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Steele v Serepisos [2005] NZCA 236; (2005) 7 NZCPR 145 (12 October 2005)

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Steele v Serepisos [2005] NZCA 236 (12 October 2005); (2005) 7 NZCPR 145

Last Updated: 19 December 2011


IN THE COURT OF APPEAL OF NEW ZEALAND

CA203/04

BETWEEN ROGER WILSON STEELE AND CHRISTINE LYNNE ROBERTS
Appellants


AND ELEFTARIOUS SEREPISOS
Respondent


Hearing: 16 August 2005


Court: William Young, O'Regan and Gendall JJ


Counsel: R C Laurenson for Appellants
S M O'Sullivan and A E Corner for Respondent


Judgment: 12 October 2005


JUDGMENT OF THE COURT
  1. The appeal is allowed but only to the extent that the assessment of damages directed in the High Court is to allow for the contingencies that the easement from the neighbours might not have been secured if the appropriate notice had been given to the respondent and that securing such an easement may have required a payment from the respondent to the neighbours.

B There is no order as to costs.


REASONS

(Given by William Young J)


Table of Contents


Para No


Introduction [1]
Factual background [2]
The High Court judgment [16]
Issues in the case [27]
What were the obligations of the appellants in terms [28]
of securing the deposit of a survey plan?
Must the appellants provide stormwater and sewage [36]
drainage over lot 1?
Was it open to the appellants to bring the contract to [45]
an end (or treat it as having come to an end) without
first having given notice to the respondent of an intention
to do so?
In light of the answers to the forgoing questions, how [54]
should the appeal be determined?
Disposition [56]

Introduction

[1] This is an appeal against a judgment of Miller J in which he held that the appellants, Mr Roger Steele and Ms Christine Roberts, were liable to pay damages to the respondent, Mr Eleftarious Serepisos, for breach of contract.

Factual background

[2] The appellants own a property at 53 Palliser Road, Roseneath, Wellington. The land area is some 579 m2. The property has frontages to both Palliser Road and Robieson Street. The existing house (in which the appellants reside) is at the Palliser Road end of the property.
[3] In 1996 the appellants contemplated subdivision so as to create a rear allotment which would have access only to Robieson Street and the construction on that allotment of a house. They employed an architect, Mr Daish, to prepare plans for a single dwelling. He engaged Mr Peter Maunder, a surveyor, to determine whether such a subdivision was practicable. Mr Maunder concluded that the appellants could subdivide their land as they proposed so as to create two lots, lot 1 facing Palliser Road and lot 2 facing Robieson Street.
[4] The appellants envisaged a connection between lot 2 and public drains on the neighbouring property (55 Palliser Road) to provide stormwater and sewage drainage. The associated physical works would have cost around $1,600 in 1996. Such connection, however, would require the owners of 55 Palliser Road to grant an easement. The appellants were confident that they could obtain such an easement.
[5] The appellants then decided to sell, and not develop, the rear allotment and to do so in advance of the subdivision process being completed. They engaged Ms Di Austin of Harcourts to sell proposed lot 2. She introduced them to the respondent. The upshot was an agreement of 18 December 1996 under which the respondent agreed with the appellants to buy from them the proposed rear allotment for $207,000.
[6] The agreement provided for the sale of a rear allotment of between 300m2 - 310m2. A deposit of 10% of the purchase price was to be paid. The agreement was in the standard REINZ/ADLS form (6ed May 1995) with no special conditions. Attached to it were two plans. One of these plans appears to be a photocopy of a plan obtained from a third party, perhaps the City Council, showing the cadastral boundaries of the properties in the area. The boundary between proposed lots 1 and 2 on 53 Palliser Road is identified. The plan also shows the drain down 55 Palliser Road (along with all other drains in the area). It does not depict the easement which would be necessary to enable lot 2 to have access to that drain. Settlement was to occur on the possession date, which was defined as “the seventh working day after the new title has issued”.
[7] The agreement is subject to the provisions of s 225 of the Resource Management Act which provides:

225 Agreement to sell land or building before deposit of plan

(1) Any agreement to sell any land or any building or part of any building that constitutes a subdivision and is made before the appropriate survey plan is approved under section 223, shall be deemed to be made subject to a condition that the survey plan will be deposited under the Land Transfer Act 1952 or in the Deeds Register Office, as the case may be; and no such agreement is illegal or void by reason that it was entered into before the survey plan was deposited.

