Suda Group Ltd v Wai

[2008] NZCA 101

IN THE COURT OF APPEAL OF NEW ZEALAND

CA1/07
[2008] NZCA 101

BETWEENSUDA GROUP LIMITED

Appellant

ANDSEE WAI AND PUTI YING WONG

Respondents

Hearing:22 April 2008

Court:O'Regan, Arnold and Ellen France JJ

Counsel:A Speed and J Nguy for Appellant

J McTavish Butler for Respondents

Judgment:28 April 2008 at 10.30 am 

JUDGMENT OF THE COURT

A          The appeal is dismissed.

BThe appellant is to pay the respondents costs of $3,000 plus usual disbursements.

REASONS OF THE COURT

(Given by Arnold J)

Introduction

[1]       This case concerns the appellant’s entitlement to interest for late settlement under cl 3.10(2) of the standard form agreement for the sale and purchase (7ed (2) July 1999) approved by the Real Estate Institute of New Zealand and the Auckland District Law Society.

Factual background

[2]       By an agreement for sale and purchase dated 5 August 2003 the respondents agreed to sell part of their property in Mangere to Yong Hui Liu or his nominee for $470,000.  The appellant is the nominated purchaser. 

[3]       The agreement contained the following special condition:

The Vendor agrees to sell a portion of the land pertaining to an area (boundary) between more or less the existing farm shed and the closest glasshouse and including remaining land to the rear boundary including the remaining glass houses.  This is subject to [the] council granting approval for this proposed new boundary line so as the shed can remain without affecting the proposed agreed new boundary line.  Both parties agree to share subdivision costs 50/50.  Diagram attached.

It provided that the “possession date” was “30 October 2003 or 5 working days from the date of issue of new title, whichever is the later”.   Under cl 1.1(3) “settlement date” meant (in this case) the possession date.  By virtue of cl 3.7(2) on the settlement date the respondents were obliged to hand to the appellant:

(a)the memorandum of transfer of the property provided by the purchaser under subclause 3.5, in registrable form; and

(b)all other instruments in registrable form required for the purpose of registering the memorandum of transfer; and

(c)all instruments of title.

[4]       A few days after it was made, the agreement was varied.  The variation provided:

Both parties agree that the vendor will pay a maximum of $5000 … for total subdivision costs to create boundary between 2 pieces of land.  The subdivision will be arranged for and undertaken by the purchaser to be completed before December 31^st 2004.  The vendor will give all necessary consents to enable the subdivision to commence and be undertaken.  All other costs pertaining to this subdivision to divide this land into 2 pieces will be paid for by the purchaser. 

[5]       At no stage in the process did the respondents obtain independent legal advice, and they had a poor command of English.  It was suggested at trial that they did not appreciate that the variation pushed the date for completion of the subdivision out to 31 December 2004.

[6]       The respondents were advised that Mr Liu had nominated the appellant as purchaser in late December 2003, following which there was no further communication between the parties until 22 March 2004.  On that date the respondents’ solicitor, Mr Yee, wrote to the appellant’s solicitor, Mr Nguy, complaining about the apparent lack of progress in respect of the subdivision.  Mr Nguy telephoned Mr Yee to advise as to progress and sent him copies of relevant documentation.  Before that had arrived however, Mr Yee sent a letter dated 24 March 2004 by facsimile to Mr Nguy in which he gave notice on behalf of the respondents purporting to cancel the agreement.

[7]       The appellant did not accept the cancellation, however.  On 2 June 2004 Mr Nguy told Mr Yee that the appellant had purchased an adjoining property and proposed to combine it with the land he was purchasing from the respondents to create a single lot.  Then, on 5 July 2004, Mr Nguy served a settlement notice.  It stated:

3.By letter dated 23.3.04 the [appellant] indicated that it was ready to seek new titles following which settlement would take place in terms of the agreement.  The [respondents have] defaulted in [their] obligations under the agreement in failing to consent to the agreed subdivision of the property thereby preventing the issuing of new titles for the subdivided portions of the land and settlement taking place on the settlement date.

4.In terms of the agreement the [appellant] was on the settlement date ready able and willing to settle and remains ready able and willing to settle but for the default of the [respondents].

The notice required that the respondents:

Consent to the subdivision within twelve (12) working days after service of this notice, time being of the essence.

[8]       That notice was not complied with and later in July the proceedings giving rise to this appeal were issued.

[9]       In its statement of claim the appellant alleged that the respondents had purported to cancel the agreement in their solicitor’s 24 March letter; that it had rejected the respondents’ purported cancellation; and that it had served a settlement notice under the agreement on 5 July stating that it was ready, willing and able to settle.  The appellant alleged that the settlement notice had expired on 22 July 2004 and that the respondents had failed to settle in accordance with the notice.  It sought an order for specific performance and, in addition, damages, interest and costs.

[10]     After this the parties attempted to settle their dispute.  During October 2004 there was a “without prejudice” exchange of correspondence between the parties.  That resulted in Mr Yee sending a settlement statement to Mr Nguy on 27 October in the expectation that settlement would occur on that day.  However, settlement did not occur, in part because new titles to the subdivided land had not been issued.  On 28 October the respondents purported again to cancel the agreement, on the basis that the settlement negotiations had resulted in a further agreement, an essential term of which was that settlement would occur on 27 October.  Following that, the matter went to trial.

High Court decisions

[11]     Frater J ordered specific performance: (2005) 6 NZCPR 895.  New titles for the subdivided property were issued in June 2006 and the transaction was settled on 4 August 2006.  Subsequently, having dealt with costs, the Judge gave judgment on the appellant’s claim for interest: (2006) 7 NZCPR 692.

