Werribee Trust Limited v Santa Rosa Developments Limited

[2004] NZCA 413

IN THE COURT OF APPEAL OF NEW ZEALAND

CA129/04

BETWEEN

WERRIBEE TRUST LIMITED

Appellant

AND

SANTA ROSA DEVELOPMENTS LIMITED

Respondent

Hearing:         24 November 2004

Court:             Anderson P, McGrath and Hammond JJ Counsel:       R B Stewart QC for Appellant

D E Smyth for Respondent Judgment: 6 December 2004

JUDGMENT OF THE COURT

AThe appeal is dismissed.

BThe appellant must pay costs to the respondent of $6,000 together with the reasonable disbursements of the respondent. In the event that counsel cannot settle the disbursements, same are to be fixed by the Registrar. Those disbursements are to include the reasonable travel and accommodation costs of counsel.

WERRIBEE TRUST LIMITED V SANTA ROSA DEVELOPMENTS LIMITED CA CA129/04 [6 December 2004]

REASONS

(Given by Hammond J)

Table of Contents

Para No

Introduction  [1]

The facts

The agreements  [6]

The events of 24 October 2003  [12]
The events of Tuesday 28 October 2003  [21]

The issues in the case  [26]

The High Court judgment  [29]
Discussion  [31]

The additional considerations  [42]

Conclusion  [43]

Introduction

[1]        We have before us an appeal from a judgment of the High Court in a vendor and purchaser dispute.

[2]        The vendor took the view that the purchaser had not complied with its obligations under certain agreements for sale and purchase, and treated them as at an end. The purchaser lodged a caveat, and then moved for an order that the caveat not lapse.

[3]        That application was determined by Venning J in a reserved judgment delivered on 28 June 2004 (CIV 2003-404-007208). The Judge held that the caveat could not be sustained. He discharged an interim order which had held the position between the parties.

[4]The purchaser now appeals to this Court.

[5]        The facts are within a narrow compass and not in dispute. It is the legal effect, if any, of those facts with which we must be concerned. Broadly, the legal issues are whether, as the purchaser asserts, the strict requirements of the written agreement as to payment of a substantial deposit were set to one side, at least for a short time; or whether, as the vendor says, it was entitled to exercise its rights, untrammelled by the constraint of what would amount to a promissory estoppel arising out of something said by the solicitor for the vendor prior to cancellation. There is also an argument as to whether the vendor’s conduct was “misleading” (in the same respect) under the Fair Trading Act 1986.

The facts

The agreements

[6]        The vendor (“Santa Rosa”) and the purchaser (“Werribee”) contemporaneously entered into eleven separate agreements for sale and purchase, whereunder Werribee agreed to buy eleven apartments in a development at Gulf Harbour. These apartments were to be constructed by Santa Rosa.

[7]        Clause 21 of these agreements required deposits totalling $250,000 in all to be paid on settlement of an unrelated agreement between Werribee and a company, Keen People, which is a company related to Santa Rosa. Essentially, Keen People was to credit $250,000 from the Keen People/Werribee transaction to satisfy the Werribee deposits in the transactions which are before us.

[8]        Clause 21 was subsequently varied, such that $32,337.94 was credited towards the deposits as envisaged by cl 21. The balance of $217,666.06 was to be paid on 11 October 2003.

[9]        Clause 3.1 of the agreements provided that Santa Rosa was not entitled to cancel the agreements for non-payment of the deposits, unless it first gave Werribee seven working days’ notice in writing of its intention to cancel, and Werribee failed within that time to pay the requisite deposits.

[10]      Werribee said that, prior to 11 October 2003 it became concerned about certain matters which it contended had arisen in relation to the earlier development with Keen People. It asserted that there were leaks in some units; the construction had not gone forward as required; and there was a lack of progress reports. There is  a dispute - which is of no consequence to the matters we have to determine - whether these concerns were well founded, or whether Werribee was simply raising these concerns because it did not have sufficient funds to pay the necessary deposits timeously.

[11]      In any event, it is common ground that Werribee in fact failed to pay the balance deposit monies on 11 October 2003; and that, on 15 October 2003, Santa Rosa served appropriate notices on Werribee’s solicitors advising that Santa Rosa would (in terms of cl 3.1) cancel the agreements if the outstanding deposit monies were not paid within seven working days. It was also common ground that the seven working days expired at 5.00pm on Friday 24 October 2003.

