Wallace v Studio New Zealand Ltd
[2021] NZCA 392
•18 August 2021 at 2.00 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA284/2021 [2021] NZCA 392 |
| BETWEEN | BRUCE JOHN WALLACE |
| AND | STUDIO NEW ZEALAND LIMITED |
| Hearing: | 21 July 2021 |
Court: | Miller, Thomas and Wylie JJ |
Counsel: | D J Chisholm QC for Appellants |
Judgment: | 18 August 2021 at 2.00 pm |
JUDGMENT OF THE COURT
AThe respondent’s application to adduce further evidence is granted.
BThe appeal is allowed. Order that Caveat No. 11884633.1 lapse. This order is not to take effect until 4.00 pm on 1 September 2021.
CThe respondent must pay the appellants one set of costs for a standard appeal on band A basis with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Wylie J)
Introduction
The appellants — Bruce Wallace, Sarah Wallace, TLR Wallace Trustee Company Ltd and Tonea Trustee Company Ltd (the trustees) — appeal a judgment given by Associate Judge Andrew in the High Court at Auckland on 3 May 2021.[1] The Judge ordered that a caveat lodged by Studio New Zealand Limited (SNZ) over a property in Porchester Road, Takanini, Auckland (the property) not lapse, conditional on SNZ taking all reasonable steps to prosecute the substantive proceedings extant between the parties.
[1]Studio New Zealand Ltd v Wallace [2021] NZHC 959 [High Court judgment].
The trustees assert that the Associate Judge erred and that an order should be made that the caveat lapse. SNZ maintains that it has a reasonably arguable case to support the interest claimed in the caveat and that the Associate Judge was correct to so conclude.
SNZ applied for leave to adduce further evidence on the appeal. This application was initially opposed by the trustees. In the event, both counsel consented to the further evidence coming in and accordingly we grant the application.
Factual background
Initial negotiations
Bruce and Sarah Wallace, TLR Wallace Trustee Company Ltd and Tonea Trust Company Ltd own a one-half share of the property as trustees of the BJ Wallace Trust. They own the other half share as trustees of the SJ Wallace Trust.
SNZ was incorporated in February 2009. Its sole director is Andrew Coldicutt. The company was incorporated with the intention that it would develop a purpose‑built screen production complex in Auckland.
In mid-2016, the trustees were advertising the property for sale. Mr Coldicutt saw the advertisement. He considered that the property might be suitable for the development of the screen production complex. Mr Coldicutt and his business partner, Richard Glenn, approached the trustees and expressed an interest in the property. Discussions between the parties and other entities associated with the Wallace family ensued. In the course of these discussions, SNZ disclosed what it proposed to do with the property. A confidentiality agreement was signed by Bruce Wallace, as well as by two other members of the Wallace family, James Wallace and Robert Wallace, and there were then further discussions about how SNZ’s proposal could best be advanced.
Robert Wallace is Bruce Wallace’s son. He is the sole director of a company called Tonea Investments (NZ) Ltd. The discussions included a proposal whereby Tonea Investments (NZ) Ltd would become a 50 per cent party in a joint venture with an entity associated with Messrs Coldicutt and Glenn. A limited partnership was also discussed. There is a dispute between the parties as to how far these discussions went and what, if any, obligations were assumed. Bruce Wallace says that steps were taken to investigate and ascertain whether it was possible to set up a joint venture with Messrs Coldicutt and Glenn but that matters were not advanced to the point where any commitments were made. SNZ says that there was a joint venture to facilitate the development of a screen production complex on the property and that fiduciary obligations are owed.
In October 2016, the trustees entered into an agreement with Mr Glenn as agent for a company to be formed. Mr Glenn agreed to purchase the property for $37 million. The agreement contained a number of detailed clauses. In particular, there was reference to an agreement between Spark New Zealand Trading Ltd and the trustees relating to the development of the property. Further, the agreement was conditional on Mr Glenn completing due diligence and confirming that the property was suitable for his requirements by 28 February 2017. In the event, this agreement was not confirmed and it did not ultimately proceed.
