Te Wani v PWI Limited

[2013] NZHC 2696

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-003813 [2013] NZHC 2696

BETWEEN  LUCY TE WANI and

SHAUN PAUL WEHEA RACKLEY Applicants

ANDPWI LIMITED Respondent

Hearing:                   11 October 2013

Appearances:           Ms Te Wani in Person

G Collecutt for the Respondent

Judgment:                17 October 2013

[RESERVED] JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie on 17 October 2013 at 1.00 pm

Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

TE WANI & ANOR v PWI LIMITED [2013] NZHC 2696   [17 October 2013 ]

Introduction

[1]      Ms Te Wani and Mr Rackley have filed an originating application seeking to remove a caveat registered against the title of a property they own at 40 Glen Marine Parade, Glendene.

[2]      The  application  to  remove  the  caveat  is  opposed  by  the  respondent, PWI Limited.

Background

[3]      The  property  at  Glen   Marine  Parade  is  owned  by  Ms Te Wani   and

Mr Rackley as trustees of a trust known as the Trent Trust.

[4]      On  or  about  15 April  2013,  Ms Te Wani  and  Mr Rackley  entered  into  a conditional agreement for the sale of the property to the respondent or its nominee. The purchase price was $381,500.  The agreement was expressed to be “conditional upon the purchaser approving all matters that the purchaser considers may concern or affect the property within 2 complete working days”.  A deposit of $10,000 was payable within three working days after the agreement became unconditional, and the balance of the purchase price was to be paid in cleared funds on settlement.

[5]      The parties used the eighth edition (2006(4)) of the agreement for sale and purchase approved by the Real Estate Institute of New Zealand Incorporated and by the Auckland District Law Society Incorporated.   Inter alia, it provided that the condition was a condition subsequent (cl 9.7(1)), that the time for fulfilment, and any extended time was of the essence (cl 9.7(3)), and that the condition was deemed not to be fulfilled until notice of fulfilment had been served by one party on the other (cl 9.7(4)). Any notice was required to be served in writing (cl 1.2(1)).

[6]      Mr  Watson,  who  is  a  director  of  the  respondent,  provided  a  cheque  to

Ms Te Wani in payment of the deposit when the agreement was signed on 15 April

2013. The cheque was post-dated to 19 April 2013.

[7]      In  an  affidavit  filed  in  support  of  the  notice  of  opposition,  Mr  Watson deposed that the cheque was given to Ms Te Wani on the condition that she was only to bank the cheque if the agreement became unconditional.   Ms Te Wani did not dispute this assertion by Mr Watson.

[8]      The condition was not satisfied within the specified two working-day period, and a request for an extension was sought by Mr Watson on behalf of the respondent. He spoke to Ms Te Wani and told her that he had not been able to obtain a LIM report from the Waitakere District Council.  Ms Te Wani says that the extension was granted on 16 April 2013.   Mr Watson says that it was granted on 17 April 2013. Nothing turns on this.  The extension was confirmed between the parties’ solicitors. The  respondent’s  solicitors  sent  an  email  to  the  applicants’ solicitors  and  they responded granting an extension to confirm the agreement until 4.00 pm on 19 April

2013.

[9]      On or about midday on 19 April 2013, Ms Te Wani met with Mr Watson. Mr Watson told Ms Te Wani that he had discovered that changes had been made from the house plans, and that they would need to be approved by the Council.  He also expressed concern about the state of the driveway on the property.   He was seeking Ms Te Wani’s agreement to a reduction in the purchase price of $4,500. Ms Te Wani was not happy with the proposed reduction, but the parties eventually agreed to reduce the purchase price by $500, making the overall purchase price

$381,000.  A variation of the sale and purchase was signed by Mr Watson on behalf of the respondent and by Ms Te Wani, both for herself, and on behalf of Mr Rackley. According to Mr Watson, it was a term of the variation that the agreement would then become unconditional.  This is denied by Ms Te Wani.  I return to this matter below.

[10]     Ms Te Wani then went to see her solicitors.  She handed the cheque for the deposit to them.  By this stage, Ms Te Wani was a little disillusioned.  She felt she had been “conned” out of $500.

[11]     The  respondent’s  solicitors  did  not  give  written  notice  to  Ms Te Wani’s

solicitors  by  4.00  pm  that  the  agreement  was  unconditional.     Accordingly,

Ms Te Wani’s solicitors, after discussing the matter with Ms Te Wani, sent an email to the respondent’s solicitors, advising that, as the agreement had not been made unconditional by the specified time, the contract was at an end.   This occurred at

4.08 pm on 19 April 2013.

