Y B Properties Limited v Choi

[2013] NZHC 1950

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-002208 [2013] NZHC 1950

BETWEEN  Y B PROPERTIES LIMITED Plaintiff

ANDDOH YOUNG CHOI, SI YOUNG CHOI, SUN JOON CHOI, GEUN HWA LEE AND GEUM HYUK LIM

Defendants

Hearing:                   29-30 July 2013

Appearances:           H Waalkens QC and P Davey for Plaintiff

G Collecutt for Defendants

Judgment:                5 August 2013

JUDGMENT OF VENNING J

This judgment was delivered by me on 5 August 2013 at 12.15 pm, pursuant to Rule 11.5 of the High

Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Wilson McKay, Auckland

C L Law Limited, Auckland

Copy to:            H Waalkens QC, Auckland

P Davey, Auckland

Y B PROPERTIES LIMITED v CHOI & ORS [2013] NZHC 1950 [5 August 2013]

Introduction

[1]      This case is about the interpretation of an agreement for sale and purchase and, in particular, whether two clauses within the agreement can be reconciled or are in conflict.

Background

[2]      The defendants are the registered proprietors and operators of a 16 unit motel complex at Shelly Beach Road, Herne Bay, Auckland, more particularly described in Certificate of Title NA101/198 (the property).

[3]      On or about 11 March 2013, the plaintiff (through its director Ms Cox) and the defendants executed a written agreement for the sale of the property by the defendants to the plaintiff at a purchase price of $4.6 million.

[4]      The  agreement  was  on  the  Real  Estate  Institute  of  New  Zealand  and Auckland District Law Society standard form (ninth edition, 2012).  In a box on the front page the form provided CONDITIONS (clause 9.0).  The condition providing for a building report was completed:  “Building report required: Yes/No.”

[5]      Clause 9.3 of the agreement provided:

9.3If the purchaser has indicated on the front page of this agreement that a building report is required, this agreement is conditional upon the purchaser obtaining at the purchaser’s costs, on or before the tenth working day after the date of this agreement a report on the condition of the buildings and any other improvements on the property that is satisfactory to the purchaser, on the basis of an objective assessment.  The report must be prepared in the good faith by  a  suitably-qualified  building  inspector  in  accordance  with accepted principles and methods.  Subject to the rights of any tenants of the property,  the  vendor  shall allow the building inspector to inspect the property at all reasonable times upon reasonable notice for the purposes of preparation of the report.  The building inspector may not be carry out any invasive testing in the course of inspection without the vendor’s prior written consent.  If the purchaser avoids this agreement for non-fulfilment of this condition pursuant to clause

9.8(5), the purchaser must provide the vendor immediately upon

request with a copy of the building inspector’s report.

[6]      In addition to the standard form conditions, the parties inserted a number of special conditions starting at clause 18:

18.0     DUE DILIGENCE

18.1This   Agreement   is   conditional   upon   the   Purchaser   and   the Purchaser’s solicitor and consultants carrying out the due diligence investigation of the property, including without limitation the following:

(a)       The soundness  and  structural  quality of  buildings  on  the property  including  the  feasibility  of  the  same  being  unit titled.

(b)      The state of the title of the property.

(c)       Obtaining any reports on or in relation to the property that the Purchaser considers appropriate.

(d)      The overall financial suitability of the Purchaser’s proposed

investment in the property.

18.2Clause 18.1 is to be satisfied within 20 working days from execution hereof.  The parties acknowledge that the condition in clause 18.1 is inserted for the sole benefit of the Purchaser and may at any time be waived by the Purchaser giving written notice of the waiver to the Vendor.  The satisfaction of that condition shall be at the sole and absolutely discretion of the Purchaser and in the event that the condition  is  not  fulfilled  the  Purchaser  shall  not  be  obliged  to provide any reason to the Vendor for the non satisfaction of the condition.

