Suzhou Hauting Energy Investment Development Co (NZ) Limited v Carhart Holdings Limited
[2016] NZHC 261
•24 February 2016
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2015-404-0027763
[2016] NZHC 261
UNDER Section 145A of the Land Transfer Act 1952 IN THE MATTER OF
Caveat Number 10208030.1
BETWEEN
SUZHOU HAUTING ENERGY INVESTMENT DEVELOPMENT CO (NZ) LIMITED
Applicant
AND
CARHART HOLDINGS LIMITED
First Respondent
DARLEY INVESTMENTS LIMITED
Second Respondent
Continued over/…
Hearing: 16 February 2016 Appearances:
D Nicholson for the Applicant
J P Nolan and K D Puddle for the Respondents
Judgment:
24 February 2016
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
24.02.16 at 4:30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
SUZHOU HAUTING ENERGY INVESTMENT DEVELOPMENT CO (NZ) LIMITED v CARHART HOLDINGS LIMITED [2016] NZHC 261 [24 February 2016]
CIV 2015-404-002774
UNDER section 145A of the Land Transfer Act 1952 IN THE MATTER OF
Caveat Number 1021426.1
BETWEEN
DREAMLAND CONSTRUCTION COMPANY LIMITED
Applicant
AND
CARHART HOLDINGS LIMITED
First Respondent
AND
DARLEY INVESTMENTS LIMITED
Second Respondent
The applications
[1] Dreamland Construction Company Limited (Dreamland) and Suzhou Huating Energy Investment Development Co (NZ) Ltd (Suzhou) apply for orders that their respective caveats over the respondents’ property not lapse.
Background
[2] The respondents Carhart Holdings Limited (Carhart) and Darley Investments Limited (Darley) are the registered owners of former farmland at 899 Papakura- Clevedon Road, Papakura (the property). Presently they are developing the property into a 169 lot subdivision pursuant to resource consent issued on 27 January 2016 (second consent). Preliminary work on the property, including bulk earthworks, for an 83 lot subdivision was previously undertaken pursuant to a resource consent issued on 17 June 2014 (first consent).
[3] Shortly after the first consent was issued the respondents began work on a new subdivision plan (scheme plan) that would enable a subdivision of approximately 190 lots and formed the basis for the second consent. Only days after the first consent issued the Auckland Council (the Council) advised the respondents the property was designated as a Special Housing Area permitting the fast track development of a higher density subdivision. The respondents decided to undertake a different development. A further resource consent was filed.
[4] In January 2015 and before the second consent had issued, the respondents sold off the second resource consent plans 35 lots to Dreamland and 21 lots to Suzhou (January agreement).
[5] In March 2015 the respondents entered into new agreements with the applicants which replaced the January agreements (March agreements). Under those Dreamland purchased 30 lots and Suzhou purchased 15 lots. Both the January and March agreements contained the following clauses:
18.3 No caveat: In consideration of the vendor entering into this agreement with the purchaser, the purchaser covenants that they will not lodge a caveat against the title to the Property at LINZ.
19.1This agreement is conditional upon the vendor obtaining, by the date which is 6 months from the date of this agreement, the Resource Consent on terms and conditions acceptable to the vendor (in its sole opinion).
19.2The condition in clause 19.1 is included for the sole benefit of the vendor and may be waived by the vendor. If the vendor elects to waive the condition the purchaser shall not be entitled to question or challenge the vendor’s ability to do so. The vendor may cancel this agreement pursuant to the condition whether or not it has cancelled other sales in the Subdivision for the same reason.
32.1 Entire Agreement: This agreement constitutes the entire understanding and agreement of the parties relating to the matters dealt with in it and supersedes and extinguishes all prior agreements, statements, representations and understanding whether verbal or written given by or made between the parties relating to the mattes dealt with in this agreement.
[6] Resource consent for the subdivision, as defined in the March agreements, did not issue within six months of the March agreements. The respondent then cancelled those agreements pursuant to clause 19.1. The applicants responded by registering caveats over the property.
The caveat
[7]In the caveat lodged by Dreamland the interest claimed was:
By virtue of an interest in land pursuant to an Agreement for Sale and Purchase dated 16th March 2015, where Carhart Holdings Limited as to a ½ share and Darley Investments Limited as to a ½ share (the registered proprietors) agree to sell and Dreamland Construction Company Limited (as purchaser and caveator) agrees to purchase the land in title NA125A/544.