(2) Subject to subsection (1), any agreement to sell any allotment in a proposed subdivision made before the appropriate survey plan is approved under section 223 shall be deemed to be made subject to the following conditions:

(a) That the purchaser may, by notice in writing to the vendor, cancel the agreement at any time before the end of 14 days after the date of the making of the agreement:

(b) That the purchaser may, at any time after the expiration of 2 years after the date of granting of the resource consent or one year after the date of the agreement, whichever is the later, by notice in writing to the vendor, rescind the contract if the vendor has not made reasonable progress towards submitting a survey plan to the territorial authority for its approval or has not deposited the survey plan within a reasonable time after the date of its approval.

(3) An agreement may be rescinded under subsection (2) notwithstanding that the parties cannot be restored to the position that they were in immediately before the agreement was made, and in any such case the rights and obligations of each party shall, in the absence of agreement between the parties, be as determined by a Court of competent jurisdiction.

[8] After the agreement was entered into there followed lengthy processes associated with the completion of the subdivision - processes which, in fact, were never concluded. A number of problems arose:
[9] The inability of the appellants to obtain an easement for stormwater and sewage has been the principal reason for subsequent delays although the appellants also took some time to comply with the requirements as to the provision of a car deck.
[10] Evidence given at trial shows that it would be possible for the appellants to provide stormwater and sewage drainage from lot 2 into their existing stormwater and sewage drainage system. This would require, however, considerable disruption to their property (including the ripping up of existing infrastructure in the garden). The difficult topography means that pipes would be exposed. The cost of providing such drainage would be in the order of $20,000.
[11] The resource consent for the subdivision has been extended from time to time but no progress was made in terms of securing an easement.
[12] As late as October 2002, the appellants were still treating the contract as alive as they successfully sought an extension of the resource consent from the Council.
[13] In March, April and May 2003 the solicitors for the respondent wrote to the appellants threatening proceedings. The first formal response to that threat of proceedings came in a letter from the appellants’ solicitors of 21 May 2003 which was in these terms:

We refer to your letter dated 20 May 2003. You appear to assume that the agreement for sale and purchase imposes some obligation on our client to comply with any council requirements so that a new title may issue. There is nothing in the contract to suggest that there is any obligation on our clients to do anything and we are of the view that the agreement is probably void for uncertainty.

In any event our client is unable to comply with council requirements because they cannot obtain the necessary consent from third parties.

Quite apart from the delays by your client in doing anything, we do not believe that you could obtain an order for specific performance because it is beyond our client’s power to comply with the city council requirements.

[14] The respondent’s solicitors responded by letter of 12 June 2003:

Whether or not your clients have been able to obtain the neighbour’s consent is of no moment. Your clients are able to grant an easement to lot 2 (our client’s property) over lot 1 (your clients’ property) and thereby comply with the resource consent.

[15] The appellants apparently did not respond to this letter and the result was the issue of specific performance proceedings which were commenced on 1 July 2003. It was only in response to these proceedings that the appellants formally took the position that the contract was at an end. They returned the deposit on 24 November 2003 and it is currently held in trust by the respondent’s solicitors.

The High Court judgment

[16] In the judgment under appeal, Miller J declined the respondent’s application for specific performance but held that he was entitled to damages, the quantification of which was deferred for another hearing.
[17] Miller J concluded that the appellants were contractually committed to completing the subdivision. The refusal of the owners of 55 Palliser Road to grant an easement providing access to the public drain was therefore not an answer to the respondent’s claim.
[18] This is an important aspect of the case and it appropriate therefore to set out what the Judge said:

[43] The agreement was subject to s.225 of the Resource Management Act, which implied three conditions into the agreement. The first was that the agreement was subject to a condition that a survey plan would be deposited under the Land Transfer Act 1952. The second was that the purchaser had a right to cancel within 14 days after the date of the agreement. The third was that the purchaser might, at any time after the expiration of two years after the date of granting of the resource consent or one year after the date of the agreement, whichever was the later, rescind the contract by notice in writing if the vendor had not made reasonable progress towards submitting a survey plan to the territorial authority for its approval or had not deposited the survey plan within a reasonable time after the date of its approval.

[44] It is clearly implicit in s.225 that the obligation to procure the deposit of a survey plan under the Land Transfer Act 1952, and to obtain any necessary resource consent, is that of the vendor; Vahora v Tse (1999) 4 NZ Conv C 192, 923.