18.3The vendor shall provide the Purchaser reasonable access to the property to enable the Purchaser to carry out the Purchaser’s due diligence exercised in terms of this Agreement.   The Vendor undertakes to provide the Purchaser with all information reasonably requested by the Purchaser.

[7]      The 10 working day period provided for in clause 9.3 expired on Monday 25

March 2013.   Taking account of the Easter vacation, the 20 working day period provided for by clause 18 expired on 10 April 2013.

[8]      The agreement recorded that Mr Fong of Arthur Fong Real Estate (trading as Empire Realty) was the agent.  The defendants executed an agency agreement with Mr Fong after the agreement was signed.

[9]      Through Mr Fong, the plaintiff arranged for its consultants to inspect the property on a number of occasions.  The consultants included a surveyor, fire safety

engineer, builder and valuer.   In particular, on 18 March the plaintiff arranged to inspect the property with a valuer, Mr Amesbury, the building inspector, Mr Hodges and Ms Kennett, a property consultant.  Although they were not able to inspect all units  that  day,  Mr  Hodges  provided  a  building  report  on  19  March,  which  the plaintiff was generally satisfied with.

[10]     Also through Mr Fong, the plaintiff arranged for its valuers and property consultant to re-inspect the property again at midday on 26 March 2013.  Although Mr Hodges was not to re-inspect that day, Ms Cox expected he would be able to re- inspect if any other issues arose.

[11]     However, at 5.32 pm on 25 March the defendants’ solicitors gave notice that as the plaintiff had not confirmed the building report condition, the agreement was cancelled pursuant to clause 9.8(5) of the agreement.  Clause 9.8(5) provided:

9.8If 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

...

(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 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.

[12]     When the property consultant instructed by the plaintiff attended the property at midday on 26 March 2013 the defendants denied her access on the basis the agreement had been avoided.

[13]     The plaintiff did not accept the defendants were entitled to cancel.

[14]     By  facsimile  of  10 April  2013,  the  plaintiff  by  its  solicitor  advised  the

defendants’ solicitor that:

the finance condition had been satisfied;

the due diligence condition had been waived;

the agreement was unconditional;

the deposit of $200,000  would be paid into their trust account and held pending  the  agreement  of  the  parties  or  as  circumstances  of  the  matter

required. The deposit was subsequently paid.

The plaintiff ’s case

[15]     The plaintiff says clause 18 and particularly 18.1(a) prevails over clause 9.3. It seeks specific performance of the agreement.

[16]     In the alternative, the plaintiff says the defendants were in breach of their obligation to allow the building inspector to inspect the property at all reasonable times, so the defendants were not entitled to avoid the contract on 25 March.

[17]     Next, and for a further cause of action the plaintiff says that, through their agent Mr Fong, the defendants represented the plaintiff had until 10 April to confirm the contract and also agreed to the plaintiff’s building consultants inspecting the property on 26 March, so that the defendants were estopped from relying on the plaintiff’s failure to give notice by 25 March to cancel the contract or had waived their right to do so.

[18]     In its pleading, the plaintiff also sought rectification to avoid the application of clause 9.3.  However, in closing, Mr Waalkens confirmed the plaintiff abandoned its claim for rectification of the building consent clause.

[19]     The plaintiff also sought rectification of clause 20.1 of the agreement.  Clause

20.1 provides, inter alia:

20.1The parties acknowledge that the Purchaser intends to subdivide the property under the Unit Titles Act 2010 so as to obtain separate unit titles for each floor of the building on the property.  ...

(Emphasis added).

[20]     The plaintiff says that instead “each floor” of the building the clause should have said “unit” as it was always the plaintiff’s intention, understood so by the defendants, that it was seeking to unit title each of the separate 16 motel units rather than each of the two floors of the property.

[21]     During  the  hearing  Mr  Collecutt  confirmed  that  the  defendants  did  not oppose the application for rectification of clause 20.1, but submitted it was not relevant as the agreement was validly cancelled.

