Varg Properties Limited v Tavai HC Wellington CIV-2005-485-68
[2005] NZHC 1308
•18 March 2005
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2005-485-68
IN THE MATTER OF Section 145 of the Land Transfer Act 1952 AND IN THE MATTER OF Caveat 6230604.1 (Wellington Land
Registry)
BETWEEN VARG PROPERTIES LIMITED
Applicant
AND
VAOALA OTELE TAVAI
Respondent
Hearing: 14 March 2005 Appearances: J. Morrison for Applicant
P. Harrison for Respondent Judgment: 18 March 2005 at 2.00pm
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
Introduction
[1] This is an application pursuant to s145 Land Transfer Act 1952 for an order that caveat no. 6230604.1 registered against Certificate of Title 46C/357 not lapse.
[2] This caveat claims an interest under an Agreement for Sale and Purchase (“the agreement) of a residential property at 269 Warspite Avenue, Porirua owned by the respondent.
[3]The application is opposed.
VARG PROPERTIES LIMITED V VAOALA OTELE TAVAI HC WN CIV-2005-485-68 18 March 2005
Background Facts
[4] On 26 October 2004 the applicant as purchaser entered into the agreement to purchase the respondent’s property. The applicant circled on the first page of the standard form ADLS contract that a LIM report was required.
[5] The applicant also included (for his own benefit) an additional clause 14 in the agreement as a “further term of sale”. This clause 14 reads:
14.0 This offer and any contract arising herefrom is conditional upon the Purchaser’s obtaining a Land Information Memorandum from the Local Authority in respect of the property to be purchased and being satisfied in all respects that all requisitions and relevant matters have been met by the vendor within 10 (ten) working days of acceptance hereof. This clause is inserted for the sole benefit of the purchaser.
[6] As a result of the circling of the requirement for a LIM report on the first page of the agreement, it is suggested that clause 8.2 of the contract was brought into operation. That clause set out a procedure for satisfying the LIM conditions. In addition, the timeframe within which the various parties had to give notices or reply to notices was stated.
[7]It is appropriate to set out this clause 8.2 in full:
8.2 (1) If the purchaser has indicated on the front page of this agreement that a LIM is required:
(a) that LIM is to be obtained by the purchaser at the purchaser’s cost; and
(b) the purchaser is to request the LIM on or before the fifth working day after the date of this agreement; and
(c) this agreement is conditional upon the purchaser approving that LIM.
(2)If the purchaser does not approve the LIM, the purchaser shall give notice to the vendor (“the purchaser’s notice”) on or before the fifteenth working day after the date of this agreement stating the particular matters in respect of which approval is withheld and, if those matters are capable of remedy, what the purchaser requires to be done to remedy those matters. If the purchaser does not give a purchaser’s notice the purchaser shall be deemed to have approved the LIM. If through no fault of the purchaser the LIM is not available on or before the fifteenth working day after the date of this
agreement and the vendor does not give an extension when requested, this condition shall not have been fulfilled and the provisions of subclause 8.7(5) shall apply.
(3)The vendor shall give notice to the purchaser (“the vendor’s notice”) on or before the fifth working day after receipt of the purchaser’s notice advising whether or not the vendor is able and willing to comply with the purchaser’s notice by the settlement date.
(4)If the vendor does not give a vendor’s notice, or if the vendor’s notice advises that the vendor is unable or unwilling to comply with the purchaser’s notice, and if the purchaser does not, on or before the tenth working day after the date on which the purchaser’s notice is given, give notice to the vendor and the purchaser waives the objection to the LIM, this condition shall not have been fulfilled and the provisions of subclause 8.7(5) shall apply.
(5)If the vendor gives a vendor’s notice advising that the vendor is able and willing to comply with the purchaser’s notice, this condition is deemed to have been fulfilled and it shall be a requirement of settlement that the purchaser’s notice shall be complied with, and also, if the vendor must carry out work on the property, that the vendor shall obtain the approval of the local authority to the work done, both before settlement.
[8] As will be seen from paragraph [5] of this judgment, clause 14, however, set out an entirely different timeframe and procedure relating to the LIM requirement.
[9] Clause 14 required that within ten working days of the date of the contract (by 9 November 2004) the purchaser was both to obtain a LIM, and “be satisfied in all respects that all requisitions and relevant matters have been met by the vendor”.
[10] In contrast, if it was to apply here, clause 8.2 would have effectively provided that all matters concerning the LIM and the respective rights of the parties under the contract in that regard would not have expired or been completed potentially until around 30 November 2004.
