SM & T Homes Ltd v Nguyen
[2015] NZHC 3228
•15 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-001422 [2015] NZHC 3228
BETWEEN SM & T HOMES LIMITED
Plaintiff
AND
THI KIM CHI NGUYEN AND VINH HGOC NGUYEN
First Defendants
BARFOOT & THOMPSON LIMITED Second Defendant
Hearing: 5-7 and 9 October 2015 Counsel:
S C Dench for the Plaintiff
N C King for the First Defendants
T D Rea and C Jiang for the Second DefendantJudgment:
15 December 2015
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 15 December 2015 at 4.00 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Counsel: S C Dench, Auckland
N C King, Auckland
Solicitors: J P Campi, Auckland Sinisa Law, Auckland Glaister Ennor, Auckland
SM & T HOMES LTD v NGUYEN [2015] NZHC 3228 [15 December 2015]
Introduction
[1] SM & T was the successful bidder at an auction on 3 December 2014 for the property at 42 Church Street, Otahuhu. The property was “knocked down” to it at a price of $450,000.
[2] Ms Chi Nguyen and Mr Vinh Nguyen are the owners of the property. They deny that there is an enforceable agreement for sale. They did not settle on the appointed date.
[3] SM & T sues for specific performance and interest at the rate provided for in the sale and purchase agreement. In the event SM & T fails on its claim for specific performance, it claims against the second defendant (Barfoot & Thompson) for misrepresentation as to the existence of an enforceable sale and purchase agreement.
[4] Barfoot & Thompson maintains the same position as SM & T on the primary claim, that is, that there is an enforceable sale and purchase agreement for the property. It denies the alternative claims against it, but in the event those claims are successful, it cross-claims against the Nguyens on the basis of estoppel.
[5] The key issue is whether or not there is an enforceable sale and purchase agreement for the property which is capable of being specifically performed.
Background
Parties
[6] SM & T is a family company owned by Mr Steve Piner and Dr Marewa Glover. The purchase of the property at 42 Church Street was to complement the other four properties it owns in Church Street.
[7] Ms Chi Nguyen and Mr Vinh Nguyen are relatives. They are both from
Vietnam and their evidence was given via an interpreter.
[8] Ms Nguyen has lived in New Zealand since September 1999. She lives in the property at 42 Church Street with her children. Ms Nguyen’s partner is Mr Tien Nguyen who also gave evidence at trial through an interpreter.
[9] Mr Vinh Nguyen has resided in New Zealand for the last 31 years. He owns a number of investment properties and is currently involved in a bakery business owned by his wife.
Agency Agreement
[10] In late 2013, Ms Nguyen decided to sell the house at 42 Church Street and was introduced to Mr Ricky Yap, a Vietnamese real estate agent with Barfoot & Thompson. Mr Yap was able to converse with the Nguyens in Vietnamese.
[11] Ms Nguyen signed an Agency Agreement in November 2013 (Agency Agreement). The Agency Agreement records the exclusive appointment of Barfoot & Thompson as agent. Although it was not signed by Mr Vinh Nguyen, he was nevertheless recorded as an owner of the property. Ms Nguyen signed a clause in the Agency Agreement stating that she had the authority of the other owners of the property to make the appointment.
[12] The Agency Agreement also records an authorisation to Barfoot & Thompson to offer the property for sale by auction and to sign a contract at or above the reserve price after the auction.
Pre Auction offer
[13] Open homes were held on 23 and 24 November 2013. Soon after the second open home, Mr Piner called Mr Yap and indicated he wanted to make a pre-auction offer. The two men met on 28 November 2013 to discuss that offer.
[14] Mr Yap gave Mr Piner a Barfoot & Thompson “pre-auction offer procedure sheet” which set out the basis upon which pre-auction offers would be made. The procedure sheet records that if an offer is made at an acceptable level to the “client”
(i.e. the vendors), then all other registered buyers would be contacted and told that an unconditional offer to purchase the property at a level acceptable to the client had been received. If other registered buyers wished to make an offer, the auction would be brought forward, and the opening bid would be the price specified in the pre- auction offer, which would also be the declared reserve price. Mr Piner signed and dated the purchaser acknowledgement on the pre-auction offer procedure sheet.
[15] The terms of SM & T’s offer was recorded on two copies of “Particulars and Conditions of Sale of Real Estate by Auction” (Auction Conditions).1 The front page records the details of the auction, the particulars of the property, conditions of sale (including the specified settlement date) and terms relating to the conduct of the auction. Clause 2.1 states:
2.1The property is offered for sale subject to a reserve price and, subject to the reserve price being met, the highest bidder whose bid is accepted by the auctioneer shall be the purchaser.