[8]In the caveat lodged by Suzhou the interest claimed was:
By virtue of an interest in land pursuant to an Agreement for Sale and Purchase dated 13 March 2015, where Carhart Holdings Limited as to a ½ share and Darley Investments Limited as to a ½ share (the registered proprietors) agree to sell and Suzhou Huating Energy Investment Development Co (NZ) Limited (as purchaser and caveator) agrees to purchase the land in title NZ125A/544.
[9] The land in NZ125A/544 comprised all that which was subject to the respondents’ subdivision development.
Dreamland’s evidence
[10] Mr Li a director of Dreamland deposes that he and fellow director Mr Chen met with Mr Brady and Mr Jia from Harveys Real Estate Papakura (Harveys) in December 2014 to discuss the purchase of 20 lots in a development known as Twin Parks. Mr Li says Mr Brady discouraged them from purchasing the Twin Parks lots instead encouraging them to consider purchasing the lots available in the respondents’ development. Mr Brady said Harveys had an exclusive agency agreement to sell the lots in the respondents’ development. Mr Li said Mr Brady told them that if they chose to invest they would be able to pick their own lots.
[11] When given a draft agreement for sale and purchase at a meeting in January 2015 Mr Li says he and Mr Chen informed Mr Brady and Mr Jia that they wanted clause 19 of the further terms of sale deleted from the agreement “as in a previous development a similar clause had been used by the developer to cancel contracts in order to seek a higher price further down the track”.
[12] Mr Li said that Mr Brady told them the developers would not agree to the removal of that clause as it was one of their standard terms. However, he said Mr Brady assured them that he had known Mr Nakhle, the director of Darley personally for 15 to 20 years and that Mr Brady said he could “guarantee, with his hand on his heart, that Daniel would never do something like that”.
[13] Mr Li said he noted also that resource consent had already been granted. He said Mr Brady agreed to send them a copy of the 2014 resource consent. He said Mr Brady advised titles would be issuing on the lots by April 2015, which was within three months.
[14] Mr Li said he and Mr Chen then agreed to leave clause 19 in the January agreement because Mr Brady had reassured them that clause 19 had already been satisfied as the 2014 resource consent had issued. Mr Li says Mr Brady’s assertions were reinforced by:
(a)The fact that he and Mr Chen had seen the bulk earthworks under construction on the property which could only have occurred if resource consent had issued;
(b)Because of Mr Brady’s assurance that title would issue in April 2015, which meant that resource consent had already been granted.
[15] Mr Li says for these reasons on 14 January 2015 Dreamland entered into sale and purchase agreements to purchase 35 lots for a total price of $10,500,000 (Dreamland January agreement).
Suzhou’ evidence
[16] Mr Jia has provided an affidavit on behalf of Suzhou. Mr Jia said the directors of Dreamland contacted him in November 2014 and he arranged for them to meet with Mr Brady shortly afterwards. He said he attended all of Dreamlands meetings with Mr Brady but that neither Mr Li nor Mr Chen needed him to act as a translator. He recalls Mr Li and Mr Chen requesting clause 19 to be removed from the purchase agreement; that they had an issue with a vendor being able to cancel if the resource consent had not been granted. Mr Jia deposes that Mr Brady told them this would not happen; that he had a good relationship with Mr Nakhle who would never do that. Mr Brady said that the resource consent had already been granted and he assured Mr Li and Mr Chen that title was going to issue in April 2015.
[17] Mr Jia listened to everything Mr Brady said carefully because he was considering suggesting to his father-in-law (a shareholder in Suzhou’s parent company) that Suzhou should invest in the development.
[18] Mr Jia says that he spoke to Mr Brady about the resource consent and Mr Brady had told him that the resource consent enabled the vendors to make certain changes to the plans if they needed to. This information gave Mr Jia the assurance he needed in recommending that Suzhou should invest in the development.
[19] Mr Jia said Suzhou entered into a sale and purchase agreement with the respondents on 16 January 2015 for the purchase of 21 lots in the development for
$6,300,000 (including GST).