[11] There was therefore a clear conflict between the respective requirements of clause 14 and clause 8.2. This is acknowledged by the parties.
[12] The other relevant clause in the contract appears to be clause 1.3(3) which states:
Where any inserted term (including any Further Terms of Sale) conflicts with the General Terms of Sale, the inserted term shall prevail.
[13] Clause 8.2 is a “General Term of Sale”, and clause 14 is “a Further Term of Sale”, in terms of the wording used in the contract.
[14] Both parties here accept that the applicant did not confirm the contract as unconditional within the time period required by clause 14, and no extension of time to the 9 November 2004 confirmation date required by that clause was given.
[15] The respondent accordingly on about 16 November 2004 purported to cancel the contract prior to the respondent purporting to confirm it as unconditional. It will be noted that this occurred outside the timeframe provided for in clause 14, but within the timeframe specified in clause 8.2.
[16] The applicant subsequently registered the caveat in question, and the respondent, as vendor of the property, is seeking to have it removed.
[17] After 26 October 2004 when the contract was signed the sequence of events surrounding the agreement evidenced by the correspondence annexed to the affidavit of Mr Patel for the applicant was as follows:
a)Applicant’s letter of 3rd November stating that the LIM which had been obtained was not approved and asking the respondent if he would comply with Code of Compliance requirements and advise by 10 November 2004..
b)10th November respondent’s solicitor’s reply which stated in part:
My understanding is that your client [the applicant] was aware of the position in relating to the code of compliance certificates and the price reflected that. However, the contract should have been amended to reflect that and it was not.
And
It is unlikely that I will get any response from my client by the close of business today and therefore cannot comply with your request.
And
Is your client going to confirm on that basis?
c)Apparently nothing was then heard from the appellant and the respondent’s solicitor wrote a letter dated 12 November 2004, but not faxed until 16 November 2005 cancelling the contract.
d)This provoked an immediate response from the applicant’s solicitor who forwarded a handwritten note dated 16 November 2004 to the respondent’s solicitor stating:
I believe my client has 10 working days (to confirm the LIM condition) from 3/11/04.
e)This prompted a handwritten note from the respondent’s solicitor on the same day indicating that the purchaser’s belief as to the timeframe was incorrect and confirming that the contract was at an end.
f)Also on 16th November 2004 the respondent’s solicitor wrote formally to the applicant’s solicitor again emphasising that the contract was at an end.
g)On 17th November 2004 the applicant’s solicitor wrote to the respondent’s solicitor purporting to confirm the contract and stating:
The terms of Clause 8 relating to requisition do not conflict with the further term. I believe that was accepted by you at the time you advised on 10 November (being the date by which your client was requested to respond) that the request could not be complied with simply because your client was unlikely to respond.
h)On 18th November 2004 the respondent’s solicitor wrote again pointing out the prior cancellation of the contract and setting out the respondent’s reasons.
Counsel’s Arguments and My Decision
[18] The general approach to applications under s145 Land Transfer Act 1952 was settled in Sims v Lowe [1988] 1 NZLR 656 where Somers J at page 660 said:
The caveator seeks to clog or fetter the proprietary interest of another. As a matter of principle, it seems right that he must justify the continued existence of his caveat. He will do that if he can show that he has a reasonably arguable case for the interest he claims.
[19] The applicants have the burden of establishing a “reasonably arguable case” that they have a caveatable interest in the properties in question, and that the caveats should be sustained – Hinde McMorland & Sim “Land Law in New Zealand” Vol. 1. Para 10.020. An order for removal of a caveat is not to be made unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it, or that no such ground may exist now – Re Graham (1912) 14 GLR 806; New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1NZLR 41 (CA).
[20] In Hinde McMorland & Sim “Land Law in New Zealand” Vol. 1. Para 10.020(a), the authors state:
It is clear that on an application under sections 143, 145 or 145A the Court ought not finally to determine the rights of the parties unless both parties consent or unless the facts are not in dispute and the law has been fully argued.
[21] Somers J. in the Court of Appeal in New Zealand Limousin Cattle Breeders Society Inc v Robertson at page 43 said:
The proceedings upon such an application (under s145) are quite unsuitable to determine the rights of the parties.
[22] The test to be applied under s145 provides the Court with a residual discretion whether to allow the caveat to lapse or not. The initial onus rests on the caveator to establish a reasonably arguable case, but a balance of convenience test has been held to be appropriate – see Pacific Homes Limited (in receivership) v Consolidated Joinery Limited [1996] 2 NZLR 652 (CA). In Pacific Homes Limited Blanchard J in delivering the judgment of the Court of Appeal said at page 656:
…The Court retains a discretion to make an order removing the caveat, though it will be exercised cautiously. An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced.
