Yu v Bradley
[2020] NZHC 1822
•28 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-1125
[2020] NZHC 1822
BETWEEN JING JUN YU
First Plaintiff
ANDREW INVESTMENTS (2004) LIMITED
Second Plaintiff
AND
DALE GORDON BRADLEY and JILLIAN ANNE BRADLEY
Defendants
Hearing: 2 – 5 March 2020 Appearances:
J F Anderson QC and L R Green for the plaintiffs
H M Z Lanham and J K Grimmer for the defendants
Judgment:
28 July 2020
JUDGMENT OF PALMER J
This judgment was delivered by me on Tuesday 28 July 2020 at 11.00am.
Pursuant to Rule 11.5 of the High Court Rules.
………………………… Registrar/Deputy Registrar
Counsel/Solicitors:
J F Anderson QC, and L R Green Barrister, Auckland H M Z Lanham and J K Grimmer, Barristers, Auckland
YU v BRADLEY [2020] NZHC 1822 [28 July 2020]
Summary
[1] The property at 471 Whitford-Maraetai Road, Whitford, has lovely views of the Hauraki Gulf and Rangitoto. On 12 November 2016, Mr Jing Jun (Jason) Yu agreed to buy it from Mr Dale Bradley and Mrs Jillian Bradley. But the expansive lawn leading to the bush in the foreground of the sea view did not all belong to the property. When the neighbour who owned a V-shaped part of the lawn issued a Fencing Act notice before settlement, Mr Yu wanted to inspect the effect on the view. On 14 February 2017, the day before settlement, Mr Bradley prevented Mr Yu and his lawyer and valuer from inspecting the property. Mr Yu claimed compensation under cl 8 of the standard form sale and purchase agreement. He issued a settlement notice on 16 February 2017. On 20 February 2017 Mr Yu and his advisers did inspect the property. The next day, the Bradleys issued a settlement notice. Settlement did not occur. On 10 March 2017, Mr Yu purported to cancel the sale and purchase agreement. On 13 April 2017, the Bradleys did the same. Mr Yu accepted that as a repudiation. The Bradleys retained the deposit of $230,000. Mr Yu sues to get it back, plus interest. The Bradleys counterclaim for damages.
[2] On the balance of probabilities, I find Ms Yangling (Helen) Han, the Bradley’s real estate agent, did not specifically point out the property’s boundaries to Mr Yu on a pre-sale visit. But she remedied this before his offer was presented to the Bradleys when she showed him a map clearly illustrating the boundaries. So the misrepresentation was corrected before the agreement was entered and Mr Yu’s claim on that ground fails. Under the standard terms of the Agreement, a purchaser is entitled to inspect a property to check they are getting what they agreed to pay for, before settlement. Any written authorisation of another person by a purchaser under cl 3.2 must be for those purposes. Mr Yu did not authorise his valuer, in writing, to inspect the property. But Mr Bradley denied Mr Yu his right to inspect the property before the agreed settlement date. Because of that, Mr Yu was not required to settle then.
[3] A claim under cl 8 must be genuine and reasonably arguable, not frivolous or vexatious or an abuse of the process set out by cl 8. Mr Yu did have such a claim for compensation but he did not make the claim unconditionally so it was not made for the purposes of s 8. That means, after inspection occurred and the Bradleys issued
their settlement notice, the Bradleys were ready, able and willing to settle and Mr Yu should have been. He was not, because he insisted on a deduction for a claim for compensation he had not made. Mr Yu’s cancellation of the agreement was therefore invalid. The Bradleys were entitled to treat it as a repudiation and cancel the agreement themselves. The Bradleys are entitled to damages of $575,672.99 and interest, with certain deductions, for the losses they sustained.
What happened?
The property
[4] 471 Whitford-Maraetai Road, at Whitford is a 45-minute drive north of Auckland, unless it is rush hour. The brochure advertising its sale in 2016 is titled “[o]n top of the hill with a spectacular sea view”.1 It advertises a two story, four- bedroom house of approximately 256 square metres on a 2.4 hectare property. It shows a reasonably steeply-sloping lawn down to native bush, with the coastline and sea view beyond that. On page nine is a photo taken with a telephoto lens, of Rangitoto, with the caption “Unobstructed views over the protected native bush to Rangitoto”. The views are mentioned, and shown, on several pages. The sweeping lawns are also mentioned.2
[5] In 2016, there was nothing physically indicating that the boundary of the property stopped before the sloping lawn reached the native bush. But, in fact, a V- shaped wedge of the lawn, pointing upwards and reaching about half way up towards the house, was part of a neighbouring property below. The sloping lawn was visible from the upstairs master bedroom in the house; but not from the downstairs or the lawn immediately outside the house, due to a hedge and the slope.3 The distance between the apex of the V and the hedge was 18 metres.4 It was approximately represented in the photograph below, sent by the lawyer for the neighbours to the purchaser, as explained below.5
1 Exhibit JU6.
2 At 6.
3 Brief of Evidence of Dale Bradley, 4 March 2020 (Bradley), at [14].
4 Notes of Evidence (NOE) 135/16.
5 CB 1/169.
The parties
[6] Mr and Mrs Bradley bought the property in 2000. Mr Bradley’s evidence is that they never treated the sloping lawn as their own but they kept it tidy as good neighbours.6 He says they agreed with the then-neighbour to remove a broken down fence that used to be on both sides of the V and a contractor, acting on the neighbour’s
6 Bradley at [5].
instructions, smoothed out the area from where the fence was removed.7 In 2016, the Bramwells bought the property which included the V in the sloping lawn. Mr Bradley continued to mow the sloping lawn sometimes, as he had done when the previous two neighbours were there.8 He did not understand the Bramwells to be unhappy with that arrangement.9
[7] Mr Yu is an Auckland businessman. He emigrated to New Zealand 20 years ago, and is the managing director of a travel company that has provided travel services to visitors, mainly between New Zealand and China. He is also the sole director of Andrew Investments (2004) Ltd, an investment company. He describes himself as having experience purchasing properties but said under cross-examination that his lawyer thinks he is a very gullible person and once shouted at him not to sign anything until the lawyer had seen it.10 Mr Yu’s evidence is that he makes “lots of mistakes” and has previously bought three leaky homes.11
Mr Yu visits the property
[8] In February 2016, the Bradleys listed the property for sale with Mr Tzong-Wen (Daniel) Huang at the Meadowlands branch of Barfoot and Thompson.12 Mr Bradley’s evidence is that he walked around the property with Mr Huang, showed him the boundary line, made clear not all the sloping lawn was on his land and told him about the arrangement that he mowed the sloping lawn to keep it looking tidy.13 Mr Bradley relied on Barfoot and Thompson’s advice about what to put in the brochure and approved the description of the property, and photographs, in the brochure.14 Around October 2016, the Bradleys rejected an offer for the property of $2.1 million from another adjoining neighbour, Mr Kelvin Mackie, who seems to have had subdivision plans for his properties.15 The Bradleys counter-offered at $2.3 million but no agreement was reached.
7 Bradley at [10]-[13]
8 Bradley at [15], [20].
9 Bradley at [19]. 10 NOE 15/11-14. 11 NOE 15/27-34.
12 Bradley at [26].
13 Bradley at [27]-[28].
14 Bradley at [29].
15 Bradley at [30].
[9] On 9 November 2016, Mr Yu visited the property. Ms Han showed him around. They spoke in Mandarin.16 There is a conflict in the evidence about what happened and what was said. Mr Yu’s evidence is that she told him the boundary followed the line of trees to the west, down to the trees.17 He says they walked all the way to the trees (down the sloping lawn), and through bushes which would have been on the adjoining property though he did not know it.18 Mr Yu and Ms Han agreed she showed him a map of the property on the Property Guru app on her phone.19 It shows the boundaries to the property. She says she texted a screenshot to Mr Yu.20
[10] Ms Han’s oral evidence was somewhat difficult to follow as she did not make a practice of directly answering questions. Under cross-examination, she stated she positively pointed out the boundaries to Mr Yu and specifically told him the lawn was not part of the property.21 This went further than her evidence in chief, or her evidence for a summary judgment hearing in 2017, which was that she told Mr Yu she “could” point out the boundaries but he would need to talk to a surveyor to know the exact boundaries.22 Mr Bradley had only pointed out the boundaries to Mr Huang, not to Ms Han.23 Neither Ms Han nor Mr Huang recalled discussing the boundaries with each other.24 Ms Han also appears to agree that she had shown Mr Yu around part of the adjoining property and said she could not recall exactly where they walked.25
[11] I find, on the balance of probabilities, Ms Han did not specifically point out the boundaries to Mr Yu on 9 November 2016. Her evidence under cross-examination was not convincing. It had the air of being a retrospective justification. The fact it had not previously been offered suggests it owed something to wishful thinking at the time of cross-examination.