[45] The authorities indicate that where an agreement is conditional on resource consent, the vendor's obligation is to take all reasonable steps to obtain consent, and to comply with all reasonable conditions imposed by the Council; D W McMorland Sale of Land (2nd Ed) para 3.26, W R Clough & Sons Limited v Martyn & Ors [1978] 1 NZLR 313. In Clough v Martyn, the Court of Appeal held that a contract subject to resource consent was to be treated as importing an obligation on the vendors to take all reasonable steps to obtain a resource consent. The Court of Appeal held that “no doubt” the vendors would have to submit to reasonable building line and sewage conditions, notwithstanding that they involved much expense and effective other land of the vendors, if that were necessary to achieve the subdivision provided for by the contract.

[46] However, the question whether the Council’s conditions were reasonable does not arise in this case, because the agreement was unconditional. A prudent vendor should include a condition permitting cancellation in the event that the Council imposes onerous or unexpected conditions. Had the defendants inserted a condition of that kind, they might have contended that the Council’s decision to make the subdivision conditional on a land use consent was unreasonable, particularly since the land use consent was out of their control.

[19] Miller J rejected an argument that the contract had been brought to an end because of the effluxion of time.
[20] He recorded the argument in these terms:

[53] Mr Laurenson contended that the agreement was subject to an implied term to the effect that the agreement would terminate if resource consent was not obtained within a reasonable time. ...

[21] His reasons for rejecting this argument were as follows:

[55] Mr Laurenson’s submission faces three formidable difficulties. The first is that in my view it is not possible to reconcile s.225 with a vendor’s right of cancellation should a resource consent not be obtained within a reasonable time. Section 225 implies into the contract stipulations as to the time within which resource consent should be obtained. The responsibility for procuring the resource consent is that of the vendor. It is only the purchaser who may cancel if consent is not obtained in time. It follows that s.225 leaves no room for an implied term that the vendor also obtains a right to cancel should the resource consent not be obtained within a reasonable time.

[56] The second obstacle is that in a case where an obligation must be performed within a reasonable time, the contract may be brought to an end only if time is of the essence or is made so by notice. ...

...

[58] Mr Laurenson further contended, however, that in some cases notice is not required, relying on a passage from D W McMorland Sale of Land (2nd Ed) at para 5.07. The author suggested that notice might not be necessary if the other party’s delay was such as to amount to repudiation and went on to say:

The only other possible analogy with repudiation is where the delay has been so protracted that it is obvious that the condition has not been fulfilled within such time as must have been in the contemplation of the parties when they entered into the contract as being a reasonable time for the fulfilment of the condition. It may be that then either party, neither being responsible for the failure of the condition, could give notice directly avoiding the contract without first giving notice making time of the essence.

[59] In this case, however, nothing that Mr Serepisos did amounted to repudiation. He sought continuously, if slowly, to obtain a land use consent. Further, the defendants did not resist the Council decision to link the subdivision consent to a land use consent. Although they became increasingly frustrated, they pursued their application and eventually obtained a resource consent on 7 April 2000. From that point on, the only obstacle to the issue of new titles was the car deck and the drains, both of which were their responsibility under the agreement.

[60] The third and final difficulty is that even if a term allowing the defendants to cancel after a reasonable interval might be implied into the contract, such a right may only be exercised by a party who is not in default; Thomas v Monaghan [1975] 1 NZLR 1 (CA), Green v Sevin (1879) 13 Ch D 589.

[61] Mr Laurenson contended that the only default was that of Mr Serepisos. The failure to complete the subdivision is the result of Mr Serepisos’ decision, contrary to his intimation to the defendants when the contract was entered, to pursue a two-townhouse development. That in turn led to delay, and caused much hostility on the part of neighbours, which resulted in the defendants losing the opportunity to procure the consent of the owners of 55 Palliser Road to an easement across their property. He submitted that the parties envisaged a co-operative process, and Mr Serepisos was obliged to co-operate in meeting any requirements of the Council.

[62] The difficulty with this contention is that the contract contained no restriction on what Mr Serepisos might do with the land, and no stipulations as to time. Any obligation to co-operate with the defendants did not extend to developing the land in a way that might minimise objections from neighbours.