[16] The last page of the Auction Conditions is headed “Memorandum of Contract”. It has space to record the date, purchaser’s name, purchase price and deposit. Signature clauses for both the vendors or auctioneer, and purchasers or auctioneer, appear side by side on the bottom of the page.
[17] Mr Piner wrote the name of the purchaser (SM & T Homes Ltd), the offer price of $440,000, and the deposit sum of $44,000 on the memorandum of contract page of two copies of the Auction Conditions and signed on behalf of SM & T. This is the document referred to by the parties as the “pre-auction offer”.
[18] A cheque for the deposit of $44,000 was delivered by Mr Piner to
Barfoot & Thompson’s branch office the next day.
Reserve Authority
[19] The following evening, on 29 November 2013, Mr Yap met with Ms Nguyen and Mr Tien Nguyen at 42 Church Street. There is a conflict in the evidence
1 The Auction Conditions are on the approved Real Estate of New Zealand and Auckland
District Law Society Inc Fourth Edition 2012 (2) form.
regarding this meeting but there is no dispute that Ms Nguyen signed a
“Reserve Authority” at this time.
[20] The Reserve Authority is a single page document addressed to the auctioneer in letter form. By its terms, the vendor of the property authorises the auctioneer to submit the property to public auction on 3 December 2013 and requests the auctioneer to set a reserve price of $440,000. The right to change the reserve price at or during the auction is specifically recorded.
[21] Later that evening, Ms Nguyen, Mr Tien Nguyen and Mr Yap met with Mr Vinh Nguyen in the carpark behind the latter’s bakery shop. Mr Nguyen signed a Reserve Authority and Auction Conditions this evening, but there is a dispute about whether the documents signed by him contained the details filled in by Mr Piner the previous day or whether they were “blank”.
[22] After the carpark meeting, Ms Nguyen took Mr Yap to show him another property in Papatoetoe and told him that she had entered into a conditional sale and purchase agreement for this property.
[23] Mr Yap telephoned Mr Piner later that night and told him that the pre-auction offer SM & T had made had been accepted.
Auction
[24] The third open home for the property was held on Saturday, 30 November
2013. Ms Nguyen says that it was after this open home that Mr Yap told her that if no one else bid higher than $440,000, then she would have to sell the house at this price. She says she told him that she wanted to keep the house and cancel the auction but Mr Yap told her she could not. Mr Yap denies Ms Nguyen told him she wanted to cancel the auction at this time or at any other time.
[25] A fourth open home was held on Sunday, 1 December 2013. There were other people interested in purchasing the property and a number of other registered buyers.
[26] Mr Yap met with Ms Nguyen and Mr Tien Nguyen on 2 December 2013 and gave them two blank copies of the Auction Conditions. He says he did so because Mr Vinh Nguyen was not going to attend the auction, and he needed a “clean” signed agreement from Mr Nguyen in the event SM & T were not the purchasers at auction. Mr Yap also gave them a variation document to sign which allowed another interested party to pay a deposit of $30,000 (less than the standard 10 per cent) to be paid in the event that this person was successful at the auction.
[27] Mr Tien Nguyen took these documents to Mr Vinh Nguyen that evening. Mr Vinh Nguyen does not deny signing blank Auction Conditions at this time but he did not accept that it was his signature on the documents produced in the bundle at trial. He also denies knowing the reason why his signature was required at this time and denies knowing that the auction was scheduled for the following day.
[28] On the evening of 2 December 2013, Mr Yap received a telephone call from Ms Nguyen regarding the auction. Mr Yap says that Ms Nguyen telephoned him to find out how many people were attending the auction. Ms Nguyen says she called Mr Yap to again cancel the auction.
[29] The auction took place on 3 December 2013. Mr Yap and Barfoot & Thompson’s manager, Tony Worsp, met Ms Nguyen and Mr Tien Nguyen at the auction rooms. Mr Vinh Nguyen did not attend. Mr Yap’s evidence was that three people attended the auction but there were only two bidders. The record of the bidding shows that it was a very quick auction, and eventually the property was knocked down to SM & T as the highest bidder for a price of $450,000.
[30] It is common ground that Ms Nguyen did not tell anyone at the auction that she wished to cancel it.