[20] Mr Jia says at no time did Mr Brady or Mr Nakhle tell him that the reason the titles had not issued was because the vendors did not have resource consent for the development. He was always told when enquiring about the issue of titles, that the delay was due to the weather.
[21] Mr Jia deposes that the March agreements were entered into because six of the lots Suzhou had purchased by the January agreements were outside of the boundary of property available for development.
[22] At no time prior to cancellation of the contacts, he says, was he ever advised the reason title could not issue was that the resource consent had not yet been granted, or that a new resource consent application was being sought. When he checked with Mr Brady he was told that the vendors had cancelled because the resource consent variation had not gone through. Mr Jia said he always believed resource consent had been obtained. That day the contracts were cancelled, he resigned because he believed Mr Brady had lied.
The March agreements
[23] Mr Jia recalls that in March 2015 Mr Brady advised Dreamland and Suzhou that they would have to cancel the January agreements because part of the land they agreed to buy did not actually belong to the vendors.
[24] Suzhou and Dreamland were unhappy about the changes. Mr Li said it resulted in less lots and smaller lots. He said however they entered into further contracts because they understood from their discussions with Mr Brady that the March agreements would be based on identical terms as had been agreed in their January agreements.
[25] On 13 March 2015 Suzhou entered into a new sale and purchase agreement for the purchase of 15 lots for $4.5M (Suzhou March agreements).
[26] On 16 March Dreamland entered into a sale and purchase agreement for the purchase of 30 lots for $9M (Dreamland March agreements).
Lodging of caveats
[27] On 30 September 2015 Dreamland and Suzhou received a letter from the respondents’ solicitors, Lowndes, advising:
We note that the due date for satisfaction of the resource consent condition in
…term 19 of the agreement …has lapsed. The resource consent has not yet issued.
Our client elects to cancel the agreement as permitted under …term 19.
[28] Mr Li says the applicants were shocked and disappointed as the letter was the first time they had been told that the vendors had been seeking a second resource consent.
[29] The following day Suzhou lodged its caveat. One week later Dreamland did also.
The respondents’ evidence
[30] On 17 June 2014 the Council issued the first consent approving a subdivision of 83 residential lots as well as a storm water drainage reserve, six new roads and three balance lots.
[31] Days later on 23 June 2014 the Council advised the respondents the property was designated as a special housing area which allowed for the potential of a fast track development of a higher density subdivision. The respondents decided to take advantage of this and complete a substantially different development from that initially contemplated. The respondents say that from July 2014 through to May 2015 they worked on a scheme plan for the proposed subdivision of approximately 190 lots, of which 169 of the lots are part of the property.
[32] The respondents depose that in September, November and December 2014 they had meetings with the housing project office at the Council. That office handled the consent for development of special housing areas in order to resolve as many potential issues as possible before a consent application is lodged. Mr Nakhle of Darley states that the process to apply for the second consent took a lot longer than anticipated under the “fast track” special housing area process. Finally the application for the second consent was lodged on 22 June 2015. The bulk earthworks needed to undertake the scheme plan was less than the earthworks consented to under the first consent. Accordingly, while going through the process to achieve the second consent Mr Nakhle reports that the respondents were able to utilise the first consent to commence bulk earthworks. He said earthworks commenced on the property in around November 2014 to allow a “head start” to be able to complete the bulk earthworks within the summer months and allow drainage works to be undertaken over winter, on the assumption the second consent would have issued before then.
[33] Mr Nakhle deposes the respondents engaged Mr Brady the principal of Harveys to act as their real estate agent to sell subdivision lots. He said they did this so they could have the benefit of Mr Brady’s experience and knowledge of requirements and types of sections that had demand in the area.
[34] On 22 December 2014 Mr Nakhle emailed Mr Brady (and others) an update on progress with the Council to achieve the second consent. The email included a lot of detail about the issues that needed to be resolved to be able to apply for the second consent.
[35] Mr Nakhle says and Mr Brady by his affidavit confirms that Mr Brady and Mr Jia were advised on a number of occasions that the second consent was being applied for. The email of 22 December 2014 which was copied to Mr Jia, confirmed advice of the second consent having been applied for before the January agreements were negotiated.
