Titterton v Dynasty Capital Limited
[2022] NZHC 1202
•27 May 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2022-409-106
[2022] NZHC 1202
UNDER Section 143 Land Transfer Act 2017 BETWEEN
ANDREA ELIZABETH TITTERTON
Applicant
AND
DYNASTY CAPITAL LIMITED
Respondent
Hearing: 20 May 2022 Appearances:
E J Walton and H Bowering-Scott for Applicant G E Slevin for Respondent
Judgment:
27 May 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
TITTERTON v DYNASTY CAPITAL LIMITED [2022] NZHC 1202 [27 May 2022]
[1] The plaintiff, Andrea Titterton, applies to sustain a caveat lodged over a property at 8 Rahme Crescent, Kaiapoi, but which I will refer to in this Judgment as “Lot 19” for reasons that will become clear. I shall refer to Ms Titterton as “the purchaser”.
[2]The respondent, Dynasty Capital Limited, I will refer to as ‘the vendor’.
[3] The purchaser entered into an agreement for sale and purchase dated 24 October 2020 to purchase Lot 19 which was a land and building package “off the plans” (the Agreement). The caveat, the subject of this application, was lodged on 15 July 2021.
[4] The vendor purported to terminate the Agreement pursuant to a “sunset clause” which provides:
30.0Condition for benefit of both parties
30.1If the Vendor has not obtained Code Compliance Certification for the dwelling by 28th February 2022 then either party can, by notice in writing to the other party’s solicitor, cancel this Agreement upon which the Purchaser’s deposit would be immediately refunded to the Purchaser.
[5]The Agreement also contains standard cl 9.10(2) which reads as follows:
Operation of Conditions
9.10 …
(2) The party or parties for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date of fulfilment.
[6] The “Further terms of sale” attached to the Agreement dealt with the construction of the dwelling. Further term of sale 22.1 provided:
The Vendor shall complete the construction and finishing of the Dwelling on the property in a proper and workmanlike manner in accordance with the plans and specifications attached to this Agreement, …
[7] Code Compliance was not achieved until after the date at which the sunset clause applied, 28 February 2022. On 1 March 2022 the vendor sought to cancel the
Agreement. The purchaser disputes the vendor’s right to cancel, treating the vendor’s attempted cancellation as a repudiation. The purchaser has affirmed the Agreement and wants to settle.
[8] It is common ground that the purchaser had a caveatable interest at the time she lodged her caveat. Mr Slevin, counsel for the vendor, succinctly identifies the issue as being the validity of the vendor’s cancellation of the Agreement. Mr Slevin correctly notes that the purchaser bears onus here, as the applicant, to establish an arguable case for her claim that the Agreement remains on foot.
[9] Mr Slevin appropriately recognises that, if the purchaser has discharged that burden, the caveat should be sustained while the parties pursue the dispute resolution mechanism in the Agreement. If the purchaser cannot meet that standard then the caveat should be removed.
Legal principles concerning sustaining a caveat
[10] Mr Slevin referred to the following passage from Birdwood Rodney Trustee Ltd v Blue Moon Ltd, , setting out the principles:1
Legal principles concerning caveats
[55] An application to sustain a caveat is determined on a summary basis in which the Court has regard to the following principles:2
(a)The applicant caveator bears the onus of presenting a reasonably arguable case that they have an interest in the land sufficient to support a caveat. However, they need not establish that definitively.
(b)An order for a caveat’s lapse will only be made if it is “patently clear” it cannot be maintained – either because there was no valid ground for lodging it in the first place, or alternatively, because such ground has now ceased to exist. A conflict between affidavits will generally be resolved in the caveator’s favour.3 The process by which these applications are determined is ill-suited to resolving disputed questions of fact. However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in
1 Birdwood Rodney Trustee Ltd v Blue Moon Ltd [2022] NZHC 23.
2 Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813. See also Philpott v Noble Investments Ltd [2015] NZCA 342.