The defendants’ case

[22]     The defendants’ case is that clauses 9.3 and 18 are not in conflict.  They can be read together and the plaintiff’s failure to confirm clause 9.3 by 25 March entitled the defendants to cancel.

[23]     The defendants say they complied with their obligations under clause 9.3 and

enabled the plaintiff ’s building inspector to inspect the premises.

[24]     Finally the defendants say that Mr Fong did not have authority to alter the provisions of the agreement and did not do so.  They deny any estoppel or waiver arises.

The issues

[25]     The following issues arise:

(a)      Are clauses 9.3 and 18 in conflict so that clause 18 is to prevail, or can they be reconciled?

(b)Did the defendants allow the plaintiff’s building inspector to inspect the   property   in   accordance   with   their   obligations   under   the agreement?

(c)      Was the real estate agent Mr Fong acting with the vendor’s apparent authority so that he was authorised to bind the vendor in relation to matters concerning the satisfaction of the building condition?

(d)If  so,  what  is  the  effect  of  Mr  Fong’s  communications  to  the purchasers  about  the  working  days  expiring  on  10 April  and  his arranging a further inspection on 26 March?

(e)      Is the plaintiff entitled to rectification of clause 20.1 of the agreement as sought?

Decision

The conflict issue

[26]     The principal issue in this case is the interpretation of clauses 9.3 and 18 and whether, as the plaintiff says, they are in conflict, or as the defendants argue, they can be reconciled and read together.

[27]     Mr Collecutt argues that clauses 9 and 18 are not in conflict and may be read together.  They deal with distinct subject matters and have different tests and times for satisfaction.

[28]     Both parties called evidence from experienced conveyancers on the point. The plaintiff called Mr Moore, the current president of the NZLS and a specialist property lawyer.  In Mr Moore’s opinion the subject matter or field of inquiry in the building report clause in clause 9.3 was the same as that part of the due diligence clause inquiry relating to the soundness and structural quality of buildings on the property.   In his opinion, considerable difficulties would arise in conveyancing practice unless the due diligence clause provision was deemed to prevail over the building report clause in this case.

[29]     The defendant called Mr Nolan, who is also a very experienced practitioner in the field of property law.  Mr Nolan confirmed that it was common for agreements for sale and purchase to have multiple conditions with different dates for fulfilment. Mr Nolan also stated that, although it is unusual for an agreement for sale and purchase to include a building report condition as well as a due diligence condition, in his opinion it did not necessarily follow that they were inconsistent, particularly if they had different dates for completion.

[30]     Mr  Nolan  suggested  that  there  could  be  an  advantage  to  the  vendor  in requiring the purchaser to approve the condition of the building on an objective basis at an earlier time, even though the purchaser would still be entitled to avoid the agreement under the due diligence condition at a later date.

[31]     Mr  Collecutt  emphasised  the  test  for  satisfaction  of  clause  9.3  was  an objective assessment, whereas the test under clause 18 was a subjective one.   He submitted that it was open for the plaintiff to declare that, on an objective basis, the building report condition in clause 9.3 had been satisfied but then, in the exercise of its sole and absolute discretion to declare that the due diligence condition, clause 18 was not satisfied.  He also made the point that clause 9.3 refers to obtaining a report, whereas clause 18 relates to an investigation.

[32]     Mr Collecutt also noted that if the purchaser relied on clause 9.3 to avoid the agreement  the  vendor  was  entitled  to  a  copy  of  the  building  inspector’s  report whereas there was no such requirement under clause 18.

[33]     Finally, he made the point that the building report was only to consider the condition  of  the  buildings,  whereas  the  due  diligence  investigation  went  much further, including the feasibility of the property being unit titled.

[34]     The points Mr Collecutt makes are correct so far as they go but they do not address the real issue, which is whether the clauses are in conflict.  The first step is to identify the scope of the clauses in issue.