[12]     At about 4.38 pm, Mr Watson spoke to Ms Te Wani by telephone.  According to  Mr Watson,  he and  Ms Te Wani  agreed  that  Ms Te Wani  would  withdraw the cancellation, and accept that the agreement was alive and unconditional.   The respondent for its part would increase the purchase price by $500, to take it back to

$381,500, and provide a “box of beers” to Ms Te Wani and Mr Rackley.  Mr Watson says that Ms Te Wani agreed to call her lawyer to confirm that the agreement was on foot  and  unconditional.     Ms Te Wani  for  her  part  acknowledges  a  telephone conversation with Mr Watson, but denies that she reached any agreement with him. She says that she did no more than agree to call her solicitor.

[13]     At 4.49 pm, Mr Watson and Ms Te Wani exchanged text messages.  The text communications read as follows:

Watson:         Hi Lucy thanks for that. We stay at the same price and I will buy you a box of beers. Will.

Watson:         Steinlager?

Te Wani:        Hi will, couldn’t get a hold of lawyer gone 4 the day.  Sori lawyers fault will have to sort Monday.

Watson:         That’s OK.   We have agreed to go ahead so that’s what

matters. All the best Will.

[14]     Also at 4.49 pm on 19 April 2013, the respondent’s solicitors sent an email to Ms Te Wani’s solicitors, advising that Mr Watson had confirmed with Ms Te Wani directly  that  the  agreement  was  still  on  foot,  and  purporting  on  that  basis  to reconfirm that the agreement was unconditional.

[15]     On 19 April 2013, Ms Te Wani’s solicitors banked the cheque for the deposit.

[16]     Mr Watson attempted to have a “box of beers” delivered to Ms Te Wani on

20 April 2013.  She refused to accept it.

[17]     On 22 April 2013, Ms Te Wani’s solicitors sent an email to the respondent’s lawyers, again advising that the contract had been cancelled.  Ms Te Wani’s solicitors refunded $10,002.64 to the respondent’s solicitors.   This represented the deposit, together with accrued interest.  The respondent does not accept that the agreement has been validly cancelled by Ms Te Wani, or that the deposit should have been refunded.  It has arranged for the deposit to be held in its solicitor’s trust account on interest bearing deposit pending resolution of the dispute between the parties.

Submissions

[18]     The submissions were straightforward from both parties.

[19]     Ms Te Wani argued that the agreement had been validly cancelled by her solicitors, before it became unconditional.  She considered that Mr Watson tried to intimidate her, and that he had “put words in [her] mouth”.   She asserted that he would not accept “no” for an answer, and was adamant that she did not agree to the contract remaining on foot.  She argued that the text messages referred to above did not record any agreement by her, and that from her perspective, she was waiting to sort things out with her solicitors on the Monday.

[20]     Mr Collecutt, appearing for the respondent, argued that there is a reasonably arguable case:

(a)      first, that agreement became unconditional when the variation was signed at or about midday on 19 April 2013;

(b)That in the alternative, Ms Te Wani agreed that the agreement should remain on foot at or around 4.30 pm on the afternoon of 19 April 2013 and that it was confirmed at that time; and

(c)      That the banking of the cheque by Ms Te Wani’s solicitors was an acceptance   that   the   agreement   was   unconditional,   and   that Ms Te Wani was precluded from asserting that the agreement was at an end having banked the cheque.

He argued that the caveat has to remain in place, because the respondent, as caveator, has a reasonably arguable case for the interest it claims pursuant to the sale and purchase agreement.

Analysis

[21]     The caveat has not been presented to the Court.  I assume it is a caveat under s 137 of the Land Transfer Act 1952, precluding other dealings from being registered against the title to the property.

[22]     The present application is brought under s 143 of the Land Transfer Act.  It provides as follows:

143     Procedure for removal of caveat

(1)       Any such applicant or registered proprietor, or any other person having any registered estate or interest in the estate or interest protected by the caveat, may, if he thinks fit, apply to the High Court for an order that the caveat be removed.

(2)       The court, upon proof that notice of the application has been served on the caveator or the person on whose behalf the caveat has been lodged, may make such order in the premises, either ex parte or otherwise, as to the court seems meet.