[36] The evidence is that when Dreamland expressed interest in the subdivision lots at the end of 2014 it was provided with a draft of the January agreement containing
those same clauses which are before this Court upon the present applications. The scheme plan attached to the January agreement noted:
THIS CONCEPT DIVISION PLAN IS SUBJECT TO CHANGE AND REQUIRES COUNCIL APPROVAL.
[37] After Dreamland received a draft of the January agreement Mr Nakhle was told by Mr Brady that Dreamland wanted clause 19 removed. Mr Brady advised Mr Nakhle that Dreamland had had a similar clause in a previous contract invoked, which cancelled their agreement on that particular property.
[38] Mr Nakhle did not agree to clause 19 being removed as it was an essential provision for them. As [by paragraphs 34 and 35 of his affidavit] he explains:
·It provides the respondents the ability to cancel the agreements if they could not obtain the necessary resource consent to undertake the development, or if there were considerable delays as a result of elements out of their control that would affect the viability or timing of the project.
·Construction prices typically increase over time, especially when there is a known shortage of contractors in the market as there currently is.
·If the respondents did not have the ability to cancel and reassess prices in line with increasing construction costs, the entire viability of the subdivision could be affected.
[39] Mr Nakhle says he made it clear to Mr Brady that clause 19 had to remain the agreement and that they would not sign the agreement without it.
[40] The respondents say their initial plan was for the storm water of some of the lower lots to drain downstream into a storm water pond to be developed. However, early in 2015 the respondents were informed the pond could not be finalised for another 18 months. This would have substantially delayed approximately 25 per cent of the subdivision and would almost certainly have engaged clause 20.1 of the January agreements which states:
20.1 If the Date of Issue of Title has not occurred by the date 24 months following the date of this agreement, this agreement can be cancelled by written notice by either party and the deposit and any other money paid by the purchase shall be refunded in full to the purchaser and either party shall have any other right or claim against the other.
[41] The respondents say as a result the respondents decided to separately stage those sections that had relied on the storm water pond, and withdraw those from sale. Mr Nakhle says Mr Brady explained this to the applicants and that the purchasers had agreed to revise the lots they were purchasing. It was for this reason the March agreements were entered into.
[42] Those agreements supersede the January agreements by which the parties had no continuing liability under them. There was no discussion between the parties regarding clause 19 in the March agreements. On 31 March 2015 Suzhou’s solicitors formally approved the March agreement.
[43] There was a delay in the filing of the application for the second consent. The respondent’s explain that was due to changes to the various disciplines within the Council relating to tweaking layouts, roading, and storm water designs, and as well there were delays in their feedback.
[44] The second consent application was lodged on 22 June 2015. Under clause 19 of the March agreements the last date for fulfilling the resource consent condition in respect of Suzhou was 13 September 2015 and for Dreamland was 16 September 2015. The respondents say that by the end of September 2015 the second consent had not issued and it was clear it would not issue in the near future. Consequently at that time the respondents gave notice of cancellation of the March agreements to the applicants. The respondents say that knowing the applicants would be disappointed, and as a good will gesture the respondents offered the applicants the first opportunity to purchase lots in whatever form the final consent issued, once there was certainty about the timing of the second consent.
[45] The applicants lodged their caveat shortly after. The respondents solicitors wrote to Dreamland’s then solicitors demanding the caveats be removed. Initially Dreamland contended that the caveat was lodged because a fundamental issue was whether the respondents had attempted in good faith and taken all reasonable steps to fulfil the conditions to obtain the resource consent. The respondents say no mention was made of any alleged misrepresentations.
[46] The respondents assert that later when evidence was provided of the substantial steps they had taken in satisfy the resource consent conditions, the applicants withdrew their initial allegations and then claimed that prior to the January agreements being signed Mr Brady made the representations, and the applicants asserted therefore that the respondents were estopped from relying on clause 19 to cancel the March agreements.
[47] The respondents say they were in the process of obtaining finance to undertake the next phase of the subdivision when the caveats were lodged. The respondents proposed funder, Westpac, was prepared to make in excess of $18M available if certain conditions were met. One of the conditions was a first ranking mortgage over the property with no other registered interests.
[48] The respondents say that offer of funding lapsed on 30 November 2015 because the respondents were unable to satisfy the funding conditions i.e. that Westpac would not provide funding while the caveats were registered nor would they entertain the provision of funding with caveats to be lodged after Westpac lodges its mortgage.