16 NOE 22/18-19.
17 Brief of Evidence of Jing Jun Yu, 2 March 2020, (Yu) [16].
18 Yu at [12].
19 Brief of Evidence of Yanling Han, 3 March 2020 (Han) at [12]-[14].
20 Han at [12].
21 NOE 116/25-26, 118/12-19.
22 Han at [11]; Affidavit of Helen Han, 19 July 2017 (Han 2017), at [5].
23 Brief of evidence of Daniel Huang, 3 March 2020, (Huang) at [5], Bradley at [27]-[28].
24 Huang at [9]; Han at [8].
25 NOE 117/1-16, 114/10-14, 118/30-119/5.
Mr Yu makes an offer and the Bradleys accept it
[12] On 10 November 2016, Mr Huang told the Bradleys that his associate, Ms Han, had a written offer for the property from Mr Yu for $2.15 million.26 On Friday 11 November 2016, Ms Fitzpatrick at Barfoot and Thompson told the Bradleys there was now a multi-party offer situation.27 On Saturday 12 November 2016, Ms Fitzpatrick chaired a meeting at which the Bradleys received two offers, from Mr Mackie and from Mr Yu. Both offers were at $2.3 million but Mr Mackie’s proposed settlement date was too soon for the Bradleys. Mr Yu’s offer was conditional on a solicitor’s approval within two days. Mr Yu later nominated Andrew Investments 2004 Ltd to take title to the Property.28 For clarity, I refer to Mr Yu as the purchaser.
[13] Mr Huang said Mr Yu would like to settle on 15 February 2017 but was happy to delay settlement or to rent the house to the Bradleys until they had bought a new home.29 Ms Fitzpatrick emailed Mr Huang stating it was “paramount that the buyer/s are aware that the proposed subdivision may result in seven properties sharing the driveway to No 471… Please also ensure that the purchaser is aware of the boundaries for the said property ie: No 471”.30 The email attached a boundary map and map of the proposed subdivision and asked that they be “disclosed to your purchasers prior to the vendors accepting the offer”.
[14] There is another conflict in the evidence about what happened next. Mr Yu’s evidence is that he met Mr Huang at the Brickworks Café (the Café) in Whitford on the morning of Saturday 12 November 2016. But the evidence of Mr Huang and Ms Han is that Mr Yu met Ms Han. Mr Bradley’s evidence is that Ms Han called him from the Café, said she was meeting Mr Yu and invited the Bradleys to meet her at the Café, which they subsequently did.31 I find, on the balance of probabilities, that Mr Yu met with Ms Han. Either way, Mr Yu agrees he was shown and initialled a hard copy of the subdivision map and the Property Guru map of Mr Bradley’s property.
26 Bradley at [32].
27 Bradley at [34].
28 CB 1/219.
29 Bradley at [36].
30 CB 1/68.
31 Bradley at [38].
[15] The witnesses also differ on the purpose of the meeting. Ms Han’s evidence is that she discussed both maps with Mr Yu and pasted into the sale and purchase agreement a solicitor approval clause.32 I accept she did this, contrary to Mr Bradley’s evidence that the offer Mr Huang presented from Mr Yu that morning was already conditional on solicitor approval within two days.33 There was a photo of the clause on Mr Yu’s phone, along with photos of the two maps.34 Mr Yu’s evidence is that he understood the only purpose of the meeting was to make sure he knew about the subdivision, not the boundaries of the property. On this issue, I accept Ms Han’s evidence. The boundaries of the property are clearly shown on the map Mr Yu initialled, which was the same one he was shown on his visit on 9 November 2017. Mr Yu may not have assimilated the information but I find, on the balance of probabilities, the boundaries were pointed out to him at this meeting.
[16] The Bradleys then stopped at the Café and met with Ms Han who showed them the subdivision plan and the map which Mr Yu had initialled.35 Mr Bradley signed the sale and purchase agreement, accepting Mr Yu’s offer.
[17] On 14 November 2016, Mr Yu visited the property again. Mr Yu says he looked at the views from both inside and outside the house, and that Ms Han gave him the impression the proposed subdivided land was past the tree line beyond the lawn area.36 He says it appeared to him that even if the neighbour subdivided their property this would not affect the view.37 Ms Han says she does not recall pointing out the proposed subdivision, but that she walked Mr Yu around the property, and Mr Yu carried the signed subdivision plan and the Property Guru map with him.38
[18] On Wednesday 30 November 2016, Mr Yu’s solicitor advised the contract was unconditional. Mr Yu requested a rental appraisal, to which Mr Bradley agreed.39 Mr Bradley says Mr Yu did not attend, but he showed representatives from Barfoot &
32 Han at [33]-[41].
33 Bradley at [36].
34 CB 1/21.
35 Bradley at [39].
36 Yu at [32].
37 Yu at [33]-[34].
38 Han at [46].
39 Bradley at [63]; Huang at [27].
Thompson around. The rental appraisal report was finalised on 13 December 2016.40 The deposit was paid by 13 January 2017.41
The fencing notice and the grey-water system
[19] On 20 December 2016 Mr Bramwell, the neighbouring owner of the V-shaped wedge in the lawn, sent a text to Mr Bradley wanting the boundaries to be clearly understood by the purchaser.42 Mr Bradley responded that he had made the boundaries very clear to the buyer. He says he believed he had done so because he had advised the real estate agent of the boundary and had seen the boundary map Mr Yu had signed.43
[20] On 21 January 2017, Mr Bramwell organised a survey of the land, revealing that part of the Bradley’s bird cage, for white fantail pigeons, was a metre over the boundary.44 In late January 2017, Mr Bramwell and Mr Bradley met, not amicably. Mr Bramwell said he did not want Mr Bradley to continue mowing the sloping lawn and Mr Bradley agreed to remove the bird cage, which he did.45 Mr Bradley told Mr Bramwell it was “a jerk move”.46
[21] On Wednesday 8 February 2017, the Bramwells served a fencing notice on the Bradleys, demanding they pay for a deer fence between the properties.47 There were no deer on the properties. Barfoot and Thompson provided the notice to Mr Yu the same day. Mr Bradley responded informally by email to the Bramwell’s lawyer the same day, rather negatively as might be expected.48 On 9 February 2017, Mr Bramwell’s solicitor provided the photograph reproduced above to Mr Yu’s solicitor.49 On 14 February 2017, Mr Bradley advised Mr Yu’s lawyers that Mr Bradley would offer to pay half the cost of the new fence.50
40 Huang at [27]; CB 1/113.
41 Yu at [38]; CB 1/142.
42 Bradley at [21]; CB 1/121.
43 Bradley at [21].
44 Bradley at [23]; CB 1/121.
45 Bradley at [23]-[24].
46 Bradley at [24]. 47 CB 1/156-156. 48 CB 1/162.
49 CB 1/166-169.
50 CB 1/227-229.
[22] On 22 December 2016, Mr Bradley emailed Mr Yu to advise the waste water system was not functioning. In fact, Mr Bradley’s evidence is that it was functioning but was not functioning properly.51 He advised Mr Yu he was going to service it and asked whether Mr Yu would like the whole system replaced with a new one. After enquiring again of Mr Yu about this in mid-January 2017, Mr Yu responded by saying he had forwarded the email to his wife and lawyers.52
No inspection and no settlement on 15 February 2017
[23] Mr David Morrison, of Grove Darlow, was Mr Yu’s solicitor. On Monday 13 February 2017, two days before settlement, Mr Morrison wrote to Mr Bradley’s lawyer, Ms Alison Tait of Wells & Co.53 The letter implied the Bradleys had not been open with Mr Yu, and that there had been a misrepresentation regarding the boundary which was material in nature. The letter stated Mr Yu would like to visit the property the following day at 3 pm and sought confirmation that time would be suitable.54
[24] The following day, Mr Morrison instructed a valuer, Mr Michael Sprague. In a phone conversation with Ms Tait at 11.40 am on Tuesday 14 February 2017, Ms Tait advised that 3 pm would be suitable and Mr Morrison “informed Ms Tait that a valuer would also be present in order to provide a genuine pre-estimate of loss in respect of the encroached area”.55 Mr Morrison’s evidence is that Ms Tait objected to that and said she would have to take instructions.56 Mr Bradley received Mr Morrison’s letter that morning and was shocked by the allegation of misrepresentation.57 He met with Ms Tait and, after receiving her advice, “decided Mr Yu should not bring a valuer onto the land as I understood he had no right to, but we would be happy to provide the normal inspection with a lawyer present”.58 However, Mr Bradley says Ms Tait did not advise Mr Yu’s lawyer of that before the meeting.59 Her letter arrived later in the day. It put Mr Yu on notice that the vendor of the property that the Bradleys had