[23]     As is noted in Brooker’s Land Law, the principles applicable to a s 143 application can be summarised as follows:1

1.The Court may make an order that a caveat be removed:  Catchpole v Burke [1974] 1 NZLR 620, at p 623.

2.If it is clear that there was no valid ground for lodging a caveat, or that the interest which in the first place justified the lodging of the caveat no longer exists, such a caveat should be removed:   Sims v Lowe [1988] 1 NZLR 656, at p 659.

3.The onus under ss 143, 145 and 145A lies on the caveator to show that there is a reasonably arguable case for the interest claimed: Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104.

4.The caveat, being a creature of statute, may be lodged only by a person upon whom a right to lodge it has been conferred by statute. It is not enough to show that the lodging and continued existence of the caveat would be in some way advantageous to the caveator:

1      Brooker’s Land Law (looseleaf ed, Thomson Reuters) at [2.9.06A].

Guardian Trust and Executors Co of NZ Ltd v Hall [1938] NZLR

1020 (CA), at p 1025.

5.For the purpose of the application, the caveator must therefore show that  he/she is  entitled to, or  beneficially interested in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission or of any trust (expressed or implied): s 137.

6.What the caveator must establish is an arguable case for claiming an interest of the kind in s 137.

7.Even if the caveator establishes an arguable case for the interest in the land claimed, the Court retains a discretion to make an order removing the caveat although it will be exercised cautiously:  Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR

652; (1996) 3 NZ ConvC 192,459 (CA).

8.Delay is a relevant factor to be weighed in the exercise of the Court’s wide discretion.   Delay is more important where there is specific prejudice.    What is required is a consideration of all the circumstances:  Varney v Anderson [1988] 1 NZLR 478, at p 480.

9.The summary procedure for removal of a caveat against dealings is wholly unsuitable for the determination of disputed questions of fact. Accordingly, the Court in Sims v Lowe [1988] 1 NZLR 656 said (at pp 659–660):

“that an order for the removal of such a caveat will not be mae under s 143 unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so.”

10.Once the caveator has established an arguable case for the interest claimed,  the  Court  has  an  overall  discretion  as  to  whether  the balance of convenience is for or against leaving the caveat in place: McMahon v McMahon [1997] NZFLR 145 (CA), at p 149.

[24]     I agree with and adopt this analysis.

[25]     Here, the respondent has lodged a caveat to protect its interests under the agreement for sale and purchase which it says is still on foot.  If it is correct in that assertion, then it cannot be said that there was no valid ground for lodging the caveat.   If the agreement is still alive, it is common ground that it has not settled. The respondent will have to seek specific performance, and it cannot be said that the interest which justified its lodgement no longer exists.

[26]     The key question is this — is it reasonably arguable that the agreement is still on foot?  The onus is on the respondent in this regard.  It seeks to discharge that onus by pointing to the following:

(a)       The variation entered into at about midday on 19 April 2013;

(b)      The wording of cl 9.7(5) in the agreement for sale and purchase;

(c)      The assertion that Ms Te Wani agreed, after her solicitor’s advice to the respondent’s solicitors, that the agreement should remain on foot; and

(d)      The banking of the deposit cheque by Ms Te Wani’s solicitors.

[27]     I consider each argument in turn.

Did the agreement become unconditional when the variation was signed?

[28]     The variation document that was signed has been exhibited by the parties.  It does not in its terms record that the agreement had been made unconditional by the respondent.

[29]     Mr Collecutt argued that it is obvious from the terms of the agreement that the price was being reduced in consideration for the respondent’s agreement to make the agreement unconditional.   I disagree.   In its terms, the variation does no more than record the price reduction which had been agreed.

[30]     Mr  Collecutt  submitted  that  Mr  Watson’s  evidence  was  corroborated  by

Ms Te Wani’s affidavit.  In that affidavit she stated as follows:

We signed the variation, and Mr Watson said he would convey his lawyer to proceed unconditional.

[31]     In my view, the conversation as it is recorded by Ms Te Wani, tells against Mr Watson.  It suggests that he was to advise his solicitors to confirm the contract — not that he had already made it unconditional himself.   That this is the case is

supported by the agreement itself.   As I have noted above, it provided that the condition was deemed not to be fulfilled until notice of fulfilment had been served by one party on the other, and that any notice was required to be served in writing. That did not occur within the stipulated time.

[32]     It follows, in my view, that the respondent as caveator has failed to show that there is a reasonably arguable case under this first head of argument.

Clause 9.7(5) of the agreement for sale and purchase.