[63] I conclude that the defendants did not have a right under the contract to bring the contract to an end by effluxion of time resulting from their failure to obtain a resource consent. They might have been able to do so by introducing an appropriate condition or by insisting on a right to cancel if the Council chose to impose unexpected conditions, but they did not take that course. Even if a right to cancel due to effluxion of time existed, its exercise would have been dependant upon a notice making time of the essence, and no such notice was given. Finally, the defendants were in default of their unconditional obligation to procure the issue of titles, and as such were in no position to give such a notice.

[22] Miller J, did, however, reach two conclusions which favoured the appellants.
[23] The first was that the parties had initially contemplated that the respondent would build a single dwelling on lot 2. On this basis the respondent’s proposal for two townhouses (which led to so much opposition from neighbours and consequent delay) was a departure from the understanding between the parties at the time of the agreement. As will become apparent (see [26] below), the Judge saw this as relevant to the assessment of damages.
[24] The second and more important of the conclusions in favour of the appellants related to what was said to be an “agreement” as to how drainage was to be provided:

[47] It is necessary to determine whether, as part of the agreement regarding subdivision, the parties reached an oral agreement that stormwater and sewage from Lot 2 would be drained through the public drains running across 55 Palliser Road. As already noted, that would require the agreement of the owners of 55 Palliser Road because a short connecting drain and an easement were required.

[48] Mr Steele’s evidence was that he explained to Mr Serepisos before the agreement was signed that stormwater and drainage would connect to the public drains on 55 Palliser Road, and that Mr Serepisos agreed to this.

[49] Ms Austin recalled a discussion with Mr Serepisos the gist of which was that he was aware that potentially the sewage was to come along the side of the neighbours property. She also discussed the matter with Mr Steele, who pointed out the drains on 55 Palliser Road, and she understood that the two men had discussed it between them.

[50] Mr Serepisos did not agree that the defendants made it clear that stormwater and sewage would be connected to the drains on 55 Palliser Road, but I am satisfied that he had very little specific recollection of the negotiations. Attached to the agreement for sale and purchase was a plan on which the drain running across 55 Palliser Road had been drawn, although the plan did not depict a connection to Lot 2. He acknowledged that he knew the drain was shown on the plan.

[51] Lastly, the parties’ subsequent conduct, to the limited extent that it is relevant, is consistent with such an agreement; Valentines Properties Limited v Huntco Corporation Limited (CA 57/99, 6 December 1999), Hill v National Bank [1985] 1 NZLR 736 at 740. The subdivision plan subsequently prepared by Mr Maunder showed that stormwater and sewage were to be connected to the public drains on 55 Palliser Road. The plaintiff used this plan for the purposes of his own resource consent.

[52] I accept Mr Steele’s evidence. I am satisfied that the parties’ agreement that the defendants would pursue subdivision extended to an agreement that stormwater and sewage would be connected to the public drains on 55 Palliser Road.

[25] This finding of fact was not challenged in front of us (although Mr Sullivan did not accept that the “agreement” could properly be seen as contractual). We confess to some difficulty in understanding the scope and intended significance of the Judge’s conclusion and, in particular, have sympathy with Mr Sullivan’s refusal to accept that the “agreement” was contractual in nature. The terms of agreements for the sale and purchase of land are customarily in writing. Contentions that what was agreed went beyond what is in writing invite arguments about the Contracts Enforcement Act 1956, part performance and perhaps rectification. There were no such arguments in the High Court. Nor indeed were these topics mentioned in argument before us until we raised them. Later in this judgment we will discuss the implications of what the Judge found.
[26] Finally, we should note the Judge’s reasons for declining to make an order for specific performance:

[75] I have come to a clear view that it would be inequitable to grant specific performance in this case, for several reasons. First, the parties agreed that the drains would be connected to 55 Palliser Road. It is not now possible to do so. I accept Mr Laurenson’s submission that this is a bar to specific performance in this case. It is not for the Court to modify the agreement before ordering that it be performed.

[76] Second, I have found that the plaintiff was the principal cause of the loss of the defendants' opportunity to procure the consent of the owners of 55 Palliser Road to an easement. In the result, a decree of specific performance would involve the defendants in substantially increased expenditure and inconvenience associated with laying drains through Lot 1.