[12]     In relation to specific performance, the Judge concluded:

(a)The respondents’ purported cancellation of the agreement by way of the 24 March letter was invalid and amounted to a repudiation of the agreement.

(b)The appellant had ignored the respondents’ purported cancellation.

(c)The settlement negotiations in October did not result in a binding agreement that settlement would take place on 27 October.  Accordingly the respondents’ second attempt at cancellation was also invalid.

(d)The settlement notice sent by Mr Nguy on 5 July was invalid.  The respondents did not need to sign the deposited plan in order for consent to the subdivision to be obtained.  All that was required for the new titles to issue was a memorandum of transfer, signed by the respondents, together with an order for a new certificate of title, signed by the respondents’ solicitor.  The preparation of these documents was the appellant’s responsibility.

(e)On balance, an order for specific performance should be issued.

[13]     In relation to interest, the Judge considered that the appellant’s claim was misconceived.  The Judge said that at the time she ordered specific performance the new titles had not been issued, so that a settlement date could not be fixed.  It was not until the new titles were issued that settlement could be effected (as noted above, the titles were ultimately issued in June 2006).  The Judge found that the appellant was in no position to settle as at 24 March 2004 because it had not at that time done what it was obliged to do under the agreement to enable new titles to be issued.  On this basis, settlement was not late, and cl 3.10 had no application.  The Judge also said that, to the extent that the award of interest is discretionary, she would not have exercised her discretion to make an award in the circumstances.

Basis of appeal

[14]     The appeal relates simply to the question of interest.  Mr Speed’s argument is straightforward.  He says that the respondents wrongfully repudiated the agreement and that cl 3.10 of the agreement applies.  He relies in particular on cl 3.10(2)(a)(ii), which  provides:

(2)If this agreement provides for vacant possession but the vendor is unable or unwilling to give vacant possession on the possession date, then, provided that the purchaser is not in default:

(a) the vendor shall pay the purchaser, at the purchaser’s election, either:

…

(ii)an amount equivalent to interest at the interest rate for late settlement on the entire purchase price during the default period.

(This is subject to a deduction for interest that was, or should have been, earned by the purchaser on the unpaid purchase price – see cl 3.10(2)(b).)

[15]     Mr Speed said that the respondents wrongfully repudiated the agreement on 24 March 2004.  Accordingly, they were unwilling to give vacant possession on the possession date and are so liable to pay interest at the late settlement rate (12 per cent) on the balance of the purchase price from the date of default (variously described as 24 March, 27 October and 31 December 2004) until the date of settlement (4 August 2006).  This is subject to any deductions required by virtue of cl 3.10(2)(b).

Discussion

[16]     Like the Judge, we consider that Mr Speed’s argument is misconceived. 

[17]     Clause 3.10(1)(a) defines the “default period” in cl 3.10(2) as being:

… the period from the possession date until the date when the vendor is able  and willing to provide vacant possession and the purchaser takes possession.

[18]     In the present case, the possession date was initially “30th October 2003 or 5 working days from the date of issue of new title, whichever is the later”.  The effect of the variation was to fix the date by which the subdivision had to be completed to 31 December 2004, so that it became, in effect, a “cut off” date.  There was no suggestion that the variation affected the settlement date (ie, five working days after the new titles issued). 

[19]     The appellant’s settlement notice of 5 July 2004 was defective for two reasons.  First, it was based on a misconception as to what was required to settle.  In particular, the respondents were not required to sign the deposited plan in order for consent to the subdivision to be granted.  Second, at the time it was issued the appellant was not in a position to settle (and the respondents were not required to settle).  The new titles had not been issued, and without them the respondents could not settle.  It was the appellant’s responsibility to attend to that, as well as to prepare the memorandum of transfer.  In fact, the appellant was not in a position to settle until mid 2006 when the necessary steps were completed.

[20]     Mr Speed argued that there was no point in the appellant taking any steps after 24 March 2004 in light of the respondents’ repudiation of the agreement.  He relied in particular on s 8(3)(a) of the Contractual Remedies Act 1979, which provides:

(3)Subject to this Act, when a contract is cancelled the following provisions shall apply:

(a)So far as the contract remains unperformed at the time of the cancellation, no party shall be obliged or entitled to perform it further.

Mr Speed said that this provision precluded the appellant from taking any further steps in relation to the agreement.

[21]     This submission is untenable.  Faced with the respondents’ wrongful repudiation the appellant had to make an election.  It could either have accepted the repudiation, cancelled the agreement and sued for damages or have affirmed the agreement and kept in on foot (see s 7(2) and (5) of the Contractual Remedies Act).  The appellant chose the latter course, as the sending of the settlement notice on 5 July plainly shows.  Having affirmed the agreement, the appellant was obliged to meet its obligations under it, including its obligations in relation to doing what was necessary to enable new titles to issue and settlement to be effected.  There was ultimately no dispute as to what those steps were, or that they were not completed until mid 2006.

[22]     Mr Speed sought to obtain assistance from the decision of this Court in Varney v Anderson (1992) 2 NZ ConvC 191,347.  However, as the Judge said, that case is distinguishable.  There the purchaser (unlike the appellant in this case) had done all that was necessary to complete the subdivision and enable settlement to be effected.

[23]     In the result, then, cl 3.10(2) has no application to the circumstances of this case.  Until the new titles issued, the respondents’ obligation to settle did not crystallise.  Only when the titles had become available were the respondents required and able to settle.  In other words, in the absence of the new titles, which it was the appellant’s obligation to organise, there could be no late settlement and no scope for the operation of cl 3.10(2).

Decision

[24]     The appeal is dismissed.  The appellant must pay the respondent costs of $3,000 in this Court, plus usual disbursements.  

Solicitors:
Jesse & Associates, Auckland for Appellant
Neumegen & Co, Auckland for Respondents