3 Bethell v Rickard [2013] NZCA 68 at [22]. See also MacRae v Rapana HC Auckland M633/94, 17 June 1994.
precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbably.4
(c)Where the applicant has discharged its burden, the Court retains a residual discretion to remove the caveat. The Court will exercise this discretion cautiously and must be satisfied removal would not prejudice the caveator’s legitimate interest.5
The purchaser’s case summarised
[11] The purchaser says the vendor had an obligation to take reasonable steps to complete the construction of the house and, having failed to do so, could not rely on the sunset clause as that would represent it relying on its own wrong.
Vendor’s argument
[12] While the vendor accepts it had an obligation to undertake the build with reasonable diligence, it denies that the purchaser has an arguable case that the delay in obtaining Code Compliance can be sheeted home to the vendor breaching this obligation.
Source of obligation to progress build with reasonable diligence
[13] There is a dispute between the parties whether the sunset clause is a condition for the purposes of cl 9.10 of the Agreement. There is also a dispute between the parties whether, if cl 9.10 does not apply, there could be an implied term obliging the vendor to complete the property within a reasonable period of time. I do not need to determine either issue. As I have said, the vendor accepts that, pursuant to further condition 22.2, which creates the obligation to complete the construction “in a proper and workmanlike manner”, it had to exercise reasonable diligence in constructing the house.
[14] Even if that is not correct, it is in my view reasonably arguable that there would be an implied term in this case. It cannot have been intended that the purchaser could be deprived of the benefit of the Agreement through the vendor simply taking no steps
4 Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175, citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 (PC) at 341; Xie v 126 Waimumu Ltd [2020] NZHC 1109 at [8].
5 Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
to advance the build and obtain Code Compliance in a timely way with a view to being able to rely on the sunset clause to cancel the Agreement in a rising market.
[15] Such an implied term would not contradict cl 21.5 of the Agreement which provides the vendor gives no warranty as to when Code Compliance would be available. An express promise by the vendor that Code Compliance would be available on a given date would be an absolute obligation (subject perhaps to the force majeure clause in the Agreement), whereas an implied term would require the vendor to exercise reasonable diligence which must take into account matters beyond the vendor’s reasonable control or reasonable anticipation. In other words, the date in the sunset clause could come and go without there being a breach of the implied term provided the vendor had, with reasonable diligence, endeavoured to complete the build. Reasonable diligence would not be a defence to a breach of warranty.
[16] In any event, as I have said, I do not need to make a finding as to the source of the vendor’s obligation to pursue construction with reasonable diligence as the vendor accepts it was under such an obligation.
[17] Mr Slevin noted the distinction between a right to cancel and whether it should be referred to as “a right to avoid”.6 Whatever label applies to what the vendor sought to achieve here, it could only rely on the sunset clause to bring the Agreement to an end if the failure to obtain Code Compliance by the cut-off date was not due to a breach of the obligation acknowledged by the vendor.
Did the alleged delays by the vendor, asserted by the purchaser here, materially contribute to Code Compliance not being available before 28 February 2022?
[18] Whether the sunset clause is described as a “condition” or not, in my view it is reasonably arguable the vendor could not rely on its own wrong, that is, a failure to pursue the build with reasonable diligence, if such is reasonably arguable, to deprive the purchaser of the benefit of the Agreement.
6 Birdwood Rodney Trustee Ltd v Blue Moon Ltd, above n 1, at [60]; and Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 60 at [1].
[19] It is therefore necessary to consider whether the purchaser has established a reasonably arguable case that responsibility for the delay in obtaining Code Compliance here rests with the vendor. Even if the purchaser’s actions contributed to some extent to the delay, it will be enough to sustain the caveat if it is reasonably arguable that the vendor’s contribution to the delay was “material” meaning “a substantial and operating” cause of the delay.7
Reasons for delay
[20] Code Compliance was not in fact obtained until 3 May 2022. Ms Walton, counsel for the purchaser, dealt with the question of delay in three parts:
(i)the first being delay in obtaining building consent – that is, in commencing the build;
(ii)the second is the effect of a telephone call between the parties that took place on 3 June 2021; and
(iii)the third is related to the second and is the delay in the kitchen being ordered, why that occurred and the flow-on effect of that delay.
[21] Mr Slevin agreed that was a convenient way of approaching the consideration of delay.
