Trustees of the Smith Family Trust v Robert Jones Holdings Ltd
[2009] NZCA 617
•21 December 2009
IN THE COURT OF APPEAL OF NEW ZEALAND
CA372/2008
[2009] NZCA 617BETWEENTHE TRUSTEES OF THE SMITH FAMILY TRUST AND ANOR
Appellants
ANDROBERT JONES HOLDINGS LIMITED
Respondent
Hearing:30 June 2009
Court:O'Regan, Ellen France and Baragwanath JJ
Counsel:G J L Kohler and S J Tee for Appellants
M Reed QC and P A Morten for Respondent
Judgment:21 December 2009 at 2.30 pm
JUDGMENT OF THE COURT
A The appeal is dismissed.
BThe appellants must pay the respondent costs for a standard appeal on a band A basis plus usual disbursements.
REASONS OF THE COURT
(Given by Ellen France J)
Table of Contents
PARA NO
Introduction [1]
THE FACTUAL BACKGROUND [5]
SUMMARY JUDGMENT [19]Issues on appeal [24]
Construction of cl 16 [25]
The approach taken by the Associate Judge [26]
The submissions [29]
Discussion [31]Was RJHL entitled to cancel for breach of an essential term? [35]
The approach taken by the Associate Judge [38]
The submissions [39]
Discussion [41]
Was RJHL entitled to cancel for repudiation? [55]
The approach of the Associate Judge [56]
The submissions [61]
Discussion [63]
Conclusion [72]
Introduction
[1] The appellants, the trustees of the Smith Family Trust and of the Vincent Family Trust (the trustees), own a commercial building at 34 Apollo Drive, North Shore City. The building was tenanted by a manufacturing company, RPM International Tool and Die Limited (RPM), in which the trustees were shareholders.
[2] The trustees entered into an agreement to sell the building to Robert Jones Holdings Limited (RJHL). The agreement included a special clause (cl 16) which provided:
The Vendor warrants to provide to the Purchaser’s or the Purchaser’s accountant such relevant material that the Tenant [RPM] is financially able to meet all of its lease obligations within the Deed of Lease and is financially viable.
[3] RJHL paid the $500,000 deposit provided for in the agreement. Subsequently, RJHL purported to cancel the agreement because the trustees did not provide sufficient information as to the financial position of the tenant to meet the obligation under cl 16. The trustees responded that RJHL was not entitled to cancel and RJHL’s deposit of $500,000 was forfeited.
[4] RJHL sought and obtained summary judgment for recovery of the deposit: (2008) 9 NZCPR 626 (HC) (Associate Judge Abbott). The trustees appeal against the grant of summary judgment.
The factual background
[5] The factual background is set out at [6] to [16] of the decision of the Associate Judge and we essentially adopt his description of events.
[6] In March 2007, Colliers International (“Colliers”) was appointed by the trustees as their agent for the sale of the building at Apollo Drive. The property was to be subject to an eight-year lease to RPM.
[7] In May 2007, Colliers approached RJHL’s Auckland office manager, Greg Loveridge, offering the property to RJHL under a tender due to close on 8 June 2007.
[8] RJHL told Colliers that it was not interested at the expected price level which was in the “high” $6 million range. However, at Colliers’ request, RJHL made an unconditional offer to buy the property. The offer was first expressed as being for $6.025 million. This was apparently an error on RJHL’s part and the offer was quickly followed by a second offer at $6.23 million. This represented a price RJHL said it was prepared to pay in the knowledge that it would not succeed (it appears Colliers wanted the offer as a potential market indicator). The trustees subsequently accepted a conditional offer of $6.7 million from a third party.