51 Bradley at [48].
52 CB 1/146.
53 CB 1/171.
54 CB 1/171 at 172.
55 Brief of Evidence of David Morrison, 3 March 2020 (Morrison), at [9].
56 Morrison at [9]–[11].
57 Bradley at [65].
58 Bradley at [66].
59 Bradley at [66].
purchased was relying on funds from the Bradleys’ sale to purchase a further property, so a wrongful cancellation could give rise to extensive damages.60
[25] In the meantime, Mr Bradley informed Mr Huang that Mr Yu would be conducting a purchaser inspection.61 Ms Fitzpatrick, from the Barfoot and Thompson office, emailed Mr Yu to confirm the 3 pm appointment.62 Mr Huang arrived around 3 pm on 14 February 2017. Mr Yu arrived with Mr Morrison and Mr Sprague shortly afterwards.63 Again there are conflicts in the evidence. Mr Bradley left it to Mr Huang to meet them but saw the three men ignore Mr Huang and go to the rear of the property where the sloping lawn was.64 Mr Bradley’s evidence is that he told Mr Morrison his lawyer had told him to not speak with him and had denied the valuer permission to attend but that Mr Huang was happy to conduct an inspection without the valuer.65 Mr Morrison’s evidence is that Mr Bradley did not offer an inspection.66 Mr Morrison tried to call Ms Tait but could not get through to her. His messages asking her to call him were not returned. Mr Bradley thought Mr Sprague was trying to head towards the rear of the property and told Mr Morrison they should leave the property.67 Mr Bradley expected them to wait off the property until Mr Morrison had spoken to Ms Tait.68 But Mr Yu and the others understood they had been asked to leave and they did so.
[26] I consider, on the balance of probabilities, that Mr Bradley intended to allow a final inspection by Mr Yu without the valuer but I am not persuaded he communicated that to Mr Morrison in a way Mr Morrison reasonably understood. That is what is suggested by Mr Morrison’s dictated letter to Ms Tait soon afterwards.69
[27] After leaving the property, Mr Morrison contacted the Bramwells, with whom he had previously been in touch, and the three of them viewed the Bradleys’ property
60 CB 1/239-240.
61 Bradley at [67].
62 Huang at [29]; CB 1/243.
63 Bradley at [68].
64 Bradley at [69].
65 Bradley at [71].
66 NOE 70/1-5.
67 Bradley at [74].
68 Bradley at [76].
69 CB 1/224, 1/273.
from the Bramwells’ property.70 Mr Morrison dictated a letter to Ms Tait in the car on the way back. The letter was faxed to Ms Tait at 4.15 pm.71 It claimed compensation for the fencing notice and grey-water system and advised Mr Yu would “endeavour” to make a cl 8 claim “in respect of the encroachment area”.72 The letter said the claim was without prejudice to Mr Yu’s rights under s 7 of the Contractual Remedies Act, if he elected to exercise that right.
[28] Mr Sprague’s expert evidence is that it was not possible to assess loss of amenity and loss of view without being permitted entry onto the Bradleys’ property.73 However on 15 February 2017, on the basis of the visit to the Bramwells’ property, Mr Sprague advised Mr Yu that his estimate of the potential loss of amenity and view was $100,000-$125,00, with a midpoint of $115,0000.74 On 21 February 2017, after having inspected the Bradleys’ property, he confirmed that view.75
[29] The settlement date agreed in the Sale and Purchase Agreement was Wednesday 15 February 2017. Mr Bradley’s evidence is that the house was empty and cleaned by 2.30 pm 15 February 2017, to provide vacant possession.76 He said they then left a couple of things when “it looked like” Mr Yu was not going to settle.77 At 5.31 pm on 15 February 2017, Mr Morrison’s legal executive faxed a letter from him to Ms Tait saying:78
Without prejudice to our clients rights pursuant to section 7 of the Contractual Remedies Act 1979 and on the assumption, which assumption may be entirely incorrect, that the neighbour would be willing to sell the encroached area to our client, our client claims further compensation pursuant to clause 8 …
The above compensatory claim will not apply if the neighbour will not sell the encroached land. We will make an approach to the neighbour to enquire as to whether they are willing to sell. If they are not willing to sell then our client will exercise its rights pursuant to section 7.
70 Morrison at [23]-[24].
71 CB 1/274.
72 CB 1/224-225.
73 Sprague at [40]; CB 1/293-295.
74 CB 1/272.
75 CB 2/412-415.
76 Bradley at [79].
77 Bradley at [81].
78 CB 1/273.
[30] Mr Yu could not recall ever offering to buy the Bramwells’ land.79 Mr Morrison’s evidence is that he was not instructed to make any such offer.80
Inspection but still no settlement
[31] On Thursday 16 February 2017, the Bradleys changed lawyers. That was also the settlement date for the property they had agreed to purchase. They had agreed to allow the former owners to stay in that house for two weeks because, Mr Bradley says they understood they could rent their own property from Mr Yu.81 Also on 16 February 2017, Mr Yu issued a settlement notice to the Bradleys which would expire on 6 March 2017.82 On 16 February and again on 17 February 2017, Mr Rooke, the Bradleys’ new lawyer, offered inspection.83 On 17 February 2017 Mr Rooke invited the cl 8 claim to be particularised and quantified after inspection, and noted the need to agree an interim amount to be retained under cl 8.84 Mr Morrison declined to comment since he considered the position “had been made clear”.85
[32] On 20 February 2017, Mr Yu and Mr Morrison returned and inspected the property, which they had arranged with Mr Rooke. Mr Bradley says he had been given conflicting times about when they would inspect the property, so Mr Huang was not at the property when they arrived.86 Mr Bradley says he was not comfortable with the inspection when he found out it happened without Mr Huang being present.87
[33] Mr Bradley’s evidence is that they were again ready to settle on 20 February 2017.88 Mr Rooke, for the Bradleys, issued a settlement notice by email at 4.54 pm and by fax at 5.02 pm that day.89 Both parties agree, under cl 1.3(4)(d) of the Agreement, the email was not effective service on 20 February 2017 and, under cl 1.2(2), the fax after 5 pm means it was effectively served on 21 February 2017.
79 NOE 60/5-10.
80 NOE 71/6-18.
81 Bradley at [86]-[88].
82 CB 2/307-308.
83 CB 2/322-324, 2/326.
84 CB 2/324.
85 CB 2/322.
86 Bradley at [83]-[84].
87 Bradley at [84].
88 Bradley at [105].
89 CB 2/333-335.
The Notice claimed penalty interest from 15 February 2020 and was set to expire on 8 March 2017. The cover letter rejected the 16 February 2017 notice and advised that the cl 8 procedure was not available to Mr Yu because there was no substantive case available against the Bradleys in misrepresentation and, if there were, he had failed to give notice of it on or before the last working day prior to settlement.90
[34] On 27 February 2017, the Bradleys responded formally to the Bramwells, offering to pay half the price of a new farming fence but not a deer fence which was unnecessary.91 No fence has been erected yet. On 6 March 2017, Mr Rooke sent a letter to Mr Morrison advising that the Bradleys remained ready, able and willing to settle.92 He noted the Bradleys had previously offered to deduct the cost of the waste water system from the sale price and to cover the cost of the fencing, and that he did not believe these amounts remained an issue.93
[35] On 10 March 2017, Mr Morrison sent Mr Rooke a letter advising that Mr Yu cancelled the Agreement.94 On 17 March 2017, Mr Rooke said that the Bradleys read that as a repudiation and would cancel the contract.95 On 13 April 2017 Mr Rooke wrote again saying the Bradleys elected to cancel the contract and would retain the deposit under cl 11.4 of the Agreement.96 On 17 May 2017, Mr Morrison said that if the 10 March 2017 cancellation was not effective they considered the Bradleys had now repudiated.97
[36] The Bradleys were in a difficult position, having agreed to buy a new property, but having not settled on the sale to Mr Yu. The vendors of the property they were buying issued a settlement notice to the Bradleys and settlement on that property occurred on 1 March 2017.98 The Bradleys paid 12 days’ penalty interest and had to get bridging finance.99 They re-listed their property with a different real estate