Notwithstanding that, the resource consents required for the establishment of a screen production complex on the property were obtained. Almost all of the costs involved were met by Tonea Investments (NZ) Ltd and another Wallace company, Wallace Group Ltd. SNZ for its part wrote to the Minister for Economic Development seeking funding for the project and, in April 2020, applied to Crown Infrastructure Partners seeking funding for the project as a “shovel ready” infrastructure project. Funding of $40 million was approved, subject to various conditions.
Despite these various developments, the trustees ultimately decided that they did not wish to commit the property to advance any joint venture with SNZ. Messrs Bruce and Robert Wallace communicated this decision to Messrs Coldicutt and Glenn at a meeting on Tuesday 25 August 2020. The advice was confirmed in a letter dated 27 August 2020 sent by Robert Wallace to Messrs Coldicutt and Glenn on Tonea Investments’ letterhead. Relevantly, that letter read as follows:
As I explained at the meeting the trustees have come to the conclusion that they are not willing to commit their land to a project to be undertaken by a joint venture or partnership. There are simply too many complexities and potential areas of conflict for them and us to feel comfortable in running the project through a joint venture or partnership over what could be five years or more.
It is therefore time to bring our negotiations to a conclusion.
The trustees have, however, asked me to confirm that they are willing to allow you one final opportunity (perhaps with other investors) to undertake the project. They would be prepared to enter into a conditional sale of the property at the agreed price of $53,500,000 (plus GST if any). The sale could be conditional on your undertaking due diligence and the trustees would allow you until 20 December 2020 to put your arrangements in place and complete your due diligence.
If that opportunity is of any interest to you could you please present a purchase proposal by the end of next week.
Mr Glenn replied to Robert Wallace by email on 4 September 2020. His reply read as follows:
We are disappointed that the partnership has to end, but understand the Trustees’ position. We value the relationship we have developed over the last few years and trust that we will still have opportunities to work with you and the Wallace team as part of the screen development project.
Please consider our attached offer in the context of the following variables
·Dissolution of partnership efforts which have existed over several years, aggravated by Covid and Christmas, means that a proposed option period to 20 December is not reasonable; a longer option period is required
·The price of $53.5m when your own proposal included committing the land for a 3 year period interest free, is also not justified in the situation of a short term option. We feel that this can be dealt with in different ways
oFor an option period to [4] March 2022 (an even split of the 3 year interest free period), a price of $53.5m would be fair and that is how our accompanying agreements have been drafted. We think that would include some level of involvement from you or Tonea as preferred. We are also amenable to considering amendment to reflect an option period to say [30] June 2021 at a price of $50m which would be reasonable in the circumstances
oIrrespective of the option period, we will be focused on achieving as early resolution for the Trustees as possible
·The agreements contain provisions relating to Spark per the original arrangements. We are both aware however that it may be possible to simplify arrangements with Spark to everyone’s advantage. We trust that you would be supportive of a joint approach/discussion with Spark to consider a variation to the historic arrangements.
·We are assured by Russell McVeagh [SNZ’s solicitors] that the remaining terms of the attached option and agreement should be considered ‘usual’, including provisions protecting SNZ’s intellectual property and contribution to increased value of 296
A proposed option agreement between the trustees and another entity — NZ Studios LP — was attached to the email. The option ran to some 65 pages. It included an option notice, an overarching agreement for sale and purchase and various attached schedules, including general terms of sale, further terms of sale, a resource consent transfer form, a deed of acknowledgement, a copy of the Spark agreement, deeds of restraint and the 10th edition of the agreement for sale and purchase of real estate form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society.
This option proposal was not acceptable to the trustees and Bruce Wallace replied to Messrs Coldicutt and Glenn by email on 7 September 2020. It read as follows:
We have received and reviewed the documents forwarded by you in relation to 296 Porchester Road, Takanini.
Our correspondence of the 27th of August 2020 detailed a simple offer which afforded you both one final opportunity to undertake the project independently of us through the purchase of 296 Porchester Road. The terms and price which the trustees would accept were detailed within that correspondence, that is our offer.