[9] The conditional contract lapsed. Colliers’ managing director, Andrew Hiskens, then contacted one of RJHL’s directors, Sir Robert Jones. Mr Hiskens told Sir Robert that the purchase had not gone ahead and asked whether RJHL was still interested. Sir Robert, aware of the collapse of the previous agreement, sought information about RPM’s financial strength. Mr Hiskens told him that he did not have that information. Sir Robert then agreed to make an increased offer subject to the term of the lease being extended to 12 years and the inclusion of a clause for provision of financial information. As the Associate Judge notes, there is a difference of view between Sir Robert and Mr Hiskens over aspects of that conversation, but they are agreed that it led to the inclusion in the agreement of cl 16.
[10] The following day Colliers sent an agreement to RJHL on the standard form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society (8ed 2006). The agreement included the clause referred to above about the vendor’s obligation to provide financial information concerning RPM’s financial viability. In addition, there was a further special clause, cl 15, relating to the deed of lease. Clause 15 read as follows:
The Vendor agrees to make the following amendment to the Deed of Lease dated 31 May 2007 on or before the Settlement Date.
a)First Schedule Term to be 12 (twelve) years.
[11] On 28 June 2007, the trustees as vendors and RJHL as purchaser entered into the agreement for sale and purchase of the property. The purchase price was $6.4 million. A deposit of $500,000 was payable upon signing. The balance of the purchase price was to be paid by settlement date which was 13 July 2007. The property was sold subject to a tenancy to RPM of 12 years from 1 April 2007 with a rental of $452,000 per annum. In addition to the standard terms the agreement as signed contained the special terms, cl 15 and cl 16.
[12] RJHL paid the $500,000 deposit to Colliers on or about 30 June 2007.
[13] Between 28 June 2007 and 4 July 2007 there were various communications between RJHL’s accountant, Brian Walshe, and the trustees’ accountant, Matthew Bellingham, about the provision of financial information concerning RPM. There was also a meeting at the property on 3 July 2007 at which the parties discussed issues raised by Mr Walshe about RPM’s financial viability.
[14] The exchange of information ceased on 5 July 2007 when Sir Robert wrote to Mr Hiskens recording his understanding of the information that had been provided. The letter began by noting that the agreement was conditional on RJHL being provided “with financial information by the vendor’s accountants showing that the tenant is financially able to meet its lease obligations”. Sir Robert continued:
The vendor’s accountant has made it perfectly clear that the vendor is not capable of meeting such obligations but is merely hopeful of things improving by obtaining new contracts and repaying debt from the sale proceeds.
Currently the vendor, according to its accountant, is technically insolvent.
We agreed to pay a premium price based on the security of a long lease but as it transpires that security rests solely on hope.
[15] Sir Robert referred to the parties’ recent meeting and said that RJHL had decided not to proceed with the purchase because the information provided showed that RPM was not financially viable and could not meet its obligations under the lease. He sought return of the deposit.
[16] On 12 July 2007 RJHL’s counsel wrote to Colliers confirming that RJHL would not be proceeding and again asking for repayment of the deposit. Colliers replied that day advising that it would hold the deposit as stakeholder while issues about the sale and purchase were resolved.
[17] On 13 July 2007, the settlement date set out in the agreement, the trustees’ solicitors wrote to RJHL’s solicitors indicating that they would be in a position to settle “shortly”. They wrote again on 27 July 2007 requesting settlement that day. On 30 July 2007 the trustees, through their solicitors, gave a settlement notice requiring settlement within 12 working days.
[18] RJHL’s solicitors replied to the trustees’ solicitors on 30 July 2007. In that letter, the solicitors said that the contract had been brought to an end by Sir Robert’s letter of 5 July 2007 for failure to satisfy cl 16. In the alternative, if the contract was still on foot, the letter gave notice of cancellation under s 7 of the Contractual Remedies Act 1979 (the Act) due to the trustees’ failure to provide evidence of RPM’s ability to meet the lease obligations or of its financial viability on or before the settlement date.