[31] Following the auction, Mr Yap retrieved the Auction Conditions signed by SM & T from the auctioneer, inserted the date on the front page, and crossed out the price of $440,000 and wrote in the price of $450,000 on the memorandum of contract page. He then took these documents to Mr Piner who initialled the changes and circled “no” in relation to GST on the front page. Mr Yap then took the
documents to Ms Nguyen and Mr Tien Nguyen. His evidence is that Ms Nguyen signed the documents at this time. Once signed, he returned to Mr Piner and Dr Glover and handed them a completed copy of the agreement telling them the original would be sent to their lawyer the next day. It is this copy of the agreement dated 3 December 2013 (Agreement) which SM & T seeks to enforce.
[32] Ms Nguyen recalls signing a document after the auction but she does not know what. She says she felt sick and dizzy and does not know how she got home from the auction. She insists she signed a blank memorandum of contract page prior to the auction and not after.
[33] When leaving the auction rooms, Mr Piner and Dr Glover shook hands with Ms Nguyen and Mr Tien Nguyen. Mr Yap gave a “sold” sticker to Mr Tien Nguyen, who had offered to put it on the advertising board outside 42 Church Street. Mr Yap noticed the sold sticker on the sign a few days later when he drove past the property.
Post-auction
[34] On the day after the auction, Mr Yap met with Ms Nguyen and Mr Tien Nguyen to show them another property for purchase. There is a dispute about whether Ms Nguyen asked Mr Yap to transfer the deposit through to her account at this time.
[35] On 7 December 2013, Mr Yap received a text sent by Mr Tien Nguyen, the
English translation of which provides:
Hi Ricky I don’t want to sell my house anymore. Please cancel all contact.
Phone Vinh Nguyen [number provided].
[36] Mr Yap’s evidence is that he telephoned Mr Tien Nguyen after receiving this
text and was told that Ms Nguyen did not want to sell the property.
[37] On 19 December 2013, the lawyers nominated in the Agreement as representing the Nguyens faxed the solicitor for SM & T advising that they no longer acted for the Nguyens. Efforts to contact the Nguyens directly and to enquire about settlement went unanswered.
[38] The Nguyens failed to settle on 22 January 2014 and also failed to settle after settlement notices were served on 25 February 2014.
[39] On 13 June 2014, proceedings were issued, initially as a summary judgment application. The summary judgment application was unsuccessful, and Barfoot & Thompson was subsequently joined to the proceeding.2
Claim and defence
[40] SM & T’s primary cause of action is against the Nguyens for breach of contract. SM & T pleads that a contract was formed when the hammer fell at the auction, and the terms of the contract were comprised in the written agreement signed by the parties and dated 3 December 2013. Specific performance and ancillary orders to give effect to the order of specific performance are sought.
[41] Interest as calculated under the Agreement is claimed in the second cause of action. An alternative cause of action for return of the deposit and damages in the event that SM & T exercised its election to cancel was abandoned during closing submissions.
[42] SM & T plead two alternative causes of action against Barfoot & Thompson. In the event this Court finds that there is no enforceable sale and purchase agreement, it claims misleading and deceptive conduct on the part of Barfoot & Thompson and breach of an implied warranty of authority.
[43] The Nguyens deny that SM & T purchased the property at auction. It is alleged that by the time of the auction, the agent’s authority to complete the sale had been cancelled. They also deny the existence of a written agreement for sale and purchase. The key pleading is at paragraph 5 of the statement of defence as follows:
They deny there is a written agreement between the parties. They did not sign the pages or amendments to the agreement and say they were never shown these pages to the agreement. They state they both signed the page entitled “Memorandum of Contract” prior to the sale but the details on the page when they signed it were blank and they were not told that in signing this page they were agreeing to selling the property. This page does not
2 SM & T Homes Ltd v Nguyen [2014] NZHC 2269.
contain sufficient detail to constitute an agreement for sale. Further they had never instructed and had no knowledge of Lucy Chu lawyers mentioned in the agreement as being their lawyers.
[44] Barfoot & Thompson’s position is the same as SM & T’s on the primary claim. They deny the alternative claim against them, but in the event they are found liable, they cross-claim against the Nguyens on the basis of estoppel.
Issues
[45] The parties’ agreed list of issues is as follows:
1Was a binding contract formed between the plaintiff and the first defendants?
2 If so, was it was [sic] enforceable pursuant to section 24 of the
Property Law Act 2007?
3If yes to both of the above, ought the Court to exercise its discretion to award specific performance? [and award contractual interest to this issue] 3
4If not, what damages (if any) should the Court award to the plaintiff against the first defendants?
5If the plaintiff is not successful in its claim against the first defendants:
(a) Does it have a claim against the second defendant under the Fair Trading Act and/or for breach of implied warranty of authority?
6 If yes:
(a) What is the plaintiff’s measure of loss?
