Spijkerman and Spijkerman v Featherstone Park Developments Ltd

[2009] NZCA 381

IN THE COURT OF APPEAL OF NEW ZEALAND

CA397/2009
[2009] NZCA 381

BETWEENSPIJKERMAN AND SPIJKERMAN

Appellant

ANDFEATHERSTONE PARK DEVELOPMENTS LIMITED

First Respondent

ANDMCCAW LEWIS CHAPMAN

Second Respondent

Hearing:18 August 2009

Court:O'Regan, Ronald Young and Venning JJ

Counsel:S W Hood and A H Heinrich for Appellant

J A MacGillivray for First and Second Respondents

Judgment:27 August 2009 at 9.30 am

JUDGMENT OF THE COURT

A        The appeal is allowed. 

B        The decision of the High Court refusing summary judgment is quashed. 

CThe application by the appellant for summary judgment is granted, with judgment in favour of the appellant against the first respondent for $57,000.

DThe second respondent will pay the net interest earned on the deposit of $57,000 to the appellant.

EWe award costs to the appellant against the first respondent for a standard appeal on a band A basis plus usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Ronald Young J)

Introduction

[1]       This appeal relates to a dispute about the meaning of a clause in an agreement for sale and purchase of land giving each party the right to cancel the agreement.  The appellant purchaser says it was entitled to cancel because a subdivisional plan affecting the land had not been deposited three years from the date of the agreement.  The first respondent, the vendor, disputes that interpretation.

[2]       Associate Judge Faire, responding to the appellant’s summary judgment application seeking return of the deposit after cancelling the contract, concluded that the appellant was not entitled to cancel the contract.  The appellant now challenges that conclusion in this appeal.

Background facts

[3]       Featherstone Park Developments Limited (the first respondents) applied to the Hamilton City Council in early 2005 for consent to subdivide 17.5 hectares of land owned by them in what is known as the Saint‑Petersburg Estate in Hamilton.  Before approval the first respondents began selling lots within the proposed subdivision.

[4]       By an agreement for sale and purchase signed on 21 July 2005 the appellants, who are property developers, agreed to buy Lots 79, 80, 81 and 82 of the proposed subdivision.  The purchase price was $1,140,000 with a five per cent deposit required.  The deposit was to be held by the second respondent, the first respondent’s solicitors, as stakeholders for the parties.  Accordingly, on 8 August 2005 the appellant paid $57,000, as the deposit, to McCaw Lewis Chapman.

[5]       On 29 September 2005 the first resource consent was granted by the local authority.  Further consents were required for earthworks and water discharges.   Subsequently, the Hamilton City Council changed the original approval and a further resource consent application was made and granted in March 2008.

[6]       In May 2008 the first respondent then obtained s 223 and s 224 Resource Management Act 1991 certificates relating to stages 1, 2 and 3 of the subdivision.  Land Information New Zealand then approved the deposit of the plan (relating to stages 1, 2 and 3) of the subdivision in June 2008.

[7]       The land to be purchased by the appellant was in stages 4, 5 and 6 of the development.  On 1 July 2008 the first respondent applied for the s 223 and s 224 certificates relating to stages 4, 5 and 6 which were granted on 29 August 2008 and titles ultimately issued on 10 September 2008.

[8]       However, on 21 July 2008 the appellant’s solicitors faxed the respondent’s solicitors the following letter:

Featherstone Park Developments Limited to Spijkerman – Lots 79, 80, 81 and 82 Saint‑Petersburg Estate

We have not received from you notification that the subdivisional plan has been deposited.  On behalf of the purchasers we hereby give notice that the agreement is cancelled.

We enclose our trust account deposit slip and look forward to receiving confirmation of lodgement of refund of the deposit plus interest.

[9]       On 23 July 2008 the respondents by letter said:

Featherstone Park Developments Limited – Sale Lots 79, 80, 81 & 82 St Petersburg Estate to Spijkerman

Your letter dated 21 July 2008 refers.