[49] The respondents say that even if the caveats can be removed imminently that development delays could amount to 12 months.
Legal principles
[50] The present summary procedure for the removal of the caveats is unsuitable for the determination of disputed questions of fact. Unless it is patently clear the caveat cannot be maintained because there was no valid ground for lodging it or if there was and such no longer exists then it shall be maintained pending a full enquiry being undertaken.1
[51] However a Court is not bound to accept uncritically as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporaneous
1 Sims v Lowe [1988] 1 NZLR 656 at 659-660.
documents or other statements by the same deponent, or inherently improbable in itself it may be.2
[52] Clearly it is not the Court’s purpose in cases like these to decide disputed questions of fact. However, the Court retains a residual discretion to remove or allow a caveat to lapse notwithstanding an arguable case of a caveatable interest has been established.3
[53] With respect to the exercise of the Court’s residual discretion, the Court should proceed cautiously and not remove a caveat unless completely satisfied the caveator’s legitimate interests will not be prejudiced.4
[54] Ms Nicholson advises that the applicants will be seeking remedies in respect of estoppel by representation, they both having reasonably arguable cases that they will receive an expectation/based remedy. Counsel submits monetary damages will not be sufficient to put them in the place they would have been in had the respondents not repudiated the contract.
[55] Also the applicants have offered to subordinate their interests to the respondents’ funder in order to ensure the development can progress. They say that offer was made prior to the second consent being granted.
[56] It is for the party challenging the caveat to show why the residual discretion ought to be exercised and that may include satisfying the Court the caveator’s interests can reasonably be accommodated in some other way.
[57] In the context of the parties’ dispute concerning representations regarding the application of clause 19 of the agreements it is the applicant’s position that the respondents cannot avail themselves of clause 19 (having been assured the vendor would not rely upon it and having been informed the ‘resource consent’ referred to therein had already been granted). Therefore Ms Nicholson submits principles of estoppel apply.
2 Eng Mee Yong v Letchumanan [1980] AC 331.
3 Pacific Homes Limited v Consolidated Joineries Limited [1996] 2 NZLR 652 at 656.
4 Stewart v Kaipara Consultants Limited [2000] 3 NZLR 55 at [23] (CA).
[58]The Court of Appeal in Wilson Parking NZ Limited v Fanshawe 136 Limited5
held that to establish an estoppel it must be shown:
(a)A belief or expectation had been created or encouraged by words or conduct;
(b)To the extent an express representation is relied on it should be clearly and unequivocally expressed;
(c)There was reasonable reliance on the representation to the recipients detriment;
(d)It would be unconscionable to permit departure from the belief or expectation.
Considerations
[59] The Court has endeavoured to review the respective viewpoints of the parties regarding factual elements in dispute. Primary areas in dispute include:
(a)Whether Mr Brady promised the respondents would not rely upon clause 19 to cancel the agreements for sale and purchase if the resource consent obtained was on terms and conditions that were not acceptable to the respondents.
(b)Was that promise/undertaking given by Mr Brady. Did he say (by reference to clause 19) that the resource consent had already been granted?
(c)Did he say title would issue in April 2015?
[60]Mr Brady denies these claims.
5 [2014 NZCA 407 at [44].
[61] The Court does not have the advantage of hearing witnesses to enable a clearer assessment regarding these differences of account. As earlier noted by reference to the applicable legal principles, this does not necessarily prevent the Court from deciding whether or not the account of one party can be preferred.
The applicants’ reasons for lodging their caveats
[62] The applicant’s position is that had Mr Brady not made the representations attributed to him the applicants would not have entered into the January or March agreements but instead would have invested their money in comparable developments elsewhere.
[63] At the core of Mr Jia’s evidence is his statement that neither Mr Brady nor Mr Nakhle told him that the respondents were seeking the second consent; much less was he instructed to advise the applicants that the second consent had not been granted.
[64] When Mr Li and Mr Chen first viewed the developments they noted significant earthworks had already taken place. In their view of matters the consent (being referred to) was that which must have already been granted because otherwise such earthworks could not have been undertaken.
[65] In support of their case the applicants obtained a report from Ms Douché, a senior planning and policy consultant who concluded that if a potential purchaser was told that titles were due to issue by April 2015 then a reasonable understanding would be that the development consent had already issued by January 2015.