(b) Does the second defendant then have estoppel claim against the first defendant?
Was a binding contract formed between the plaintiff and the first defendants?
[46] The key issue in the proceeding is whether a contract was formed for the sale and purchase of the property.
[47] The Nguyens’ defence raises a number of factual and legal sub-issues relevant to determination of this question, namely:
(a) What did the Nguyens sign? (b) When did the Nguyens sign?
(c) What did the Nguyens agree to?
(d) Did the Nguyens understand what they were signing?
(e) Did the Nguyens withdraw authorisation for the auction? [48] Each of these sub-issues is considered below.
What did the Nguyens sign?
[49] There is no dispute that the Nguyens’ respective signatures appear on the memorandum of contract page of the Agreement which SM & T seeks to enforce. As Miller J observed in Welsh v Gatchell:4
A signature is a distinct and personal act that identifies the party to be charged and evidences his or her intention to be bound by the contents of the document
[50] However, Mr King submits on behalf of the Nguyens that each of their signatures on a single memorandum of contract page is not enough to bind them to the entire contents of the Agreement in this case. That is because the Nguyens say that the memorandum of contract page they signed did not have the price and purchaser’s name inserted. Mr Vinh Nguyen also says that the Reserve Authority he signed was “blank”.
[51] Mr King submits that both the purchase price and the identity of the purchaser are essential terms for any sale and purchase contract and there must be
agreement or a means of achieving agreement on these terms in order for there to be a binding contract of sale.5
[52] Furthermore, the Nguyens’ evidence is that they signed the memorandum of contract page only, and Mr King submits that there is no evidence that they agreed to the other terms and conditions of sale set out in the other pages of the Auction Conditions.
[53] The Nguyens’ evidence about what they signed, and when, is at odds with the evidence of Mr Yap. Mr Yap says that on the evening of 29 November 2013 he showed Ms Nguyen and Mr Vinh Nguyen the signed Auction Conditions which had the details of the pre-auction offer filled in on the memorandum of contract page and had the other pages of the Auction Conditions attached. He says Mr Vinh Nguyen signed both originals of the Auction Conditions and the Reserve Authority with all relevant details included.
[54] I prefer Mr Yap’s account of events on the evening of 29 November 2013. The very purpose in meeting with the Nguyens that night was to inform them of the pre-auction offer made by SM & T the night before, and to ascertain whether or not the offer of $440,000 was acceptable to them. Ms Nguyen’s evidence was that she knew that Mr Yap was coming over to the house that evening to discuss an offer which had been received.6 There was no reason for Mr Yap to show either of the Nguyens a blank page without the necessary details of the offer included, and I consider it is implausible that he did so.
[55] The fact that Mr Vinh Nguyen originally signed in the middle line of the purchasers’ execution clause on both originals of the memorandum of contract page also suggests that the page was not blank at the time he signed. The most likely explanation for that initial error is that Mr Piner’s signature appeared on the top line
of the execution clause and Mr Nguyen mistakenly assumed that his signature was to
5 See Electricity Corp of NZ Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA) at [53]. The essential terms for sale and purchase agreements relating to land are parties, property and price: DW McMorland, Sale of Land (3rd ed Cathcart Trust, Auckland, 2011) at [3.01].
6 NOE p 86 lines 22-29.
go in the same place. Mr Nguyen’s evidence during cross-examination confirms this:7
Yeah, because, because I saw a signature above so I, I signed under it but I, after I realised that it was the wrong place I move it to the left opposite so that it was on the same line as the previous one.
[56] Mr Vinh Nguyen’s evidence that the Reserve Authority was also blank is implausible. The whole purpose in signing a Reserve Authority is to fix the reserve price for auction. The most important term to be included in that Authority is therefore the price at which the reserve is set. It is not credible to suggest that the Reserve Authority did not include that price when, as I have found, it was specified in the Auction Conditions signed by Mr Vinh Nguyen that evening.
[57] I also find that the entire Auction Conditions document was shown to the Nguyens at this time as opposed to a single memorandum of contract page. Ms Nguyen’s own evidence was that Mr Yap had shown her “two piles” and that she could not recall whether the memorandum of contract page she allegedly signed was
attached to the others or not.8
[58] Mr Nguyen’s evidence was that there was somewhere between three and five pages to the document he signed. There is no reasonable explanation for Mr Yap to have shown either of the Nguyens a single page detached from the other pages of the document that evening. It is much more likely he showed them the full copy of the Auction Conditions signed by SM &T.
