Sia-Fox v Jubilee Management Limited HC Wellington CIV 2010-454-377

[2010] NZHC 1695

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-454-377

BETWEEN  BOON KEE SIA-FOX Applicant

ANDJUBILEE MANAGEMENT LIMITED Respondent

Hearing:         2 August 2010

Counsel:         P S Withnall for Applicant

D I Sheppard for Respondent

Judgment:      11 August 2010

RESERVED JUDGMENT OF JOSEPH WILLIAMS J

In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 12.30pm on the 11th August 2010.

Solicitors:

P S Withnall,  [email protected]

D I Sheppard,  [email protected]

SIA-FOX V JUBILEE MANAGEMENT LIMITED HC WN CIV-2010-454-377  11 August 2010

[1]      This  is  a  case  about  whether  the  applicant  should  still  be  treated  as  a purchaser whose interest in the land would sustain a caveat when she has failed to settle an agreement for sale and purchase dated 9 December 2009.

The background facts

[2]      The applicant is Boon Kee Sia-Fox.  The respondent is Jubilee Management

Limited (JML), a company that was put into liquidation by the High  Court on

6 March 2009.  The company was owned by its directors Ms Sia-Fox and her former husband, Graeme James Fox.  The liquidation appears to be the result of the breakup of  their  marriage.    The  company  owns  three  properties:  a  rental  property,  an industrial property, and a residence and functions centre known as ‘Coehaven’ – all at Otaki.  These properties are the subject of a sale and purchase agreement between the company and Ms Sia-Fox.   The liquidators of the company were originally Roderick Thomas McKenzie and Lyne Maree Carey but Mr McKenzie has since resigned leaving only Ms Carey.

[3]      Between November 2009 and May 2010, the applicant and the liquidators reached three successive written agreements (and the applicant argues one oral agreement) for the sale and purchase of the properties.

[4]      On about 6 November 2009, a written agreement for sale and purchase was executed conditional upon the applicant arranging finance.  The applicant could not raise the finance and on 30 November 2009 the liquidators cancelled the contract. However, they invited her to enter into a second agreement on the same terms except that she would have until 4 December 2009 to confirm finance, pay a deposit of

$3,000 and agree that any liquidator’s warranties as to the state of the properties would be deleted.

[5]      On 1 December 2009, Ms Sia-Fox met with Mr McKenzie.  She carried with her a letter in draft that had been prepared by her solicitors.  She presented the letter. It provided in part:

Our client proposes that she pay bank arrears, the liquidator’s costs and expenses  and  take  sole  personal  liability  for  the  ANZ  Bank  security

registered against the assets of the company and in consideration thereof she or her nominee take the company assets.

…

Even were the liquidator not to acknowledge the QA debts, a decision which would fly utterly in the face of the evidence, no money would be available for distribution until a relationship property settlement is reached between the husband and wife shareholders.

[6]      The “QA debts” were debts allegedly owed by JML to QA Homes Limited and QA Joinery Limited, both companies owned by Ms Sia-Fox and Mr Fox.

[7]      Mr McKenzie in his affidavit described the 1  December discussion with

Ms Sia-Fox about her proposal as follows:

The  applicant  also  discussed  with  me  a  proposal  that  if  the  third  party finance was not able to be arranged:

-         the applicant would purchase the property;

-         the first mortgage would be refinanced by her;

-payment of the balance of a purchase price would be postponed until she and Mr Fox had resolved their relationship property issues;

-         the applicant will remain in possession of the properties.

[8]      Note that the proposal in the draft letter of 1 December and the recollection of Mr McKenzie as to what was actually discussed were not the same.   The letter proposed a straight takeover of the company’s assets and liabilities with vendor financing until settlement of the matrimonial property dispute between the Foxes. The discussion as recorded by Mr McKenzie (and confirmed in this proceeding by Ms Sia-Fox)  was  for  purchase  facilitated  by  delayed  settlement  pending,  again, resolution of the matrimonial property dispute.

[9]      On  2  December  2009,  Ms  Sia-Fox’s  solicitors  wrote  to  the  liquidator’s solicitors.  The letter provided in part:

We are instructed that the proposal detailed in our letter of 1 December 2009 is acceptable to him.

