:
Clause 23.8 – as discussed, our client does not agree to a right of cancellation. Our client is prepared however to agree to meaningful consult [sic] with your client during the cancellation of unit plan and subdivision process. Hopefully this will mitigate any concerns your client has regarding interests on the title (if any) affecting their proposed project.
[63] Subsequently, the defendant’s solicitors advised in an email to the plaintiff’s solicitors dated 23 June 2022 that:
We are also instructed to advise our client requires the right to cancellation of the agreement, regarding the Title, even though meaningful consultation would be entered into between the parties and our client’s consent would not be unreasonably withheld. The new Title may not register without a requirement that will affect our client’s project, and this may be beyond either parties’ control.
[64] Following that exchange, the final version of cl 23.8 was put forward by the plaintiff’s solicitors and agreed by the defendant’s solicitors. The final version preserved the defendant’s right to approve the new title, but the defendant was not to unreasonably withhold approval, and if there were no rights or interests registered on the title then the defendant did not have the right of approval and was deemed to accept it.
[65] In my view, it is arguable, on the basis of the exchange between the parties’ solicitors referred to above, that performance by the plaintiff of the consultation obligation in and of itself was not essential to the defendant. The defendant did not propose or insist on consultation. It was proposed by the plaintiff. The defendant’s solicitors acknowledged that, even with the consultation obligation, the new title might
not issue without a requirement which affected their proposed development. Therefore, the defendant reserved the right of approval of the new title which gave the defendant the right to bring the contract to an end subject to approval not being unreasonably withheld.
[66] It is possible that a term is found to be essential even though the consequences of breach in the particular case are relatively minor.27 However, in this case, it seems unlikely that the parties would have intended that a breach of the consultation obligation in and of itself would give rise to a right to cancel, regardless of whether any right or interest was required to be registered against the new title. It seems to me that what was essential to the defendant was the right to approve the new title. Arguably, the defendant may have entered into the contract without the consultation obligation, but would almost certainly not have entered into the contract without reserving the right to approve the new title.
[67] This interpretation is reflected in the notice given by the defendant’s solicitors on 23 May 2023 which purported to bring the contract to an end because of the requirement for registration of the consent notice on the new title. The notice refers to the alleged lack of meaningful consultation but does not seek to cancel the contract for breach of that obligation as an essential term. Rather, the notice advised that, pursuant to cl 23.8, the defendant did not approve the new title because the defendant’s “proposed project on the land is severely impacted by the Consent Notice”.28 This raises an issue as to the admissibility of subsequent conduct.29 I consider that assessment of the relevance and probative value of the 23 May 2023 notice under ss 7 and 8 of the Evidence Act 2006 should appropriately be undertaken in the context of a trial and not in determining this summary judgment application.
[68] Further, as noted above, there was at least one telephone discussion between the lawyers for the parties during negotiations on 27 June 2022 prior to clause 23.8 being finalised. It may be that evidence will be required from the lawyers involved in
27 Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 90, [2010] 3 NZLR 805 at [22].
28 Even though the defendant purported to bring the contract to an end by not approving the new title under cl 23.8 of the agreement, this does not preclude cancellation under cl 37 of the CCLA – see Kumar v Station Properties Ltd [2015] NZSC 34 at [66].
29 Bathurst Resources Ltd, above n 11, at [89]-[90].
the negotiations so that the Court can properly determine whether there was a common mutual intention with regard to whether performance by the plaintiff of the consultation obligation was essential to the defendant.
[69] The defendant also contends that it was entitled to cancel the contract under cls 23.12 or 11.4(5) of the agreement on the basis that cl 23, as a condition subsequent, was not satisfied by the agreed date. Mr Morten submits that, because the plaintiff failed to meaningfully consult during the resource consent process, compliance with cl 23 is impossible and the condition can never be satisfied, giving rise to a contractual right to cancel. However, on the basis of the discussion above, it seems to me to be arguable that, regardless of whether the plaintiff complied with the consultation obligation, cl 23 was satisfied on cancellation of the unit plan and issue of the new title provided that no rights or interests were required to be registered against the new title for Lot 1 which would affect the defendant’s proposed project.
[70] Although not strictly relevant to the defendant’s claim for summary judgment, the issue of whether the consent notice would in fact affect the defendant’s proposed development, and whether the defendant has unreasonably withheld approval of the new title, is the subject of a material conflict of evidence which cannot properly be determined summarily.
[71] Overall, I consider that the plaintiff has a tenable argument that performance by the plaintiff of the consultation obligation, in and of itself, was not essential to the defendant, and/or satisfaction of cl 23 as a condition subsequent was not dependent on compliance with the consultation obligation.
Conclusion
[72]I have found that:
(a)the plaintiff has a tenable argument that the consultation obligation in cl 23.8 did not encompass consultation during the resource consent process;
(b)even if the plaintiff was required to meaningfully consult prior to April 2023, there is a factual controversy as to whether consultation occurred during the relevant period between October 2022 and April 2023 and this cannot properly be resolved summarily; and
(c)the plaintiff has a tenable argument that performance of the consultation obligation in and of itself was not essential to the defendant, and/or satisfaction of cl 23 as a condition subsequent was not dependent on compliance with the consultation obligation.
[73] In the circumstances, I am not satisfied on the balance of probabilities that the plaintiff’s claim against the defendant for breach of contract cannot succeed or is hopeless.
Result
[74] The defendant’s application for summary judgment against the plaintiff is dismissed.
[75] As to costs, my preliminary view is that costs should be reserved. The parties should endeavour to agree on costs. However, if the parties are unable to agree then memoranda may be filed (not exceeding three pages excluding costs schedules) and costs will be determined on the papers.
[76] The matter is to be listed in the next Associate Judge’s chambers list for Wellington for directions to be made as to the progress of the proceeding. The parties are to file a joint memorandum or separate memoranda three working days in advance of that conference addressing all relevant matters in sch 5 to the High Court Rules 2016.
Associate Judge Skelton
Solicitors:
J B Morrison, Wellington for Plaintiff
Costa Varuhas & Co, Wellington for Defendant
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