[59] I therefore find that the Nguyens both signed copies of the Reserve Authority on the evening of 29 November 2013 which specified a reserve price of $440,000. I also find that Ms Nguyen was shown, and Mr Vinh Nguyen signed, a full copy of the signed Auction Conditions with the relevant details of the SM & T offer inserted on
the memorandum of contract page.
7 NOE p 152, lines 25-28.
8 NOE p 87, line 26 – p 88, line 25.
When did the Nguyens sign?
[60] There is no dispute that both of the Nguyens signed the Reserve Authority on the evening of 29 November 2013. Similarly, there is no dispute that Mr Vinh Nguyen signed Auction Conditions that evening also. There is, however, a dispute about whether Ms Nguyen signed Auction Conditions on the evening of
29 November 2013 or after the auction.
[61] Ms Nguyen accepts that she signed “a paper” after the auction. Mr Yap’s evidence is that she signed the Auction Conditions with the completed details at this time and not before. There is no evidence that any other document, other than the signed Auction Conditions, was signed by Ms Nguyen after the auction.
[62] There was no need for Ms Nguyen to sign the Auction Conditions before the auction. She was always going to attend the auction. She would be available to sign an agreement once the auction was complete.
[63] I therefore find that Ms Nguyen signed the Auction Conditions after the auction and not before. It follows that when she signed, the date of the auction (3 December 2013), the name of the purchaser (SM & T), and the purchase price ($450,000) were all written in on the memorandum of contract page. That page was attached to the other pages of the document she signed.
What did the Nguyens agree to?
[64] The next issue is to consider what the Nguyens were agreeing to at the time each of them signed the relevant documents. The focus is on whether, and if so, when, an enforceable contract of sale was formed. That question is to be approached objectively, in light of the relevant factual matrix, including the subsequent conduct
of the parties.9
9 Electricity Corp of NZ Ltd v Fletcher Challenge Energy Ltd, above n 5 at [53]-[56].
[65] Mr King, on behalf of the Nguyens, contends that there was no acceptance of the pre-auction offer and therefore no agreement for sale and purchase formed. In support of that submission, he points to non-compliance with the pre-auction procedure sheet and inconsistencies between a clause in the Reserve Authority allowing alteration of the reserve price and acceptance of the pre-auction offer.
[66] Mr King may well be right on these points, but ultimately they do not have any bearing on whether a contract of sale was formed. That is because the evidence suggests that none of the parties intended a contract of sale to be immediately formed on acceptance of the pre-auction offer. Rather, for the reasons elaborated on below, the parties intended a contract of sale to be formed at auction. Such a contract is formed by an offer by way of bid being accepted by the auctioneer on behalf of the vendors. Acceptance by the auctioneer is indicated by the fall of the
hammer or by the auctioneer otherwise indicating that the sale is complete.10
[67] The SM & T pre-auction offer was made on the terms of the Barfoot & Thompson pre-auction procedure sheet. Acceptance of that offer could only result in a reserve price being set for the auction, and the auction being brought forward. It was not intended by SM & T that a binding contract of sale for the property at $440,000 would arise on acceptance of its offer prior to auction.
[68] It is clear from the evidence that Ms Nguyen also intended a contract of sale to be formed at auction and not before. By signing the Agency Agreement and Reserve Authority, Ms Nguyen authorised the auctioneer to form a contract of sale on her behalf by accepting bids at or above $440,000. That is in fact what happened. The document signed by Ms Nguyen after the auction evidenced the terms of the bargain struck moments earlier when the auctioneer accepted SM & T’s bid of
$450,000.
[69] At first blush, Mr Nguyen’s signature on the Auction Conditions containing
SM & T’s offer on the evening of 29 November 2013 looks like an acceptance of an offer to purchase. The signed Auction Conditions has the appearance of an
10 DW McMorland, Sale of Land, above n 5 at [3.22]; See also s 42(5) of the Property Law Act
2007 repealed and replaced by ss 36X-36ZF of the Fair Trading Act 1986.
enforceable sale and purchase agreement. At the very least it could be argued that a conditional agreement was formed at that time, with purchaser and price to be finally determined via the machinery of an auction, and neither party intending to be bound until that had occurred.
[70] Despite initial appearances, I do not consider Mr Nguyen was intending to be bound by a contract of sale, conditional or otherwise, at the time he signed the Auction Conditions. Viewed objectively and in context, the evidence suggests that he too intended for a contract of sale to be formed at auction and not before. That conclusion flows from the terms of the Auction Conditions which he signed which expressly contemplate an auction taking place and a contract being formed on the acceptance of the highest bid at auction. His signature on the Reserve Authority is consistent with a contract being formed at auction, as it expressly authorises the auctioneer to sell the property at the specified reserve. The fact that Mr Nguyen also signed blank Auction Conditions prior to auction confirms that he did not consider himself bound in any way to the Auction Conditions containing the details of the SM & T offer.