[10]     On 3 December, a new agreement for sale and purchase was sent by the liquidator’s solicitors to Ms Sia-Fox’s solicitors.  I call this the second agreement.

The second agreement did not provide for delayed settlement but provided instead for “the balance of purchase price to be paid by payment in clear funds on the settlement  date  which  is  18  December  2009.”     It  was  therefore  a  simple unconditional contract containing none of the conditions in the 1 December draft letter nor any mentioned in the discussions as described by Mr McKenzie.

[11]     On 7 December, Ms Sia-Fox signed the second agreement and returned it to the liquidators together with a $3,000 deposit.

[12]     By letter of 8 December 2009, the liquidators confirmed that they accepted her offer and would themselves execute the second agreement shortly.   The letter provided in part:

We have discussed your further proposals with our client.  We understand those proposals and confirm that, provided all the required legalities are in place, our client will not be obstructive in that intention.

[13]     The letter then set out a number of issues that had first to be resolved before the proposal could go forward, including obtaining the consent of Mr Fox.  The letter concluded as follows:

This letter is intended to indicate our clients’ good faith in considering your proposal.   It is possible that as these are worked through, it may not be necessary for the sale transaction to be completed, but we are not certain of your client’s intention.  However, this should not be taken as any indication from our clients that the agreement will not be enforced, and our current instructions are that the sale transaction should proceed.

[14]     On 9 December, the liquidators’ solicitors wrote again having now received and read a copy of the High Court decision by which JML was put into liquidation in March.  The letter provided:

…  it seems clear on a quick perusal and also Mr Fox’s role in the company that it will not be possible for our clients to agree to your client’s request regarding payment of our client’s costs, and your client assuming other matters in the company.

Apart from the court order by which the company came into liquidation, the process for ending the liquidation under Section 250 of the Companies Act

1993 requires an application to the court and the consent of all creditors, payment of the Liquidator’s costs and shareholders’ consent.

If Mr Fox’s consent can be obtained the position changes of course.  If you are able to negotiate that consent, please advise.

Unless we have missed something in this analysis your client should be making preparation for settlement on 18 December.

[15]     The   second   agreement   was   executed   by  the   liquidator   on   that   day accordingly, and returned to Ms Sia-Fox’s solicitors complete with its 18 December settlement date.

[16]     Ms Sia-Fox did not settle on 18 December 2009.  On 17 December, solicitors for Ms Sia-Fox wrote to solicitors for the liquidators indicating that they relied upon the 1 December oral agreement and that she would settle with the balance of the price once the Family Court proceedings had been completed as had been agreed. The liquidators’ solicitors wrote back the same day denying the existence of any such agreement, and confirming that although the matter had been discussed both on and  after  1 December,  the  proposal  in  the  end  was  unacceptable.    The  letter provided:

The difficulty is that with this proposal, there will be no cash balance paid to the Liquidators on settlement.  Rather, your client’s new company will have acquired the legal title to the property by refinancing the mortgage, with a debt due back to the Liquidators to be paid when and if directed by the court.

Apart from payment of the arrears in the bank mortgage, nothing more will have been achieved by the Liquidators and they will have exposed interested parties (particularly the other shareholder) to the risk that your client will not be able to pay any balance upon a court order or otherwise.   In effect, a journal entry will have been completed but our clients will no longer be in legal control of the company’s tangible assets.

[17]     This  appears  to  be  a  reference  to  the  vendor  finance  proposal  in  the

1 December  letter  rather  than  the  delayed  settlement  proposal  referred  to  in discussion.

[18]     The liquidators’ solicitors then opened the possibility of an alternative way of resolving the question of the future of these properties.  The letter continued:

It may be that your client is proposing that our clients should postpone any further action in regard to company property until the Family Court issues are settled.  For our clients to do this there will need to be:

•    Clearance of the bank arrears;

•    The consent of Mr Fox (not because Mr Fox has excessive persuasive powers against our clients, but because consent of both shareholders and creditors is required);

•    Payment of our clients’ costs, which are now accruing significantly, unfortunately  increased  by  the  need  to  deal  with  difficulties  being created by your clients.