If you avail yourselves of the opportunity as presented, then the property and the project will be yours. If you do not or are unsuccessful meeting the terms and price, then as the landowner and the holder of the consent we will look to capitalize of any commercial opportunity that either land or consent provide.
If you wish to represent your offer, we will give you until close of business (5.00pm) Wednesday 9th September 2020 failing which the offer will be withdrawn.
Mr Coldicutt replied to both Robert and Bruce Wallace care of Tonea Investments on 9 September 2020. His letter read as follows:
1.We refer to your letter dated 27 August 2020. Studio New Zealand Limited accepts the offer made by the trustees of the BJ Wallace Trust and SJ Wallace Trust for Studio New Zealand Limited to purchase the Property at a purchase price of $53,500,000.00 plus GST (if any) conditional on due diligence by 20 December 2020.
2.We enclose a signed sale and purchase agreement which formally documents the sale. We have included provisions dealing with the transfer and use of the resource consents and associated materials and tailored the due diligence clause to reflect the current circumstances.
3.We look forward to receipt of the agreement duly signed by the trustees as soon as possible so that we can progress with undertaking our due diligence.
The letter attached a signed agreement prepared by SNZ’s solicitors. The agreement incorporated a number of clauses from the standard agreement for sale and purchase, deleted other clauses and added various further terms of sale. A deposit of five per cent was payable to the trustees’ solicitors within 10 working days of satisfaction or waiver of the conditions, to be held by the solicitors as stakeholder pending settlement or cancellation. It was proposed that settlement would take place 50 working days after the due diligence date. The due diligence condition was required to be satisfied by 20 December 2020. It required that the purchaser be satisfied with the results of a due diligence investigation in relation to the property and the development, including funding, the costs of construction, the availability of occupiers and the terms on which occupiers would participate in the development. The agreement required that the benefit of resource consents procured by Tonea Investments (NZ) Ltd/Wallace Group Ltd be transferred. A resource consent transfer form was attached. The Spark agreement was referred to and there were various provisions as to how that agreement was to be dealt with. Obligations of confidentiality were included.
The trustees refused to execute this sale and purchase agreement. Bruce Wallace has deposed that the terms of the agreement included matters that had not previously been discussed or agreed.
Post-caveat discussions
SNZ lodged a caveat — Caveat No. 11884633.1 — on 15 October 2020. The caveat asserted that SNZ had an estate or interest in the Porchester Road property pursuant to:
[An a]greement for Sale and Purchase between Registered Owners Bruce John Wallace, Sarah Jane Wallace, Tonea Trustee Company Limited and TLR Wallace Trustee Company Limited as to a 1/2 share and Sarah Jane Wallace, Bruce John … Wallace, Tonea Trustee Company Limited and TLR Wallace Trustee Company Limited as to a 1/2 share as vendor and the Caveator Studio New Zealand Limited as purchaser pursuant to a letter dated 27 August 2020, an email dated 7 September 2020 and a letter dated 9 September 2020.
The trustees applied to the Register General of Land under s 143(1)(b) of the Land Transfer Act 2017 for the lapse of the caveat. Notice of this application was given to SNZ’s solicitors on 5 November 2020. SNZ then applied to the High Court for an order that the caveat not lapse under s 143(3)(a).
The parties’ respective solicitors then engaged in detailed correspondence and participated in various without prejudice discussions. Bruce Wallace deposed the following:
(a)The trustees were still prepared to negotiate in good faith with SNZ.
(b)By 18 November 2020, an agreement acceptable to the trustees and SNZ had been negotiated. It included a 20 December 2020 due diligence date and a full and final settlement clause.
(c)The trustees’ solicitors sent an execution copy of the agreement to SNZ’s solicitors on 18 November 2020, pursuant to a request from SNZ, but SNZ failed to return an executed copy of the agreement to the trustees.
(d)SNZ was then given a deadline of 26 November 2020 to sign the agreement but it failed to do, without explanation.