While not stated, we assume your purported cancellation is pursuant to the provisions of section 225(2)(b) of the Resource Management Act 1991.  As our client has made reasonable progress towards submitting the survey plan to the territorial authority for its approval, your purported cancellation is not accepted.  The Agreement is still on foot.

[10]     And the same day the appellant’s further responded:

Featherstone Park Developments Limited to Spijkerman – Sale Lots 79, 80, 81 and 82 St Petersburg Estate

I acknowledge receipt of your fax dated 23^rd July 2008.

The Agreement is cancelled in accordance with the provisions of Clause 4.4 as the developer, Featherston Park Developments Limited has not been able to obtain deposit of the subdivisional plan within the time period specified in clause 4.5.2 (time being of the essence).

The Agreement is at an end and we await the refund of the deposit.

[11]     This exchange of correspondence illustrates the different contentions of the parties and the essence of the dispute in both the High Court and this Court.

[12]     To return to the Agreement for Sale and Purchase of July 2005.  The relevant clauses provide:

4.2Subdivision Plan: The Vendor will (at the Vendor’s cost):

4.2.1prepare the Subdivision Plan;

4.2.2comply with any statutory or other lawful requirements of the Territorial Authority relating to the Development;

4.2.3obtain approval of the Subdivision Plan by the Territorial Authority and LINZ; and

4.2.4deposit the Subdivision Plan and take all other steps necessary to obtain a separate title for the Lot.

4.3No Time Period: The Developer will use its best endeavours and do all things reasonably necessary to ensure the deposit of the Subdivision Plan at LINZ at the earliest possible date.  The Developer is not obliged to obtain deposit of the Subdivision Plan by any fixed date, nor will the Purchaser be entitled to make any claim against the Vendor for any delays which may occur in the deposit of the Subdivision Plan and the issue of the title for the Lot.

4.4Sunset: If for any reason the Developer has not been able to obtain deposit of the Subdivision Plan at LINZ within the time period specified in clause 4.5.2 (time being of the essence) then either party may by notice in writing to the other cancel this agreement and upon cancellation the Purchaser will be entitled to a refund of the Deposit paid and neither party will have any further claims or rights against the other.

4.5Section 225 Resource Management Act 1991: In consideration of the Vendor entering into this agreement with the Purchaser, the Purchaser:

4.5.1agrees that the Purchaser has contracted out of the provisions of section 225(2)(a) of the Resource Management Act 1991 and waives the right to the 14 day cancellation provision set out therein; and

4.5.2agrees that the provisions of section 225(2)(b) of the Resource Management Act 1991 are modified to provide for a period of three years from the date of this agreement, this variation being agreed due to the nature of the Works required to be undertaken by the Developer to complete the Development.

[13]     Section 225 of the Resource Management Act  provides as follows:

225     Agreement to sell land or building before deposit of plan 

(1)Any agreement to sell any land or any building or part of any building that constitutes a subdivision and is made before the appropriate survey plan is approved under section 223, shall be deemed to be made subject to a condition that the survey plan will be deposited under the Land Transfer Act 1952 or in the Deeds Register Office, as the case may be; and no such agreement is illegal or void by reason that it was entered into before the survey plan was deposited.

(2)Subject to subsection (1), any agreement to sell any allotment in a proposed subdivision made before the appropriate survey plan is approved under section 223 shall be deemed to be made subject to the following conditions:

(a)That the purchaser may, by notice in writing to the vendor, cancel the agreement at any time before the end of 14 days after the date of the making of the agreement:

(b)That the purchaser may, at any time after the expiration of 2 years after the date of granting of the resource consent or one year after the date of the agreement, whichever is the later, by notice in writing to the vendor, rescind the contract if the vendor has not made reasonable progress towards submitting a survey plan to the territorial authority for its approval or has not deposited the survey plan within a reasonable time after the date of its approval.

(3)An agreement may be rescinded under subsection (2) notwithstanding that the parties cannot be restored to the position that they were in immediately before the agreement was made, and in any such case the rights and obligations of each party shall, in the absence of agreement between the parties, be as determined by a Court of competent jurisdiction.

