White v RR Ventures (2018) Ltd
[2022] NZHC 2111
•25 August 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-000130
[2022] NZHC 2111
IN THE MATTER of an application that a caveat not lapse UNDER
Section 143 of the Land Transfer Act 2017
BETWEEN
JASON PAUL WHITE and KELLY MARIE WHITE
Applicants
AND
RR VENTURES (2018) LTD
Respondent
Hearing: 7 July 2022 Appearances:
D W Ballinger for Applicants
M R C Wolff and H J Dempsey for Respondent
Judgment:
25 August 2022
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 25 August 2022 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
WHITE v RR VENTURES (2018) LTD [2022] NZHC 2111 [25 August 2022]
[1] The applicants (Mr and Mrs White) entered into an agreement with the respondent (RR Ventures) to purchase an allotment in a subdivision. RR Ventures has purported to cancel the agreement in reliance upon a ‘sunset clause’. Mr and Mrs White do not accept the agreement has been validly cancelled. They apply, pursuant to s 143 of the Land Transfer Act 2017, to sustain a caveat they lodged to protect their interest in the land under the agreement.
Background
[2] In October 2011, Horowhenua District Council granted consent for the subdivision of land at 224 Arawhata Road, Levin and the creation of 18 rural/residential lifestyle allotments. The subdivision did not proceed at that time.
[3] RR Ventures acquired the land in October 2018, intending to implement the subdivision consent and sell allotments whilst retaining two of the allotments as retirement properties for the company’s directors. RR Ventures is proceeding with the subdivision in two stages. The subdivision is now known as Waiwiri Springs.
[4] The allotments have in the past been marketed through Suzanne Cottle of Harcourts Real Estate (Ms Cottle). They were being advertised on a real estate website in August 2020 when seen by Mr and Mrs White. Mr and Mrs White contacted Ms Cottle and were provided with marketing information. Mr and Mrs White were interested in what is Lot 4 of the subdivision.
[5] In email correspondence on 21 September 2020, Mr and Mrs White advised Ms Cottle they wanted to place an offer on Lot 4. Ms Cottle asked them to provide personal details so that a contract could be prepared. Mr and Mrs White advised Ms Cottle that the contract should contain due diligence, finance and sunset clauses.
[6] Ms Cottle provided an initial draft agreement for sale and purchase by email to Mr and Mrs White, but it did not contain a sunset clause. Mrs White’s evidence is that she had a conversation with Ms Cottle by telephone, and Ms Cottle suggested that she could handwrite in a sunset clause that read, “Sunset Clause – 12 months”. Mrs White says she followed those instructions, wrote those words into the agreement, and made two other amendments. Mr and Mrs White then signed the agreement.
Mrs White says the reason she asked for a sunset clause was that Ms Cottle had told her that it was a good idea as, in Ms Cottle’s experience, subdivisions may take longer to complete than the developer’s indications, causing purchasers to become frustrated by delays.
[7] There was some negotiation over the price to be paid for Lot 4 before the agreement was concluded on 28 October 2020. I set out the relevant terms of the agreement below.
[8] On 23 November 2020, Mr and Mrs White confirmed the finance and due diligence conditions and paid their deposit.
[9] The subdivision consent conditions required earthworks to be completed to provide driveway access, service connections, and entranceways to the allotments. These conditions had to be met before new titles could be issued, but progress was slow. There was correspondence between the parties over the ensuing months as Mr and Mrs White were eager to get on with their build.
[10] From September 2021, RR Ventures started to plan for stage 2 of the subdivision, which required construction of an access road to the rear of the land. RR Ventures was advised that the road, which went behind Lot 4, would be challenging. RR Ventures began to consider alternatives. Several options were considered and rejected.
[11] On 1 December 2021, a landslide occurred on a flat section of the stage 1 right- of-way. Following the landslide, RR Ventures considered a possibility that the stage 2 access road could be built along the boundary between Lots 4 and 5, but this would have significant effects on Lot 4.