[19]     On 18 December 2009, the liquidators’ solicitors issued a settlement notice requiring remedy of the failure to settle the purchase within 12 working days.

[20]     The liquidators did not  act on  that settlement notice but in  letters  dated

16 and 17 February 2010, they put another proposal on the table.  They called it an

‘Interim Settlement’.   They proposed that they would not exercise their rights to cancel the second agreement for six months on condition that Ms Sia-Fox:

a)       satisfy the arrears due to the ANZ Bank by 22 February 2010;

b)       pay the liquidators costs and expenses – at that date amounting to

$45,825 by 22 February 2010; and

c)        pay rating arrears “approaching $12,000 and there may be more now”. [21]  By email dated 24 February 2010, two days after the contract date for settling

bank arrears and liquidators’ fees, the applicant’s solicitors advised that Ms Sia-Fox accepted the interim settlement.  She paid the monies due to the bank on the same day.  They amounted to more than $95,000.  She did not pay the liquidators’ fees or the rates, but has continued to service the loan.

[22]    On 3 March, the liquidators’ solicitors wrote to Ms Sia-Fox’s solicitors recording that she had still not paid rate arrears of $6,294.92 and liquidiators’ costs of $45,825.  The letter continued:

Clearing these payments is an essential part of the Interim Settlement. Accordingly, that settlement has not been completed.

The liquidators hereby give your client notice that if these payments are not made by 5pm on Thursday, 4 March (time being of the essence), the liquidators will regard the Interim Settlement as abandoned.

[23]     On 4 March, Ms Sia-Fox’s solicitors wrote advising that she had arranged further funds that “should be available next week”.   The letter asked that the liquidiators “please bear with our client”.  Seven days later on 11 March, a further week was requested.  By 24 March no payment had been received by the liquidators or the Council.  Solicitors for the liquidators wrote again.  They advised that:

a)        “Their  continuing  agreement  to  the  Interim  Settlement  is  now suspended on account of the defaults by your client.”;

b)        Preparations would be made for the sale of the properties;

c)        They did not cancel the 9 December agreement for sale and purchase

“although reserve their right to do so on the basis previously notified”;

and asked if Ms Sia-Fox had any alternative proposals.

[24]     On 28 April 2010, Ms Sia-Fox’s solicitors wrote to the liquidators’ solicitors advising that they held $45,000 in cleared funds to meet the liquidators’ costs but needed comfort that the second agreement would not be cancelled as soon as the funds were transferred.  On 14 May, the liquidators’ solicitors responded recording Ms Sia-Fox’s proposal (described by them as a request that the “suspension” of the Interim Settlement be “terminated”).  They made an extensive counter proposal but on 18 May, before any response was received from Ms Sia-Fox’s solicitors, that counter proposal was withdrawn and the liquidators’ solicitors formally cancelled the second agreement.

[25]     An application was then made by the liquidators on 20 May to lapse the caveat  purporting  to  protect  Ms Sia-Fox’s  interest  in  the  land,  and  Ms Sia-Fox responded with the application to which I must now turn.

Arguments

[26]     Mr   Withnall   for   Ms Sia-Fox   makes   three   relatively   straightforward arguments in support of his application.  They are:

a)       It is at least arguable that there was a collateral, partly written partly oral agreement sitting alongside the second (9 December) agreement the crucial term of which was that the settlement date of 18 December

2009 would not be enforced and that settlement would await final resolution of the matrimonial dispute between the Foxes.

b)It is at least arguable that the Interim Settlement accepted by his client on 24 February 2010 could not be cancelled except on reasonable notice and the 29 hours notice given by the liquidators on 3 March

2010 was not reasonable.

c)       It is at least arguable that the Interim Settlement was affirmed rather than cancelled by the liquidators in the way they dealt with Ms Sia- Fox  after  4  March.    In  particular  the  liquidators  used  the  terms

‘suspended’ and ‘abandoned’ rather than ‘cancelled’, when expressing their intentions with respect to the Interim Settlement and then did not exercise their rights under the second agreement until after an offer to pay the liquidators’ fees was made on 24 April.

[27]     For any of these reasons, he argued, Ms Sia-Fox is still entitled to be treated as a purchaser and so has a caveatable interest.