The events of 24 October 2003

[12]      It was then in this general context that certain critical exchanges took place between the solicitors for Werribee (Mr Walters) and Santa Rosa (Ms Rose).

[13]      At 10.12am Mr Walters e-mailed Ms Rose offering to vary the agreement to provide for a deposit of $100,000 (on top of the sum already paid), on the basis that that sum could be released immediately to Santa Rosa. Mr Walters said this was a reasonable compromise given that Werribee was strictly obliged to recover its deposit from the Gulf Harbour vendors; the concerns his client had raised; and that there had been certain irregularities with respect to Gulf Harbour body corporate levies.

[14]      At 1.50pm Ms Rose left a voicemail message for Mr Walters in these terms: “Not yet been able to obtain instructions from our client. Will advise John when we do”.

[15]      At  1.55pm  Mr Walters  had  a  telephone   conversation   with   Ms Rose. Mr Walters said this was in relation to the proposal he had advanced. He deposed:

She (Ms Rose) said she did not have any instructions in respect to my proposal. I asked her if she had instructions to cancel  the contracts at the  end of the day if the deposit was not paid. She said that she did not have instructions to that effect and that the matter would have to be carried over until Monday. I reminded her that Monday was a holiday (Labour  Day).  She said that the position would have to wait until Tuesday.

[16]Ms Rose made a file note of that conversation, which reads:

I said I have not been able to obtain instructions from our client in regard to the deposits and in regard to the offer by Werribee to alter deposit to

$100,000.

He asked if I had instructions to cancel the contracts if the deposits were not paid today. I said as this stage no - but would get back to John if I received instructions from our client.

[17]At 2.21pm Mr Walters sent Ms Rose an e-mail which read as follows:

Further to our telephone discussion, I confirm as follows;

(1)You’ve been unable to get instructions from your client.

(2)You do not have instructions to cancel today if the deposit is not paid today.

(3)You intend to await for instructions on Tuesday. That should be to the end of the day. We will be in touch first thing Tuesday morning to discuss.

[18]      At 3.30pm Mr Walters left his office for the day on account of the long weekend.

[19]At 5.01pm Ms Rose e-mailed Mr Walters in these terms:

With respect to your message I confirm that when I spoke to you I did not have instructions from my client to cancel the contracts if the deposit was not paid today. Neil Dowsett of this office has now received instructions from Layne Kells, the Director of Santa Rosa Developments Limited to cancel the contracts if the deposit is not received by 5.00pm today. Accordingly if we do not have confirmation by 5.00pm today the contracts will be cancelled.

With respect to your point (3) to clarify our position I did not advise that I would wait until the end of the day (Tuesday).

[20]      There was no response from Mr Walters.  At  5.08pm  Ms Rose  wrote  to  Mr Walters referring to the deposit notices of 15 October 2003, noting that payment of the balance of the deposit had not been received, and cancelling the eleven agreements.

The events of Tuesday 28 October 2003

[21]      Mr Walters arrived back at his office on the Tuesday morning. He e-mailed Ms Rose at 9.44am. Referring to her e-mail the previous afternoon, he said:

This was not received until after 5.00pm last Friday after I had left for the long weekend, and I have only just seen it on arriving to the office this morning. I have also received this morning your fax letter of cancellation, again received in our office after closing on Friday at 17.05pm. You admit that you didn’t have instructions to cancel when we spoke on Friday and I recorded immediately afterwards that you had also said in the circumstances that you would therefore have to wait until Tuesday. Accordingly, my client is entitled to rely on an extension until the end of business today and your cancellation notice is invalid. It is also pertinent that we have never received a response from you to any of the numerous concerns my client had expressed in relation to the development or to my client’s offer to pay $100k deposit on a full release basis.

Your client’s actions constitute a repudiation of the contracts. I will be registering caveats over the title(s) to the development today and taking instructions to enforce the agreements. Litigation can be averted if you confirm the extension until the end of business today and advise whether or not you accept the variation of the deposit as proposed, so my client knows how much to pay.

[22]Ms Rose responded by e-mail as follows:

We note in your e-mail of 2:21 pm on 24 October 2003, you recorded that we did not have instructions. Accordingly you were fully aware at all times that our client had not agreed to any extension.