[12] Mr and Mrs White were invited to meet onsite to discuss RR Ventures’ proposal and the impacts it would have on Lot 4. The meeting took place on 9 December 2021. Mrs White attended, but Mr White did not. Both directors of RR Ventures, Mr Goel and Mr Khera, attended. Mrs White was told RR Ventures intended to build the stage 2 access road on the boundary of Lots 4 and 5. Mrs White advised this was not
acceptable. The directors indicated they might sacrifice Lot 4 to make room for an access road if they needed to do so. They suggested Mr and Mrs White might wish to pull out of the contract.
[13] On 17 December 2021, Mr and Mrs White lodged their caveat (Instrument No 12338549.1) against the head title to the land.
[14] On 8 January 2021, the directors of RR Ventures sent an email to Mr and Mrs White with further information concerning the new access road that RR Ventures was “proposing to the Council”. The directors noted the proposal might take a few months to be approved by the Council and that the likely impact was that “we will have to delete Lot 4 from the scheme plan, which is extremely unfortunate”. They proposed an option of cancelling Mr and Mrs White’s agreement by mutual consent with the reimbursement of 50 percent Mr and Mrs White had spent on their architect and other tradespeople.
[15] On 13 January 2022, Mr and Mrs White responded, advising that they had engaged their lawyer and lodged the caveat.
[16] On 17 January 2022, RR Ventures’ lawyers wrote to Mr and Mrs White’s lawyers, purporting to cancel the agreement in the following terms:
RR Ventures (2018) Ltd & White - proposed Lot 4 at Waiwiri Springs
The Agreement between the parties dated 28 October 2020 includes a sunset provision requiring completion of the terms of the Agreement by 28 October 2021.
The proposed subdivision has been delayed by matters beyond the control of the vendor despite the best efforts of the vendor to progress matters. The terms of the Agreement cannot be fulfilled by the latest date specified; accordingly the vendor now invokes the sunset provision and cancels the Agreement …
[17] On 26 January 2022, Mr and Mrs White’s solicitors responded, challenging RR Ventures’ right to rely on the sunset clause and advising that should RR Ventures apply to remove the caveat, Mr and Mrs White would apply to the High Court to sustain it.
[18] On 4 March 2022, the Registrar-General of Land advised Mr and Mrs White that RR Ventures had applied under s 143(1)(b) Land Transfer Act 2017 to lapse the caveat. Mr and Mrs White’s application to sustain the caveat followed.
Caveat principles
[19] The relevant principles are set out in Philpott v Noble Investments Ltd, where the Court of Appeal noted the following in relation to applications to sustain caveats:1
(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; 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.
(footnotes omitted)
[20] To these principles I would add that the Court will not finally determine the rights of the parties unless both consent or the facts are not in dispute and the law has been fully argued.2
The terms of the agreement
[21] The agreement is in the ADLS/REINZ 10th ed 2019(2) form with added further terms of sale and covenants attached. The relevant terms are as follows:
1 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].
2 Neil Campbell Campbell on Caveats (3rd ed, LexisNexis, Wellington, 2019) at 10.020(a) and
Macrae v Rapana HC Auckland, M633/94, 17 June 1994.
(a)The property being purchased was 5,848m2 being Lot 4 in the proposed subdivision of Lot 300 DP 447038.
(b)The purchase price was $370,000.
(c)There was a 10 per cent deposit payable immediately upon confirmation with the balance of the purchase price being payable on the settlement date.
(d)Settlement was subject to the issue of title in accordance with cl 3.17. Clause 3.17 provided:
New Title Provision
3.17(1) Where
(a) the transfer of the property is to be registered against a new title yet to be issued; and
(b) a search copy, as defined in section 60 of the Land Transfer Act 2017, of that title is not obtainable by the tenth working day prior to the settlement date,
then, unless the purchaser elects that settlement shall still take place on the agreed settlement date, the settlement date shall be deferred to the tenth working day following the later of the date on which:
(i)the vendor has given the purchaser notice that a search copy is obtainable; or
(ii)the requisitions procedure under clause 6.0 is complete.
(2) Subclause 3.17(1) shall not apply where it is necessary to register the transfer of the property to enable a plan to be deposited and title to the property to be issued.