90 CB 2/333.
91 CB 2/425-426.
92 CB 2/442.
93 CB 2/443.
94 CB 2/452.
95 CB 2/461-464.
96 CB 2/472.
97 CB 2/483.
98 Bradley at [121].
99 Bradley at [121].
company in May 2017, by which time the market had slowed considerably. They listed with a further real estate company in December 2017 and, in June 2018, entered into a property swap.100 At the time of the hearing they were still trying to sell the property for which they swapped theirs. Mr Bradley’s evidence is that this situation has been financially devastating, the stress on them has been immense and their living conditions are the worst they have ever been.101
Proceedings
[37] Mr Yu sues the Bradleys for return of the deposit with interest. In response, the Bradleys counterclaim for the costs they say were caused by Mr Yu’s failure to settle. In November 2017, Associate Judge J P Doogue declined an application by Mr Yu for summary judgment.102 He considered there was a substantial dispute about whether Mr Yu was materially misled.103 He considered it was not unreasonable to interpret the contract in such a way that a purchaser exercising the right to inspect the property ought to be able to do so in the company of an expert such as a valuer.104 The Judge considered it was not impossible for Mr Sprague to prepare a genuine estimate of loss despite being asked to leave the property, and the Bradleys were arguably not in breach of any contractual obligation by disregarding Mr Yu’s settlement notice.105 He also considered it was reasonably arguable that Mr Yu was responsible for his failure to comply with the timing requirements of making a claim for compensation under cl 8 of the Agreement.106 That would mean Mr Yu was not intending to settle in accordance with the contract, entitling the Bradleys to cancel and retain the deposit.
[38] In September 2018, Moore J dismissed Mr Yu’s application for leave to appeal.107 He held the arguments for summary judgment on appeal were not capable of bona fide and serious argument, though he considered Mr Yu’s substantive case was strong.108
100 Bradley at [132].
101 Bradley at [139]-[140].
102 Yu v Bradley [2017] NZHC 2816.
103 At [14].
104 At [51].
105 At [52] and [67].
106 At [82].
107 Yu v Bradley [2018] NZHC 2312.
108 At [20].
Issue 1: Did a misrepresentation induce Mr Yu to enter the contract?
Law of misrepresentation
[39]Section 35(1) of the Contract and Commercial Law Act 2017 provides:
If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B), –
(a)A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and
(b)A is not, in the case of a fraudulent misrepresentation, or of an innocent misrepresentation made negligently, entitled to damages from B for deceit or negligence in respect of the misrepresentation.
[40] So, to succeed, a plaintiff must establish there was a false representation, made by or on behalf of the defendant, which induced the plaintiff to enter into the contract. In addition, courts have held that it must have been reasonable to rely on the representation and that the representation must have been made with the intention of inducing entry into the contract, though this has been the subject of well-reasoned academic criticism.109 If the conditions of s 35 are satisfied, the plaintiff will be entitled to damages. If the misrepresentation was essential or substantially reduced the benefit of the contract, the plaintiff may also be entitled to cancel the contract.110
[41] In King v Wilkinson, Holland J held there was a positive misrepresentation as to the boundary from the presentation of a property as “[n]o one examining this property without prior knowledge of the true boundary would contemplate that the boundary was anywhere other than on the fence line.”111
Submissions
[42] Ms Anderson QC, for Mr Yu, submits the way the property was marketed and presented created a misrepresentation as to its boundaries, to the effect that the
109 For example, Ridgway Empire Ltd v Grant [2019] NZCA 134, (2019) 20 NZCPR 236 at [22]-[23]; Ridgway Empire Ltd v Grant [2019] NZSC 85 at [15]-[16]. See David McLauchlan “A misrepresentation muddle” [2020] NZLJ 56.
110 Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 145.
111 King v Wilkinson (1994) 2 NZ ConvC 191,828, HC Christchurch, CP 134/92, 29 March 1994, at 8–9 of the unreported decision.
property included the entirety of the sweeping lawns to the north of the house. She submits the defendants have not shown that the true boundaries were plainly brought to the attention of the plaintiff. She submits Mr Yu’s evidence should be preferred to Ms Han’s about pointing out the boundaries on 9 November 2016. She also submits it can be inferred from Mr Yu’s reaction to the fencing notice and his other evidence that he had not been aware the lawn was outside the property’s boundaries when he initialled the map on 12 November 2016. Ms Anderson submits any further attempts to make him aware were inadequate and misrepresentation is made out.
[43] Mr Grimmer, for the Bradleys, submits the Bradleys made no misrepresentations in the booklet because the booklet did not purport to define the boundaries. He submits Ms Han made no misrepresentation on 9 November 2017 because her evidence should be preferred to that of Mr Yu and she had a better recollection of the meeting at the Café than he did. And even if there was a misrepresentation, Mr Grimmer submits it was rectified by Ms Han showing Mr Yu the boundaries at the Café before his offer was accepted.
A misrepresentation corrected
[44] On the basis of my factual findings above, I consider Ms Han probably made a misrepresentation about the boundaries when she showed Mr Yu around the property on 9 November 2016. As in King v Wilkinson, the state of the property itself does not invite the logical conclusion that the boundary of the property forms a V in the middle of the sloping lawn. Clear explanation would have been required to make that plain, if misrepresentation was to be avoided. On the balance of probabilities, I am persuaded Ms Han did not provide a clear explanation of that on 9 November 2016.
[45] But, again on the balance of probabilities, I consider Ms Han did explain the boundaries to Mr Yu at the meeting at the Brickworks Café on Saturday 12 November 2016. Mr Yu is adamant he met Mr Huang, in the face of persuasive evidence that he met Ms Han. Mr Yu may also have misremembered the subject of the conversation and/or may well have not assimilated what he was told. I consider that, on 12 November 2016, Ms Han corrected her misrepresentation of 9 November 2016, before Mr Yu confirmed his offer to purchase. Given my finding that the boundaries
were pointed out to him then, I consider there was no misrepresentation at the time he entered the contract and Mr Yu was not induced to enter the contract by a misrepresentation. Alternatively, Mr Yu’s reliance on what he was told on 9 November was not reasonable. Mr Yu does not succeed in his cause of action on misrepresentation.
Issue 2: Who repudiated and/or cancelled the Agreement?
Law of inspection, compensation, settlement and cancellation
[46] Clause 1.1(33)(b) of the sale and purchase agreement used here, the ninth (2012) (5) edition of the REINZ/ADLS template, states “[u]nless a contrary intention appears on the front page or elsewhere in this agreement: … (b) a party is in default if it did not do what it has contracted to do to enable settlement to occur, regardless of the cause of such failure.”.
[47]Clause 3.2 states:
If the property is sold with vacant possession, then subject to the rights of any tenants of the property, the vendor shall permit the purchaser or any person authorised in writing, upon reasonable notice:–
(1)to enter the property on one occasion prior to the settlement date for the purposes of examining the property, chattels and fixtures which are included in the sale; and
(2)to re-enter the property on or before the settlement date to confirm compliance by the vendor with any agreement made by the vendor to carry out any work on the property and the chattels and the fixtures.
[48] Clause 6.4 of the Agreement provides that “[e]xcept as provided by section 7 of the Contractual Remedies Act 1979, no error, omission, or misdescription of the property or the title shall enable the purchaser to cancel this agreement but compensation, if claimed by notice before settlement in accordance with subclause 8.1 but not otherwise, shall be made or given as the case may require”. Clause 7.5 provides that breach of a warranty in the Agreement “does not defer the obligation to settle but that obligation shall be subject to the rights of the purchaser at law or in equity, including any rights under subclause 6.4 and any right of equitable set-off.”