(i)Delay in obtaining consents
[22] Lots 20 and 21 were being developed in parallel to Lot 19. This is of significance as Lots 19, 20 and 21 are referred to collectively in some of the correspondence from the vendor.
[23] Again, the Agreement was signed on 24 October 2020. On 16 November 2020, the vendor’s lawyers provided to the purchaser’s lawyer a copy of the title expected to issue and advised it was expected Code Compliance to be available in May 2021.
7 Melco Property Holdings (NZ) 2012 Ltd v Hall, above n 6, at [53].
Construction was said to be “highly likely” to commence around 18 January 2021. The building consent application was not in fact lodged until 14 January 2021.
[24] An initial building consent was granted on 26 February 2021 but amended the following month on 25 March 2021 with a view to changing the foundation design to apparently a more economic specification. Construction did not start until 30 March 2021, five months after the Agreement was signed, or roughly a third of the period provided for in the sunset clause.
[25] Mr Slevin submitted this first period of delay was not material. He points to Lots 20 and 21 which where the builds at the same time and were completed and Code Compliance obtained well within the sunset period. Code Compliance was obtained for Lot 20 on 22 September 2021 and for Lot 21 on 15 September 2021. Mr Slevin submitted this was because Lots 20 and 21 were “conventionally scheduled” at the outset and that building schedule was able to be followed.
[26] Accordingly, Mr Slevin submits that it was after the 3 June 2021 telephone discussion where the time was lost.
[27] Ms Walton’s submission is that the entire period covered by the sunset clause needs to be considered. While the vendor, for its convenience, wanted to build the houses collectively, for its own reasons it did not commence building until five months after the Agreement was signed and unless it can demonstrate a reasonable basis for doing so given the obligation the vendor accepts it was under, then the time lost at the start of the Agreement is relevant.
(ii)The 3 June 2021 telephone call
[28] Before addressing the 3 June 2021 telephone call, for which there is a transcript in the evidence, it is necessary to refer to an email from the vendor’s solicitors to the purchaser’s solicitor of 15 April 2021. That email forwarded an email dated 13 April 2021 from the vendor’s project manager to the vendor’s solicitor which referred to problems at the subdivision:
… which are going to lead to lengthy and unwanted delays moving forward which will unfortunately impact on the completion of Lot 19, 20 and 21
respectively. Given the following setbacks that we have suffered of late, which I will detail below shortly, we now estimate the completion for these properties will be around June 2022 (potentially later), which is beyond the sunset clause of 28 February 2022 and we will have to look to change this on the new agreements going forward. I have already been in contact with the purchasers of Lots 20 and 21 and can confirm that we will mutually cancel the contract for Lot 20 with the purchaser and will be returning their deposit to them in the near future.
[29] The email then referred to the factors said to be contributing to the “lengthy delay” being a nationwide shortage of timber, price increases, appliance supply shortages, a need to adjust the fill level on site to adjust the finished floor levels and issues with funding.
[30] This email was forwarded by the vendor’s solicitors to the purchaser’s solicitor, expressly referring to the revised forecasting that the building would not be completed until June 2022 and possibly later. How this is reconciled with the actual completion date for lots 20 and 21 is not explained by the vendor.
[31] This theme came up again in the telephone call of 3 June 2021. This was a call from Mr Rameez Jones to the purchaser. Lots 19, 20 and 21 were discussed. Mr Jones refers to site fill issues, timber supplies, the impact of COVID, price increases et cetera. He said:
… we’ve already gone to Lot 21 and told them that there would be a price increase or variation. They decided that they will accept it and pay it so they’re going to keep their contract and we’re carrying on with the build.
[32]Mr Jones went on to say:
So ultimately, Lot 19 is the last one. So Lot 21 is a $40,000.00 increase in price, which they agreed to pay. The one next door, Lot 20, was $47,000.00 and the one on 19 is $45,000.00.
[33] The purchaser said she was not sure how the price increase was her problem. Mr Jones said:
If you’re not able to pay it Andrea, we can’t finish house. We can’t finish the house, we can’t get the Code of Compliance Certificate.
…
… if there’s no money, then how can we, we can’t pay for it so we have to stop.