[22] Clause 9.9 provided the following in relation to s 225 of the Resource Management Act 1991:
(1) If this agreement relates to a transaction to which section 225 of the Resource Management Act 1991 applies then this agreement is subject to the appropriate condition(s) imposed by that section.
[23]Clause 9.10 deals with the operation of conditions and reads as follows:
9.10 Operation of conditions
If this agreement is expressed to be subject either to the above or to any other condition(s), then in relation to each such condition the following shall apply unless otherwise expressly provided:
(1)The condition shall be a condition subsequent.
(2)The party or parties for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.
(3)Time for fulfilment of any condition and any extended time for fulfilment to a fixed date shall be of the essence.
(4)The condition shall be deemed to be not fulfilled until notice of fulfilment has been served by one party on the other party.
(5)If the condition is not fulfilled by the date for fulfilment, either party may at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this agreement, the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement and neither party shall have any right or claim against the other arising from this agreement or its termination.
(6)At any time before this agreement is avoided, the purchaser may waive any finance condition and either party may waive any other condition which is for the sole benefit of that party. Any waiver shall be by notice.
[24] Clause 23, which is what RR Ventures relies upon in cancelling the agreement, reads:
Sunset Clause – 12 months.
The parties’ positions
[25] There is no dispute the agreement of 28 October 2020 conferred on Mr and Mrs White an equitable interest in the land,3 and that their interest would not survive the valid cancellation of the agreement.
[26] Mr and Mrs White argue that the agreement for sale and purchase has not been validly cancelled because:
(a)the sunset clause cannot be relied upon by RR Ventures as it:
3 Bevin v Smith [1994] 3 NZLR 648 (CA).
(i)was inserted in the agreement for their sole benefit; or
(ii)is meaningless and can be severed from the agreement;
(b)RR Ventures could not rely on the sunset clause because it did not make all reasonable endeavours to complete the subdivision and convey title to Lot 4 to Mr and Mrs White.
[27]In response, RR Ventures says:
(a)It can rely on the sunset clause because:
(i)the sunset clause applied if title to Lot 4 did not issue within 12 months of the date of the agreement;
(ii)the sunset clause was inserted for the joint benefit of the parties;
(iii)it took all reasonable steps to obtain the issue of new titles within 12 months of the date of the agreement, but as title had not issued it was within its rights to cancel; and
(iv)the Court should exercise its discretion and lapse the caveat.
The issues
[28]In my view, the issues arising are:
(a)What does cl 23 mean?
(b)If cl 23 has no meaning, can it be severed from the agreement?
(c)Is RR Ventures unable to rely on the sunset clause because it did not take reasonable steps to complete the subdivision and obtain title within 12 months?
(d)If Mr and Mrs White have a caveatable interest, should the Court exercise its discretion to remove the caveat?
What does cl 23 mean?
[29] The approach in New Zealand to contractual interpretation is settled. An objective approach is taken to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.4 Contractual language must be interpreted within its overall context broadly viewed, and if the language used, construed in the context of the whole contract, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant.5
[30] Importantly, the Supreme Court in Bathurst Resources Limited v L & M Coal Holdings Ltd said:6
… The objective approach to this contextual assessment is a legal construct designed as the best way of reliably determining the true agreement as recorded in the words of the contract. It rejects the parties’ subjective evidence of intent as irrelevant to what both parties meant and as generally unreliable. Rather, the court (embodying the reasonable person) assesses the evidence reasonably available to both (or all) of the parties at the point of contract which could bear upon the meaning of those words. Overall, this is a test which best supports the aim of the efficient and just conduct of proceedings.
[31] Mr Wolff argues that the purpose of the sunset clause is to protect both parties in the event title does not issue by the agreed date. He relies on Ling v Northwest Developments Ltd, where the Court of Appeal was required to determine what was meant by the words “the survey plan” in a sunset clause in an agreement for sale and purchase of land. 7 The Court of Appeal said:
[28] … The interpretative exercise in this case must proceed on the basis of the known purpose of a sunset clause, which was to protect both parties in the event that title does not issue by the agreed date. This risk is common
4 Firm Pl 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147, [2015] 1 NZLR 432 at [60] citing Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffmann.