[49] In Property Ventures Ltd v Regalwood Holdings Ltd, the Supreme Court considered the relationships between claims for compensation, settlement and cancellation in relation to the seventh edition (2) of the REINZ/ADLS template:112
(a)The Court recognised the right of a purchaser, who is entitled to an equitable set-off, to decline to settle if the vendor did not recognise the claim.113
(b)The Court considered the predecessor to cl 7.5 was not a barrier to assertion of a right of abatement, so “the existence of a breach of warranty is not a licence for a purchaser simply to sit on its hands refusing to proceed to settlement until the breach is remedied”.114 Rather, a purchaser must elect either to cancel or to perform the contract. A purchaser cannot suspend an election without risking default because “it risks being taken to have affirmed the contract but defaulted in performance”.115 The Court suggested the drafters of standard-form contracts devise a mechanism for speedy resolution of bona fide and reasonable purchasers’ claims, protecting both parties.116
(c)A claim must be raised in substance and may be made in general terms.117 A vendor who does not permit a purchaser to inspect the property to see what works are necessary to remedy the vendor’s default can hardly expect the purchaser to particularise its claim.118 A claim for compensation, under the Agreement or as an equitable set- off, must be advanced “and, to the extent which is reasonably possible, particularised” before settlement.119 If it is not, the vendor can ask for settlement in full. If it is, the vendor cannot continue to insist on payment in full as it would be “no longer in all material respects ready,
112 Property Ventures Investments Ltd v Regalwood Holdings Ltd [2010] NZSC 47, [2010] 3 NZLR 231.
113 At [68].
114 At [72].
115 At [72].
116 At [75].
117 At [79].
118 At [78].
119 At [79].
able and willing to perform its contractual obligations”.120 There, the vendor “made it sufficiently clear that it would not accept anything less than the full price”.121
[50] The eighth edition of the ALDS/REINZ contract responded to the invitation in Regalwood by inserting cl 7 which provided for a party to a sale and purchase agreement to claim compensation without holding up settlement. It was updated and amended in the ninth edition and became cl 8, which applies here:
8.0Claims of compensation
8.1If the purchaser claims a right to compensation either under subclause
6.4 or for an equitable set-off:
(1)the purchaser must serve notice of the claim on the vendor on or before the last working day prior to settlement; and
(2)the notice must:
(a)in the case of a claim for compensation under subclause 6.4, state the particular error, omission, or misdescription of the property or title in respect of which compensation is claimed;
(b)in the case of a claim to an equitable set-off, state the particular matters in respect of which compensation is claimed;
(c)comprise a genuine pre-estimate of the loss suffered by the purchaser; and
(d)be particularised and quantified to the extent reasonably possible as at the date of the notice.
8.2For the purposes of subclause 8.1(1), “settlement” means the date for settlement fixed by this agreement unless, by reason of the conduct or omission of the vendor, the purchaser is unable to give notice by that date, in which case notice may be given on or before the last working day prior to the date for settlement fixed by a valid settlement notice served by either party pursuant to subclause 11.1.
8.3If the amount of compensation is agreed, it shall be deducted on settlement.
8.4If the amount of compensation is disputed:
120 At [82].
121 At [83].
(1)an interim amount shall be deducted on settlement and paid by the purchaser to a stakeholder until the amount of the compensation is determined;
(2)the interim amount must be a reasonable sum having regard to all the circumstances;
(3)if the parties cannot agree on the interim amount, the interim amount shall be determined by an experienced property lawyer appointed by the parties. The appointee’s costs shall be met equally by the parties. If the parties cannot agree on the appointee, the appointment shall be made on the application of either party by the president for the time being of the New Zealand Law Society.
…
(6)the amount of compensation determined to be payable shall not be limited by the interim amount; and
(7)if the parties cannot agree on a stakeholder, the interim amount shall be paid to a stakeholder nominated on the application of either party by the president for the time being of the New Zealand Law society.
8.5The procedures prescribed in subclauses 8.1 to 8.4 shall not prevent either party taking proceedings for the specific performance of the contract.
[51] The leading text identifies the purpose of this clause as being “designed to prevent a purchaser making a spurious or inflated claim, and to give the vendor full and clear information of the basis of the claim made”.122
[52]Clause 11 of the Agreement provides:
11.0Notice to complete and remedies on default
11.1(1) If the sale is not settled on the settlement date, either party may at any time thereafter serve on the other party a settlement notice.
(2) The settlement notice shall be effective only if the party serving it is at the time of service either in all material respects ready, able, and willing to proceed to settle in accordance with this agreement or is not so ready, able, and willing to settle only by reason of the default or omission of the other party.
…
122 D W McMorland Sale of Land (3rd ed, Cathcart Trust, 2011) at [8.10](d).
11.2Subject to subclause 11.1(3), upon service of the settlement notice the party on whom the notice is served shall settle:
(1)on or before the twelfth working day after the date of service of the notice;
…
time being of the essence, but without prejudice to any intermediate right of cancellation by either party.
…
11.4If the purchaser does not comply with the terms of the settlement notice served by the vendor then . . .:
(1)Without prejudice to any other rights or remedies available to the vendor at law or in equity, the vendor may:
(a)sue the purchaser for specific performance; or
(b)cancel this agreement by notice and pursue either or both of the following remedies namely:
(i)forfeit and retain for the vendor’s own benefit the deposit paid by the purchaser, but not exceeding in all 10% of the purchase price; and/or
(ii)sue the purchaser for damages.
(2)Where the vendor is entitled to cancel this agreement, the entry by the vendor into a conditional or unconditional agreement for the resale of the property or any party thereof shall take effect as a cancellation of this agreement by the vendor if this agreement has not previously been cancelled and such resale shall be deemed to be have occurred after cancellation.
(3)The damages claimable by the vendor under subclause 11.4(1)(b)(ii) shall include all damages claimable at common law or in equity and shall also include (but shall not be limited to) any loss incurred by the vendor on any bona fide resale contracted within one year from the date by which the purchaser should have settled in compliance with the settlement notice. …
…
11.5If the vendor does not comply with the terms of a settlement notice served by the purchaser, then, without prejudice to any other rights or remedies available to the purchaser at law or in equity the purchaser may:
(1)sue the vendor for specific performance; or
(2)cancel this agreement by notice and require the vendor forthwith to repay to the purchaser any deposit and any other money paid on account of the purchase price and interest on such sum(s) at the interest rate for late settlement from the date or dates of payment by the purchaser until repayment.
…
11.8A party who serves a settlement notice under this clause shall not be in breach of an essential term by reason only of that party’s failure to be ready and able to settle upon the expiry of that notice.
Sub-issue 1: Did Mr Bradley breach Mr Yu’s right to inspect?
[53] Ms Anderson, for Mr Yu, submits the Bradleys breached Mr Yu’s right to inspect the property. She submits cl 3.2 is a significant right empowering the purchaser to inspect a property, and its broad framing shows it is intended to extend to a right to inspect with a valuer. She submits the right to claim compensation under cl 8 further supports the right to inspect with a valuer, as it requires the purchaser to particularise pre-estimates of loss, which will require expert advice in many cases. Ms Anderson submits cl 8 must also give rise to an independent right to inspect with appropriate experts, regardless of cl 3.2.123 She submits Mr Bradley breached Mr Yu’s right to inspect.
[54] Ms Lanham, for the Bradleys, submits there is no general right of inspection for any purpose under the Agreement. There is a one-time right of “final inspection” under cl 3.2 for the purpose of ascertaining the condition of the property, fixtures and chattels to ensure they are as contracted before taking possession. But cl 3.2 does not provide a right to inspect outside of that purpose and is not concerned with permitting an examination of the property for the purpose of making a claim under cl 8. The Supreme Court did not say it did in Regalwood and a one-time right for that purpose would not be workable.
[55] Clause 3.2 of the Agreement states that “the vendor shall permit the purchaser or any person authorised in writing, upon reasonable notice” to enter the property being sold for either of two specified purposes. It is expressed as an obligation on the vendor, which creates a corresponding right of inspection owing to the purchaser.
123 Citing Property Ventures Investments Ltd v Regalwood Holdings Ltd, above n 112, at [78].
The right is specifically extended to “the purchaser or any person authorised in writing”. The reasonable implication is that it is the purchaser, rather than the vendor, who is empowered to authorise someone other than the purchaser to inspect. It would make little sense for the identity of an alternate person exercising the purchaser’s right of inspection to be authorised by the vendor. But the purchaser may only exercise the power to authorise an alternate person to inspect the property for one of two specified purposes.