[34] The purchaser was obviously taken aback by this and she says that she was speechless. The purchaser asked for a breakdown of the $45,000. The reply was that it was a mixture of various items. I note here that despite a number of requests, the
$45,000 has never been broken down.
[35] The purchaser said she wanted to speak to her lawyer. Ultimately, and this is the crucial part of the discussion from the vendor’s point of view, Mr Jones says: “All I need to know, is that Andrea can indeed pay the variation.” The purchaser says: “No. No I can’t right now …” and she said “So, stop building, I will talk to my lawyer and you will hear from her”. The purchaser said she wanted to find out what her legal rights were and would come back to Mr Jones.
[36] It is clear from this telephone conversation that the purchaser was neither agreeing to the variation, nor abandon her contract. She wished to take legal advice.
[37] The purchaser took legal advice and on 15 June 2021, the purchaser’s solicitor wrote to the vendor’s solicitor. The email from the purchaser’s solicitor gave formal notice in accordance with Further Term 28 (the dispute resolution provision) that there were issues in dispute that should be resolved. The email noted each area of dispute and briefly set out the purchaser’s position. Those disputes included the vendor’s demand for a price increase, with the purchaser’s solicitor noting they could not see any provision in the Agreement permitting the increase. In relation to the issue with the finished floor level, the purchaser noted that the concrete slab was in fact already down and so requested details of that issue. In relation to the alleged timber shortage, it was noted that the walls were up, the roof was on and the brick cladding had started. Details were sought of why, given that, completion was not expected for another year.
[38] Mr Slevin submitted that this email was not a retraction of the stop work advice referred to in the 3 June 2021 telephone conversation. While I need not make a finding as to what the letter does mean, I note it called for an extension of the sunset clause to take into account the delay. However, there is considerable force in the submission
made by Ms Walton that the effect of the dispute resolution clause in the Agreement being triggered, is that pursuant to cl 28.7:
Despite the dispute, each party must continue to perform its obligations under this Agreement as far as practicable given the nature of the dispute. This includes, without limitation, settlement completion in accordance with the terms of this Agreement.
[39] What, however, is clear from the evidence provided by the vendor is that despite, on 3 June 2021 the purchaser referring to stopping work, the vendor continued work through to 30 July 2021. That work being the installation of the gib lining, the gib stopping and the painting.
[40] The project manager working for the vendor in his evidence says that on 30 July 2021, which is when the internal painting at lot 19 was completed:
Developer advises all further work on hold to Lot 19 while they review position with client regarding variation costs.
[41] No further discussion between vendor and purchaser in relation to the vendor’s request for a price increase occurred after 30 July 2021. However, on 12 August 2021, the project manager records:
Developer advises to proceed with construction on Lot 19. Query to kitchen supplier regarding availability of new supply date.
[42] In the telephone conversation on 3 June 2021, Mr Jones said the gib work and half the painting would be completed. Mr Jones recorded that the developer had sufficient funds to complete those steps.
[43] It is at least arguable that a proper construction of the purchaser’s solicitor’s email of 15 June 2021 required the works to be continued while the developer provided further information to justify the price increase and the reasons for the delays. There does not seem to be a reply to the purchaser’s solicitor’s letter in the evidence nor, as noted above, any further contact with the purchaser in relation to the price variation.
[44] I also take into account that the purchaser’s reference to stopping work was prompted by a demand for a substantial price increase coupled with a threat of cancellation of the Agreement. The purchaser had apparently requested that
communication be through her solicitor, as is recorded in the vendor’s email to its solicitor on 13 April 2021, which accompanied the 15 April 2021 email referred to above. Knowing that, the direct contact with the purchaser coupled with the threat of cancellation if a substantial increase was not agreed to, smacks of an attempt to put unfair pressure on the purchaser.8
[45] Further, it is a significant matter to put a build on hold on the strength of oral advice and, in particular, given the purchaser’s solicitor’s letter referred to at [37] above. It was arguably unreasonable for the vendor to stop work on 30 July 2021 allegedly in reliance on this telephone call, nearly eight weeks after the telephone call, when they had not responded to the 15 June 2021 email.
[46] On 15 July 2021, the project manager sent an email to the vendor in relation to Lot 19 saying:
We are currently at interior painting here at Lot 19, with kitchens and external works due.