5 At [63].
6 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [46].
7 Ling v Northwest Developments Ltd [2019] NZCA 630, (2019) 20 NZCPR 671 at [28].
knowledge, given the uncertainties inherent in the subdivision process. As Mr Jones explained in his evidence, a sunset clause helps to ensure that a developer endeavours to complete the project within time while allowing some flexibility where, for unforeseen reasons, titles do not issue within the agreed time but it also ensures that the purchaser is not committed to a contract that runs on perpetually. This is done by the parties agreeing that if title has not issued by a specified date either party can cancel. This right may, as it was in this case, be subject to a proviso allowing the vendor to extend the time for cancellation, but with an ultimate “drop dead” date in this case six months from 31 March 2018.
[32] Mr Wolff submits the sunset clause in this case was drafted very broadly. He says it set a date of 12 months from the date of the agreement and that, “[u]nder the standard application of a Sunset Clause”, RR Ventures was entitled to cancel as no title had issued for Lot 4 within 12 months.
[33] In response to Mrs White’s evidence that the clause was intended for the benefit of herself and Mr White, RR Ventures argues there is nothing in the clause to suggest this and, in those circumstances, the clause must be interpreted as having been inserted for the benefit of both parties.
[34]I am unable to accept RR Ventures’ submissions.
[35] On the issue of whether cl 23 was intended to benefit only Mr and Mrs White or both parties, the Court is entitled to take into account evidence of the parties’ pre- contract negotiations and post-contract conduct to the extent it sheds light on the meaning the contract would convey to a reasonable person at the time of the contract.8
[36] Here, the most relevant evidence of the pre-contract negotiations is given by Mrs White as to the discussions she had with Ms Cottle, who was acting as RR Ventures’ agent in the preparation of the agreement. Mrs Cottle advised Mrs White that the sunset clause was a good idea to protect Mr and Mrs White from developer delays. The intention was to protect the interests of Mr and Mrs White, not RR Ventures. There is no evidence there was ever any discussion the clause might be relied upon by RR Ventures. That tends to show a mutual understanding the clause was intended to benefit only Mr and Mrs White. While Mr Goel says his
8 Bathurst Resources Limited v L & M Coal Holdings Limited, above n 6, at [75] and [89].
understanding was that cl 23 protected both parties, that was never communicated to Mr and Mrs White and is therefore irrelevant.9
[37] As far as the parties’ post-contract conduct is concerned, there is evidence that prior to lawyers becoming involved on RR Ventures’ behalf, the directors had never suggested RR Ventures could rely on the sunset clause to cancel, but had acknowledged Mr and Mrs White’s right to do so. While there may be good commercial reasons for taking that approach, this may suggest that RR Ventures understood cl 23 was inserted for the benefit of Mr and Mrs White only.
[38] However, the major difficulty I have with RR Ventures’ approach is that it assumes there is a “standard application” of a sunset clause and that consistent with this, cl 23 means that either party had the right to cancel the agreement if title was not available within 12 months of the date of the agreement. I do not accept there is a standard application (or meaning) of the term “sunset clause” other than that it generally is taken to refer to a condition of a contract allowing parties to cancel on a particular date should some specified milestone not be reached. Beyond that, the content of sunset clauses differs from contract to contract.
[39] It is not, therefore, necessarily the case that, in relation to an agreement for the sale of land, a sunset clause will run from the date of the contract, or that the milestone to be achieved is the issue of title. The milestone could just as easily be the date upon which certain works are completed or when a survey plan is deposited if, as in this case, the land is being subdivided. It may be that the milestone is expressed as the making of reasonable progress towards some other event (such as the deposit of a survey plan).