[77] Third, if specific performance is granted the defendants will obtain a 1996 price, without interest, in circumstances where the plaintiff, who is the cause of much of the delay, will benefit from an almost threefold increase in value. I accept Mr O’Sullivan’s submission that delay is not in itself a reason to decline specific performance. Nor is the change in values. But the delay that resulted between December 1996 and April 2000 was not the fault of the defendants. The application for subdivision was filed early in 1997, and it was the Council which delayed the processing of the application until 1998. From that point until April 2000, the delay was accounted for by Mr Serepisos’ actions.

[78] Of course, the plaintiff will be entitled to damages for breach of contract but it is not necessarily the case that the Court will adopt the date of trial as the appropriate date for assessing damages; Stirling v Poulgrain [1980] 2 NZLR 402, 420, 424. The general rule is that damages in contract are assessed as at the date of breach, but the Court has power in the interests of justice to fix a different date. Nothing further need be said about that at this stage.

[79] Fourth, the contract was executed following a discussion between Mr Steele and Mr Serepisos in which Mr Serepisos indicated that he would construct a single dwelling on the property. More than that, Mr Steele’s evidence was that Mr Serepisos indicated that he would proceed with the design prepared by Mr Daish. Mr Serepisos said that he never intended to use the Daish design, but he acknowledged that he intended to build a single dwelling. However, I accept Mr Steele’s evidence. The defendants did not plead misrepresentation. But had they realised that Mr Serepisos might proceed with a two-townhouse proposal, it is possible that they would have insisted upon conditions that would have protected them in the event of delay.

[80] A further consideration that is relevant to specific performance is the potential for further complications to arise in completion of the agreement. Mr Maunder's evidence was that the remaining steps involved the connection of drains, payment of a reserve contribution and water connection fee, creation of easements, approval by the Council, and lodging of a certificate under s.224(c) of the Resource Management Act with Land Information New Zealand. However, these considerations would not preclude a degree of specific performance in themselves.

Issues in the case

[27] We propose to approach this case by considering a series of sequential questions:

What were the obligations of the appellants in terms of securing the deposit of a survey plan?

[28] The Judge held that the appellants, as vendors, were obliged to procure the deposit of the survey plan. His reasons for this conclusion appear in [44] and [46] of his judgment (set out above in [18]).
[29] The leading case is WR Clough & Sons Ltd v Martyn and Others [1978] 1 NZLR 313 in which s 351(3) of the Municipal Corporations Act 1954 (the statutory precursor to s 225(1) of the Resource Management Act) was in issue.
[30] The case concerned the proposed sale of land which adjoined, to the West, an existing property owned by the purchaser. The land to be acquired was defined in terms of its area and on the basis that it was to be formed by a “prolongation” of the Northern and Southern boundaries of the land already owned by the purchaser. The subdivision was approved subject to conditions that included the dedication of a service lane between the existing landholdings of the vendor and purchaser. If this condition had been satisfied, the resulting subdivision would not have corresponded exactly to what was contemplated by the agreement (as the service lane would have meant that there was no “prolongation” of the Northern and Southern boundaries of the purchaser’s land).
[31] The purchaser’s claim against the vendor failed at first instance and a subsequent appeal to this Court was dismissed. In delivering the judgment of this Court, Cooke P observed (at 317):

We accept that the contract is to be treated as importing an obligation on the vendors to take all reasonable steps to obtain approval ... . This is supported by Hargreaves Transport Ltd v Lynch [1969] 1 WLR 215; [1969] 1 All ER 455 and other cases cited in 9 Halsbury’s Laws of England (4th ed) para 459. No doubt the vendors would have to submit to reasonable building line and sewerage conditions, notwithstanding that they involved much expense and affected other land of the vendors, if that were necessary to achieve the subdivision provided for by the contract. But the contract and the implied obligation relate to that subdivision. ...

Having concluded that the subdivision as approved was not what was contemplated by the agreement, Cooke P went on (at 318):

It should be added that the appellant has not contended that there is anything which the respondents could reasonably be called upon to do in an endeavour to have the service lane requirement removed. ...