On 14 December 2020, SNZ’s solicitors wrote to the trustees’ solicitors. They asserted that there was a mutual understanding between the parties that they were working together towards a joint venture and that the trustees were obliged to offer the property to SNZ on reasonable terms when they sought to withdraw from the joint venture. It was claimed that the terms on which the trustees offered the property were neither reasonable nor genuine, and, in particular, that the due diligence period was unreasonably short. It was suggested that the trustees’ failure to sell the property to SNZ on reasonable terms constituted a breach of their fiduciary obligations owed to SNZ.
In addition, it was said that the trustees were in breach of the agreement. One of the key terms of the agreement was that due diligence was to be completed by 20 December 2020, but that condition was premised on the expectation that the trustees would cooperate and do everything reasonably necessary to allow SNZ to complete its due diligence and investigation. It was asserted that that cooperation had not been provided by the trustees and that the trustees had breached their obligation to provide a signed sale and purchase agreement to SNZ. It was noted that without a signed agreement, SNZ was unable to secure funding and complete its due diligence. SNZ’s solicitors gave notice requiring the trustees to provide a signed sale and purchase agreement and extending the date for the fulfilment of the due diligence condition by Wednesday 16 December 2020.
The trustees’ solicitors replied rejecting the various assertions made by SNZ’s solicitors. They denied that there was a joint venture agreement between the parties or that the trustees were required to offer the property to SNZ. It was asserted that the trustees gave SNZ the opportunity to make an offer to purchase the property but stipulated that any offer had to have a date for completion of due diligence of 20 December 2020. It was denied that the correspondence amounted to a binding sale and purchase agreement.
On 21 December 20201, the trustees’ solicitors wrote to SNZ’s solicitors, again recording the trustees’ position that there was no binding agreement. However they asserted, without prejudice to that position, that if the correspondence at issue was found to constitute a conditional purchase agreement, the agreement was cancelled for non-fulfilment of the due diligence condition.
SNZ’s solicitors responded on 22 December 2020. They acknowledged that SNZ had not confirmed due diligence by 20 December 2020, but claimed that the trustees were responsible for that failure.
On 23 December 2020, SNZ filed proceedings against the trustees and Robert Wallace in the High Court at Auckland (CIV-2020-404-2544). Inter alia, SNZ asserts that it took all reasonable steps to satisfy the due diligence condition, including meeting various prospective funders. It says that each prospective funder required a signed sale and purchase agreement before making a commitment. It pleads that the trustees were asked but refused to provide a signed agreement, and that as a result it was unable to secure funding. It raises three causes of action, including breach of fiduciary duty and breach of an implied term. Relevantly that proceeding includes the following allegations:
(a)SNZ alleges that, pursuant to the joint venture, the trustees owed duties to it, including a duty of loyalty. It says that the trustees breached this duty by failing to act “reasonably and with fair dealing” when they purported to terminate the joint venture and by making an offer to sell the property on unreasonable terms. SNZ seeks a mandatory injunction requiring the trustees to provide a signed sale and purchase agreement, extending the period for fulfilment of the due diligence condition to a date at least 80 working days after the trustees provide such agreement.
(b)SNZ alleges that the trustees breached an implied term of the agreement requiring that they cooperate and to do everything reasonably necessary to allow SNZ to meet the due diligence condition, including by providing a signed agreement to enable SNZ to seek funding for the purchase of the property. SNZ seeks an order for specific performance requiring the trustees to provide a signed agreement and to extend the period for fulfilment of the due diligence condition.
These various allegations are denied by the trustees and by Robert Wallace.
In April 2021, the trustees and Robert Wallace filed a counterclaim against SNZ and its solicitors, Russell McVeagh, claiming damages for losses they allege they have suffered as a result of the caveat being lodged. The allegations made in the counterclaim are denied.
The High Court decision
After recording the factual background, the Associate Judge referred to relevant statutory provisions and legal principles. He considered that the issue before him was whether SNZ had established a reasonably arguable case that there was a legally binding agreement for the sale and purchase of the property. In order to resolve that issue, he identified two questions he considered required determination:[2]
(a)Did the email correspondence give rise to a binding agreement for the sale and purchase of the property?