[40] Sunset clauses, like other terms of contracts, are subject to negotiation and one size does not fit all. Ling v Northwest Developments Ltd, demonstrates this point as there the sunset clause was in these terms:10
24.2 Should title have not issued by 31 March 2018 then either party may cancel the agreement by giving written notice to the other party notifying them that the agreement is now terminated. Provided
9 Bathurst Resources Limited v L & M Coal Holdings Limited, above n 6, at [76]-[77].
10 Ling v Northwest Developments Ltd, above n 7, at [2].
however that in the event that the vendor has submitted the survey plan for approval to LINZ the vendor may at its sole discretion, prior to 31 March 2018, notify the purchaser that the time for satisfaction of this condition has been extended for a further 6 months.
[41] Here, cl 23 does not say when the 12 month period begins to run, nor does it say what milestone must be met within the 12 months. It does not say what the consequence shall be if the milestone is not achieved within 12 months. It also does not state for whose benefit the clause was inserted into the agreement. In truth, therefore, RR Ventures is not asking the Court to interpret cl 23, but to rewrite it in the manner which is most beneficial to it. That is not a permissible approach to interpretation.
[42] Mr Wolff’s submission that cl 23 is drafted very broadly is something of an understatement. Importantly, it does not, as he submits, set a date of 12 months from the date of the agreement or provide that RR Ventures was entitled to cancel if title had not issued for Lot 4 within that 12 months. In my view, cl 23 is so enigmatic and lacking in content that no meaning can reasonably be attributed to it.
Can cl 23 be severed from the agreement?
[43] There is authority that where a contract contains a term or phrase which is vague, ambiguous or apparently meaningless and not essential, then it does not necessarily vitiate the contract and may be severable from the contract and ignored.
[44] The authors of Chitty on Contracts, after referring to several authorities, put the matter this way:11
Such cases show that the question whether the inclusion of a meaningless clause vitiates the contract, or can be ignored, depends on the importance which the parties may be considered to have attached to it. If it is simply verbiage, not intended to add anything to an otherwise complete agreement, or if it relates to a matter of relatively minor importance, it can be ignored. But if the parties intended it to govern some vital aspect of their relationship its vagueness will vitiate the entire agreement.
11 HG Beale (ed) Chitty on Contracts (34th ed, Sweet & Maxwell, London, 2022) vol 1 at [4-190]. The same principles are recognised in Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at 91.
[45] In Williams v Wairarapa Automobile Association Mutual Insurance Company, the Court was required to decide whether, under a comprehensive private motor- vehicle policy, an accident had occurred “at the time of or during the continuance of or subsequent to, a ‘convulsion of nature’. 12 Northcroft J held the term convulsion of nature was “too vague, indefinite, and ambiguous to have any effect” in the policy of insurance and therefore could not be relied upon by the insurance company to excuse its obligations under the policy. 13
[46] Another example is Nicolene Ltd v Simmonds, where steel bars were bought on terms which were clear except for a clause which provided the sale was subject to “the usual conditions of acceptance” when there were no such usual conditions. It was held the phrase was meaningless and was severable and could be ignored.14 Lord Denning said:15
I take it to be clear law that if one of the parties to a contract inserts into it an exempting condition in his own favour, which the other side agrees, and it afterwards turns out that that condition is meaningless, or what comes to the same thing, that it is so ambiguous that no ascertainable meaning can be given to it, that does not mean that the whole contract is a nullity. It only means that the exempting condition is a nullity and must be rejected.
[47] Michael Richards Properties Ltd v Corp of Wardens of St Saviour’s Parish, Southwark concerned an agreement for sale and purchase of a property where the plaintiff purchasers failed to complete and demanded the return of their deposit. They claimed that no contract had come into existence because the defendant’s letter of acceptance had a clerical error which contained the words “subject to contract”, which the plaintiff contended was not, therefore, an acceptance at all. The Court held that a valid contract had been concluded by the letter of acceptance. 16 Goff J held that on the particular facts of the case, the words, “subject to contract”, were meaningless and could be ignored. He said:17