[33]     The eighth edition of the standard form agreement provided as follows:

If the condition is not fulfilled by the date for fulfilment either party may at any time before the conditions were fulfilled or waived avoid this agreement by giving notice to the other.

Mr Collecutt argued that written notice that the condition was fulfilled was given on the date specified.  He submitted that the general conditions in the agreement only gave the vendor the option of avoiding the agreement after the date for fulfilment of the condition had passed, and that it did not give any right to avoid until that had occurred, notwithstanding that the time specified for fulfilment of the condition had not been met.

[34]     I do not consider that there is anything in this argument.  While the drafting is untidy,  it  is  implicit  from  the  provisions  of  cl  9.7  generally,  that  the  time  for fulfilment of any condition is of the essence.   Where the time for fulfilment is specified to be a fixed time on a fixed date, it seems to me unduly legalistic to suggest that the condition can be fulfilled at any time on the day fixed, regardless of the time agreed by the parties.  Either the agreement is varied so that the time agreed is of the essence, or the parties, by agreeing to set the time, waive the provisions of cl 9.7(5) and are estopped from relying on the strict wording of the clause.  Where a specific time is agreed, cl 9.7(5) does not, in my judgment, provide an escape for a party who fails to comply with his or her obligation to fulfil within that time.

Following  cancellation,  did  Ms  Te  Wani  nevertheless  agree  that  the  agreement should remain on foot?

[35]     Mr Watson deposed that he spoke to Ms Te Wani by telephone at about 4.38 pm.  He asserted that it was agreed that Ms Te Wani would withdraw the repudiation, and accept that the agreement was on foot and unconditional, and that the respondent would increase the purchase price by $500 and provide a box of beers to her.

[36]     Ms Te Wani, for her part, denied that any agreement was reached, and simply said that she agreed to discuss the matter with her solicitors.

[37]     In my view, there is support for Mr Watson’s version of events in the texts which were exchanged, and which I have set out above.   It is noteworthy that Ms Te Wani did not respond to Mr Watson, denying that the parties had agreed to go ahead.   When  I asked  Ms Te Wani  about  this,  she was  unable to  provide any satisfactory explanation for the exchange of texts which took place.  Rather, it was her view that she was being “bullied” by Mr Watson.

[38]     Although the point was  not  taken, it may be arguable that Mr Watson’s discussions were only with Ms Te Wani, and that the property was owned by both Ms Te Wani and Mr Rackley.  There is nothing to suggest that Mr Rackley agreed to keep the contract on foot.   As against this, I note that Ms Te Wani signed the variation which was agreed at or about midday on the same day on behalf not only of herself, but also on behalf of Mr Rackley.  It may be arguable that she thereby held herself out as being able to bind Mr Rackley.

[39]     I  accept  that  it  is  reasonably  arguable  that  the  parties  agreed  that  the agreement for sale and purchase should remain on foot.

Receipt of the Deposit

[40]     The  agreement  provided  for  payment  of  the  deposit  after  the  agreement became unconditional.

[41]     It is common ground that Mr Watson provided Ms Te Wani and Mr Rackley with a post-dated cheque in payment of the deposit.  Mr Watson says that the cheque

was provided on the condition that it was only to be banked once the agreement became unconditional.   Ms Te Wani does not dispute this.   Indeed, it is consistent with the agreement.

[42]     The cheque was banked by Ms Te Wani’s solicitors on 19 April 2013, after

she had delivered it to them.

[43]     The cheque tendered in payment of the deposit was a conditional bill of exchange within the meaning of s 21(2)(b) of the Bills of Exchange Act 1908. Relevantly, it provides as follows:

21       Delivery

(1)       Every contract on a bill, whether it is the drawer's, the acceptor's, or an indorser's, is incomplete and revocable until delivery of the instrument in order to give effect thereto:

Provided that where an acceptance is written on a bill, and the  drawee  gives  notice to  or according to the directions of the person entitled to the bill that he has accepted it, the acceptance then becomes complete and irrevocable.

(2)       As between immediate parties, and as regards a remote party other than the holder in due course, the delivery—

(a)       In order to be effectual must be made either by or under the authority of the party drawing, accepting, or indorsing, as the case may be:

(b)       May be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the bill.

…

[44]     Mr Collecutt argued that the effect of s 21(2)(b) is that the property in the cheque did not pass to Ms Te Wani as the vendor, until the condition contained in the agreement was fulfilled, and the only proper basis upon which Ms Te Wani and her solicitors could have banked the cheque was if the agreement was unconditional.