(b)Did Bruce and Robert Wallace have actual or ostensible authority for the purposes of s 24 of the Property Law Act 2007 to bind all the trustees to the agreement?
[2]High Court judgment, above n 1, at [26].
The Associate Judge found that SNZ had established a reasonably arguable case that the correspondence exchanged can properly be considered as an offer by the trustees that was capable of acceptance, and that SNZ accepted that offer, giving rise to an immediate intention by the parties to be bound. Ultimately, the decisive factor was the language used in the correspondence. The Associate Judge found that the parties had reached agreement on all legally essential terms — namely, the purchase price and that the agreement was conditional on SNZ undertaking due diligence by 20 December 2020.[3] Any outstanding terms could be implied. He acknowledged that SNZ did not meet the due diligence condition by 20 December 2020, but considered that, in context, the proposition advanced by SNZ that a party cannot rely on its own default to justify the cancellation of an agreement was reasonably arguable.[4]
[3]At [34]–[37].
[4]At [46].
The Associate Judge then went on to deal with the authority of the parties to enter into the agreement he had found existed and the requirements of s 24 of the Property Law Act. He considered it was arguable that there had been a mutual understanding, reinforced by the actions of at least some of the trustees, that all of the trustees as registered proprietors were prepared and willing to sell the property.[5]
[5]At [54].
Finally, the Associate Judge recorded that he retained a discretion. He exercised that discretion in favour of SNZ. He considered that an order that the caveat lapse would prejudice SNZ.[6] Further, he declined to require SNZ to give an undertaking as to damages, because he considered this issue was best addressed by way of an application of security for costs in the substantive proceeding.[7]
Submissions
[6]At [60].
[7]At [64].
Mr Chisholm QC, appearing for the trustees, submitted that the appeal has a narrow focus — whether there is an arguable case for a binding agreement based on the three communications referred to in the caveat, and, if so, whether any such agreement remained on foot after 20 December 2020. He submitted that the opportunity presented to Messrs Coldicutt and Glenn by Robert Wallace in his email of 27 August 2020 was simply the opportunity for them to present a purchase proposal. He argued that the letter could not be objectively interpreted as an offer on behalf of the trustees capable of acceptance.
Mr Chisholm further submitted that Mr Glenn’s reply email of 4 September 2020 was a proposal in the name of a different party: NZ Studios LP. He then referred to Bruce Wallace’s email of 7 September 2020 rejecting the proposal and noted that Bruce Wallace then referred back to “the opportunity as presented” in Robert Wallace’s 27 August 2020 letter and invited Messrs Glenn and Coldicutt to “represent” their offer. He acknowledged that Bruce Wallace, in referring back to the 27 August 2020 letter, suggested that it contained a simple offer which afforded Messrs Coldicutt and Glenn one final opportunity to undertake the project independently. He argued that this statement must be considered in context — a layman writing to a layman and seeking a different commercial transaction from that suggested by Mr Glenn in his 4 September 2020 proposal. He submitted that objectively “the opportunity as presented” on 27 August 2020 had not changed There was nothing in the 27 August 2020 letter, or in Bruce Wallace’s email of 7 September 2020, which was capable of acceptance by SNZ. All that was being sought by the trustees was the presentation of a purchase proposal. Mr Chisholm further argued that there was no consensus on sufficiently certain terms on which the parties intended to be immediately bound. He relied on Carruthers v Whitaker[8] for the proposition that, in a situation of this kind, correspondence which takes place between parties has no contractual effect until a formal agreement is executed.
[8]Carruthers v Whitaker [1975] 2 NZLR 667 (CA).