Summary judgment
[19] RJHL claimed for the return of the deposit alleging breach of contract, misrepresentation and breach of the Fair Trading Act 1986. RJHL sought summary judgment in relation to the first of its three causes of action. In the first cause of action, RJHL claimed that the agreement had been avoided on 5 July 2007 because of the trustees’ failure to satisfy cl 16. RJHL advanced two alternatives to this first cause of action. As its first alternative, RJHL said that the agreement was cancelled on 30 July 2007 for repudiation, namely, the trustees’ failure to provide evidence of RPM’s financial ability to meet its lease obligations and its financial viability by date of settlement (or at all). As a further alternative, RJHL pleaded that it had cancelled the agreement on 30 July 2007 for breach of an essential term.
[20] On the first cause of action, the Associate Judge concluded that he could not be sure that the trustees did not have an arguable defence that the alleged avoidance on 5 July was based on an incorrect factual premise or was premature. Accordingly, if the application had to be decided on whether RJHL had validly avoided the agreement by its letter of 5 July, Associate Judge Abbott said at [48] that he would decline summary judgment so that these matters could be determined after trial.
[21] However, the Associate Judge found in favour of RJHL on each of its alternatives in the first cause of action. Applying s 7(2) of the Act, the Associate Judge concluded that RJHL had validly cancelled the agreement by the letter of 30 July 2007 on the basis that the trustees had repudiated the contract. The Associate Judge also determined that RJHL had validly cancelled by the letter of 30 July for breach of an essential term of the contract (cl 16) in terms of s 7(3)(b) and (c) of the Act. In this context, the Associate Judge considered that there was an implied agreement between the parties that cl 16 was an essential term (s 7(4)(a)). Finally, Associate Judge Abbott found that the effect of the breach of cl 16 was such as to substantially reduce the benefit of the contract and so also allowed cancellation in terms of s 7(4)(b).
[22] On this basis, the Judge entered summary judgment for RJHL against the trustees, making a declaration that the sale and purchase agreement was cancelled on 30 July 2007 and ordering the trustees to pay RJHL the sum of $500,000 together with interest and costs.
[23] Summary judgment was also initially sought against Shaw Commercial Realty Limited. That company trades under licence as Colliers. Because Colliers abided the judgment, summary judgment was ultimately not sought against the company. Colliers similarly abides the decision of this court.
Issues on appeal
[24] The appeal turns on the effect of cl 16 and on whether, as the Associate Judge found, the contract was properly avoided so that RJHL was entitled to get back its deposit. There are several ways in which what occurred could be analysed but we focus on two, because, as shall be seen, we agree with the Associate Judge that summary judgment was appropriate on the basis that RJHL was entitled to cancel for breach of an essential term and for repudiation. Before addressing those two matters, we do need to say something briefly about the construction of cl 16 as that was a focus of counsel for the appellant’s submissions and also because the Associate Judge’s view of the clause informed the conclusions on the essentiality of the provision.
Construction of cl 16
[25] We first set out the approach taken by the Associate Judge and then address the parties’ contentions.
The approach taken by the Associate Judge
[26] Associate Judge Abbott said at [25] that the task in construing the clause was to:
[A]scertain the meaning that [the contractual provision] would convey to a reasonable person having the background knowledge that the parties had at time of entering into the contract: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912-913; applied in Boat Park Limited v Hutchinson [1999] 2 NZLR 74 at 81-82; Burrows, Finn & Todd Law of Contract in New Zealand 3rd ed at 160-165.
[27] The Judge also noted at [26] and [27] with reference to a number of authorities that the words of the contract are the “primary source” from which the court works but that “even a prima facie ‘clear’ meaning can be cross-checked against surrounding circumstances” to determine whether some other meaning was intended. Finally, the Judge observed at [28] that:
Even where background facts are admissible, there are limits to what may be used. It is trite law that subjective intentions are irrelevant but pre-contract negotiations may be relevant to ascertain what objectively observable facts were within the contemplation of both parties: Potter v Potter [2003] 3 NZLR 145 (CA).