[45]     This  issue  was  addressed,  albeit  in  a  different  context,  in  Homeguard

Products v Kiwi Packaging.2    In that case, a cheque was banked which had been

2      Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd [1981] 2 NZLR 322 (HC).

provided on the condition that an accord and satisfaction had been reached.  Mahon J

held as follows:3

This additional ground is, in my opinion, that the respondent in this case had no legal right to bank the cheque without accepting the condition upon which it was sent. The terms of delivery of the appellant's cheque fall within s 21 (2)(b) of the Bills of Exchange Act 1908 as being "conditional, or for a special purpose only, and not for the purpose of transferring the property in the bill". It therefore follows that the property in this cheque could not pass to  the  respondent  until  it  complied  with  the  condition.  By  banking  the cheque and then repudiating the condition the respondent, in my opinion, converted the cheque. Thus it might be said that the respondent is precluded from asserting any right to disclaim the condition and to treat the cheque only as a payment on account, for it could only adopt that course by committing against the appellant the tort of conversion.

[46]     In Homeguard, Mahon J decided two points.  First, he held that if a debt is unliquidated, or the subject of a dispute, the rule in Foakes v Beer4 does not apply — acceptance by the creditor of a lesser amount than he or she is claiming “in full satisfaction”  does  satisfy  and  extinguish  the  debt.    Secondly,  he  held  that  if  a creditor, whose debt is unliquidated or disputed, receives a cheque tendered in full satisfaction and banks it, that is conclusive evidence that he or she consented to it

being in full satisfaction.

[47]     Section 21(2)(b) of the Bills of Exchange Act was one ground discussed by

Mahon J in ruling on the second point.

[48]     The ruling on the second point in Homeguard has since been doubted by the

High Court. The Court of Appeal has declined to follow it.5

[49]     The effect of s 21(2)(b) is as a result uncertain.  It is probable that the section is referring only to conditions which make delivery of the bill conditional — that is conditions which postpone its legal operation as a bill of exchange.6    If that is the

case, the condition here imposed would arguably mean that Ms Te Wani was not

3      At 333.

4      Foakes v Beer (1884) 9 App Cas 605 (PC).

5      Burrows, Finn & Todd, Law of Contract in New Zealand (4th ed, Lexis Nexis, Wellington, 2012)

at 769.

6      James Cook Hotel Ltd v Canx Corporate Services Ltd [1989] 3 NZLR 213 (HC) at 218; NGC Metering Ltd v Todd Energy Ltd HC Wellington CIV 2004-485-2633, 21 December 2005 at [60]; Burrows, Finn & Todd, above n 5, at 775.

entitled to take delivery of the cheque, or to bank it, unless the condition in the agreement has been fulfilled.

[50]     It is not necessary for me to consider this issue further in the present context.

[51]     In my judgment, it is reasonably arguable that the cheque could only properly be banked if the agreement was on foot, and had been made unconditional by the respondent.  Further, and in any event, the banking of the cheque provides evidential support for Mr Watson’s version of events.   It is arguable that the banking of the cheque precludes Ms Te Wani and Mr Rackley from asserting that the agreement had been cancelled as at 4.08 pm on 19 April 2013.

Conclusion

[52]     Accordingly, I find that the respondent has made out a reasonably arguable case for the interest claimed — namely, its interest under the agreement for sale and purchase.

[53]     Although I retain a discretion to make an order removing the caveat, that discretion has to be exercised cautiously, and there is no proper justification for its exercise in the present case.  There has been no delay by either party.  In my view, the balance of convenience favours leaving the caveat in place, pending the substantive resolution of the dispute between the parties, or prior settlement of the agreement for sale and purchase.

[54]     The application to remove the caveat is dismissed.

Costs

[55]     The  respondent  is  entitled  to  its  reasonable  costs  and  disbursements. However, I note that the respondent failed to establish a reasonably arguable case in respect to two of its four arguments.

[56]     If the respondent wishes to pursue an application for costs, then I make the following directions:

(a)       The respondent is to file and serve a memorandum within 10 working days of this judgment;

(b)Ms Te Wani and Mr Rackley are to file and serve a memorandum opposing any claim to costs within a further 10 working-day period.

[57]     I will then deal with the issue of costs on the papers, unless I require the assistance of Mr Collecutt and Ms Te Wani.

Wylie J