Finally, Mr Chisholm referred to the argument advanced by Messrs Coldicutt and Glenn that the conditional agreement they say was entered into included an implied term requiring the trustees to provide a signed sale and purchase agreement. He submitted that the Associate Judge failed to consider whether such a term was reasonably arguable having regard to the established test for implied terms. The implied term suggested by Messrs Coldicutt and Glenn was not necessary to give business efficacy to the agreement, it was not so obvious that it went without saying, and it was not capable of clear expression. Even if there was such a term, the Associate Judge failed to consider whether the trustees were in breach of the term. Accordingly, Mr Chisholm argued that the appeal should be allowed and that the caveat should lapse.
Mr Mullins, for SNZ, argued that all the Associate Judge had to determine was whether or not SNZ had a reasonably arguable case for the interest claimed in the caveat. He relied on the context — in particular, the joint venture agreement. He said that when SNZ was informed that the business relationship with the Wallace entities was at an end, it received correspondence from Robert Wallace offering to sell the trustees’ land so that it could continue with the venture to develop a film studio on the property on its own. SNZ accepted that offer “as an exit” from the joint venture, and that it is now seeking to enforce its rights as a co-venturer through the substantive proceedings. Mr Mullins argued that the trustees’ arguments invite this Court to determine disputed issues of fact that are the subject of the substantive proceedings.
The elements required to establish a legally binding contract, according to Mr Mullins, are simply an intention to be immediately bound and an agreement, express or implied, or the means of forming an agreement on every term legally essential to the formation of the contract, or which the parties have manifested as being essential to their bargain. The only legally essential terms of an agreement for the sale and purchase of land are identification of the parties to the agreement, details of the interest being sold and the purchase price.
Mr Mullins referred to Carruthers v Whitaker, and argued that the inference the parties will only be bound on the signing of a formal written agreement was displaced in this case. Robert Wallace’s letter of 27 August 2020 was an offer by the trustees to sell the property to SNZ and Mr Glenn’s response on 4 September 2020 was a counter offer. Mr Bruce Wallace’s email of 7 September 2020 rejected the counter offer and renewed the original offer made in the 27 August 2020 letter. Finally, the letter from SNZ to Robert and Bruce Wallace on 9 September 2020 accepted the renewed offer. He submitted that it is reasonably arguable that the property was offered to SNZ, and that no amount of “fine grained quoting” can establish this position is inarguable.
As a result, Mr Mullins submitted that the Associate Judge did not err in his conclusion. He acknowledged that SNZ did not make the agreement unconditional by 20 December 2020 and that the trustees purported to cancel the agreement for non‑fulfilment of the due diligence condition. He submitted that the trustees cannot avoid the agreement by virtue of their own default, and that it was a matter of commercial common-sense that execution of a formal agreement was required so that SNZ could complete due diligence and obtain funding for the project. The implied term contended for by SNZ in this regard is reasonably arguable — namely, that it went without saying that the provision of formal documentation was necessary to assist in the due diligence process. This follows on from the history of dealings between the parties over the years, and that it is an issue which falls to be determined in the substantive proceedings. He argued that in the interim SNZ’s rights should be preserved by the caveat.
Analysis
Section 143 of the Land Transfer Act provides that the registered owner of an estate or interest affected by a caveat can apply to the Registrar for the lapse of the caveat.[9] The Registrar must give notice of the application to the caveator and the caveat lapses unless, within 10 working days after the date on which the Registrar gives notice, the caveator gives notice to the Registrar that an application has been made to the Court for an order that the caveat not lapse, and, within 20 working days after the caveator gives notice to the Registrar, an order made by the Court is served on the Registrar.[10] There are provisions permitting this time period to be extended until the Court can deal with the application.
[9]Land Transfer Act 2017, s 143(1)(b).
[10]Section 143(2) and (3).
The principles on which the jurisdiction to remove or extend a caveat falls to be exercised are not set out in the section but they have been developed by the Courts. As was noted by the Associate Judge, the relevant principles were succinctly restated by this Court in Philpott v Noble Investments Ltd as follows:[11]
[26] The applicable legal principles which governed the application to sustain the caveats, and which now govern this appeal, are as follows:
(a)The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;
(b)It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;
(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained — either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists;[12] and
(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.[13]
[11]Philpott v Noble Investments Ltd [2015] NZCA 342. Recently approved in Melco Property Holdings (NZ) 2012 Ltd v Hall [2021] NZCA 184 at [19] and [36].