[28] Applying these principles, the Associate Judge made two key findings as to the meaning of cl 16. The first finding was that, read in context, cl 16 imposed an obligation on the trustees “to provide such information as would show that RPM was financially able to meet its lease obligations and was financially viable”: at [34]. The clause went beyond a mere warranty as to a state of affairs. The other key finding was that RJHL did not have to take any steps to facilitate the fulfilment of the clause, for example, by “quiz[zing] the trustees as to what information might be available and [then deciding] what it would call for”: at [36].
The submissions
[29] There is no challenge to the general principles of construction applied by the Associate Judge or to the principles applicable to summary judgment. Rather, the trustees maintain that the proper conclusion was that cl 16 was not an essential term but rather a warranty, breach of which entitled RJHL, at most, to damages. (We deal with that submission in more detail later.) As to the wording of cl 16, the trustees say that the clause simply required production of material that was relevant to an assessment of RPM’s viability. They say the Associate Judge’s approach requires reading into cl 16 a requirement that the information supplied would “establish” viability or the ability to meet the lease obligations.
[30] RJHL supports the reasoning of the Associate Judge. Mr Morten, who argued this point on behalf of RJHL, emphasises the need to focus on the intentions of the parties.
Discussion
[31] In terms of the text of the clause, we agree with the Associate Judge that on its face the clause imposes an obligation on the trustees to act by providing the information specified. As the Associate Judge says, it is clear reading the clause as a whole that this was the parties’ intention. Hence, there is no qualification on the obligation, such as limiting it to information RJHL might (reasonably) request.
[32] As to the argument that this construction requires a reading in of the requirement to “establish” viability, we disagree. The clause on its face has no effect if not read as requiring the provision of information establishing that RPM is viable. That said, cl 16 is not well-drafted. As the trustees say, it would have been an easy task to make the effect of the clause and of non-compliance with it plain. It is a little odd given Sir Robert’s experience in these matters that this was not done. However, the omission to do so is not in our view critical.
[33] As we shall develop further in considering the essentiality of the clause, the construction adopted by the Associate Judge is also supported by a cross-check against the surrounding circumstances.
[34] Finally, we agree with the Associate Judge that there was no obligation on RJHL to facilitate the provision of the financial information. That would not make sense in this case because there was no suggestion that the trustees did not have access to the relevant information. Indeed, as Associate Judge Abbott said at [39], “the trustees were in a position to provide the material … needed to enable clause 16 to be fulfilled, without the necessity for any steps to be taken by RJHL”.
Was RJHL entitled to cancel for breach of an essential term?
[35] We turn then to the trustees’ challenge to the Associate Judge’s conclusion that RJHL succeeded in its second alternative cause of action, ie, that it validly cancelled the agreement under s 7(3)(b) of the Act.
[36] Section 7(3) relevantly provides that a party may cancel a contract if:
…
(b)A term in the contract is broken by another party to that contract; or
(c)It is clear that a term in the contract will be broken by another party to that contract.
[37] The right to cancel under s 7(3) arises in the circumstances set out in s 7(4), which relevantly reads:
Where … subsection (3)(b) … of this section applies, a party may exercise the right to cancel if, and only if, –
(a)The parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the term is essential to him; or
…
The approach taken by the Associate Judge
[38] On this issue, the Associate Judge took the view that it was clear from the uncontested facts that RJHL would not have entered into the agreement without the inclusion of cl 16. In the Associate Judge’s view, there could not be “any clearer acceptance” of the importance of the term: at [72].
The submissions
[39] Even if in breach or even if the trustees made it clear that they were not going to perform fully the obligations in cl 16, the trustees say the requirements of s 7(4) of the Act were not met. Mr Kohler on behalf of the trustees relies here on the use of the word “warrants” rather than language indicating essentiality. Mr Kohler also points to evidence that those involved treated the agreement as unconditional which he submits is inconsistent with the implication that the parties had agreed that the term was an essential one.