The writer has consulted her  file  notes  to  our  conversations  on  Friday  24 October 2003. We confirm that you telephoned the writer and that you were advised that the writer had not been able to obtain instructions from our client in regard to the deposits and in regard to the offer by your client to alter the deposit to $100,000.00. Subsequent to that telephone conversation, Mr Dowsett of this office received instructions from our client that if payment of the deposit was not made by 5:00 pm we were to cancel the agreement.

The writer did not at any stage grant your client an extension of the payment date until Tuesday. The writer simply stated that if she did not obtain instructions on Friday, then she would seek instructions again on Tuesday.

It is incorrect to state that your client is entitled to rely on an extension until the end of business on Tuesday simply because the writer advised you that we did not have instructions. Our cancellation notice is valid. In the circumstances your client has no basis to lodge a caveat.

[23]      Later that day, Mr Walters’ law firm tendered a personal cheque drawn on a company called Blue Sky Holdings Limited,  in  an  amount  of  $216,662.06,  to  Ms Rose’s firm.

[24]      Mr Dowsett,  a  principal  in  Ms Rose’s   firm,   returned   the   cheque   to Mr Walters with a covering letter which read (in part):

You will recall that the agreements have already been cancelled and we return your client’s cheque unbanked.

[25]      Correspondence then flowed between the law firms, the caveat was lodged and the present proceedings were instituted.

The issues in the case

[26]      The appellant’s case was put, both in the High Court and in this Court, in two ways.

[27]      First, it is claimed that the statements made by Ms Rose as to taking instructions were such  that,  to  use  Mr Stewart’s  words,  “she  thereby  induced  Mr Walters to believe that Santa Rosa’s rights to cancel would be kept in abeyance until the instructions were received and communicated and Werribee given an opportunity to make payment if the instructions were to decline the proposal and to cancel.”

[28]Secondly, Mr Stewart said:

If the communication of the instructions was withheld until such time as it would be impossible for Werribee to comply with a notice, then a strong case exists on the basis of deceptive and misleading conduct in terms of the Fair Trading Act given the communications and representations earlier in the day.

The High Court judgment

[29]      Venning J felt able to deal with the case shortly. In a sense, he conflated both of the appellant’s concerns, insofar as he saw the central issue to be what (if anything) had been held out by Ms Rose. As to that issue, the Judge held, “there was no commitment by Ms Rose on behalf of her client to any particular course of action. And, there [was] nothing that she said, taken objectively that could amount to a representation no steps would be taken by or on behalf of Werribee to cancel the contract until Tuesday 28 October.”

[30]      The Judge was further of the view that “there were two other matters which [in any event] were fatal to Werribee’s case”. First, the cheque which was tendered was a personal cheque drawn on the account of Blue Sky Holdings Limited. On the authority of Otago Station Estates Ltd v Parker & Ors (CA158/03 10 June 2004)  that was not a legal tender. Payment, in the context of this case, required a legal tender by bank cheque or bank transfer of cleared funds. Secondly, for some reason the cheque was in the wrong sum. It was for $1,000 less than what would have been required to be tendered, in full.

Discussion

[31]In our view the Judge was plainly correct to reject this claim.

[32]      As to the first head of claim (promissory estoppel), it is common ground that there were settled, and precise, contractual obligations between these parties. To avoid the effect of a lawful notice, the purchaser either had to procure a variation of the agreement (which has never been suggested as having been effected), or it had to demonstrate that there had been an unequivocal assurance by a person in a position to give such an assurance, that there would be a “deferment”, to use a neutral term, of the exercise of the contractual right to cancel, at least until Tuesday 28 October.

[33]      Mr Stewart relied strongly on certain judgments of the High Court of Australia in Legione v Hateley (1982-83) 152 CLR 406. That was a case concerning a contract for a sale of land which provided for the payment of the balance of the

price on 1 July 1979. There was a condition that time was of the essence, but a party could not enforce his rights and remedies unless written notice had been given, affording a period of 14 days’ grace. The purchaser did not settle on the due date.  On 26 July 1979 the vendor served a notice specifying as defaults the purchaser’s failure to pay the residue of the price and to pay interest at the rate of 15 percent per annum. On 9 August 1979 the purchaser’s solicitor telephoned the vendor’s solicitor and informed a clerk, whom he was told was dealing with the matter, that the purchaser had arranged bank finance and would be ready to settle on 17 August 1979.  The clerk said, “I think that’ll be all right but I’ll have to get instructions.”   On 14 August 1979 the vendor claimed that the contract had been rescinded in consequence of the notice, and a later tender of the residue of the price was refused.