[12]Sims v Lowe [1988] 1 NZLR 656 (CA) at 660; and Zwarst v Saxton [2012] NZHC 448 at [12].
[13]Stewart v Kaipara Consultants Limited [2000] 3 NZLR 55 (CA) at [23].
It was common ground between counsel that caveat lapse applications are summary in nature and that they are not suitable for deciding disputed questions of fact. Where there are disputed questions of fact, the proper course will normally be to extend a caveat until the conflicting claims of the different parties are determined in proceedings brought for that purpose. However, as noted in Philpott, an order for the removal of a caveat can be made if it is patently clear that the caveat cannot be maintained, either because there was no valid ground for lodging it in the first place, or because such a ground no longer exists.
We have reached the clear view now that there was no valid ground for lodging the caveat in the first place. We set out our reasons for that conclusion.
As has been noted by legal commentators,[14] it has long been usual to employ the language of offer and acceptance in considering whether it is reasonable to infer the existence of an agreement between parties. There are five major matters which the Court will be concerned with in determining whether a contract has come into existence, namely:
(a)the making of an offer;
(b)acceptance of the offer so that an agreement has been reached;
(c)the communication of the acceptance;
(d)the requirement of certainty, meaning whether the agreement reached by the parties contains a sufficiently definite statement of the terms by which the parties are to be bound; and
(e)whether the creation or continuance of the obligations undertaken is expressly or impliedly conditional on some event or some action.
[14]Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at [3.2].
Here, we are concerned principally with the first requirement — did the trustees make an offer which was capable of acceptance so as to create a contract?
We do not consider that the letter sent by Robert Wallace to Messrs Coldicutt and Glenn on 27 August 2020 contained an offer. Rather, it advised that the trustees were willing to allow Messrs Coldicutt and Glenn one final opportunity to purchase the property so that they could undertake the project. The letter advised that the trustees would be prepared to enter into a conditional sale of the property at $53.5 million (plus GST) and that any sale could be conditional on due diligence until 20 December 2020. Messrs Coldicutt and Glenn were invited to present a purchase proposal. There was no definite promise to be bound provided that certain specified terms were accepted. Rather, the letter was an invitation to treat. It manifested a willingness by the trustees to receive and consider an offer; it was an offer “to chaffer”[15] on everything other than price and the date for satisfaction of any due diligence condition.
[15]Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (CA) at 268. See also Gibson v Manchester City Council [1979] 1 WLR 294 (HL).
The email sent by Mr Glenn to Mr Wallace on 4 September 2020 did not contain a purchase proposal. Rather, he proposed a three year option. This proposal was rejected by the trustees.
Mr Bruce Wallace, in his email of 7 September 2020, renewed the 27 August 2020 offer made by Robert Wallace. He referred to the 27 August 2020 letter and to “the opportunity as presented”. He invited Messrs Glenn and Coldicutt to “represent” their offer. The renewed offer again invited a purchase proposal from Messrs Coldicutt and Glenn in accordance with the terms of the 27 August 2020 letter.
We accept that there are passages in the email of 7 September 2020 which suggest that the trustees were making an offer which was capable of acceptance. In particular, Bruce Wallace asserted that the letter of 27 August 2020 set out “a simple offer”; he said that the terms and price which the trustees would accept were detailed in the letter and that that was the trustees’ offer. Mr Wallace’s language was loose but we do not consider that his infelicity in expression lead to an offer evincing an invitation to be immediately bound if it was accepted. Read as a whole, the email does not depart from, or add to, the 27 August 2020 invitation to treat made by Robert Wallace.
Mr Coldicutt, in his 9 September 2020 letter, purported to accept the offer made by the trustees in the letter sent by Robert Wallace on 27 August 2020 but as we have noted, we do not consider that there was any offer in the 27 August 2020 letter capable of acceptance by SNZ. As a result, there was no binding contract.