[71] In summary, by signing the Auction Conditions and Reserve Authority on the evening of 29 November 2013, Mr Nguyen was authorising the auctioneer to form a contract of sale by accepting the highest bid at or above $440,000 at auction. The final terms of sale would be comprised in one of the copies of the Auction Conditions he had signed.
[72] Subject to the sub-issues canvassed below, I consider a contract of sale for the property was formed at the auction when the auctioneer accepted SM & T’s bid of $450,000.
Did they understand what they were signing?
[73] Throughout their evidence, the Nguyens complain that Mr Yap did not properly explain to them the effect of the documents they were signing. They say that had they understood that they were agreeing to sell the property at auction for at least $440,000, then they would never have signed any documents.
[74] I consider it likely that the Nguyens understood the legal effect of what they were signing. The language difficulties were no barrier in this case as Mr Yap spoke Vietnamese. Ms Nguyen had already signed a conditional sale and purchase agreement for another property and her evidence suggested she understood the concept of a reserve price at auction. Mr Vinh Nguyen was an experienced businessman well aware of the mechanics of an auction and what was involved in purchasing property.
[75] In any respect, a lack of understanding cannot, on its own, release the Nguyens from the obligations contained in the documents which they signed. This was made clear by Tipping J in Bradley West Solicitors Nominee Co Ltd v Keeman when he said:11
If you sign a document without appreciating what you are signing you are bound by the document according to its tenor unless you can successfully plead non est factum. The tenor of the document is determined by the ordinary rules of construction. There is no halfway house whereby someone who has voluntarily signed a document and who falls short of non est factum can disavow the legal effect of the document according to its true construction on the basis of not having understood or fully understood its contents.
If the law took any other approach the commercial efficacy of signed documents would be substantially undermined and so would the corresponding and deliberately strict approach which is taken to a plea of non est factum. If you sign a document without understanding or fully understanding the legal consequences of doing so, and cannot establish non est factum, you have only yourself to blame or, if acting under legal or other advice, you may be able to look to your advisor for redress. What you cannot do is impeach the validity of the transaction as between yourself and the other party unless the other party knows (or perhaps has reason to believe) you are signing a document which you do not understand. This is the law with regard to parties who lack contractual capacity: see O'Connor v. Hart [1983] NZLR 280; CA: [1985] 1 NZLR 159 PC. The position cannot logically be any more favourable to people with contractual capacity but who, for some reason, do not appreciate what they are signing.
[76] In the same vein, a party who signs a contract without reading all its clauses is also still bound by the clauses in the contract.12
11 Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 at 116.
12 Nightingale v Barfoot & Thompson Ltd HC Auckland CIV-2009-404-4073, 22 October 2009 at
[31].
[77] It seems likely that the Nguyens did understand what they were signing, but if they did not, then they committed to those obligations at their own risk. A lack of understanding does not provide grounds in this case to release them from their contractual obligations.
Was authorisation withdrawn?
[78] Ms Nguyen says any authorisation she gave to sell the property at auction for
$440,000 or more was withdrawn on two occasions. The first was following the open home on 30 November 2013 when she says she told Mr Yap she wanted to cancel the auction. The second was during a telephone conversation she had with Mr Yap on 2 December 2013 when she again says she wanted to cancel.
[79] Mr Yap’s evidence is that there was no conversation of this nature on
30 November 2013, and that Ms Nguyen did not say she wanted to cancel the auction in the telephone conversation on 2 December 2013, the night before the auction.
[80] I prefer Mr Yap’s evidence on this point also. A withdrawal of authorisation prior to the auction, whether on 30 November 2013 or 2 December 2013, is inconsistent with Ms Nguyen’s attendance at the auction on 3 December 2013. There is no dispute that she did not tell anyone she did not want to go ahead at the auction. Indeed she sat through the auction, signed the duplicate copies of the Agreement, shook hands with Mr Piner and Ms Glover, and returned home.
[81] Withdrawal of the authorisation prior to auction is also inconsistent with the post-auction conduct of both Ms Nguyen and Mr Tien Nguyen. Mr Tien Nguyen placed the sold sticker on the advertisement board outside the property. They both continued to look for properties to buy and nothing was said to Mr Yap when they met him the day after the auction.