12 Williams v Wairarapa Automobile Association Mutual Insurance Company [1943] NZLR 322 (SC) at 323.
13 At 324.
14 Nicolene Ltd v Simmonds [1953] 1 QB 543.
15 At 551.
16 Michael Richards Properties Ltd v Corp of Wardens of St Saviour’s Parish, Southwark [1975] 3 All ER 416.
17 At 424.
This was a sale by tender. Nothing remained to be negotiated, there was no need or scope for any further formal contract, and it is difficult to see how it would be drawn. Nobody ever thought there was. The vendors did not submit a draft contract, nor were they asked to do so, and the matter proceeded with the steps necessary not to negotiate or finalise a contract, or even put it into further form or shape, but with the steps required for completion. In the context of a tender document which sets out all the terms of the contract, and which is required to be next to the tender offer, it seems to me that the words ‘subject to contract’ in the acceptance are meaningless, and that I ought to apply the principle of Nicolene Ltd v Simmonds.
[48] Consistent with these principles, cl 23 is, in my view, severable from the agreement and able to be ignored. I consider it can be ignored without doing mischief to the contract as a whole. This last point requires some further explanation.
[49] While neither party argued that the agreement was void for uncertainty, as noted above, if a term to which no clear meaning can be attached is regarded by the parties to govern some vital aspect of their bargain, to sever it may vitiate the entire agreement.18 That is not the case here. What appears to have been overlooked by the parties is s 225 of the Resource Management Act 1991.
[50] Section 225 implies conditions into all agreements where a vendor enters into an agreement to sell land which is yet to be subdivided and before the appropriate survey plan is approved. Section 225 is also recognised in cl 9.9 of the agreement.
[51] It is unnecessary to embark upon a detailed analysis of s 225.19 For present purposes, it is enough to note that s 225(2) provides that if an agreement to sell an allotment in a proposed subdivision is made before the appropriate survey plan is approved under s 223 of the Resource Management Act, the contract is subject to the following conditions:
(a)that the purchaser may, by notice in writing to the vendor, cancel the agreement at any time before the end of 14 days after the date of the making of the agreement:
(b)that the purchaser may, at any time after the expiration of 2 years after the date of granting of the resource consent or 1 year after the date of the agreement, whichever is the later, by notice in writing to the vendor, rescind the contract if the vendor has not made reasonable
18 Van Der Hulst v Tainui Corp Ltd [1998] 2 NZLR 359.
19 For a helpful discussion of s 225, see the decision of Clifford J in AAA Development (Ormiston) Ltd v Ormiston Group Ltd (2010) 12 NZCPR 329.
progress towards submitting a survey plan to the territorial authority for its approval or has not deposited the survey plan within a reasonable time after the date of its approval.
[52] A vendor has no right of cancellation under section 225(2)(b). The purchaser’s statutory right of cancellation provided by the section is for the sole benefit of the purchaser. In AAA Development (Ormiston) Ltd v Ormiston Group Ltd, Clifford J described s 225(2)(b) in this way:20
This can also be seen as including a “no fault” right of cancellation for the purchaser. That is, the right arises by reference to an objective assessment as to whether or not “reasonable progress” has been made towards submitting the survey plan, irrespective of whether or not the vendor has taken the necessary reasonable steps. Put very simply, a vendor may have taken such steps but, for example due to the inefficiency of the local council, reasonable progress may not have been made. At the same time, the lack of reasonable progress may be attributable to the fault of the vendor.
[53] It is notable s 225(2)(b) provided Mr and Mrs White with the protection that they sought by the inclusion of cl 23. In circumstances where resource consent for the development was obtained in 2011, Mr and Mrs White could, under s 225(2)(b), cancel the agreement with RR Ventures if they wished in the event RR Ventures did not make reasonable progress towards submitting a survey plan within 12 months of the agreement.
[54] I have not overlooked Mr Goel’s evidence that RR Ventures signed the agreement after taking legal advice that the sunset clause could be invoked by either party. He also says that had Mr and Mrs White not included the sunset clause, RR Ventures would have done so. Notably, however, Mr Goel, has not put the legal advice into evidence, and it would be most surprising if any solicitor had advised that cl 23 was an effective sunset clause. Further, RR Ventures’ conduct when difficulties arose in December 2021 suggesting Mr and Mrs White might wish to withdraw from the contract and then a mutual termination of it, raises issues as to what RR Ventures actually understood by it. For present purposes, it is enough that it is fairly arguable that cl 23 is a meaningless term which can (and should) be severed without vitiating the agreement.