[40] RJHL supports the reasoning of the Associate Judge and submits that the Associate Judge was right to conclude that the statutory requirements were met.
Discussion
[41] We consider that the objective factors relied on by the Associate Judge at [35] point inexorably to the conclusion that there was an implicit agreement by the parties that cl 16 was essential. As the Associate Judge noted, the agreement provided for a 12-year lease to be put in place rather than the eight-year term initially offered. The strength of the lease was seen as clearly “relevant” to the purchase price being negotiated: at [35]. Against this background, it is difficult to see what point there would be in including cl 16 if, as is the case on the trustees’ approach, it did not have to be satisfied prior to settlement. Damages, in these circumstances, would not provide a real remedy.
[42] Further, as the Associate Judge also states, RJHL knew that a prior contract with another party had collapsed and this gave it concerns about RPM’s financial position. When those concerns were raised with Colliers as the trustees’ agent, Colliers could not answer them but agreed to insert cl 16 to address them. Finally, as Associate Judge Abbott noted, the information to answer RJHL’s concerns was within the trustees’ control, as directors and shareholders of RPM.
[43] In reaching this view, we have kept in mind the fact that the difference between the first offers and the second offer in monetary terms was not great. That factor loses significance when considered in light of the other matters highlighted by the Associate Judge.
[44] As to the trustees’ argument that the use of the term “warrants” is significant, as Mr Kohler properly accepts, the “conditions/warranty” language is not decisive: L. Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 251 per Lord Reid and 256 per Lord Morris of Borth-y-Gest; cf the dissenting judgment of Lord Wilberforce; and see 9(1) Halsbury’s Laws of England “Contract” (4ed, Reissue) at [994].
[45] Turning then to the evidence relied on by the trustees, we agree with RJHL that this evidence is inadmissible evidence of subjective intentions, irrelevant to the question of essentiality or, even in the context of a summary judgment, cannot be determinative of the matter.
[46] This evidence can be characterised as coming under two broad heads. The first category of evidence is that of the real estate agents and the solicitor who acted for the trustees. In summary, this evidence is to the effect that in the discussions leading to the agreement for sale and purchase, and immediately thereafter, terminology such as “executed unconditional contract” or a “done deal” was used. The second category comprises the evidence from Mr Hiskens of Colliers about his discussions with Sir Robert over the insertion of cl 16.
[47] In terms of the evidence in the first category, some of this can be ignored because it relates to the earlier offers. Other evidence in this category, such as Colliers’ letter purporting to enclose an “unconditional contract”, is also irrelevant when it comes to determining the intentions of the parties and the essentiality of cl 16. The other material, such as the “understanding” of the solicitor acting for the trustees, comes after the event.
[48] That leaves the evidence of Mr Hiskens which is, potentially, of greater significance. The relevant passage is as follows:
Mr Jones said he was prepared to put in an unconditional offer provided he could have access to RPM’s accounts. I advised him that I did not have information about the financial position of RPM, but that a warranty could be inserted into the agreement requiring information about RPM’s financial position to be provided to RJH[L] by the vendors. I emphasised to him that this would be a warranty, not a condition, because the price being offered by RJH[L] was less than the other interested parties.
[49] Sir Robert disputes that evidence.
[50] As the authors of McGechan on Procedure observe at [HR12.2.08]:
It is well established that as a general rule in determining summary judgment applications, the Court will refrain from attempting to resolve genuine conflicts of evidence ... .
[51] However, as Lord Diplock said in Eng Mee Yongv Letchumanan [1980] AC 331 at 341E, the court is not bound:
[T]o accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, ... or inherently improbable in itself it may be.
[52] In our view, Mr Hiskens’ evidence is equivocal because even he says that RJHL was only prepared to put in what he describes as an unconditional offer provided RJHL first had access to RPM’s accounts. Further, to the extent Mr Hiskens is suggesting that the parties agreed to insert a clause in the agreement which was not an essential term, we consider that it is an improbable proposition. We do not see how it is possible for the clause to operate in that way.