[66] According to the applicants Mr Brady repeatedly advised that the delay in titles issuing was due to weather conditions.
[67] The applicants submit they will suffer prejudice if the caveats are removed. They say Mr Brady’s representations induced them to enter into the agreements when they were at the time considering other development options in and around Auckland.
[68] The applicants dispute the respondents’ claims that the caveats had prevented the respondents from obtaining funding and were delaying development. The
applicants note Mr Nakhle states that there was uncertainty surrounding the obtaining of the second consent and had said the time involved would be significant. Therefore the applicants say it was not the presence of the caveats but the fact that it was not until 27 January 2016 when the second consent was granted that has caused any delay.
If there was a caveatable interest should the Court exercise its residual discretion to lapse the caveat
[69] In this regard the Court’s focus is upon whether the continuance of the caveat is likely to provide a benefit to the caveator, and/or about whether the caveator’s interests can reasonably be accommodated in some other way.6
[70] The respondents claim the development cannot proceed and titles cannot issue whilst the caveats remain in place. Further, the sunset clause (clause 20.1) in the agreement can be invoked in March 2017 because present evidence indicates titles may not issue before then. The applicants have, as earlier noted herein, offered to “subordinate their interests to the respondents’ funder in order to ensure that the Papakura development can progress”.
Conclusions
The evidence
[71] The first consent was granted in June 2014. It was for the development of an 83 lot subdivision. That consent did not relate to the scheme plan attached to the January agreement entered into seven months later which made no reference to the first consent but clearly contemplated a consent yet to issue.
[72]Clause 18.1.8 of the agreements defined “resource consent” as meaning:
The resource consent or consents issued by the Local Authority for the Subdivision based on the scheme plan.
[73]Clause 18.1.9 defines “scheme plan” as meaning:
6 Pacific Homes Limited (In receivership) v Consolidated Joineries Limited. [1996] 2 NZLR 652 at 656.
The plan attached as Schedule 3.
[74] The scheme plan at schedule 3 states it is a “subdivision concept” for “190 lot 2 existing” and includes:
THIS CONCEPT SUBDIVISION PLAN IS SUBJECT TO CHANGE AND REQUIRES COUNSEL APPROVAL.
[75] The Court does not accept therefore that clause 19.1 referred to the first consent but that it referred to a consent that had not yet been granted.
[76] Mr Jia said that neither Mr Brady nor Mr Nakhle referred to a second consent being sought. However this assertion overlooks advice emailed to Mr Jia on 23 December 2014 attaching a copy of a redrafted final plan [inter alia for consent application purposes] and containing Mr Brady’s comment:
We are expecting with everything in our favour, titles being ready in June/August 2015 which will see us come to market with a finished product in our peak selling season of November/December 2015.
[77] Mr Nolan submits and the Court agrees that it is inherently improbably that the respondents would insist on clause 19 remaining in the January agreements if resource consent had been granted for the scheme plan. Likewise, if resource consent had been granted then there would be no reason for Mr Brady to allegedly give his “personal guarantee” that the respondent would not rely on clause 19.1.
[78] The Court must measure claims of representations made against the contract terms and in particular the scheme plan attached to their contract.
[79] The purpose of clause 19 is clear – to enable contracts to be cancelled if resource consent was unavailable or if significant delays occurred for which the developer had no responsibility and which impacted on the financial viability of the development.
[80] Dreamland was apparently an experienced developer and was aware of outcomes if clause 19 was utilised to cancel sale and purchase agreements.
[81] The respondents refused to remove the clause. It follows they intended to retain the ability to rely on it. It seems improbable that a party twice insisting on a clause remaining in a contract would represent that it would not rely upon it.
[82] The applicants claim Mr Brady guaranteed, with his hand on his heart that Mr Nakhle would not use clause 19 to cancel the contracts in order to seek a higher price later.
[83] Mr Brady denies making such a guarantee. The evidence is he is an experienced real estate agent with an extensive history of dealing with developments subject to resource consent. Mr Brady agrees speaking well of Mr Nakhle.