[82] When Ms Nguyen decided she wanted to cancel, a text to Mr Yap was sent to that effect. Mr Yap consulted with his manager about what to do in light of receipt
of that text. I consider he would have taken the same steps had Ms Nguyen indicated prior to the auction that she did not want to go ahead with it.
[83] I find that there was no withdrawal of the authorisation to sell at auction prior to the auction on 3 December 2013.
Conclusions on first issue
[84] In answer to the first question, a binding contract of sale was formed between
the plaintiff and first defendants on the fall of the auctioneer’s hammer on
3 December 2013.
Is the contract enforceable pursuant to s 24 of the Property Law Act 2007?
[85] Section 24 of the Property Law Act 2007 provides:
24Contracts for disposition of land not enforceable unless in writing
(1) A contract for the disposition of land is not enforceable by action unless—
(a) the contract is in writing or its terms are recorded in writing;
and
(b) the contract or written record is signed by the party against whom the contract is sought to be enforced.
(2) In this section, disposition does not include—
(a) a short-term lease; or
(b) a sale of land by order of a court or through the Registrar.
[86] A defendant who does not specifically plead reliance on s 24 will be taken to have foregone the protection it affords and a plaintiff need not prove compliance.13
Although the Nguyens do not specifically plead reliance on s 24, their statement of defence does contain a denial of a written agreement between the parties.14 On that
basis, I have considered whether the requirements of s 24 are met in this case.
13 DW McMorland, Sale of Land, above n 5 at [4.19].
14 Statement of Defence at [5].
[87] As noted above, I consider a contract for sale was formed on the fall of the auctioneer’s hammer. It is the terms of that agreement which must be recorded in writing. Although s 24 itself does not specify the time at which a record must come into existence, generally speaking, it is after the contract was made and before the proceedings were commenced. The signing of the record by the party against whom the contract is sought to be enforced is the time at which the record comes into
existence.15
[88] This does not pose any difficulties insofar as Ms Nguyen is concerned. She signed a copy of the Agreement after the auction. That Agreement recorded the terms of the contract as finally concluded on the fall of the auctioneer’s hammer. The requirements of s 24 are met in that respect.
[89] The requirement that the record be signed after the contract was formed is problematic in respect of Mr Vinh Nguyen who signed the Agreement (the record) before the auction, and therefore before the contract was formed.
[90] In Leeman v Stocks the auctioneer had inserted the name of the vendor into a memorandum of contract prior to an auction.16 The property was sold at auction to the highest bidder. At the completion of the auction, the auctioneer procured the signature of the purchaser on the agreement so as to create a written record of the contract. The written record was not signed by the vendor or the auctioneer. Nevertheless, the Court found that the insertion of the vendor’s written name into the
memorandum of contract prior to auction was sufficient to meet the writing requirements. That was because the auctioneer had the authority to put before the purchaser a document containing the vendor’s name in full as that of the party with whom the contract is made. Justice Roxburgh said:17
The point, however, which has given me much ground for reflection, is Mr Parbury’s next point, that the document contemplates by its own terms that it should be signed by both parties. That is quite true if the document is regarded in isolation, but it is equally certain that when the auctioneer obtained the purchaser’s signature, neither the purchaser nor the auctioneer, acting on behalf of the vendor, ever intended any other signature to be
15 DW McMorland, Sale of Land, above n 5 at [4.03].
16 Leeman v Stocks [1951] Ch 941 (Ch).
17 At 949.
added. It was the intention of both the purchaser and the vendor’s agent, the
auctioneer, that this should be the final written record of the contract.
[91] The position in this case is even stronger than it was in Leeman v Stocks. Not only was the name of the vendor inserted on the Agreement, but Mr Vinh Nguyen’s signature was also on the document presented to SM & T for signing. By his signature, Mr Nguyen was evidencing his intention that the document he was signing would be the record of the agreement formed at auction. The Agreement was presented by Barfoot & Thompson to SM & T as a complete written record of the terms of the contract of sale recently formed. It was not intended by any of the parties that any other signatures would be required to enforce the Agreement.
[92] Mr King submits that there was a variation to the Agreement by the crossing out of the price of $440,000 and the insertion of $450,000 in its place. He says such changes did not meet the requirements of s 24 because they were not initialled by the Nguyens.
[93] I do not agree that the crossing out of the price of $440,000 and the recording of the final price for the property was a variation or alteration of a contract requiring signature. As I have found above, there was not a contract for the sale of the property formed until the auctioneer’s hammer fell at the final bid of $450,000. There was no prior contract in force and therefore no contract to vary or amend. The crossing out and insertion of the final price, and the insertion of the date simply recorded in writing the terms of the contract formed by the auctioneer’s hammer moments earlier. There was no requirement for the vendors to initial these “changes” as they were not, in fact, changes at all.