[35]     The purpose of standard clause 9.3 is to enable a purchaser to obtain a report on “the condition of the buildings and any other improvements”.   The purpose of clause 18 is to enable the purchaser and its consultants to carry out a due diligence investigation of the property including, at clause 18.1(a), insofar as buildings were concerned,  “the  soundness  and  structural  quality of  buildings  on  the  property”. While clause 18.1 went on to also deal with the feasibility of unit titling the property, and the other clauses of 18 provided for additional considerations, insofar as the clause provided for an investigation into the state of the buildings on the property, there is no material difference between that part of clause 18(1)(a) and clause 9.3.

As Mr Moore said:  “...the subject matter or field of enquiry ... is the same” between the two clauses.  I do not consider there is anything in Mr Collecutt’s suggestion of a difference between a report and an investigation.  The building inspector would have to  carry  out  an  investigation  to  make  his  report,  and  an  investigation  without reporting the outcome would be pointless.

[36]     I consider that a report into the condition of a building, and an investigation into its soundness and structural quality raise essentially the same considerations.  If a building is not structurally sound, then it will not be in good condition.  There is a duplication between clause 9.3 and subclause (a) of clause 18.1 in that both provide for the same investigation to be carried out by the purchaser.   Mr Collecutt’s argument, based on Mr Nolan’s evidence that clause 18.1 goes on to address the feasibility of unit titling the property does not address this point.  The first part of clause 18.1(a) is in conflict with clause 9.3 in that both purport to provide for the same inquiry, and even if the remaining provisions of the due diligence clause were otherwise satisfied,  the purchaser would be entitled to avoid the contract under clause 18.1(a).

[37]     Mr Collecutt relied on the case of Société Générale London Branch v Geys as supporting the defendants’ case.1   That was an employment case.  Under the terms of the employment contract the employer could terminate Mr Gey’s employment on three months’ notice.   There was also a handbook which provided for a different method of termination leading to a different calculation for reimbursement of the terminated employee.  In that case the Court did not consider the provisions to be in

conflict.  In delivering the leading decision on this issue Lord Hope stated:

[24]      It is not obvious that these two provisions are inconsistent with each other. Paragraph 13 of the contract set out one way of terminating the contract, but it did not say that it is the only way. It used the word 'can', which suggests that it is a course of action that the bank might take if it wants to. But the bank reserved the right, as para 8.3 of the handbook put it, to use the PILON method. The provision in the handbook can be read as qualifying the provision which is set out in the contract. In any event the court's duty, when confronted with two provisions in a contract that seem to be inconsistent with each other, is plain. It must do its best to reconcile them if that can conscientiously and fairly be done: Pagnan SpA v Tradax Ocean Transportation SA [1987] 1 All ER 81 at 89 per Steyn J. That approach,

1      Société Générale London Branch v Geys [2012] UKSC 63.

which was endorsed by Bingham LJ in the Court of Appeal [1987] 3 All ER

565 at 573, does not seem to me to give rise in this case to any difficulty.

[38]     Mr Collecutt submitted the case was “analogous” to the present and that the Court should take the same approach.   However, while I accept the statement of principle cited by Lord Hope that the Court’s duty, when confronted with two apparently inconsistent provisions in a contract, is to do its best to reconcile them if that can conscientiously and fairly be done, I do not consider the case to be of much assistance to resolving the issues in the present case.  It is not analogous.  In Geys the conflict argument was a fall-back argument by counsel for the appellant.   The appellant’s primary submission was there was no conflict.