[84] The Court cannot at this time say the applicants are wrong. However the Court agrees with Mr Nolan that it is inherently improbable that an agent who understands the effect of clause 19 would make a representation that a developer would not rely on it. Mr Brady’s explanation makes better sense. He said that Mr Nakhle would not cancel the agreements simply to obtain a better price. Also it is clear the agreements were not cancelled to obtain a better price but because there was uncertainty about when a resource consent would issue and the effect that this would have on the viability of the development. The second consent was late in forthcoming being almost five months after the expiry of the six month condition in the March agreements and some eight months after expiry of the January agreements.
[85] Also, there are legal issues with claims of a personal guarantee having been given. As Mr Nolan submits an agent can only bind their principal when acting inside the bounds of their actual or apparent agency. The Court has evidence of Mr Brady’s agency agreement and clearly that did not include the making of personal guarantees as to how the respondents would or would not act.
[86] In the presence of Mr Li and Mr Chen, Mr Brady telephoned Mr Nakhle about the request to remove clause 19. There is no dispute Mr Brady told Mr Li and Mr Chen that Mr Nakhle would not agree to that request.
[87] Mr Nolan submits and the Court agrees it is inherently improbable that Mr Brady would have received instructions from Mr Nakhle insisting on clause 19 remaining in the agreements but at the same time, guaranteeing clause 19 would not be relied upon.
[88] The applicants claim Mr Brady represented title would issue in April 2015. Mr Brady denies he made this representation.
[89] The Court agrees with Mr Nolan’s submission that this allegation is also inconsistent with contemporaneous documents and other information which the applicants understood. The Court has already referred to the 23 December 2014 email to Mr Jia which relayed an estimated timeframe for titles to issue in July or August 2015. Mr Brady’s evidence is that prior to the March agreements he told Mr Jia that the respondents targeted date for titles being issued had moved to September 2015.
[90] It seems unlikely that an experienced real estate agent who knew that resource consent had not been granted would have represented as a certainty that title would issue in April 2015.
[91] As Mr Nolan submits the uncertainty when title would issue was reflected in the January and March agreements for neither contained any express reference as to when title would issue.
[92] Mr Li gave evidence that that clause 20.1 [providing for cancellation if title did not issue within 24 months] was inserted at his insistence because Dreamland were concerned that settlement could be held up by a failure to obtain title. As Mr Nolan submits this concern is entirely inconsistent with Mr Li having been told titles would be issued within the next four months and his placing any reliance upon that advice. It is also inconsistent with any assertion that title issuing in April 2015 was a precondition to Dreamland entering into the January agreement. Otherwise the clause
20.1 sunset provision would have been four months and not 24 months.
[93] The applicants say the respondents said they would not rely on clause 19 because the condition had already been satisfied. However, this ignores the fact the
respondents insisted clause 19 remain in the January agreements. Also it remained in the March agreements. The express wording of the agreements clearly contemplates a consent that was yet to issue. The applicants say Mr Brady personally guaranteed the contract would not be cancelled – it follows because resource consent had not been obtained. On the other hand the applicants also claim having been informed that resource consent had already issued. There is, as Mr Nolan submits, some confusion regarding these two aspects of claims of representations made.
[94] The agreements contained a definition of resource consent in schedule 3 which clearly stated resource consent had yet to be granted. A sunset clause referred to rights if title did not issue within 24 months. There respondents were entitled to cancel the agreement if resource consent was not granted within six months. These are the clear terms of the written agreement. The applicants claims of representations are contrary to those clear terms and nor was there any objection by the applicants when those same terms were repeated in the March agreements. Both those agreements contained an “entire agreement” provision at clause 32.1 the clear purpose of which was to prevent parties researching prior correspondence to found a basis for a misrepresentation claim.
[95] The applicants both had or appeared to have had the availability of legal advice. The Dreamland agreements referred to Wong and Bong Law Office Limited as the purchaser’s solicitors. Dreamland has not provided any evidence about whether or not those solicitors were consulted. They could have done so.
[96] Suzhou had lawyers involved and indeed they required a solicitor’s approval clause in their agreement. As earlier noted that solicitor approval was provided.
[97] In this background of matters and taking into account the entire agreement clause the Court considers that even if the alleged representations were made that they were not relied upon.