[94] The Agreement represents the terms of the contract formed at auction, it is signed by the parties against which it is sought to be enforced, and accordingly the requirements of s 24 are met in this case.
Should the Court exercise its discretion to order specific performance?
[95] The second issue is whether the Court should exercise its discretion to order specific performance of the Agreement.
[96] At all material times, SM & T remained ready, willing and able to settle. Settlement notices were served but were not complied with. Finance was arranged and could have been transferred to meet the purchase price had the Nguyens been ready and willing to settle the property at any time. An award of damages will not adequately compensate SM & T for the loss of this particular property which is unique in that it complements the other rental properties it owns in the same street.
[97] SM & T has not acted in a way which would otherwise disentitle it to an equitable remedy. There is no basis upon which specific performance of the Agreement should not therefore be ordered and I intend to grant that remedy as set out at the end of this judgment.
Contractual interest
[98] SM & T also seeks interest at the contractual rate calculated pursuant to cl 5.13 of the Agreement.
[99] The total interest claimed is the difference between:
(a) The late settlement interest rate of 15 per cent on the purchase price of
$450,000;18 and
(b)An amount equivalent to the interest earned or that would be earned on overnight deposits lodged in Ms Campi’s trust bank account on the unpaid balance of the purchaser price ($410,000) less withholding tax, bank or legal administration fees and commission charges, and any interest payable in respect of any loan or mortgage taken out in
relation to the property concerned;19
From the settlement date (22 January 2014) to the date that the vendors are able and willing to provide vacant possession and the purchaser takes
possession.20
18 Agreement, cl 5.13(2)(a)(ii).
19 Agreement, cl 5.13(2)(b).
20 Agreement, cl 5.13(1)(a)(i).
[100] SM & T adduced evidence as to the sum in (b) above which was unchallenged. The total interest due according to this formula as at the date of trial as calculated by SM & T is $92,061.54. But, interest will continue to run pursuant to the contract until the date of possession can be determined.
[101] An order for specific performance requires the Agreement to be performed in accordance with its terms. It is a means by which parties are held to their bargain. Clause 5.13 is a term of the Agreement. An order for specific performance will therefore afford SM & T a right to interest under the Agreement without any additional order from the Court being made.21
[102] Judgment for the interest due at the time of judgment as sought in the second cause of action would amount to an interim payment of interest pending determination of the final settlement date. The Agreement does not create such a right. It is not for the Court to modify the Agreement before ordering that it be performed, because to do so would risk holding the parties to an agreement they never intended to make.22
[103] An order granting interest quantified as at the date of judgment would give SM & T a benefit not contemplated by the terms of the Agreement. I therefore decline to order interest in accordance with the second cause of action in addition to the order of specific performance.
[104] Mr King suggested in closing submissions that calculation of interest in accordance with the Agreement would be punitive for the Nguyens and give rise to a windfall for SM & T. That amounts to a submission that the order for specific performance should be amended in this case so as to relieve the Nguyens from their obligation to pay default interest.
[105] There is no evidence that interest at the agreed rate would be punitive or cause hardship of the kind that would justify modification of the order for specific
performance. Nor am I satisfied that there is sufficient evidence of a windfall to
21 See Varney v Anderson (1992) 2 NZ ConvC 191,347 (CA).
22 Zhang v Zhai [2014] NZHC 2156 at [15] citing Serepisos v Steele (No 1) (2004) 5 NZ ConvC
194,041 (HC) at [75].
justify departing from the rate of interest which the parties agreed. Payment of interest as calculated in cl 5.13 is part of the bargain struck between the parties. It is designed to compensate the innocent party for losses suffered as a result of delay. The Nguyens accepted the risk that they would be liable to pay such interest when they failed to settle on the settlement date. There is no basis upon which the Nguyens should now be relieved from that obligation.
Result
[106] The plaintiff is successful on its first cause of action. [107] The second cause of action is dismissed.
[108] It is unnecessary to determine the alternative causes of action against Barfoot
& Thompson and the latter’s cross-claim against the first defendants also falls away. [109] I make the following orders:
(a) The first defendants are ordered to specifically perform the terms of the sale and purchase agreement dated 3 December 2013.
(b)Leave is reserved to the plaintiff to seek ancillary orders necessary (including in relation to the calculation of interest) to give effect to the order in (a) above.
(c) If costs cannot be agreed, then memoranda claiming costs shall be filed within 20 working days of this judgment with memoranda in
reply to be filed 14 working days after that.
Edwards J
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