[39]     The Supreme Court accepted that the clauses were not in conflict because they provided for alternative ways to achieve the same end, the termination of Mr Geys’ employment.  Lord Hope noted that clause 13 used the word “can” suggesting the Bank could use that clause if it wished to, but it also reserved the right to use the method in para 8.3 of the handbook.  In the present case, however, clauses 9.3 and

18.1(a) (insofar as it relates to approval of the structure) are not alternative methods of approving the building.  On the defendants’ case, both would have to be satisfied. On the plaintiff’s case, only one can apply.  In neither case are they alternatives.  Nor do they supplement each other as the clauses in the Geys case.  I note that in cross- examination Mr Nolan accepted that the clauses did not sit well together and that there was clearly conflict and tension between the two.

[40]     The only differences between the clauses are the time for satisfaction and the fact one provides for an objective test and the other a subjective test.  As to timing, there is no principled or rational reason for there to be two clauses dealing with the same condition, with one to be satisfied in 10 working days and the other in 20 working days.  Mr Nolan’s evidence that agreements for sale and purchase can have different dates for confirmation of specific clauses does not address the point.  It is not in contention that agreements for sale and purchase may have different dates for confirmation of finance, LIM, and due diligence clauses, for example.  The point is that  on  the  defendants’ case  the  agreement  in  this  case  would  provide  for  two separate  dates  for  confirmation  of  the  same  issue,  namely the  condition  of  the building.

[41]     Mr Nolan suggested there was an advantage to the defendant vendors in knowing within the 10 working days whether or not the contract was to be confirmed or avoided.  However, as Mr Collecutt acknowledged, it is conceivable the purchaser might obtain a building report which, on an objective consideration, would require the purchaser to confirm their satisfaction and, on the defendants’ case, confirm clause 9.3 but then, 10 working days later it would be open to the purchaser to decline to confirm the contract on an entirely subjective basis relying on that part of clause 18.1(a) relating to the building.  There could be no advantage to the defendant vendors on that scenario.

[42]     The high point for the defendant vendors on this argument is, as Mr Collecutt suggested, if the building were a leaky building or had such substantial defects that the plaintiff would avoid the contract on both an objective and subjective view, then the defendants would know that after 10 working days.   There may be some advantage in that, as Mr Waalkens was prepared to concede, but it is largely notional because from a practical point of view, if that was the situation then, although the plaintiff has 20 working days under clause 18.1(a) (as opposed to 10 working days) to avoid the contract, it is likely any reasonable business person would wish to cancel earlier if the report was so unfavourable as to lead to that conclusion.  In those circumstances the parties could agree that there was no need to await the expiry of

the 20 working day period.2   There would be an incentive for the plaintiff to cancel

early in order to avoid the expense of the other consultants otherwise required to assess the additional aspects of the due diligence clause.

[43]     So, rather than enabling the clauses to be reconciled and exist together, in my judgment the fact one is objective, and the other subjective, highlights the conflict between them.  On the defendants’ argument the purchaser could obtain a building report within the 10 day period that objectively would not entitle them to refuse approval, but then use the same report within the next 10 day working period to subjectively refuse to approve the condition in clause 18.  That flies in the face of

common sense let alone business common sense.

2      As the Court of Appeal observed in BS Developments No 12 Ltd v PB and SF Properties Ltd

CA73/05, 30 May 2006.

[44]     I do not overlook that Mr Collecutt emphasised the agreement for sale and purchase had the box on the front page of the agreement providing for a building report completed.  Ms Cox said Mr Fong did that when she said the plaintiff wanted a building inspection (which from her point of view was provided for in clause 18.1). But in any event, all that does is engage clause 9.3.  Without that, there could be no argument on this issue.   It does not address whether clause 9.3 and 18.1 are in conflict.

[45]     I consider that it is precisely this type of situation that clause 1.4(3) of the agreement was designed to address.  It provides:

1.4(3)   If any inserted term (including any Further Terms of Sale) conflicts with the General Terms of Sale the inserted term shall prevail.

[46]     The draftsman of the special condition, clause 18 which has been included as a further term of sale, has not had regard to clause 9.3 with the result that clause

18.1(a) conflicts with clause 9.3 of the general terms of sale both as to the dates for approval and the basis upon which approval can be given.   The drafters of the standard form agreement contemplated such a situation might occur when special conditions are included and provided for it by clause 1.4(3).  The result is that clause

18 must prevail.

