Lang v Fox CA49/99 [1999] NZCA 370 (10 May 1999)

Last Updated: 9 February 2019

IN THE COURT OF APPEAL OF NEW ZEALAND CA49/99


BETWEEN DAVID MILLAR LANG AND
KATHRYN GAIL DUNCAN

Appellants


AND IVAN WILLIAM FOX AND LORNA MARY FOX

Respondents


Hearing: 5 May 1999

Coram: Gault J
Thomas J Salmon J

Appearances: D M Lester for Appellants
A W Robinson and J D Warren for Respondents

Judgment: 10 May 1999

JUDGMENT OF THE COURT DELIVERED BY SALMON J

[1] In the District Court summary judgment was entered against the appellant for
$22,000 plus interest and costs. An appeal to the High Court failed. The appellant now seeks to persuade us that the two earlier judgments were wrong.

Background

[2] The respondents (the plaintiffs in the District Court) were the owners of a property at 76 Alexandra Street, Christchurch. On 4 June 1997 they entered into two contracts in relation to that property. Under the first contract (the land contract) the respondents agreed to sell the property to “PJ Duncan or Nominee”. Under the second contract (the flat contract) the respondents agreed to purchase from “P J
Duncan or Nominee” a one-eighth share in the property together with a 999 year lease on the respondents’ choice of one of the eight flats to be erected thereon. Each contract was conditional on the other.

[3] Clause 21 of the special conditions of sale of the flat contract provided that the plaintiffs would have the right at any time before possession date to cancel the agreement by notice in writing to the vendor, and that the vendor would thereupon pay to the plaintiffs the sum of $6,000 and would refund any purchase moneys paid.

[4] The flat contract imposed certain important obligations on the vendor. The vendor was required to subdivide the land by way of a cross lease plan; to complete in a proper and workmanlike manner the buildings proposed; within 12 weeks of possession date to purchase back the unit if required to do so by the purchaser; and to guarantee the renting of the unit.

[5] It is apparent from the above outline that the two contracts were inter- dependent. That was a finding in both the District Court and the High Court and one not challenged in this Court. Indeed, it would have possible and probably preferable, to have included the whole of the agreement between the parties in the one document rather than having two separate agreements.

[6] Mr Duncan nominated the appellants, who are the trustees of the Duncan Family Trust to take title under the land agreement. It was conceded in this Court though denied earlier, that the appellant trustees were also nominated by Mr Duncan as the vendors under the flat contract.

[7] The respondents pleaded that the appellants were bound as vendors under the flat contract.

[8] Pursuant to the flat contract the respondents paid a deposit of $16,000. The statement of claim alleges that this money was paid to the appellants and a letter from the appellants’ solicitors in December 1997 acknowledges that the deposit was “used by the trust to complete the purchase of the Alexandra Street property”.
[9] By letter dated 31 October 1997 the respondents, through their solicitor, gave notice to the appellants pursuant to the flat contract, cancelling the agreement and requiring that the sum of $6,000 and a refund of the deposit of $16,000 be paid to the respondents.

[10] By letter dated 3 November 1997 the appellants’ solicitors acknowledged that the flat contract was cancelled but asked the respondents to reconsider their position. The respondents were not prepared to do so and asked for immediate payment of the sum of $22,000. The appellants refused to pay.

[11] Proceedings were issued by the respondents and an application for summary judgment made.

[12] The appellants lodged a notice of opposition which contained the following grounds:

1. The plaintiffs are unable to sue the defendants under the contract between them and a third party there being no privity of contract between the plaintiffs and the defendant.

2. No nomination has occurred.

3. As appear in the affidavit of David Millar Lang filed herein.

Mr Lang is a solicitor and is one of the appellants. He and his firm act for the appellants and for Mr Duncan.

[13] In his affidavit Mr Lang acknowledged the nomination of the appellants under the land contract. He denied that they had been nominated as parties to complete the sale under the flat contract and he denied that the appellants had entered into any form of agreement whatsoever with the respondents as purchasers of the property.

[14] There were affidavits filed in reply and a considerable quantity of correspondence between the parties was annexed. That correspondence so far as the appellants were concerned, was signed either by Mr Lang or by one of his firm’s
employees. The letters included the one already referred to concerning the use of the deposit, letters referring to the financing of the development and a letter dated 21 November 1997 in which Mr Lang’s firm advised:

Our client is prepared to execute an agreement to mortgage to enable your clients to caveat the title on Alexandra Street should they so require ...