[32] If the approach of Cooke P in Clough is taken here, the agreement must be regarded as having been, at all times, conditional on the deposit of a survey plan. Further, the appellants were not obliged to procure the deposit of such a survey plan but only to take reasonable steps to do so (including submitting to any reasonable conditions imposed by the Council).
[33] Section 351(3) of the Municipal Corporations Act was not as detailed as the present s 225 of the Resource Management Act and, in particular, did not contain anything equivalent to s 225(2)(b) and (3). Those subsections, however, do not require a different approach from that taken in Clough. The specific rights for purchasers provided by s 225(2)(b) and (3) are not inconsistent with the continuing conditionality of an agreement where a survey plan has not been deposited. Indeed, given the relevant statutory context as a whole, an agreement which is subject to s 225 must necessarily always be conditional until a survey plan has been deposited. That section provides for specific rights of cancellation in favour of purchasers and no similar rights for vendors. But we do not see this as having the consequence that the vendor under such an agreement has an absolute obligation to procure the deposit of the relevant survey plan; something which, as experience shows, may often be incapable of achievement.
[34] Although we agree with the Judge that the appellants were unwise not to reserve themselves the right to cancel if unhappy about subdivision consent conditions, we do not see why the absence of a clause conferring such a right means that the appellants were required to take unreasonable steps (including submission to unreasonable conditions) to obtain a consent (which appears to be what the Judge held in [46] of his judgment).
[35] It follows that we are satisfied that the appellants’ obligations in relation to procuring the deposit of a survey plan were not absolute but rather were simply to take reasonable steps to that end. Thus they had no obligation to submit to unreasonable conditions. Indeed, Mr Sullivan did not seek in this Court to argue otherwise.

Must the appellants provide stormwater and sewage drainage over lot 1?

[36] The appellants maintain that they were not required to provide stormwater and sewage drainage over lot 1. This was put in two ways: first that the “agreement” found by the Judge meant that the subdivision contemplated by the agreement is different from what would be involved if drainage was provided over lot 1 (an argument which in a sense invokes the actual decision in Clough); and secondly that in all the circumstances, including what was in common contemplation of the parties in December 1996, provision of such drainage lies outside of the reasonable steps they are obliged to take.
[37] If the Judge’s remarks in [47] – [52] of his judgment are taken literally, it would appear to follow that he found an agreement that the drainage for lot 2 was to be into the public drains on 55 Palliser Road. It would likewise appear to follow, on the basis of Clough, that the appellants have no obligation to provide drainage over lot 1. Although it is difficult to see how the Judge’s remarks in question can be taken otherwise than literally, we nonetheless harbour considerable reservations as to this approach; this primarily for the reasons already referred to in [25] above. For this reason, we prefer to base our conclusion on this aspect of the case on other (albeit broadly related) grounds.
[38] Whether it is reasonable for the appellants to provide drainage over lot 1 is necessarily to be addressed in the context that existed in December 1996 when the agreement was entered into.
[39] At the very least, the Judge’s finding of fact establishes that it was the shared contemplation of the appellants and the respondent that drainage for lot 2 would be into the public drain on 55 Palliser Road. Whether drainage could physically or practicably be provided through lot 1 would not have been obvious to them. We say this given the topography of the land, the very small size of the sections and the location of the existing dwelling house on proposed lot 1.
[40] The evidence given before Miller J indicates that such drainage can be provided. But doing so would involve the destruction of existing paths and concrete steps. Further, it would leave the drainage pipes exposed at the rear of the proposed lot 1. Finally, instead of the $1,600 (in 1996 dollars) which the anticipated physical works (involving a connection via 55 Palliser Road) would have cost, the physical works actually necessary to provide drainage in 2004 would have cost an estimated $20,000.
[41] We see the merits of the conflicting cases on this point as being closely balanced.
[42] A vendor who enters into an agreement to sell a proposed allotment in terms of a proposed subdivision must expect to provide appropriate drainage, along with other services, for the new allotment. The actual provision of such drainage might often be more expensive than the vendor had anticipated and hoped. Such a contract cannot sensibly be treated as conditional on the vendors’ own budgetary expectations as to the subdivision process being met. On that basis, it might be thought that the appellants must accept, as rub of the green, the inconvenience and expense of providing drainage over lot 1, cf the remarks of Cooke P in Clough at 317.
[43] On the other hand, context is all important. We see it as particularly significant that the cost of supplying drainage through lot 1 would be approximately 12 times (leaving aside changes in the value of money) those which would have resulted if an easement had been available over 55 Palliser Road. Also relevant is the amenities factor associated with the destruction of paths and steps and exposed stormwater and sewage pipes. All in all, a subdivision involving drainage through lot 1 would be of a substantially different character to what the parties had contemplated at the time of their agreement.
[44] On balance, we are of the view that the appellants are not required to provide drainage over lot 1.