[56] The wording of cl 3.2 has been the same since the seventh edition of the agreement in July 1999. Before that, a purchaser’s right of inspection was limited to “ascertaining the state of repair of the property”. As Ms Anderson submits, the change in wording widened the purchaser’s right of inspection of the property. There are now two purposes for which a purchaser has a right of inspection:
(a)The first, in cl 3.2(1) is “for the purposes of examining the property chattels and fixtures which are included in the sale”.
(b)The second purpose, in cl 3.2(2), is to confirm compliance by the vendor with any agreement that the vendor would carry out work on the property, chattels and fixtures.
[57] These are related purposes. The right of inspection under cl 3.2 enables the purchaser to examine the property, chattels and fixtures. The purchaser is entitled to check that they are getting what they agreed to pay for, before settlement. Any authorisation of a person by a purchaser under cl 3.2 must be for those purposes. So a purchaser could not validly authorise their friends and relations to all come and look at the property under cl 3.2. But a purchaser could authorise, in writing, a valuer to inspect the property under cl 3.2 for the purpose of checking they are getting what they agreed to pay for, as Mr Yu sought to do here. In this regard, I agree with Associate Judge Doogue’s indication that, had it been necessary, he would have attributed a reasonably expansive meaning to cl 3.2, extending to a purchaser being able to inspect a property in the company of a valuer.124
124 Yu v Bradley, above n 102, at [28].
[58] The fact a valuer’s advice is intended to be relied upon in making a claim for compensation under cl 8 does not disqualify a purchaser from authorising the valuer to inspect the property. A claim for compensation under cl 8 is directly related to the purchaser getting what they have agreed to pay for. Clause 8 itself does not provide, implicitly or explicitly, for any independent right of inspection. If the one-time right under cl 3.2(1) has already been exercised before a cl 8 claim is conceived, there is no further right of inspection. But, as I explain below, it would usually be in the interests of a vendor to allow inspection for the purpose of particularising a claim under cl 8.
[59] The authorisation under cl 3.2 is required to be in writing. It must be provided with reasonable notice. This provides certainty for the vendor, in advance, as to exactly who is authorised by the purchaser to exercise the right of inspection. The problem for Mr Yu here is that there is no evidence he authorised Mr Sprague in writing to inspect the property. Mr Morrison’s letter of 13 February 2017, after alleging misrepresentation and referring to the fencing notice and grey water issues, said “[o]ur client would to visit the property tomorrow at 3pm” and asked for confirmation that that time was suitable.125 It did not state that the visit was for the purposes of inspection, nor did it authorise Mr Sprague or Mr Morrison under cl 3.2. The proposal that Mr Sprague accompany Mr Yu appears to have been put forward by Mr Morrison in his telephone conversation with Ms Tait at 11.40 am on the morning of 14 February 2017.126 According to Mr Morrison’s evidence, she objected and said she would have to take instructions.127
[60] Because Mr Yu did not authorise Mr Sprague in writing to inspect the property on reasonable notice, he did not satisfy the requirements of cl 3.2. Neither did he authorise Mr Morrison in writing to inspect the property, though Mr Bradley was prepared to permit Mr Morrison to inspect it anyway. Accordingly, Mr Bradley did not breach Mr Yu’s right of inspection under cl 3.2 in denying entry to Mr Sprague. But Mr Yu had the right of inspection himself. As I found above, Mr Bradley intended to allow Mr Yu and Mr Morrison to inspect the property. But he did not communicate that in a way Mr Morrison reasonably understood. From Mr Yu’s reasonable
125 CB 1/172.
126 Morrison at [9].
127 At [9]–[22].
perspective, Mr Bradley was denying him inspection. To that extent, Mr Bradley breached Mr Yu’s right of inspection.
Sub-issue 2: What was the status of Mr Yu’s claim for compensation?
[61] Ms Anderson, for Mr Yu, submits cl 8 is designed to ensure settlement can proceed despite the existence of a dispute related to the property to be transferred. She submits Mr Yu had a claim for misrepresentation which gave rise to a right of equitable set-off, as part of which claims for the fencing notice and grey water system could also be raised. She submits the threshold for validly invoking cl 8 is low, requiring a claim of compensation to have at least “a ghost of a chance of succeeding”,128 which was satisfied here. She submits a vendor who is aware of a purchaser’s intention to claim compensation under cl 8, but prevents pre-settlement inspection, invariably extends the time for particularising a claim until the last day for settlement fixed by a valid settlement notice. She submits that was the effect of Mr Bradley’s actions. She submits that, except for Mr Bradley’s prevention of inspection, Mr Yu would have been able to provide a sufficiently reasoned, genuine pre-estimate of loss by 5 pm 14 February 2017.
[62] Ms Lanham, for the Bradleys, submits that cl 8.1 sets a low bar requiring a genuine pre-estimate particularised and quantified “to the extent reasonably possible”. She submits no inspection was required here to particularise the claim, Mr Yu was able to provide a genuine pre-estimate but did it late and provided no evidence as to why he could not provide it earlier. She submits, even if the Bradleys did prevent a cl 8 claim being issued in time, cl 8.2 permitted Mr Yu to give notice the day before the date for settlement fixed by a settlement notice. That was either Friday 3 March 2017 under Mr Yu’s settlement notice, or Tuesday 7 March under the Bradleys’ settlement notice. But Mr Yu did not issue a cl 8 claim before either date. Mr Yu never advised that his conditional cl 8.1 notice of 15 February 2017 became unconditional, so Ms Lanham submits the Bradleys were never required to take a position on it.
[63]The purpose of cl 8, responding to the Supreme Court’s invitation in
Regalwood, is to provide a mechanism for the speedy resolution of bona fide and
128 D W McMorland, above n 122, at [8.10].
reasonable purchasers’ claims. Clause 8.1(2)(d) states a claim must “be particularised and quantified to the extent reasonably possible as at the date of the notice”. If inspection has not occurred under cl 3.2, that may affect what is reasonably possible. Depending on the nature of the claim, that may lead to more uncertainty about the amount of compensation at issue and, therefore, a larger interim amount being reasonably deducted under cl 8.4 if the amount of compensation is disputed. As the Supreme Court pointed out in Regalwood, the purchaser can only make their claim on the basis of the information they have. So, even if it is not required under cl 3.2, it will usually be in the interests of the vendor to allow inspection for the purposes of particularising a purchaser’s claim under cl 8.
[64] The threshold for raising a claim for compensation is not high but it is not as low as “a ghost of a chance”. The interim amount withheld at settlement under cl 8.4 could reflect the chances of success, as they appear at the time. But there may not be much information about that available at that time. There must be some minimum threshold to avoid the cl 8 process being weaponised by an unscrupulous purchaser. At a minimum, similar to the criteria for striking out a claim under r 15.1 of the High Court Rules 2016, I consider a claim under cl 8 must be genuine and reasonably arguable, not frivolous or vexatious or an abuse of the process set out by cl 8. The process itself will ensure it is not likely to cause prejudice or delay.
[65] I did not uphold Mr Yu’s claim for misrepresentation above. But I accept he had a genuine and reasonably arguable claim, which was not frivolous or vexatious or an abuse of process. It took a High Court trial to elicit the relevant evidence. The claim had to be particularised and quantified to the extent reasonably possible. I do not consider Mr Yu was prevented from making his claim by Mr Sprague not being able to inspect the property or by Mr Bradley breaching his duty to allow Mr Yu to inspect the property on 14 February 2017. That is because, after inspecting the property, Mr Sprague confirmed the quantification he had made before inspecting the property.
[66] However, cl 8(1) requires a purchaser to serve notice of a claim on the vendor “on or before the last working day prior to settlement”. Clause 8.2 defines settlement to mean, for that purpose, “the date for settlement fixed by this agreement unless, by
reason of the conduct or omission of the vendor, the purchaser is unable to give notice by that date”. So, Mr Yu was required to serve notice of his claim under cl 8 on the Bradleys on or before 14 February 2017 unless the exception applies. I have concluded the exception does not apply, because the Bradleys’ conduct or omission did not mean Mr Yu was unable to give notice of his claim by then. Mr Bradley was within his rights to prevent Mr Sprague from entering onto the property because he had not been authorised in writing to do so. And neither Mr Sprague nor Mr Yu needed to inspect the property for Mr Sprague to estimate the loss and the claim to be made.