[28]     For the liquidators Mr Sheppard argues that:

Collateral agreement

(a)      On the facts the existence of a collateral oral agreement for deferred settlement is inherently improbable.

(b)       Any such agreement would be in breach of s 24(1) of the Property

Law Act 2007 anyway.

Interim Settlement

(a)      In the context of Ms Sia-Fox’s constant failures to meet deadlines imposed on her by the successive agreements including the Interim Settlement itself, the deadline for remedy of the breach of the Interim Settlement imposed on 3 March 2010 was reasonable.

(b)       Even if it was not, the 4 March deadline was in fact extended first to

11 March  and  then  finally  to  24  March,  both  of  which  were unquestionably reasonable.

(c)      The liquidators did not subsequently affirm the Interim Settlement by electing  not  to  cancel  the  second  agreement  immediately  but reserving their right to do so.  They were merely keeping their options open.

Applicable principles for applications under Land Transfer Act 1952, s 145A

[29]     The essential principles here are clear.  If Ms Sia-Fox can demonstrate that she is entitled in law or equity to be treated as a purchaser, then she has a sufficient interest to support a caveat in this case.   Because of the summary nature of the s 145A procedure, it will be sufficient if she can make out an arguable case in that respect, the onus being on her.   The court will avoid finally resolving disputed questions of fact for obvious reasons.  It will also be reluctant to resolve questions of law unless the relevant arguments have been fully ventilated.

[30]     On the other hand the caveat will be removed if it is “patently clear” that there is no ground for it having been lodged or continuing on the title.[1]

[1] See Sims v Lowe [1988] 1 NZLR 658 at 659-660

Oral agreement

[31]     In my view it is at least arguable that a collateral agreement was reached on

1 December  between  Ms  Sia-Fox  and  Mr  McKenzie  to  the  effect  that  the

18 December settlement date in the second agreement would not be enforced.  It is true that the draft letter of 1 December contained a proposal for vendor finance rather than  late  settlement  but  Mr McKenzie’s  own  evidence  confirms  that  delayed settlement was in fact discussed.   It is true also that Mr McKenzie denies any agreement crystallised and says that the liquidators’ letter of 9 December poured cold water on what was still at that stage only a proposal.  But there is no way of knowing, except through viva voce evidence from the relevant witnesses, whether that letter represented a final refusal of the 1 December offer or an attempt by the liquidators to backtrack on an agreement that had crystallised earlier.

[32]     Taken as a whole, the documentary trail tends to suggest delayed settlement was more hoped for by Ms Sia-Fox than agreed to, but even an improbable scenario can still be arguable.   I do not feel able to discount the possibility that viva voce evidence will run contrary to the documentary trail and suggest on the balance of probabilities that an agreement for delayed settlement was reached on 1 December.

[33]     Having said that, there is still the matter of the interim settlement to be considered.

Interim settlement

[34]     Whatever the so-called oral agreement did or did not provide on 1 December, that  agreement  was  superseded  ‘for  the  moment’[2]   at  least,  when  Ms  Sia-Fox indicated  her  acceptance  of  the  liquidators’  Interim  Settlement  proposal  on

[2] That phrase was adopted by the liquidators in their offer of 16 February.

24 February.   That settlement provided that the liquidators would not pursue the rights they claimed under the second agreement provided Ms Sia-Fox paid the bank arrears, liquidators’ fees, and rating arrears by 22 February.  Implicitly, Ms Sia-Fox also agreed to forbear in respect of her claims while the Interim Settlement remained

on foot.  Of course by the time Ms Sia-Fox accepted the proposal, 22 February had already passed, indicating that the liquidators were prepared to accept late payments although the degree of lateness remained at large.   The bank arrears were paid immediately on the 24th but the other payments were not made.

[35]     Time was made of the essence on 3 March insofar as the Interim Settlement related to the non-paid items and remedy was required by 5pm the next day.   On

4 and again on 11 March Ms Sia-Fox sought week long extensions of the deadline. On 24 March, the Interim Settlement was suspended.