Reasonable access

[47]     Given my finding on the first point, it is strictly unnecessary to consider the plaintiff’s alternative causes of action,3  but for completeness I propose to refer to them briefly.  The plaintiff says the defendants did not provide reasonable access to the buildings to enable them to be inspected by the purchaser’s building inspector as required by clause 9.3 so that, even if clause 9.3 applied, the defendants were not entitled to avoid the contract on 25 March.

[48]     Mr Waalkens referred to the evidence of Mr Hodges about an incident that occurred during the inspection.  One of the guests was leaving the units, (apparently going out for the day) and when told they were carrying out a building report and

inspecting  the  rooms,  said  “Oh  that’s  absolutely  fine”  and  left  her  door  open.

3      Although the additional claim for rectification of clause 20.1 is still relevant.

However Mr Choi said “No, no” and closed and locked the door.  I do not consider that to be a breach of the obligation to allow inspection “at all reasonable times”.  It was reasonable for Mr Choi as the manager of the motel to preserve the privacy of the motel guests.   Even though, when faced with Mr Hodges and the others, the guest may have volunteered to leave her room for inspection, it was reasonable for Mr Choi to make the point in front of the guest that he respected the privacy of the guests.   It could reflect on the good will of the business.   I consider the plaintiff seeks to read too much into that particular incident.

[49]     There is  a conflict  of  evidence between  Mr Choi  and  Mr Hodges  as  to whether Mr Choi invited Mr Hodges to come back at another time to inspect the units  that  were  occupied  when  Mr  Hodges  was  first  there.     However,  it  is unnecessary to resolve that issue because on the evidence, the defendants did not refuse to allow Mr Hodges to return to inspect the remaining units.  It was not (at least not initially) unreasonable to refuse access to units that had guests registered to them.   Mr Moore said he expected arrangements would be made to inspect those units.  That would need to be at a later date.  There was no formal request made to enable Mr Hodges to return to the property to inspect the interior of the units before

25 March.   Ms Cox accepted that the plaintiff never told the defendants that the plaintiff wanted Mr Hodges to go back to the premises.  Mr Waalkens overstates the position when submitting that the defendants had persistently refused access to all units.

[50]     As Mr Collecutt submitted, the short answer in relation to this point is that Mr Hodge inspected the buildings, saw inside approximately half the units and was able to complete his building report and make it available to the plaintiff on 19

March, all within the 10 working day period.

Estoppel

[51]     The plaintiff next says that the defendants, by their actions, represented that Mr Fong had authority to confirm that the plaintiff had until 10 April to confirm the building conditions.   It is clear that Mr Fong had no express authority.   Once the agreement was signed, Mr Fong, of Arthur Fong Real Estate Ltd, was appointed as

the real estate agent of the vendors. The terms and conditions of his agency included the clause:

7.The owner does not authorise Empire Realty to sign an agreement for the sale and/or Lease of the Property on the owner’s behalf.

[52]     Nor is there any evidence of a representation by the defendants direct to Ms

Cox for the plaintiff that Mr Fong was authorised to vary the agreement.

[53]    So the issue is whether the defendants clothed Mr Fong with “apparent authority”  and  whether  he  did  represent,  on  behalf  of  the  defendants,  that  the plaintiff had until 10 April to confirm the building condition in clause 9.3.  In Savill v Chase Holdings (Wellington) Ltd the Court of Appeal acknowledged:4

The locus classicus on the subject is the judgment of Diplock LJ in Freeman

& Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at p

503:

"An 'apparent' or 'ostensible' authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract."

[54]     The issue arises because on 12 March, Mr Fong sent a text to Ms Cox stating

“10th April is the 20th working day”.