This view is consistent with established authorities. The transaction contemplated by the parties was clearly a commercial contract of some complexity and of considerable value. In such cases, the exchange of a signed agreement is well known and the customary method of dealing.[16]
[16]See Carruthers v Whitaker, above n 8, at 671–673, citing Eccles v Bryant [1948] Ch 93 (CA) at 99 and 104; Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd [1981] 2 NZLR 385 (CA) at 388–389; Shell Oil New Zealand Ltd v Wordcom Investments Ltd [1992] 1 NZLR 129 (CA); and Verissimo v Walker [2006] 1 NZLR 760 (CA).
It is unreasonable to suppose that either the trustees or SNZ contemplated that anything short of the signing of an agreement by all parties would bring finality to their negotiations. We note the following:
(a)The agreement for sale and purchase entered into in October 2016 was prepared by solicitors. It contained complex and detailed terms, covering a large number of unusual matters.
(b)It was envisaged that any joint venture/limited partnership would involve the solicitors acting for the parties. SNZ’s solicitors were to prepare the requisite documentation, the solicitors for the trustees and the other Wallace interests were to review the draft, and the respective solicitors were to get the documents into a final form which the trustees could review. It was envisaged that the trustees’ solicitors would summarise the documents and get that summary to the trustees for consideration prior to execution of the documents. Bruce Wallace has deposed that this is the way in which matters proceeded and this assertion has not been denied by Mr Coldicutt.
(c)The 27 August 2020 letter, read objectively, invited Messrs Coldicutt and Glenn to present an offer for consideration.
(d)Any offer made had to be considered by the trustees and their unanimous approval was required before any agreement could be concluded.
(e)Messrs Glenn and Coldicutt arranged for their solicitors to prepare a draft agreement for execution by all parties. Mr Coldicutt endorsed the sale and purchase agreement prepared by SNZ’s solicitors on 9 September 2020 saying that this “formally documents the sale.” He said that SNZ looked forward to receipt of the agreement duly signed by the trustees so that “we can progress with undertaking our due diligence”. This confirms both that SNZ and its solicitors considered that a formal agreement was required to be executed and that due diligence had not and could not commence until the agreement was signed.
(f)The agreement which Mr Coldicutt proposed on 9 September 2020 was much more complex than a normal straightforward agreement for the sale of purchase of land. Terms such as the amount of the deposit, who it should be paid to and when it should be released, when settlement might occur, the transfer of resource consents (requiring third party involvement), the Spark agreement and how it might be varied to better suit SNZ’s requirements (again requiring third party involvement), and the like had not been agreed. While agreement was not required on all such terms in order to create a legally enforceable contract, the need to address these matters and the fact that they were addressed in the agreement tendered for execution goes to the parties’ intention.
(g)SNZ’s subsequent assertions through its solicitors and in its statement of claim reinforce the conclusion that both parties considered that a formal agreement was required. So does the agreement subsequently negotiated by the parties and forwarded by the trustees’ solicitors to SNZ’s solicitors on 18 November 2020 — see [19] above.
For these various reasons, we have concluded that there was no offer capable of acceptance made in the 27 August 2020 letter or in the 7 September 2020 email. It follows that there was no valid ground for lodging the caveat in the first place and that an order should be made that the caveat lapses. It also follows that we do not need to consider the arguments advanced in relation to implied terms and ostensible authority.
Mr Mullins invited us, in the event we concluded that the caveat should lapse, to defer the operation of any order for a period of 10 working days from the date of delivery of the judgment so that SNZ could consider its options. Mr Chisholm accepted that this would not be inappropriate.
Result
For the reasons we have set out:
(a)The respondent’s application to adduce further evidence on the appeal is granted.
(b)The appeal is allowed. We make an order that Caveat No. 11884633.1 lapse. This order is not to take effect until 4.00 pm on 1 September 2021.
(c)The respondent must pay the appellants one set of costs for a standard appeal on a band A basis with usual disbursements.
Solicitors:
Hornabrook Macdonald Lawyers, Auckland for Appellants
Lee Salmon Long, Auckland for Respondent
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