[36]     In this case, the advice on 3 March requiring payment within 29 hours was arguably unreasonable.  The liquidators had indicated from the outset that the time limit in the Interim Settlement was flexible and, although there had been consistent failures on the part of Ms Sia-Fox to meet due dates under both the first and second agreements, breaches under the second agreement were in the context of at least an arguable case as to what the actual settlement date was.  In addition, Ms Sia-Fox had paid over $95,000 on 24 February in part satisfaction of the terms of the Interim Settlement and was making ongoing mortgage payments as they fell due.   In that context, it is well arguable that a 29 hour deadline was unreasonably short.

[37]     In  fact  however,  Ms  Sia-Fox  was  eventually given  21  days  in  which  to remedy her breach before the liquidators declared the Interim Settlement to have been ‘suspended’.   That was three times the week first sought by Ms Sia-Fox on

4 March as the time she needed to remedy her breach.

[38]     Thus, the facts indicate that the liquidators gave Ms Sia-Fox more time than she asked for in order to make good on her breach, and she failed even within that extended period.  It is clear in my view that, on these facts, a reasonable time was given in accordance with Steele v Serepisos and the authorities discussed particularly

by Tipping J therein.[3]

[3] Steele v Serepisos [2007] 1 NZLR 1 at [38-40].

Affirmation

[39]     The liquidators were quite ambivalent about their stance over the fate of the

Interim Settlement after Ms Sia-Fox’s failure to remedy her defaults.  The letter of

24 March  from  the  liquidators’  solicitors  gave  notice  that:    “Their  continuing agreement to the Interim Settlement is now suspended on account of the defaults by your client.” This was not language of cancellation.

[40]     The letter indicated further that the liquidators did not at that stage exercise their  rights  to  cancel  the  second  agreement  but  asked  that  Ms  Sia-Fox  advise urgently of any “alternative proposals” she might have.  Overall the language of that letter suggested that the liquidators would sell if they were forced to, but they did not want to.  It is arguable that the letter leaves an impression that if Ms Sia-Fox had come up with all of the money the next day, they would have accepted it.

[41]     On 12 April 2010, with no further progress, the liquidators again rehearsed the history of the matter and concluded:   “Accordingly, after several notices the liquidators now regard that Interim Settlement as abandoned.”  This appears far less equivocal.    But  on  14 May  2010  the  liquidators  returned  to  the  language  of suspension  in  considering  the  28 April  offer  by  Ms  Sia-Fox  to  pay  out  the liquidators.  They then make an offer on substantially the same terms as the Interim Settlement.

[42]     Viewing the liquidators’ correspondence as a whole, I am quite satisfied that the letter of 12 April 2010 declaring the Interim Settlement to be abandoned was an effective cancellation.   From that point on the earlier equivocation ceased.   That declaration was the liquidators’ final position on the matter.   Even after Ms Sia- Fox’s offer to meet the liquidators’ costs on 28 April, the liquidators’ response was to make a fresh offer on substantially the same terms as the Interim Settlement. While that offer was on foot, it should be properly understood as the offer of a fresh agreement rather than resurrection of the Interim Settlement.  In the event the offer was withdrawn four days later and the liquidators sought to proceed with an alternative option.

[43]     I do not consider that it is arguable that, after 12 April 2010, the liquidators took any steps that could be construed as affirming their commitment to the Interim Settlement.

Conclusion

[44]     In light of the foregoing, I would conclude as follows:

a)        As from 12 May 2010, the Interim Settlement was at an end.

b)        We must therefore return to the position under the second agreement. c)       That has the effect of re-awakening the parties’ respective contentions

in relation to the second agreement.

d)Because the question of what if anything was agreed between Ms Sia- Fox and Mr McKenzie on 1 December is a question of fact, and because the subsequent written communications between the parties do not completely discount the possibility that the liquidators agreed not to enforce the 18 December settlement date, Ms Sia-Fox has an arguable case in that regard.

[45]     The  caveat  is  to  be  sustained  accordingly  until  the  matters  at  issue  are resolved at trial.  I invite counsel now to file memoranda in respect of timetabling for the proceedings which Ms Sia-Fox must now bring in order to have her contentions finally  resolved.    I  advise  counsel  that  I  expect  proceedings  to  be  dealt  with promptly.

[46]     It is inappropriate for any costs award to be made at this stage, they being best left for final disposition of the proceedings to be filed.

Joseph Williams J