[67] Mr Morrison’s letter of 14 February 2017, faxed to Ms Tait at 4.15 pm, gave notice of claims for compensation for the Fencing Act notice and the grey water system and foreshadowed a claim for compensation “in respect of the encroachment area”, while reserving Mr Yu’s right to elect to cancel the contract.129 Mr Yu’s evidence is that these two claims were minor and were not his major focus compared with the “encroachment”.130 But Mr Morrison’s letter of 15 February 2017 did not make a further claim for compensation. It expressed a claim conditional on “the assumption, which assumption may be entirely incorrect, that the neighbour would be willing to sell the encroached area to our client” and, again, without prejudice to Mr Yu’s right to cancel the contract.131 The conditionality was reiterated in the last paragraph of the letter which said “the above compensatory claim will not apply if the neighbour will not sell the encroached land”. If the Bramwells were not willing to sell, the letter said “our client will exercise its rights pursuant to section 7”.132
[68] So the notice of the cl 8 claims for compensation in respect of the Fencing Act notice and the grey-water system were made in time but the purported claim in relation to the property boundary was only made conditionally and was not made in the time required under cl 8(1). It was never made unconditionally. For the purposes of the procedures and requirements of cl 8, the claim in relation to the boundary was not made at all.
129 CB 1/224 at 225.
130 NOE 52/1-4.
131 CB 1/273 at 275.
132 The reference to s 7 is to the Contractual Remedies Act 1979, which is now reflected in subpt 3 of the Contract and Commercial Law Act 2017.
Sub-issue 3: Who was ready, able and willing to settle and who validly cancelled?
[69] Ms Anderson, for Mr Yu, submits the breach by the Bradleys of Mr Yu’s right to inspect placed them in default of a significant clause of the agreement, and rendered them not ready, able and willing to settle. This put the time for settlement “at large” until the default was cured or the purchaser issued a settlement notice. She submits Mr Yu was not obliged to settle until the day after inspection was allowed, which was 21 February 2017, and only then could the Bradleys have issued a valid settlement notice. Otherwise, she submits, the Bradleys would be able to truncate the time between inspection and settlement, which they cannot do. She submits Mr Yu was clearly ready, able and willing to perform the contract because he had deposited more funds than necessary into Grove Darlow’s trust account to do so, issued a settlement notice on 16 February 2017 stating he was ready and simply required the vendors to allow inspection and recognise the cl 8 claim. She submits the Bradleys were not ready, able and willing to settle at the settlement date stipulated in the Agreement. Ms Anderson submits the Bradleys’ settlement notice was invalid because:
(a)There was no default by Mr Yu on 21 February 2017 because he had until 5 pm that day to fulfil the Agreement.
(b)The Notice incorrectly sought penalty interest from the settlement date specified in the Agreement. It was incorrect because, according to Stewart v Davis, if the vendor’s notice is erroneous, the vendor can hardly be regarded as ready, able and willing to settle.133 She submits this is not a case of a simple and genuine error in what the vendors were intending to claim like that in Westpac Banking Corp v Bhana,134 but an unambiguous claim to penalty interest to which the vendors were not entitled, relying on Neeta (Epping) Pty Ltd v Phillips.135
(c)The notice was issued under cover of a letter advising that cl 8 and its procedures were not available. Because the claim was available, and the notice was insisting on full payment, the settlement notice was
133 Stewart v Davis [1995] 3 NZLR 604 at 610 (HC).
134 Westpac Banking Corp v Bhana (2003) 5 NZCPR 73 (HC).
135 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 301.
invalid because the Bradleys were not in all material respects ready, able and willing to settle in accordance with their contractual obligations.
(d)Accordingly, the Bradleys’ settlement notice constituted a repudiation of the Agreement according to Stewart v Davis.
[70] Ms Anderson submits Mr Yu was entitled to claim for compensation and the Bradleys’ failure to recognise that constituted a continuing repudiation. Accordingly, Ms Anderson submits Mr Yu had the right to cancel the Agreement and did so validly on 10 March 2017. She submits the Bradleys’ purported cancellation was invalid because their settlement notice was invalid and they refused to acknowledge the cl 8 procedure. She submits that. if Mr Yu’s cancellation was invalid, the Bradleys’ cancellation was a repudiation which Mr Yu accepted. She submits it would have been futile for Mr Yu to tender settlement because the vendors had made it abundantly clear they would not recognise a claim under cl 8 and would not have accepted anything less than the purchase price (perhaps minus a deduction of approximately $5,000 for the fencing notice and grey water issues). She submits Mr Yu could not have been put to his election of whether to cancel or perform until after he inspected the property on 20 February 2017 and he was entitled to invoke the cl 8 procedure while reserving his right to cancel once he had established the extent of his claim. She submits Mr Yu is entitled to have the deposit returned with interest.
[71] Ms Lanham, for the Bradleys, submits that a purchaser with a claim for compensation must either elect to settle and sue for damages or to settle subject to a deduction or to cancel the agreement. A purchaser cannot defer settlement on an indefinite basis. And a purchaser cannot cancel unless the purchaser is ready, able and willing to perform its contractual obligations in all material respects at the time of cancellation. She submits Mr Yu never made a clear election to settle with a deduction, but reserved his right to cancel. She submits the request for penalty interest in the Bradleys’ settlement notice was rightly made given they had not breached their obligations. If it were wrongly made, that would not invalidate the notice, according to Westpac Banking Corporation v Bhana, because the amount claimed is not an
essential part of the notice.136 She submits the Bradleys’ settlement notice was not premature because the definition of settlement date in cl 1.1(20) of the Agreement refers to “the date specified as such in this agreement” which was 15 February 2017. Ms Lanham therefore submits the Bradleys’ settlement notice was valid, but little turns upon it because they validly accepted Mr Yu’s cancellation as a repudiation. She submits Mr Yu’s settlement notice was invalid because he requested compliance with cl 8 when he had not engaged it.
[72] The settlement date specified in the Agreement was 15 February 2017. On that date, the Bradleys were prepared to settle at the price specified in the Agreement minus deductions of $4,166 for the greywater system and $1,500 for the property’s contribution to the fencing required under the Fencing Act notice. The Bradleys’ willingness to make those deductions was expressed in Ms Tait’s letter to Mr Morrison of 14 February 2017.137 The purported claim to compensation for the encroachment was not an obstacle to settlement because, as I found above, it was not properly made. But Mr Bradley had not discharged his obligation to allow Mr Yu to inspect the property under cl 3.2, as I found above, and was in default under cl 1.1(33)(b). Mr Yu had raised a significant and genuine question about whether he was getting what he had agreed to pay for. In those circumstances, the breach of his right of inspection was material. Mr Yu was not required to settle on 15 February 2017 because he had not had the opportunity to inspect the property. He was not ready, able and willing to settle at that point, only because of a default by the Bradleys.
[73]It is convenient to summarise the relevant events following that:
(a)On 16 February 2017, Mr Yu issued a settlement notice to the Bradleys which would expire on 6 March 2017, seeking access to the property, vacant possession, compliance with cl 8 and interest for failure to give vacant possession on the settlement date.138
136 Westpac Banking Corp v Bhana (2003) 5 NZCPR 73 at [27]-[28].
137 CB 1/227 at [5] and [7].
138 CB 2/306.
(b)On 20 February 2017, Mr Yu (and Mr Morrison and Mr Sprague) inspected the property.
(c)By letter dated 20 February 2017, service of which was effected on 21 February 2017, the Bradleys rejected Mr Yu’s settlement notice, advised the cl 8 procedure was not available to Mr Yu and issued a settlement notice to Mr Yu, which would expire on 8 March 2017, including penalty interest.139
(d)On 10 March 2017, Mr Yu cancelled the Agreement.140
(e)On 13 April 2017, the Bradleys treated that as a repudiation and cancelled the agreement.141
(f)On 17 May 2017, Mr Yu treated that as a repudiation, if his earlier cancellation had not been effective.142
[74] By 21 February 2017, then, both parties professed to be ready, able and willing to settle. The inspection had been undertaken. Both parties had issued settlement notices. They were both required to settle. But Mr Yu was insisting on compliance with cl 8 in respect of three claims. The Bradleys had offered a deduction for two of them and denied the availability of the third. Because the Bradleys were proposing deductions for the two cl 8 claims that were validly made, Mr Yu could not resist settlement on that basis. Neither could he resist settlement on the basis of the third purported claim, for misrepresentation, because that claim was never made unconditionally and was not made at all for the purposes of cl 8.