[53] It is plain the appellants did not supply the information they were obliged to provide under cl 16 thereby breaching an essential term.
[54] For these reasons, we consider RJHL was entitled to summary judgment on the basis it was entitled to cancel because of breach of an essential term. For reasons to which we now turn, we are satisfied that the letter of 30 July 2007 was a valid cancellation.
Was RJHL entitled to cancel for repudiation?
[55] We turn then to the issue of cancellation for repudiation.
The approach of the Associate Judge
[56] Associate Judge Abbott took the view that the obligations under cl 16 had to be fulfilled by 13 July 2007, the settlement date: Aberfoyle Plantations Ltd v Khaw Bian Cheng [1960] AC 115 (PC) and Scott v Rania [1966] NZLR 527 (CA). He said that the trustees had not fulfilled their obligations by that date. In reaching that conclusion, His Honour rejected as not credible an argument that RJHL’s “experienced accountant, advising a client on whether a prospective tenant was financially viable or able to meet its lease obligations” would agree not to press for full financial statements on the “promise of a balance sheet showing the position if a proposed restructuring took place”: at [57].
[57] On 13 July, the Associate Judge noted, the trustees indicated their intention to proceed to settlement. Then there was a hiatus until the trustees called for settlement on 27 July before issuing a settlement notice on 30 July. Associate Judge Abbott said he accepted the submission on behalf of RJHL, in reliance on Re Stone and Saville’s Contract [1963] 1 WLR 163 (CA), that the trustees had to be taken as deciding that they had completed their obligations and the “only reasonable inference to be drawn was that they were not going to provide any further information”: at [60]. The Associate Judge found that this was a repudiation of the agreement which entitled RJHL to cancel and that it did so by its solicitor’s letter of 30 July 2007.
[58] Associate Judge Abbott also rejected the trustees’ submission that they could rely on the letter of 5 July from Sir Robert “as a continuing repudiation”: at [62]. (That was the letter in which Sir Robert said that RJHL was not proceeding with the purchase and wanted the deposit returned.) The Associate Judge applied s 7(5) of the Act which states that a party is not entitled to cancel if, “with full knowledge of the repudiation or … breach, he has affirmed the contract”. Here, the Associate Judge concluded, the trustees could have cancelled on the basis of the 5 July letter but they did not do so. Instead, they asked for settlement and issued a settlement notice. The Associate Judge found that was an affirmation in “full knowledge” of any repudiation in the 5 July letter.
[59] Finally, the Associate Judge dealt with RJHL’s argument that Sir Robert’s letter of 5 July meant RJHL was estopped from cancelling. The trustees’ argument was that the effect of the letter was that although the trustees could have provided more information, if requested to do so, they did not because of RJHL’s firm position.
[60] In rejecting the estoppel argument, the first point made by the Associate Judge was that he had already found that RJHL had no obligation to request information. Secondly, the Associate Judge considered that the trustees could not just “sit back and ignore their own obligations, even if they believed that RJHL was wrong in attempting to avoid the agreement”: at [59]. They said they had further information and so they had to either supply that information or treat the letter as a repudiation and cancel. Instead, they affirmed and sought settlement. In those circumstances, the Associate Judge considered that a plea of estoppel could not succeed.
The submissions
[61] The appellants say that the Associate Judge was wrong to find that the trustees had repudiated the agreement entitling RJHL to cancel. They challenge the Associate Judge’s reliance for this conclusion on Re Stone and Saville’s Contract. Mr Kohler points out that in that case the vendor had refused to answer a clear and specific question from the purchaser’s solicitor despite a number of reminders. Further, the trustees say, unlike the position in Re Stone and Saville’s Contract, there was evidence that they were prepared to provide further information. Mr Kohler also submits that the courts recognise that in most such cases a notice making time of the essence would be necessary before the contract could be cancelled. Finally, the trustees argue, in the alternative, that RJHL was estopped from changing its stance without notice.