…
Please note, if job is placed on hold, all suppliers, trades and builders will move onto the other units within Blossom Estate. Completion of these units will take priority to ensure projects are completed to schedule and settlements occur.
[47] The vendor accepts that no progress was made with the build of lot 19 from 30 July 2021 to late November 2021. This was apparently due to the kitchen order being placed on hold and delays in the kitchen order being reactivated. The delay in getting the kitchen to site had flow-on effects in terms of a shortage of materials and an inability to get tradesmen on site.
[48] At one point, Mr Slevin said the kitchen was not ordered because the vendor had no funding to pay for the kitchen. If that was the reason for the delay, it is at least arguable that such was not a reasonable ground for delay. I say that as the vendor committed to complete this build on a fixed price basis. It is reasonable to expect that it had funding in place to do that. It took on the risk of price escalation which is not
8 I note that the Transcript records the purchaser making the telephone call but it was in response to a message left by the developer.
unknown in the industry. In any event, before an assessment could be made as to whether cancelling the kitchen was a reasonable step by the vendor, its financial position would have to be disclosed and in particular whether it is seeking to preserve its own profit at the expense of the purchaser.
[49] Accordingly, in relation to the vendor’s argument that time was lost because of the 3 June 2021 telephone call, that is, the stop work comment, I find there is a reasonable argument the vendor was not justified in stopping work nearly eight weeks later. Similarly, in relation to whether it was reasonable to put the kitchen order on hold, either because of the 3 June 2021 telephone call or because of a shortage of funds, such cannot be determined on the strength of the evidence as it stands.
[50] That lots 20 and 21 were finished well before the sunset clause shows there was no reason, from a purely construction point of view, that Lot 19 could not have also been finished on time. The email referred to at [46] suggests that Lots 20 and 21 were prioritised because the purchaser had agreed to a price increase, or the original purchaser had agreed to cancel, allowing the vendor to sell at an increased price.
[51] Again, the 13 April 2021 email referred to at [28] which claimed all three Lots could not be finished until June 2022, was so inaccurate it might be submitted that it was intended to mislead. The evidence from the project manager is that the build in issue here, under normal circumstances, would take 18-24 weeks to build. The sunset date was set some 68 weeks after the date of the Agreement, allowing almost three times the normal length of time to complete the construction. It took 77 weeks to complete the construction and obtain Code Compliance.
[52] The vendor says the 24 week period to build applied under “normal circumstances” and that the circumstances at the time of the contract were “anything but usual”. The vendor says that is why no completion date was given in the Agreement and Mr Slevin submits was the reason for the absence of warranty as to a completion date and the presence of the sunset clause. However, that the vendor was aware the circumstances at the time of the Agreement were “anything but usual” cuts both ways in terms of the funding, that a reasonable developer should have had in place and the need to get the build underway in a timely way. Here, the vendor was
raising the issue of delay within two weeks of starting work (the emails of 13 April 2021 and 15 April 2021 referred to above at [28]) and seeking further funding within a further two months. It is in this regard that the five month delay in getting underway may indeed be relevant. The short point is what was reasonable in all the circumstances of this case cannot be determined in a summary context such as this.
[53] I am satisfied the purchaser has established a reasonably arguable case that the vendor was not entitled to invoke the sunset clause. That is because it is reasonably arguable the vendor breached its obligation to complete the build with reasonable diligence. It is arguable it was unreasonable for the vendor to treat the 3 June 2021 telephone discussion as a basis for it to stop work and cancel the kitchen with all the consequential effects.
[54] Further, the effect of the original five month delay cannot be dismissed given that soon after the build commenced the vendor was raising the issue of the delays.
[55] There is an order that caveat no. 12173050.1 affecting title identifier 957191 not lapse.
Costs
[56] The respondent shall pay the applicant costs on a 2B basis plus disbursements as fixed by the Registrar. I certify for second counsel.
Associate Judge Lester
Solicitors:
Wynn Williams, Christchurch (for Applicant) Maciaszek Brown Law, Christchurch (for Respondent)
Copy to counsel:
G Slevin, Barrister, Christchurch (for Respondent)
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