20 AAA Development (Ormiston) Ltd v Ormiston Group Ltd, n 19, at [95].
[55] The next issue is what is the effect of severing cl 23 from the agreement in the present context. The only basis upon which RR Ventures purports it had a right to cancel the agreement is under cl 23. If cl 23 is severed from the agreement and can be ignored, it must follow RR Ventures’ purported cancellation was not effective. In those circumstances, Mr and Mrs White’s equitable interest in the land as purchasers under an unconditional agreement for sale and purchase has not been terminated and their caveat should, subject only to the exercise of the Court’s discretion, be sustained.
Did RR Ventures take reasonable steps to complete the subdivision?
[56] Given my finding above, it is strictly unnecessary for me to consider this issue, but in case I am wrong in the conclusions I have already reached, I will deal with it.
[57] RR Ventures accepts it would not be entitled to rely upon the sunset clause to cancel the agreement if it had not made reasonable efforts to obtain title for Lot 4.21 That acknowledgement is consistent with cl 9.10(2) of the agreement which provides that a party for whose benefit a condition has been included in the agreement “shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment”.
[58] Recently, also in a caveat case, the Supreme Court noted in Melco Property Holdings (NZ) 2012 Ltd v Hall that: 22
… A party whose breach of the contract has contributed materially to non- fulfilment of the condition may not rely on such non-fulfilment to avoid a contract. When considering the situation where both parties have contributed to some extent in the non-fulfilment of a condition, in other words the contribution to the non-fulfilment is shared, it will be necessary to construe “material” as meaning “substantial and operating”.
[59] Mr Wolff accepts there were delays in the development but says RR Ventures took all reasonable steps to obtain titles, and the delays were unexpected and concerned matters beyond its control. These included:
21 In making the submission, Mr Wolff relied on Lu v Wila Developments (Ormiston) Ltd [2021] NZHC 2772, (2021) 22 NZCPR 569.
22 Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 60 at [53].
(a)wet weather delays;
(b)unavailability of labour and resources due to the Transmission Gully project and other developments in the Horowhenua area;
(c)COVID-19 lockdowns and restrictive operating conditions;
(d)unexpected ground conditions; and
(e)schedule slippages causing difficulties to reorganise and coordinate multiple contractors.
[60] Mr Goel says that he and the other director visited the site on a regular basis to ensure the project was running smoothly but, due to adverse conditions encountered throughout 2021, the project timeline was constantly slipping.
[61] Attached to Mr Goel’s affidavit is a letter from Paul Weldon, a director of Nodlew Industrial Limited, who was engaged to install the infrastructure of the subdivision and who refers to the impacts of adverse weather conditions, COVID lockdowns and sickness, as well as poor availability of labour and contractors.
[62] Despite this evidence, there are several factors which lead me to the view that Mr and Mrs White have shown there is an arguable case that RR Ventures did not take all reasonable steps to progress the subdivision and that such failings materially affected the prospect of completing the subdivision within 12 months. In making that assessment, I bear in mind that applicants in the position of Mr and Mrs White have the onus to raise a fairly arguable case that RR Ventures failed to use reasonable efforts to progress the development and to obtain titles in time. Without detracting from that obligation, it must be realised that they are not developers and cannot possibly be expected to know all of the reasons that delays have occurred. Full knowledge of how the development has proceeded and the causes of delays is likely only known to the developer or its contractors.
[63] The first matter is that RR Ventures had no previous experience in undertaking a development of this kind. It appears that the directors were introduced to the
subdivision as a result of them looking to build retirement homes for themselves on rural lifestyle blocks away from Wellington City. The decision to take on the subdivision was perhaps surprising when the subdivision is apparently a complex one for reasons Mr Goel emphasises in his affidavit.