[14]     Another relevant provision of the Agreement is cl 2.8:

2.8Refund of Deposit: If this agreement is cancelled pursuant to clauses 4.4 or 21.1 the Vendor will repay the Deposit and net interest earned from the Deposit to the Purchaser.

Associate Judge’s Decision

[15]     In refusing summary judgment the Associate Judge said:

[31]     When I consider the relationship between clause 4.4 and clause 4.52 [sic], I conclude that the interpretation advanced by Mr Hood, which in effect provides that clause 4.4, by referring to clause 4.52 [sic], simply means three years from the date of the contract is not correct.  The reason for that conclusion is that it leads to a lack of harmony between clause 4.4 and clause 4.52 [sic].  That is because the rights given to the parties under s 225(2)(b) of the Resource Management Act 1991, as modified by clause 4.5.2, expressly provide a right to rescind at or after the expiry of three years from the date of the agreement if the vendor has not made reasonable progress, or in the other alternative has not deposited the survey plan within a reasonable time.  The condition attaching to the right to give a notice to rescind would be totally superfluous if the plaintiff’s interpretation of clause 4.4 was accepted.  In short, the plaintiff’s interpretation would indicate a lack of harmony between two clauses in the contract.  I do not see any significance in the reference in the Resource Management Act to a right to rescind and the term now used in contracts following the enactment of the Contractual Remedies Act 1979 of cancellation.

[32]     As I have reached that conclusion, it is clear to me that this is not an appropriate case to enter summary judgment on the plaintiff’s application.

[16]     As to the matrix of facts he said:

[33]     I raised with counsel whether there was any particular reason why there had bee no cross‑application for summary judgment by the defendant.  Mr MacGillvray rightly pointed out that the question of interpretation in this case might well be assisted by the matrix of facts, which could only be established on a trial.

Discussion

[17]     The appellant’s case is that cl 4.4 entitles either party to cancel the agreement if the respondents have not been able to obtain deposit of the plan within three years from the date of the signing of the Agreement for Sale and Purchase.  This requires the interpretation of the words “the time period specified in cl 4.5.2” in cl 4.4 to be three years rather than, as the respondent maintains, a period of three years and that reasonable progress has been made towards the deposit of the survey plan.

[18]     We are satisfied the interpretation asserted by the appellant is correct and that the agreement for sale and purchase was validly cancelled.

[19]     Turning first to cl 4.4 this refers to the “time period specified in clause 4.5.2”.  The only time period referred to in cl 4.5.2 is “three years from the date of this agreement”.  In cl 4.5.2 the opportunity to cancel only arises after the expiry of three years from the date of the agreement.  However there can only be cancellation if the vendor has not made reasonable progress toward (as relevant here) depositing the survey plan.  The assessment of “reasonable progress” is not concerned with any time period but with progress towards obtaining the title.  On the plain words, therefore, the time period specified in cl 4.5.2, to be attached to cl 4.4, is three years from the date of the agreement. 

[20]     This interpretation of cl 4.4 also allows for an appropriate harmonisation between cl 4.4 and cl 4.5.2.  Cancellation under cl 4.4 is available to both vendor and purchaser on the third anniversary of the contract and for a reasonable time thereafter: Jansen v Whangamata Homes Limited [2006] 2 NZLR 300 at [16] (CA). Cancellation under cl 4.5.2 is only available after the expiry of the three year period and where reasonable progress has not been made toward (as relevant here) deposit of the plan. Only a purchaser may cancel under cl 4.5.2. Accordingly, both vendor and purchaser may, at the three year anniversary, be content to let the contract run thereby loosing rights of cancellation under cl 4.4. However, months later the purchaser may become disillusioned with the lack of progress by the vendor in obtaining title and give notice of cancellation under cl 4.5.2.

[21]     Further, the use of the word “Sunset” as the heading of cl 4.4 and the use of the phrase “time being of the essence” also support the appellant’s claim that cl 4.4 provides for a certain date for cancellation.  Such words fit much less comfortably with an ill defined date for cancellation under cl 4.4 as the respondents contend.