[55]     Ms Cox’s evidence on the point was:

I knew that the due diligence clause allowed a period of 20 working days but I wanted to confirm the exact date by which this had to be completed.   I accordingly telephoned Mr Fong and asked him which day was the day by which the plaintiff’s satisfaction with the condition of buildings and other conditions (finance included) needed to be confirmed.  He confirmed to me later that afternoon by text that 10 April 2013 was the date for this deadline.

4      Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 at 304-305.

[56]     I note that in her affidavit in support of the caveat Ms Cox put a slightly different emphasis on the matter.   When referring to the discussion with Mr Fong about dates she said:

I telephoned him and asked him which day was the day to go unconditional and get everything done.  He confirmed to me by text that 10 April 2013 was the 20th working day.

[57]     Mr Fong’s evidence on this issue was that Ms Cox phoned him and asked if the 20th  working day is 10 April.  He said “I’m not sure” but later text her to say “10th  April is the 20th  working day”.   Mr Fong said that generally he answers the question that is asked so that if she had asked when the contract went unconditional he would have referred to an unconditional date.

[58]     Even on Ms Cox’s evidence, Mr Fong’s advice was correct insofar as it related to the satisfaction of clause 18.  Importantly there is no suggestion that Ms Cox had in mind a possible conflict between clause 9.3 and clause 18 and was seeking clarification of that from Mr Fong.

[59]     I find that when the discussion between Ms Cox and Mr Fong about the fulfilment of the conditions took place Ms Cox was focused on the due diligence clause.  Her concern arose as to the expiry of the 20 working days, given that Easter intervened and it was on that issue that she was seeking clarification from Mr Fong. There was no mention of clause 9.3 by either of them.  Mr Fong’s advice to Ms Cox

that the 20th working day expired on 10 April was, as a matter of fact, correct.  There

was no representation or suggestion by Mr Fong that the vendor was not relying upon clause 9.3 nor that any requirement for satisfaction of that clause was waived or extended.

[60]     Mr Waalkens referred to a passage at para 5.13(c)(i) in McMorland Sale of Land (2nd ed, 2000), to the effect that under the general law notice of waiver to the agent of the vendor (either the solicitor or the real estate agent) is notice to the vendor, referring to the then clause 11 of the agreement for sale and purchase (clause

12 in the ninth edition).

[61]     However, there is a difference between the authority of the agent to receive or accept notice on behalf of the vendor and the agent being able to alter the terms of contract or confirming (mistakenly) the terms of contract such as to bind the vendor. Ms Cox could have confirmed approval of the condition to Mr Fong.  That is quite different to Mr Fong varying the terms of the contract.  Mr Fong had no authority to vary the terms of contract.

[62]     Next, the plaintiff says that by making arrangements with the defendants to allow  the  plaintiff ’s  consultants  to  inspect  on  26  March,  the  defendants  were estopped from relying on clause 9.3 or waived any ability to cancel for non compliance with clause 9.3.

[63]     The requirements for an estoppel are conveniently summarised in Butler’s

Equity and Trusts in New Zealand:5

(a)       a belief or expectation has been created or encouraged through some action representation;

(b)      the belief or expectation has been reasonably relied on; (c)     detriment will be suffered;  and

(d)it would be unconscionable for the party against whom estoppel is alleged to depart from that belief or expectation.

[64]     Mr Fong made arrangements with the defendants to allow the plaintiff’s builders to inspect on 26 March.  On 25 March, at 3.06 pm Mr Fong wrote to Mr Daniel Choi (the first named defendant):

Write to confirm that the builders will be coming at 12 noon tomorrow.  I

will try and get there after my other appointment at 12 noon.

Ms Cox received a copy of that email and says that as a result she understood everything had been organised for a further inspection the next day.

5      Andrew Butler (ed)  Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington,

2009) at [19.2].