[75] As Ms Anderson submits, the Bradleys did make an unambiguous claim to penalty interest which was not justified. But whether the Bradleys were ready, able and willing to settle depends on an assessment of all the circumstances. I do not consider the claims for penalty interest by either party in their settlement notices were
139 CB 2/402.
140 CB 2/450.
141 CB 2/472.
142 CB 2/483.
sufficient to disqualify either party from being considered ready, able and willing to settle for that reason alone, having regard to the rest of their circumstances. As stated in Westpac Banking Corporation v Bhana, the amount the purchaser is required to pay to complete the purchase is governed by the contract itself, not by the settlement notice.143 The settlement notice required Mr Yu to “complete settlement”. I consider the Bradleys were ready, able and willing to settle irrespective of penalty interest.
[76] I also do not accept the Bradleys’ settlement notice was otherwise ineffective. It was issued after the Bradleys had allowed inspection. It required settlement by 8 March 2017. It was a valid settlement agreement, under cl 11.1(2) of the Agreement. Time became of the essence. Mr Yu was required to settle. But Mr Yu’s evidence is, after inspecting the property on 20 February 2017, he thought he might be able to purchase the “V” in the property from Mr Bramwell so did not cancel, but reserved his right to cancel the agreement.144 Mr Yu’s own settlement notice made clear that he was insisting on a deduction for a claim under cl 8 that he had only made conditionally and he had not attempted to fulfil the condition. That did not constitute a claim for which the cl 8 process had to be followed. The Bradleys were entitled to reject it. On 17 February 2017 Mr Rooke, on their behalf, pointed out the need for the claim to be particularised and quantified to the extent reasonably possible and the need to agree an interim amount to be retained under cl 8.145 On 27 February 2017, on Mr Yu’s behalf, Mr Morrison insisted the Bradleys’ settlement notice was invalid and asked to be advised if the Bradleys changed their position on the application of cl 8.146
[77] As the Supreme Court said in Regalwood, and cl 8 provides, the Bradleys were entitled to ask for settlement in full (other than the deductions for the claims in respect of which they had made offers). They were ready, able and willing to settle from 21 February 2017. Mr Yu was required to settle. Mr Yu was not entitled to insist the cl 8 process and consequent deduction be followed for the conditional claim. He did not address the Bradleys’ offers regarding the other two claims. He was not ready, able and willing to settle on 21 February 2017, or thereafter. He did not settle. He was, therefore, not entitled to cancel the Agreement.
143 Westpac Banking Corp v Bhana (2003) 5 NZCPR 73 at [27]-[28].
144 Yu at [72].
145 CB 2/322 at 324.
146 CB 2/424.
[78] Consequently, Mr Yu’s purported cancellation on 10 March 2017 was not effective. The Bradleys were entitled to treat it as a repudiation and to cancel the Agreement themselves on 17 March 2017, under ss 36 and 37(1)(b) of the Contract and Commercial Law Act 2017.
What remedy should be awarded?
Claim
[79]The Bradleys claim damages of $575,672.99, comprising:
(a)$320,000 for the loss of the property’s value on resale;
(b)$55,085 for the additional commission on the resale;
(c)$4,024.11 penalty interest they had to pay to the vendor of the property they had agreed to buy;
(d)$66,122.79 for interest and bank charges to service the loan on the property before it was sold;
(e)$104,013.49 for interest and bank charges to service bridging finance on the property they had agreed to purchase (but not penalty interest under cl 11 of the Agreement);
(f)$2,389.85 for transport and storage costs of furniture while awaiting settlement on the property they agreed to purchase;
(g)$5,589.38 for rates on the property before sale;
(h)$2,161.06 for insurance on the property before sale;
(i)$16,287.31 for conveyancing, solicitors’ fees and disbursements.
[80] They propose the total be set off against the $230,000 deposit they have retained, consistent with cl 11.4(1)(b), meaning they seek an additional $345,672.99.
Relevant law of damages
[81] The general rule is that damages for breach of contract should put a successful plaintiff in the position they would have been in if the breach had not occurred. A plaintiff’s losses are not recoverable if they are too remote. The venerable rule in Hadley v Baxendale is that damages “should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it”.147
[82] The date for assessing damages is usually the date of the breach. However, the Court of Appeal recognised in Stirling v Poulgrain that a different date may be used “to work out a fairer solution” and “in the interests of justice”.148 The Court of Appeal of England and Wales considered in Hooper v Oates that the breach date is most unlikely to be the right date for assessing damages for a vendor of land because, if the vendor properly mitigated their losses, the eventual resale price is likely to show what loss the seller suffered.149 The Court of Appeal agreed in Dempsey v Howe, saying the “fairer solution” was to assess damages at the point of resale of the property.150
Submissions
[83] Ms Lanham submits the damages claimed were within the parties’ contemplation because Mr Yu knew the Bradleys were purchasing another home and the proceeds would be required and that the associated costs were reasonably foreseeable.
[84] Ms Anderson submits the law is not perfectly clear about whether bridging finance is recoverable. Loss is recoverable under Hadley v Baxendale where it can reasonably be supposed to have been in the specific contemplation of the parties. But Mr Yu was not aware of the Bradleys’ imminent settlement at the time of the contract
147 Hadley v Baxendale (1854) 9 Exch 341 at 354.
148 Stirling v Poulgrain [1980] 2 NZLR 402 (CA) at 420 and 424.
149 Hooper v Oates [2013] EWCA Civ 91, [2014] Ch 287 at [38].
150 Demsey v Howe [2015] NZCA 9, (2015) 16 NZCPR 209 at [27] (although the position was complicated in that case as the contract was lost to the vendors through their own default in selling to a third party without issuing a fresh settlement notice).
and Mr Bradley’s email on 22 December 2016 may be taken to have suggested they would not be settling on their purchase for some time. Ms Anderson submits the Bradleys’ share of the fencing notice and the costs of servicing the grey water system should be deducted from any damages award as should Mr Yu’s claim for compensation if proven. She also takes issue with recovery of the costs of Ms Tait and Mr Rourke’s costs of getting up to speed. And she submits the costs borne by the Bradleys’ daughter and son-in-law are too remote to be recoverable.
Damages
[85] Mr Yu knew the Bradleys were intending to buy another house when he made the offer. He requested a rental appraisal report for the purpose of the Bradleys renting the house from him until they found a new house. In Mr Bradley’s email to Mr Yu of 22 December 2016, he said they had made an offer on another property and indicated the settlement date would either be on 15 February 2017 or they might need a short- term tenancy.151 Mr Morrison’s letter to Ms Tait on 13 February 2017 recorded that she had advised that the Bradleys had already purchased a property and needed Mr Yu’s funds to settle.152. Ms Tait’s letter of 14 February 2017 to Mr Morrison reiterated that and put Mr Yu on notice that the vendor of the property the Bradleys had purchased was relying on funds from the Bradleys’ property to purchase a further property. She said “any decision by your client to cancel the agreement ought to be carefully considered as the damages that might flow to your client from a wrongful cancellation could be extensive”.153
[86] In these circumstances, the costs claimed by the Bradleys, including because of the need for bridging finance, were reasonably foreseeable as naturally arising from Mr Yu’s breach of contract. This is governed by common law, rather than the Agreement. Clause 11.4(3) regarding damages for loss of resale if the property is resold within a year, is not engaged.
[87] I agree there should be deductions of: $230,000 for the deposit retained by the Bradleys; $1,500 for the Bradleys’ share of the potential costs of the Fencing Act
151 CB 1/147.
152 CB 1/171.
153 CB 1/239 at [11].
notice; and $4,166 for the costs of servicing the grey water system. I also agree with Ms Anderson that any costs arising from the Bradleys’ change of solicitor should be borne by them so they should be deducted too.
[88] Interest on the damages is payable, in order to restore to the Bradleys the real value of the loss they suffered. I award the Bradleys the damages they seek, minus the deductions ordered in the previous paragraph, plus interest under s 87 of the Judicature Act 1908 from the dates at which the costs were incurred.
Result
[89]I dismiss Mr Yu’s claim and uphold the Bradley’s counterclaim for
$575,672.99, minus deductions for the deposit they retained and as set out above, plus interest.
[90] With such experienced counsel, costs should be able to be resolved between the parties. If that is not possible, I give leave to counsel for the Bradleys to file and serve a memorandum of no more than 10 pages on costs within 10 working days of the date of this judgment and to counsel for Mr Yu to file and serve a corresponding memorandum within 10 working days of that.
Palmer J
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