[22] The first respondent’s case is that the “time period specified in clause 4.5.2” is three years plus a period at the end of which it can be said reasonable progress toward the deposit of a plan has not been made. If this interpretation is correct then the only real difference between cl 4.4 and cl 4.5.2 would be cl 4.4 permits cancellation by both parties and cl 4.5.2 only by the purchaser. Beyond that difference the two clauses would be essentially the same. The respondent suggested that cl 4.4 had additional significance because it provided for a remedy for cancellation being refund of the deposit without further claims or rights. However, cl 2.8 in the agreement for sale and purchase already provides for this remedy: above at [14]. We consider that such an interpretation of these sections would be illogical and confusing and give no real meaning to cl 4.4.

[23]     The respondents stress that, without accepting the meaning contended for by the appellant, if the clauses being considered here were susceptible to more than one meaning summary judgment was not the appropriate forum.  The respondent submitted that an assessment of the matrix of facts at a full trial was the way to resolve this interpretative dispute: Westpac Banking Corporation v M M Kembla New Zealand Limited [2001] 2 NZLR 298 at [71] (CA).

[24]     Kembla was a defendant application for summary judgment where different principles apply from a plaintiff’s application (see rule 12.2(1) and 12.2(2) of the High Court Rules). The drafting of cl 4.5 and cl 4.5.2 are less than a model of clarity. It would have been simpler to have included the three year period directly in cl 4.4. However, we are satisfied, for reasons given, the interpretation of the clauses contended for by the appellant are clearly correct. This Court has described the circumstances of the development of the land and the sale to the appellants ([3]–[7]). There is nothing in any of the respondents’ affidavits to suggest that there is any other factual material, which would bear upon the interpretation of cl 4.4 and cl 4.5.2. We acknowledge in saying this that it was the appellant’s onus at the summary judgment hearing to establish the defendant had no defence to the claim. In those circumstances there is no obligation on the defendant to establish anything. However, in this case, we conclude the meaning of the clauses are clear and there is no factual material before the Court which would cast doubt on our interpretation.

[25]     We are satisfied, therefore, that this question of interpretation could be properly resolved at a summary judgment hearing and can be resolved by this Court now.

[26]     Finally, the respondent argues that cl 4.3, which provided that the developer had no obligation to deposit the plan by a fixed date and excluded purchaser damages claims for delay, is inconsistent with a bilateral cancellation right after three years.

[27]     We see no inconsistency between cl 4.3 and cl 4.4.  Clause 4.4 gives both parties the right to cancel at or shortly after a certain date irrespective of progress if the plan has not been deposited.  The fact cl 4.3 provides that in failing to deposit the plan by a particular date the developer is not in breach does not affect the cl 4.4 right to cancel.  This right exists independent of any breach.  Such a cancellation is not tied to the developer’s progress.

[28]     The exclusion of a damages claim for delay in cl 4.3 is entirely independent of cl 4.4 and cl 4.5.2.  Clause 2.8 provides for the remedy upon cancellation.  Clause 4.3 is also consistent with cl 4.5.2.  Neither impose a date by which the plan must be deposited.  Once the right to cancel under cl 4.4 is lost then cancellation may only occur after three years and when no reasonable progress toward deposit of the plan is made.  This imposes no obligation to deposit the plan on a fixed date and so is consistent with that expression in cl 4.3.

[29]     For the reasons given the appeal will be allowed.  The decision of the High Court refusing summary judgment is quashed.  The application by the appellant for summary judgment is granted in the following terms:

(a)       there will be judgment in favour of the appellant against the first respondent for the sum of $57,000;

(b)there will be an order directing the second respondent to pay to the appellant the net interest earned on the deposit while held in the second respondent’s trust account.

Costs

[30]     Standard appeal costs plus usual disbursements are payable on a band A basis in favour of the appellants against the first respondents.

Solicitors:

Norris Ward McKinnon, Hamilton for Appellant
Tompkins Wake, Hamilton for First Respondent