[23] Thus, it is clear from Pacific Homes Limited that even if a caveator satisfies the Court that she/he has an arguable case, the Court retains a discretion to make an order removing the caveat.
[24] The first issue for consideration here is whether the applicant has a caveatable interest in the property in terms of s137 Land Transfer Act 1952.
[25]Section 137 states:
137. Caveat against dealing with land under Act – Any person –
(a) Claiming to be entitled to or to be beneficially interested in any land, estate, or interest under this Act by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise howsoever; or
(b) Transferring any estate or interest under this Act to any other person to be held in trust –
may at any time lodge with the Registrar a caveat in Form N in the Second Schedule to this Act.”
[26] It is settled law that an Agreement for Sale and Purchase of land passes a beneficial or equitable estate to the purchaser – Foreman v Hazard [1984] 1NZLR 586, and see Familton v Nebraska Investments Limited (HC Christchurch, CIV- 2003-409-2488, 3 March 2004, Associate Judge Thomson) and Bevin v Smith [1994] 3 NZLR 648 (CA).
[27] The caveat in question here claims an estate or interest in the land under an Agreement for Sale and Purchase.
[28] The respondent’s opposition to this application is on the basis that the applicant does not have a caveatable interest, in that the agreement is no longer on foot, it being validly terminated by the respondent prior to it being confirmed as unconditional.
[29] The issue for determination, therefore, is whether the agreement was confirmed within its permitted timeframe, and therefore became unconditional prior to the purported cancellation.
[30]I now turn to deal with this issue.
[31] The starting point in this matter must be a consideration of the contractual terms agreed between the parties. As to this, clause 14.0 was added as a Further Term of Sale. It provided specifically as a condition that the purchaser had 10 working days first to obtain a LIM, and secondly to be “satisfied in all respects that all requisitions and relevant matters have been met by the vendor”. That there was some negotiation with respect to this special condition is clear, because originally the proposed clause 14.0 in the agreement appeared to give the applicant 5 working days to approve the LIM. This period was extended to 10 working days when the agreement was finally concluded between the parties.
[32]This clause 14.0 goes on to state:
This clause is inserted for the sole benefit of the purchaser.
[33] In my view, clause 14.0 provides the applicant, as purchaser, with a substantial discretion with respect to the LIM to either approve it or otherwise, having regard to what it understands the respondent might have done to meet any requisitions or relevant matters relating to the property.
[34] This differs significantly from the provisions and procedure contained in the standard printed clause 8.2 of the agreement. Clause 8.2 provides for a process whereby once a LIM is obtained, a purchaser can give a notice to a vendor stating matters in respect of which its approval of the LIM is withheld, and allowing the vendor a period of time after receipt of the purchaser’s notice to advise whether the vendor is able and willing to remedy those matters. If a vendor confirms that it will remedy the outstanding matters, then it is to be a requirement of final settlement of the purchase that the work required to be undertaken by the purchaser is complied with.
[35] As I see it, this is a very different procedure from that which would apply under clause 14.0 of the agreement. It envisages a process taking a reasonably lengthy period of time. In my view, this is significant in terms of the present agreement. That agreement was entered into on 26 October 2004, and importantly it
provided for a settlement and possession date of 30 November 2004 “or earlier by mutual agreement”.
[36] If the LIM requisition procedure outlined in paragraph 8.2 of the agreement was to apply here, then potentially under that process the purchaser, from the date the agreement is signed (26 October 2004), has:
a)5 working days to obtain the LIM – by 2 November 2004.
b)15 working days from the date of the agreement to give notice to the vendor advising of the matters in respect of which it does not approve the LIM – by 16 November 2004.
c)A further 5 working days to advise the purchaser whether the vendor is able and willing to comply with the purchaser’s notice – that is by 23 November 2004.
d)A further 5 working days period from that date to advise whether the purchaser might waive its objection to the LIM in the event that the vendor was unable or unwilling to comply with the purchaser’s notice
– this period expires potentially on 30 November 2004 – the nominated settlement date.
[37] Given these potential paragraph 8.2 timeframes, if that clause 8.2 was to apply here, it is possible that the parties to this agreement might not know until 30 November 2004 whether the agreement was unconditional or not, notwithstanding that the agreement itself calls for settlement on the same date or earlier. In my view, this makes little sense.
[38] It lends weight to the argument that the only proper interpretation of the agreement between the parties here is that clause 14.0 is to prevail, and clause 8.2 is to have no application.