[62] RJHL supports the reasoning of the Associate Judge.
Discussion
[63] The trustees’ arguments require consideration of s 7(2) of the Act. Section 7(2) provides that, subject to the Act, a party to a contract may cancel the contract if “by words or conduct”, another party repudiates:
[B]y making it clear that he does not intend to perform his obligations under it or, as the case may be, to complete such performance.
[64] As Associate Judge Abbott notes at [52], there was no dispute between the experts that the material provided by the trustees was not sufficient to show that RPM was financially viable and able to meet its lease obligations. The trustees’ expert, Mr Cregten, accepted that it did not. That finding did not require a determination of the factual disputes over RPM’s solvency. Accordingly, there was a clear basis for the finding that there was a breach of cl 16.
[65] We also agree with the Associate Judge’s conclusion that this case is on all fours with Re Stone and Saville’s Contract. In that case, the purchaser delivered requisitions on title. The vendor’s solicitors said they would respond but did not do so, despite reminders. They ultimately issued a notice to complete whereupon the purchaser’s solicitors responded saying that the vendor was not able to make title and that they had instructions to rescind and sought return of the deposit. The vendor’s solicitors stated that the deposit was forfeited. Proceedings were commenced to recover the deposit. The Court of Appeal concluded that the effect of the notice to complete in these circumstances meant the purchaser was entitled to treat the agreement as repudiated.
[66] On this analysis, service of the settlement notice of 30 July 2007 by the trustees meant the only reasonable inference to be drawn was that the trustees did not intend to supply any further information to RJHL about RPM’s financial ability.
[67] We do not consider RJHL was required to give notice stating that compliance was necessary and making time of the essence. As Mr Morten submits, given the settlement date was 13 July, it was correct to conclude that the trustees ought to have met their obligations by that date. Further, the inference to be drawn from the settlement notice meant RJHL did not have to make time of the essence. We note that in Hunt v Wilson [1978] 2 NZLR 261 (CA), in the passage at 273 relied on by Mr Kohler, Cooke J (as he then was) acknowledges there may be situations where there may be no point in requiring notice given the other party’s attitude.
[68] We turn then to the alternative argument, namely, that RJHL was estopped from changing its stance without notice. Essentially, for the reasons given by the Associate Judge, we consider the estoppel argument could not succeed.
[69] Apart from the letter of 5 July, there is nothing in the evidence that assists the trustees on this aspect. The high point of the evidence on behalf of the trustees comes from Mr Vincent, one of the trustees. But all he says is that additional evidence could have been provided to address RJHL’s concerns if RJHL had indicated its concerns to the trustees. Mr Hiskens simply says that the trustees’ solicitors took the view there was an unconditional contract.
[70] It is significant that the trustees acknowledged that they had more information which could have been provided in relation to cl 16. Mr Bellingham’s reason for not providing full financial statements was that he did not have that level of authorisation from his client. As the Associate Judge noted, the available responses to the 5 July letter were therefore either to produce the financial statements and other material that was available to them to show RPM was financially viable or, alternatively, to treat the letter as a repudiation and cancel. Instead, the trustees affirmed the contract in full knowledge of the alleged repudiation, sought settlement, and issued a settlement notice.
[71] Our conclusions on these two matters mean it is not necessary to deal with the arguments based on s 7(4)(b) of the Act. Nor do we need to determine the inter-relationship between cl 16 and the standard form provision relating to conditional agreements in cl 8 of the agreement for sale and purchase and we do not do so.
Conclusion
[72] For these reasons, the appeal is dismissed.
[73] There is no reason to depart from the usual rule that costs follow the event. The appellants must pay the respondent costs for a standard appeal on a band A basis plus usual disbursements.
Solicitors:
Morton Tee & Co, Auckland for Appellants
Gillespie Young Watson, Lower Hutt for Respondent
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