[15] There is also an affidavit by the respondents’ solicitor exhibiting file notes, including one recording a conversation he had with Mr Duncan, in which Mr Duncan said that he would have nothing to do with the transactions, that the trust would be involved.

[16] In the District Court in a carefully reasoned judgment, Doherty DCJ, held that the contracts were dependent upon each other and formed the basis of a common intention constituting in essence one arrangement. He held that the nomination of the appellants under the land contract resulted in them accepting responsibility as contracting party. He said:

The same solicitors were acting for both Mr Duncan and the defendants and it would have to be said that all parties accepted (on the facts) the defendants would be the parties to the land contract. The evidence was that they completed it. It seems to me that in these circumstances, and bearing in mind the relationship between the two contracts, the defendants would be estopped from denying that they were indeed the vendors under the flat contract or put another way, under the other half of the common intention.

[17] He noted that there was no credible evidence advanced to explain how, if the parties had agreed to perform the contract, the defendants as registered proprietors of the land could have avoided responsibility. He noted the complete absence of any explanation of the relationship between the appellants and Mr Duncan and that in that sense the clear inference could be drawn that the defendants were the contracting party. He held, adopting the principles in Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 that the evidence and the position of the appellants was not credible and so inherently improbable as to be discounted for the purpose of the application.
[18] That judgment was upheld by Hansen J in the High Court. He accepted the District Court Judge’s analysis of the contractual arrangements and that the appellants in accepting the nomination under the land contract had accepted responsibility as the contracting party for the whole agreement.

The Argument in this Court

[19] Despite those two judgments against them the appellants advanced their case in this Court on the basis of what may fairly be described as technical arguments. Counsel relied, as he did in the District Court and the High Court, on the decision of this Court in Lambly v Silk Pemberton Ltd [1976] 2 NZLR 427.

[20] He submitted that the case was put by the plaintiffs on the basis of nomination and that Lambly was clear authority for the proposition that on that basis the judgments were wrong. We do not agree that the case was put on the basis of nomination.

[21] The facts pleaded, and particularly the pleading that the appellants were bound as vendors under the flat contract is sufficient to found the argument that there was a novation and indeed that argument was put forward at each of the previous hearings. The findings in each Court as Mr Lester ultimately acknowledged, are consistent with the existence of a novation. Chitty on Contracts (27^th ed) General Principles para. 19-050 states that:

Novation takes place where the two contracting parties agree that a third, who also agrees, shall stand in the relation of either of them to the other. There is a new contract and it is therefore essential that the consent of all parties shall be obtained...

[22] The effect of the findings in the District Court and in the High Court are that the appellants did accept responsibility as the contracting party for the whole agreement. The element of their consent is, therefore, present. We agree that the denial by Mr Lang that this was so is inherently improbable. It is clear that the respondents accepted the appellants as the contracting party.
[23] It is now accepted that the appellants were nominated as vendors under the flat contract. Given the responsibility of a vendor to transfer title it cannot possibly be said that they did not thereby accept responsibility under the contract with the respondents. Certain of the correspondence from the appellants’ solicitors is consistent only with the appellants having accepted responsibility for the flat contract.

[24] The situation is quite different to that in Lambly. There the Court was concerned just with a nomination by a purchaser. As this Court made clear in that case a purchaser’s right to nominate another party as transferee is independent of the terms of the contract. The nomination does not affect in any way the contractual obligations between the vendor and the purchaser as parties to the contract. No consent is required of the vendor in relation to such a nomination. The nominated party does not, solely as a result of the nomination, enter into any sort of contractual relationship with the vendor. That is what was held in Lambly and it remains good law. The Court in Lambly distinguished that situation from a novation.

[25] Here we have no doubt on the facts found in the District Court and affirmed in the High Court, that there was a novation. As we have said earlier the pleadings are adequate to allow such a proposition.

[26] The appeal is dismissed.

[27] The appellant is ordered to pay the respondent costs of $5,000 together with disbursements, including the travel and accommodation expenses of counsel to be fixed, if necessary by the Registrar.

Solicitors:

Saunders & Co, Christchurch for Appellants Cunningham Taylor, Christchurch for Respondents