[39] This is reinforced by the specific provision in the agreement’s General Terms of Sale under clause 1.3(3) noted above which states:
(3) Where any inserted term (including any Further Terms of Sale) conflicts with the General Terms of Sale, the inserted term shall prevail.
The clear effect of this provision is to confirm that clause 14.0 is to prevail here, as it directly conflicts with clause 8.2.
[40] In my view, this conclusion is further supported by the passage referred to me by counsel for the respondent from Chitty on the Law of Contract (paragraph 12.07(O)) which states:
Where the contract is contained in a printed form with writing superadded the written words if there should be any reasonable doubt about the sense and meaning of the whole are to have greater effect attributed to them than the printed words in as much as the written words are the immediate language in terms selected by the parties themselves for the expression of their meaning and the printed words are a general formula adapted equally to their case and that of all other contracting parties in similar occasions and subjects. Nevertheless it is open to the parties to stipulate in their printed conditions of contract that written conditions appended to the printed form are not to override, modify or effect in any way the implication or interpretation of that which is contained in the printed conditions and effect must then be given to such a stipulation even though this is contrary to the ordinary rules.
[41] In my view, this accords with the general essence of this agreement which envisaged that the parties would know some two weeks after the contract was signed whether or not it was unconditional with a settlement date provided for some three weeks later.
[42] I reject, therefore, the arguments put forward by counsel for the applicant that although unstated, under clause 14.0 additional steps were required to be undertaken giving the applicant an opportunity to provide notice to the respondent of its LIM requisitions, and the respondent an opportunity to give notice as to whether it could comply or not, with the purchaser then having a further notice opportunity to waive the requirement. The words used in clause 14.0 simply do not provide for this process, nor do the timeframes envisaged, in my view, allow for this procedure to be sensibly instituted.
[43] I find that by electing to insert clause 14.0 into the contract, both the applicant and the respondent first created shorter timeframes for dealing with LIM
matters, and secondly avoided the comprehensive list of procedures that were required to be undertaken by the parties in relation to the LIM as outlined in the standard clause 8.2 of the agreement.
[44] I reject too the suggestion from the applicant that it had an option exercisable by the 17th of November 2004 to waive its objection to the LIM. This contention cannot be supported, given the application of clause 8.2, and indeed the broad timeframes envisaged under the agreement.
[45] Given my finding that clause 14.0 applies here, then I am satisfied that when the respondent formally cancelled the contract on 16 November 2004, he was entitled to do so. Once the applicant’s solicitor advised on 3 November 2004 that “my client does not approve the LIM”, and the respondent through his solicitor on 10 November 2004 then indicated first that it was unlikely that any requisitions raised by the applicant would be met, and secondly, asked the question whether the applicant was going to confirm the contract on that basis and nothing further happened, then the condition in clause 14.0 clearly was not satisfied, and it was open to the respondent to cancel the contract on 16 November 2004 as he did.
[46] At best, from the applicant’s point of view, it might be argued that the date for satisfying the condition in clause 14.0 could have been extended on a day to day basis after its due date on 10 November 2004. But, in any event, clearly the respondent cancelled the agreement on 16 November 2004 well before any attempt was made by the applicant to waive the condition and declare the contract as unconditional.
[47] Certainty is clearly required with property agreements and in matters of this kind. Counsel for the respondent has advised that the respondent has entered into another unconditional agreement for the sale of this property, based upon the position that since November 2004 the present agreement with the applicant is at an end.
[48] I find, therefore, that the agreement was validly cancelled by the respondent on 16 November 2004, on the basis that it had not become unconditional by that date, and the time for satisfying the condition in clause 14.0 had expired.
[49] The applicant, therefore, as I see it, has been quite unable to establish a reasonably arguable case that it has a caveatable interest in the property in question in terms of the established tests. The beneficial or equitable estate in the property which the applicant may have had when the contract was signed on 26 October 2004 came to an end when the agreement was validly cancelled by the respondent on 16 November 2004.
Conclusion
[50]The applicant’s application to sustain the caveat in question is unsuccessful.
[51] An order is now made that caveat no. 6230604.1 registered against Certificate of Title 46C/357 shall lapse.
[52] The respondent has been successful in opposing this application, and is entitled to an award of costs. Costs are therefore awarded against the applicant in this matter upon a category 2B basis, together with disbursements as fixed by the Registrar.
Associate Judge D.I. Gendall
Delivered at 2.00pm on 18 March 2005.
Solicitors:
P. Brinsley, Solicitor, Wellington for ApplicantP. Harrison, Solicitor, Porirua for Respondent
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