[98] Regarding claims that the applicants relied on the representations claimed, they have provided few details about claims of detriment suffered. The only detriment mentioned has been Dreamland’s claim that he could have invested in other
developments in Albany at the time. Suzhou provides no evidence of suffering any detriment. Nor is there any evidence of time or money spent in the expectation these contracts would not have been cancelled under clause 19.
Estoppel
[99] The applicants claim the respondents were estopped from cancelling the March agreement. The applicants want specific performance of the March agreement. They seek to use estoppel to enforce claims of a bargain through an expectation-based remedy. However, it is clear the applicants’ interest in the land is only economic. It seems to the Court damages would be an adequate remedy. Mr Nolan submits it is unlikely a claim for specific performance would succeed. The Court agrees.
[100] Regardless, it is clear the applicants’ interest is only economic and does not have an interest in the land itself.
[101] The Court agrees with Mr Nolan that the representations were oral, equivocal and inconsistent with signed written terms; that assertions of detrimental reliance focus only upon the foregoing of other opportunities; that the applicants’ interest in the land is monetary rather than the upholding of the agreements.
[102] The present case is not dissimilar to that considered by the Court of Appeal in Landco Albany Limited v Fu Ho Construction Limited7. In that case a construction company purchased land pursuant to an agreement which contained a clause forbidding the lodging of a caveat on the title to the property. The purchaser’s interest was purely commercial. It had entered into the transaction in order to make a profit. The vendor/developer cancelled the agreement due to its inability to obtain the required resource consents and the construction company had sought specific performance.
[103] The Court of Appeal found the construction company had no realistic prospect of obtaining specific performance, for two reasons:
7 2006 2 NZLR 174.
(a)The performance of the contract was not wholly in the control of the vendor, as the Council had made it clear it would not approve the subdivision;
(b)The purchaser’s interest in the land was commercial and profit oriented, such that damages would be an adequate remedy.
[104] The Court of Appeal overruled the High Court decision which had held the agreement not to caveat to be unenforceable on the basis that it was contrary to public policy.
[105] The Court of Appeal decision provides an endorsement permitting this Court to express a determination on the appropriateness of the remedy of specific performance in the context of a caveat lapsing procedure.
[106] In this case the applicants’ sole interest in the property is commercial and profit driven. The Court is advised the same lots were the subject of the March agreement had been offered for sale back to the applicants, albeit at the current market price. If the applicants were to purchase those properties again then the focus of their loss would be upon the difference in the sale prices.
[107] Apparently those properties are available. Resource consent only issued about three weeks ago.
[108] There is no suggestion the respondents would be unable to satisfy any judgment awarded in favour of the applicants.
[109] In the past the Court has considered on a number of occasions lapsing a caveat in consideration of an undertaking provided by a development vendor to hold funds from the sale of the subject properties in a solicitor’s trust account.
[110] In this Court’s view the circumstances do not suggest consideration be given to a similar arrangement. The evidence is the respondents are experienced developers. There is no evidence or suggestion they have a poor reputation or are without means to meet any judgment that might be due to the applicants in due course.
[111] The acceptable evidence is that the existence of the applicants caveats have forestalled efforts to obtain funding because of the funders position that it will not provide any funding at all while caveats are in place. The Court is satisfied that much is clear from the evidence provided on behalf of the respondents. Also and clearly the presence of the caveats will prevent the issue of title.
Summary
[112] Claims of oral representations made entitling the applicants to avoid the clear terms of their written contracts are unreliable, are improbable, and are not supported by any evidence save for the recollections of Mr Li and Mr Jia.
[113] In that outcome claims of caveatable interest are weak. They are not sufficient to permit the Court to sustain those claims pending resolution of the applicants proceeding.
[114] In the Courts view the applicants’ claim of an interest in the properties is purely economic. Despite the time that has now lapsed since the caveats were lodged, the applicants have taken no steps at all to file proceedings in support of their claims. Almost certainly any such claim or proceeding will be focussed upon allegations of financial loss – the calculation of which will focus upon the increase over time in the value of the land since the March agreements were signed.
[115] The balance of competing considerations in this instance clearly favours the applicants’ claim being dismissed.
Judgment
[116]The applications are dismissed.
[117] Each of the applicants shall pay the respondents costs on a 2B basis. If Counsel cannot agree upon these then submissions are to be filed. The Court will deal with the matter on the papers.
Associate Judge Christiansen
0
0
1