CHURTONLEIGH RETIREMENT HOME LIMITED & ANOR v PETER MICHAEL HUNT and STEPHEN JOHN BROWN & ORS [1999] NZCA 193 (20 September 1999)

IN THE COURT OF APPEAL OF NEW ZEALAND

ca109/99

	between	churtonleigh retirement home limited
		First Applicant

	AND	PETER MICHAEL HUNT and STEPHEN JOHN BROWN
		Second Applicants

	and	DAVID JOHN RENWICK
		Respondent

Hearing:	20 September 1999
Coram:	Richardson P Gault J Tipping J
Appearances:	J R Billington QC for applicants F M R Cooke for respondent
Judgment:	20 September 1999

judgment of the court delivered by RICHARDSON P

[1] The applicants seek leave to appeal from a summary judgment of the Full Court of the High Court delivered on 12 February 1999.

[2] The case relates to two separate deposits of $50,000 each paid by the purchaser, Mr Renwick, to the vendors, Churtonleigh Retirement Home Limited, and Mr Hunt and Mr Brown, under agreements for sale and purchase of a retirement home and a private hospital.In each of the agreements the special conditions of sale included the following vendor warranties:

17.2 The vendor warrants that at the date of settlement:

17.2.1 The said premises and the business carried on therein complies as at the date of settlement in all respects with the requirements of the relevant Local Authority, the Ministry of Health, and the New Zealand Fire Service;

17.2.2 That there are no unfulfilled requisitions pursuant to any regulations or requirements administered by the said Local Authority, Ministry of Health or the New Zealand Fire Service, concerning or touching the said premises;

The vendor will prior to the date of settlement take all such steps as may be required to obtain fulfilment of the foregoing provisions of this clause.If these conditions shall not be fulfilled by the date of settlement, then the purchaser may by notice to the vendor rescind this agreement and thereupon the purchaser shall be entitled to a refund of all monies paid hereunder.

[3] Two days before the date of settlement the purchaser became aware of letters written by the New Zealand Fire Service to the vendors.In those letters the Fire Service indicated a number of concerns that it had about the rest home and the hospital and suggested that some remedial work would be needed.The purchaser's solicitor raised the issue with the vendors' solicitor but the latter made it clear that the vendors did not consider that any work was needed to satisfy the clause 17.2 waranty.The vendors considered that the Fire Service had made recommendations only and that there were no formal requirements for the vendors to meet.

[4] The purchaser rescinded the agreements for breach of the clause 17.2 waranty and commenced an action for summary judgment to recover the two deposits.

[5] The matter was heard at first instance in the District Court.In a judgment delivered on 18 August 1998 that court held that on the face of the letters there was uncertainty as to whether they amounted to requirements of the kind contemplated by the agreements for sale and purchase.Summary judgment was refused.

[6] The appealwas heard by a Full Court of the High Court consisting of Gendall and Wild JJ.The Full Court concluded that the two sub-clauses 17.2.1 and 17.2.2 had obviously been included in the agreement because they addressed different points:"Requirements of the Fire Service" was a wider, less specific, description than "unfulfilled requisitions pursuant to any regulations or requirements administered by the ... Fire Service". "Requirements" simply means something that is asked for by the Fire Service.

We think the clear intention of the parties in clause 17.2.2 was to protect the purchaser if the Fire Service notified requirements prior to settlement date. Complying with such requirements would almost inevitably involve cost.Clause 17.2 was intended to give the purchaser an "out" if he did not wish to settle and meet that cost.The purpose and intent of clause 17.2 was to protect the purchaser from costs which, prior to settlement, were likely to be unknown, and difficult to assess.

[7] The Full Court concluded that, giving the word "requirements" its ordinary, everyday meaning, the letter of 21 April imposed requirements in terms of clause 17.2 of the retirement home agreement, as did the 27 April letter in terms of clause 17.2 of the hospital agreement.

[8] The court rejected the various defences, allowed the appeal, and entered summary judgment.On the important question as to the lawfulness of the Fire Service requirements, it said:

We reject also, as not reasonably arguable, the defence that the Fire Service requirements were unlawful and of no effect.We have already held that the two Fire Service letters imposed requirements.The mere imposition of such requirements triggered clause 17.2.The vendor's obligation was to obtain fulfilment of those requirements.If the vendor considered that any of those requirements was unlawful and of no effect, then the vendor's obvious course was to take that up with the Fire Service with the aim of having the requirements withdrawn prior to settlement.If the vendor was not able to achieve that, then the purchaser was entitled to regard the requirements as unfulfilled and to rescind.The contractual risk that requirements which might be unlawful or invalid might be imposed by the Fire Service before settlement date rested on the vendor not on the purchaser.If that were not so, the purchaser would be obliged to settle and then contest the legality of the Fire Service requirements.That might involve the purchaser in time-consuming negotiations, or even in expensive and lengthy litigation.We are firmly of the view that the purpose of clause 17.2 was to protect the purchaser from precisely that type of outcome.

[9] On 23 April 1999 the vendors applied to the High Court pursuant to s67 of the Judicature Act 1908 for leave to appeal to the Court of Appeal.The application was heard by the Full Court, again consisting of Gendall and Wild JJ, and leave to appeal was declined.The Judges emphasised that the issue was essentially one of fact involving the content of letters written by the Fire Service and whether they triggered the operation of special clause 17.2 so as to require the vendor to take certain steps, which it refused to do, failing which the purchaser might rescind.

[10] The vendors now make a further application for leave to appeal to this court.

[11] Having heard argument from Mr Billington QC for the applicant and Mr Cooke for the respondent we are satisfied that this is not a proper case for leave.Leave to bring a second appeal pursuant to s67 is appropriate where the appeal raises some questions of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal. As noted by the Full Court, the present case turns largely on the interpretation of letters written by the Fire Service and whether they entitled the purchaser to rescind pursuant to special clause 17.2.

[12] Mr Billington submitted that if the approach taken by the Full Court is correct, then the argument in the case, which he emphasised involved the sale of substantial business and the assets employed in the business, amounted to no more than an option.We cannot agree.

[13] Clause 17.2.1 is directed to the requirements of the Fire Service. On their face the letters from the Fire Service purported to be a lawful exercise of the Fire Service's powers.A purchaser in that situation could not be expected to buy into an argument with the Fire Service and the obvious intent of the subclause was for the vendor to take that contractual risk of ensuring that any such requirements were withdrawn or fulfilled.As Mr Cooke submitted, the case for summary judgment centred around the particular letters and whether they fell within the special condition.Those were questions of construction, not raising any wider issues justifying consideration by means of a second appeal.Further, we are not persuaded that the approach to that special clause has any wider significance for the interpretation of the Real Estate Institute of New Zealand and Auckland District Law Society approved standard agreement for sale and purchase of real estate.

[14] For the reasons given leave to appeal is refused, with costs of $1,500 together with any reasonable disbursements as fixed by the Registrar.

Solicitors

John Langford, Wellington, for applicants

Gilbert Swan, Wellington, for respondent