[64] It is clear that RR Ventures did not go into the project with its eyes wide open as to the complexity of the undertaking, and Mr Goel says that they only became aware subsequent to purchasing the subdivision of matters such as the absence of engineering plans, the need to engage with local iwi, the need for approval from Heritage New Zealand and the unavailability of bank finance. While Mr Goel’s evidence deals with steps taken to plan the project, it appears RR Ventures has been surprised by matters that could have been expected to have been known to an experienced developer. For instance, Mr Goel says it was only in November 2021 that it was realised the stage 2 right of way was “a lot more complex and challenging [than] what we had initially anticipated and what the Engineering Plan shows”.
[65] Further, when Mr and Mrs White expressed interest in Lot 4, RR Ventures was not ready to begin the physical works. Mr Goel says that the property was not being marketed at the time because the focus was on getting the work started, but nonetheless RR Ventures agreed to sell Lot 4 to Mr and Mrs White. Relevantly, it appears that what Mr Goel describes as the “actual development work (machines turning the soil)” had not commenced, and did not commence, until early February 2021.
[66] This does not appear to be consistent with advice that RR Ventures was giving to Mr and Mrs White at the time. In an email of 6 December 2020, Mr and Mrs White were advised that the “road construction is about to start”, and on 20 January 2021, that the “roading contractor started the project a couple of weeks back and the project is in full swing now”.
[67] Be that as it may, the important point is that even allowing for the Christmas holidays, there appears to have been a period of close to three months after the agreement was signed when RR Ventures was not in a position to begin the physical works. The importance of that delay becomes clear when one considers Mr Goel’s evidence which appears to be that, with a February 2021 start date, RR Ventures did
not expect to have completed stage 1 until November 2021, which is more than 12 months after the date of the agreement.
[68] The other significant matter concerns the changes RR Ventures proposes to make to the stage 2 right of way. On 28 October 2021, Mr Khera emailed Mr White, advising him of the final survey to confirm “the exact boundary of each lot”, following which RR Ventures could apply for the s 223 Resource Management Act certificate. On this basis, matters must have been well-advanced. However, it appears that since around mid-November 2021, RR Ventures became concerned with the access road to stage 2. This led to a change in its plans necessitating it to go back to the Council for approvals, which it told Mr and Mrs White in its 8 January 2022 email would take months. It appears, then, that since mid-November 2021, RR Ventures has not been taking all reasonable steps to obtain title to Lot 4. Rather, it seems matters were largely put on hold. There is little evidence of work done to progress stage 1 since December 2021.
[69] I am satisfied that this is not a case where I can have any confidence that RR Ventures in fact took reasonable steps to obtain title to Lot 4. There are real issues concerning its ability to undertake a development of this kind (in terms of both resources and experience), the extent to which it properly planned the work, and the extent to which the delays that undoubtedly occurred were caused by factors that were beyond its control. That is an issue for a substantive hearing following full discovery and examination of witnesses.
The discretion
[70] The discretion of the Court to remove a caveat, notwithstanding the right to the claimed interest, is exercised cautiously and only where the Court is completely satisfied that the legitimate interests of the caveator will not be prejudiced.23 There can be no suggestion that is the case here.
23 Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
[71] While Mr Goel says in his affidavit that the caveat threatens to prevent RR Ventures from completing its obligations to purchasers of other lots, there is no evidence of sales of other lots so it is difficult to give weight to this consideration.
[72] Clearly this is not a case for the Court to exercise its discretion to refuse to sustain the caveat.
Result
[73] There shall be an order that caveat no. 12338549.1, lodged against Record of Title Identifier 563810 (Wellington Land Registration District), shall not lapse.
[74] The order in paragraph [73] is conditional upon the applicants commencing, within 21 days of the date of this judgment, proceedings in a Court of competent jurisdiction against the respondent to uphold the interest claimed by their caveat.
[75] The applicants are successful and entitled to 2B costs plus reasonable disbursements as fixed by the Registrar.
O G Paulsen Associate Judge
Solicitors:
Todd Whitehouse (T Montague), Levin Morrison Kent Lawyers, Wellington
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