Was it open to the appellants to bring the contract to an end (or treat it as having come to an end) without first having given notice to the respondent of an intention to do so?

[45] We think it clear that the condition implied in the contract by s 225 of the Resource Management Act was required to be satisfied within a reasonable time. To put this another way, we do not think that the respondent would have been entitled to insist on the agreement remaining alive indefinitely, perhaps for decades, on the off-chance that, eventually, a subdivision consent might be obtained.
[46] We think it likewise clear that such reasonable time has long since passed.
[47] In general, a party who seeks to cancel a contract on the basis of non-satisfaction of a condition within a reasonable time must first give to the other party a notice akin to a notice making time of the essence. Such notice must give the other party a reasonable opportunity to attempt to satisfy the condition. The requirement to give such a notice emerges from the judgment of Cooke P delivered in this Court in Hunt v Wilson [1978] 2 NZLR 261, a judgment which must now be regarded as authoritative. We see no basis for concluding that this approach should not apply in the general context of the condition implied by s 225 of the Resource Management Act. Indeed in Hunt v Wilson (at 273) Cooke P referred to Clough in terms which make it clear that he regarded that case as being subject to the principles of law which he was discussing.
[48] As Cooke P recognised in Hunt v Wilson, the necessity for notice depends on the circumstances, and especially on the utility of such notice in the context of the practicalities of the situation and the stances taken by the parties.
[49] In the present case, the primary stumbling block to the completion of the subdivision was the unwillingness of the appellants to accept the condition as to drainage over lot 1. There would not have been much point in the appellants giving the respondent notice that the contract would lapse unless they (the appellants) had changed their mind on that point within say three months. On that basis it might be thought that there was no practical requirement to give notice.
[50] In the course of argument, however, another possibility was floated from the bench. If the appellants had given the respondent notice that the contract would end after the expiry of a specified but reasonable period unless the condition as to the survey plan was satisfied within that period, it would have been open to the respondent to endeavour to secure an easement from the current owners of 55 Palliser Road. Given the value to the respondent of completing the contract, it would have been in his interest to make, if necessary, a substantial payment to the neighbour for such an easement. We have no basis for concluding that such an approach might not have succeeded.
[51] We have referred earlier in this judgment to the correspondence which we see as primarily relevant to this issue, see [13] - [15].
[52] From the date of receipt of the letter of 21 May 2003, the respondent knew that the appellants were relying on their inability to secure an easement from the owners of 55 Palliser Road. There is nothing in the 12 June 2003 letter to suggest that the respondent would have been prepared to negotiate directly with the owners of lot 2. On the other hand, it would not be safe to conclude that the respondent would necessarily have stood on the understanding of his rights conveyed by the letter of 12 June if the appellants had given him a fair opportunity to secure the necessary easement. As to this we, we note:
[53] Accordingly we are satisfied that it was not open to the appellants to cancel the contract without having first given the respondent fair notice of their intention to do so and a fair opportunity to take steps himself to secure the easement.

In light of the answers to the forgoing questions, how should the appeal be determined?

[54] In the context of the case as a whole (which includes the decision of the respondent not to appeal against the refusal of specific performance), the respondent is entitled to damages under the discretionary jurisdiction provided for by s 16A of the Judicature Act 1908.
[55] In his judgment, the Judge indicated some of the considerations which might affect the assessment of damages and no challenge was made in this Court to his approach, which, as far as it goes, we regard as appropriate. However, when damages come to be assessed, allowance will also have to be made for our conclusion that the obligations of the appellants were more limited than the Judge recognised. The assessment of damages will therefore have to allow for the contingency that the easement from the neighbours might not have been secured even if appropriate notice been given to the respondent and to the probability that if secured, this would have probably have required a payment from the respondent. We recognise that at the quantum hearing the parties may wish to adduce evidence addressed to these issues.

Disposition

[56] The appeal is allowed but only to the extent that the assessment of damages directed in the High Court is to allow for the contingencies that the easement from the neighbours might not have been secured if the appropriate notice had been given to the respondent and that securing such an easement may have required a payment from the respondent to the neighbours.
[57] Given the mixed success of the parties, there is no order as to costs.

Solicitors:
Sladden Cochrane & Co, Wellington for Appellants
Phillips Fox, Wellington for Respondent

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