[34]      Mason, Brennan and Deane JJ had no difficulty in accepting that promissory estoppel should be accepted in Australia as applicable to preclude the enforcement of rights, at least between the parties to an existing contract. However, the real issue in the case was, as in the case before us, whether on the facts any such promissory estoppel had been made out.

[35]      Mason and Deane JJ were of the view that “plainly” the statement made by the solicitor’s clerk:

…could not be treated as an agreement or representation that the vendors would extend the time for settlement until 17 August 1979. Nor can that statement properly be seen as containing any representation that, pending communication of instructions, the purchasers could, with impunity, disregard the time allowed for settlement by the notice of rescission. To the contrary, Miss Williams’ statement that she thought it would be all right but would have to get instructions intimated that she was not in a position to agree to what was, on a fair interpretation of Mr Gardiner’s account of the conversation, being put to her as a fait accompli (at 440).

[36]      Two Judges (Gibbs CJ and Murphy J) who formed a minority on this issue took the view that, on the facts:

The statement by Miss Williams was in our opinion both intended and likely to induce a belief in the mind of the purchaser’s solicitors that the vendors would not enforce their strict legal rights until they indicated their intention to do so (at 422).

[37]      Unsurprisingly, Mr Stewart urged on us that we should take the same view of the instant case as that taken by Gibbs CJ and Murphy J in Legione v Hateley.

[38]      We accept, as did the High Court of Australia, that promissory estoppel could arise in circumstances of the general character which are before the Court in this instance. Having said that, the difficulties in the way of a claimant are manifest.  First there is the doctrinal difficulty which was clearly articulated by Mason and Deane JJ, namely that the statement relied upon must be clear and unambiguous. Secondly, that doctrinal consideration is reinforced by the need for certainty in conveyancing practice. It would be quite inappropriate for relatively  loose statements in conversations between solicitors or their employees, in circumstances like the present, to subvert the precise terms of agreements. If Mr Walters was going to secure the deferment he was  apparently seeking for  his  client  (until  Tuesday  28 October) it was necessary that he do so in precisely understood terms, for it to have the quality of an assurance which would deflect or defer, at least for a time, Santa Rosa’s contractual rights.

[39]      To return to the facts of this matter, we entirely agree with the High Court Judge that there was no commitment by Ms Rose on behalf of her interests to any particular course of action. Ms Rose did not say, and Mr Walters could not reasonably infer, that an assurance of a deferment was being advanced. Ms Rose did not hold out anything beyond that she would get back to Mr Walters “if [she] received instructions from [her] client”. It follows that the Judge was correct to say, as he did, “the way Mr Walters left the matter there was always a risk that Ms Rose would receive instructions about the matters raised and those instructions might be to cancel if the deposit was not paid ([30])”.

[40]      It was incumbent on the appellant in this appeal to demonstrate that the Judge was wrong and that there had been an assurance or representation of the requisite character which had been made in favour of the purchaser. Not only was the view which the Judge took one which was open to him, but we think he was plainly right. Nothing in what Ms Rose said amounted to an assurance of the requisite character that no steps would be taken by or on behalf of Werribee to cancel the contract until Tuesday 28 October.

[41]      Once that view of the facts is taken, as it has been both in the High Court and by us, then the Fair Trading Act claim also fails at the outset: there has been no misleading statement by or on behalf of Werribee.

The additional considerations

[42]      In our view, the Judge was also correct to say that there were other fatal aspects to the plaintiff’s claim. First, even when it did endeavour to tender  settlement on the Tuesday, the sum tendered was $1,000 less than it should have been. Secondly, the cheque put forward was a personal cheque of a third party. The vendor was not obliged to accept it on that count and also because there was a failure to comply with the decision of this Court in Otago Station. It is correct that  leave has been granted to appeal in that case, to the Supreme Court of New Zealand. However the decision stands, unless and until it is overruled by that Court.

Conclusion

[43]Accordingly the appeal will be dismissed.

[44]      The respondent will have costs of $6,000 together with its reasonable disbursements.

Solicitors:

Walters Law, Auckland for Appellant Simpson Dowsett Mackie, for Respondent