[65]     While  Mr  Fong  referred  to  builders  in  his  email  of  25  March  Ms  Cox accepted that the plaintiff did not intend to send Mr Hodges back on 26 March.  At best from the plaintiff’s point of view it is ambiguous as to who would attend the inspection.   Given the ambiguity about the communication and Ms Cox’s state of mind at the time, I do not accept she or the plaintiff could reasonably conclude the defendants would not rely on their rights under clause 9.3 to avoid the contract on that basis..

[66]     In terms of whether the reliance or belief is reasonable, Butler states:6

... for example in commercial transactions reliance on “informal communications of an ambiguous kind” is unlikely to be considered reasonable or to override contractual rights.

Rectification

[67]     Rectification is preserved by the Contractual Mistakes Act:   s 5(2)(b).   A recent summary of the principles is set out in the judgment of Peter Gibson LJ in Swainland  Buildings  Ltd  v  Freehold  Properties,7   adopted  by  Lord  Hoffman  in

Chartbrook Ltd v Persimmon Homes Ltd.8     The party seeking rectification must

show that:

a)   the  parties  had  a  common  continuing  intention  ...  in  respect  of  a particular matter and the instrument to be rectified;

b)   there was an outward expression of the accord;

c)   the intention continued at the time of the execution of the instrument sought to be rectified;

d)   by mistake the instrument did not reflect that common intention.

The onus is on the party seeking rectification.   The issue is not the individual intentions  of  the parties but  whether their common  intention  has  been  properly

recorded.

6      At [19.2.2], citing Travel Agents Assn of NZ Inc v NCR (NZ) Ltd (1991) ANZ ConvR 553; Sterns

Trading Pty Ltd v Shteinman [1988] NSW ConvR 55-414 at 57,793.

7      Swainland Buildings Ltd v Freehold Properties [2002] 2 EGLR 71 at [33].

8      Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101 at [48].

[68]     In the present case the unchallenged evidence of Ms Cox is that it was always the plaintiff’s intention to unit title each of the separate motel units.   That was a matter she raised with the defendants through Mr Fong.  The due diligence clause was directed to it as well.   Insofar as the additional clause 20.1 refers to floors as opposed to individual units, it does not reflect that common intention, which I am satisfied was the intention of the purchasers.  It was of no moment to the defendants. For them the issue was the sale price and conditions of sale.

[69]     I also note that clause 19 which provided for settlement referred to “the issue

of separate unit titles for each unit in the building ...”.

[70]     The plaintiff is entitled to rectification of clause 20.1.

Summary/Result

[71]     There  is  a  conflict  between  special  condition  18  and  clause  9.3.    The agreement provides for resolution of such conflicts.  Clause 18 is to prevail.  On that basis, the plaintiff had until 10 April to confirm its approval of the due diligence clause which included approval of the condition of the buildings.   The plaintiff confirmed the agreement by that date.  The agreement became unconditional at that time.

[72]     Judgment for the plaintiff as follows:

(a)      An  order  for  specific  performance  requiring  the  defendants  to specifically perform the agreement for sale and purchase between it and the plaintiff in relation to the property on the following terms.

(i)The date of settlement is to be 10 working days after the issue of separate unit titles for each unit in the building on the property or 31 October 2013, whichever is the earlier.

(ii)Leave reserved to the parties to apply for any other directions or orders that  may be  necessary to  implement  the specific performance of the agreement on 48 hours notice.

(b)      Clause 20.1 of the agreement is rectified by replacing the words “floor

of the building” with the word “unit”.

(c)      The plaintiff’s claim for damages following the delay in settlement is adjourned sine die.   In the event the parties are unable to agree on damages that aspect may be brought back for determination by the Court.  Counsel are to file a memorandum to confirm the position by

8 November 2013.

Costs

[73]     Costs are to be dealt with by the exchange of memoranda in the event counsel cannot agree.  Subject to the issue of any Calderbank offer it would appear that costs

on a 2B basis would be appropriate.

Venning J