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Court of Appeal of New Zealand |
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Court of Appeal of New ZealandLast Updated: 13 April 2011
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CA139/2010
[2011] NZCA 140 |
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BETWEEN PEGASUS TOWN LIMITED
Appellant |
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AND ANDREW ROGER DRAPER AND CHIANG CHUN CHIN
Respondents |
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Hearing: 28 March 2011
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Court: Stevens, Keane and Fogarty JJ
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Counsel: D M Lester for Appellant
N Till QC and N Pointer for Respondents |
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Judgment: 8 April 2011 at 4.00 pm
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JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Stevens J)
Introduction
[1] This is an appeal against a judgment of French J in the High Court[1] granting summary judgment to the respondents, Andrew Draper and Chiang Chun Chin, upholding their right as purchasers to cancel an agreement for sale and purchase of property with the appellant. The respondents acquired the land, part of the Pegasus Town and Mapleham Golf Course development near Christchurch (the development), in April 2007. But subsequent to learning of a proposal by Transit New Zealand to construct a bypass near their property between June and September 2007, the respondents took steps to cancel the agreement on the grounds of misrepresentation and misleading and deceptive conduct.
[2] Proceedings were issued seeking confirmation of the right to cancel and return of the deposit under the Contractual Remedies Act 1979 (the Act) and similar relief under the Fair Trading Act 1986 (the FT Act). The respondents successfully applied for summary judgment in respect of both causes of action. The Judge made orders confirming the respondents’ right to cancel and for the return of the deposit of $86,250 together with interest.[2]
[3] The appellant, the developer of the Pegasus Town complex, appeals against the grant of summary judgment. Three main points are advanced. First, that the Judge wrongly found that the truth of the representations made by the agents of the developer were essential to the respondents, this being an issue that is not apt for determination at summary judgment. Second, the Judge wrongly found that the purchasers had relied on the statements of the agents during the negotiation process, particularly given the presence of clauses in the agreement purporting to preclude a court from inquiring into the question of reliance. Third, the Judge ought to have declined to grant relief under s 9 of the Act.
Factual background
[4] The essential facts are not in dispute. The respondents are a married couple who have been residing overseas. On 24 March 2007, they attended an exhibition in Hong Kong organised by Colliers International promoting the development, as they were interested in buying a building lot on the golf course. The respondents discussed the available lots with the agent and took away a package of promotional material that included the following statements:
Mapleham, which forms a landmark entranceway to the town, will offer the very best of lifestyle living.
Rural setting with extensive planting of mature trees
Rich environment, characterised by wetlands, streams and woods
These sites [for properties] will be positioned to make the most of the course’s parkland aspects, views, wooded areas and waterways.
And perhaps most importantly, we are building that community around a lifestyle, one that offers all the benefits of one of the best locations in the South Island, to allow people to live where they play.
An area dedicated to parkland approximately 50 metres in breadth was situated immediately to the east of the property running approximately north and south. The parkland was in an area known as the “Western Conservation Management Area”.
[5] The promotional material included a DVD entitled “Live where you play”. A copy of the DVD was supplied to the Court. The DVD contains “fly by” sequences of the proposed development. It portrays a meticulously planned development offering the very best of lifestyle living. In particular, it shows the Mapleham properties enjoying a rural setting with extensive views over the championship golf course and adjacent wetlands, forest, bush and streams.
[6] More generally, the DVD emphasises the peace and tranquillity of the setting alongside a lake (with waterfall), town beach and open green spaces. There are nature reserves, replete with wildlife, said to be located not far from the coast and between two major South Island rivers. The overall scene is enhanced by parks, playing fields and natural landscapes. This is said to be a place for enjoying leisure, lifestyle and entertainment with an emphasis on recreation and sharing the natural beauty of the area.
[7] After studying the material, including the DVD, the respondents selected Lot 1 of Stage 3 of the development as the most suitable site on which to build their “dream retirement home”. Their reasons for choosing this particular lot, as set out in a joint affidavit of Mr Draper and Ms Chiang, included the fact that:
- [It was] located furthest from the state highway, being adjacent to an area which would be developed as parkland, giving pedestrian access to the adjacent Pegasus Town Centre and it being right next to the golf course. We both are sensitive to noise so wanted a peaceful environment to make our home.
[8] A few days after attending the exhibition, the respondents met with Mr Li, the appellant’s agent, and a colleague of his who had recently returned from a visit to New Zealand. What transpired at the meeting is best described in the uncontradicted evidence of the meeting in the joint affidavit filed by the respondents:
- Mr Li and his colleague asked what our intentions were in wanting to purchase Lot 1 and we explained that it was to build our dream retirement home where we could relax and enjoy the peace and tranquillity of the pastoral setting and the convenience of a championship golf course on our doorstep.
- I, Andrew Draper, explained how important the setting of the development within the surrounding wetlands, waterways, parklands and woods was to us. I confirmed we had been very impressed with the proposed development and were attracted by the peace and tranquillity of the location and in particular in the quiet pastoral setting with parklands, woods, waterways and open views. The site being set within a golf course was also a great attraction to us.
- Mr Li’s colleague asked if we were familiar with the Mapleham area and we explained that we were not. I, Chiang Chun Chin, had never been to New Zealand. I, Andrew Draper, had visited Christchurch in the early 1990’s but was not familiar with Mapleham and the surrounding area.
- Mr Li’s colleague explained that he had visited the site and confirmed that it was a most beautiful location for the proposed new town and golf course development. He said it was truly a very quiet rural environment, with mountain views and surrounding wetlands and woods and that the proposed development would be in harmony with the surroundings and provide a very peaceful and tranquil environment for us to build our dream home.
- I, Andrew Draper, specifically asked both Mr Li and his colleague whether there were any proposals which might affect the nature of the proposed development going ahead and in particular might impact upon the Stage 3 development of Mapleham. We were told that there were no proposals which they were aware of which might have any impact upon the proposed development.
- I, Andrew Draper, also asked about the status of the company behind the development and their track record in completing major developments of this kind. We were told that they were a top tier company, financially sound with a very good reputation in New Zealand and that Colliers International were happy to recommend this particular project to their clients.
[9] At the same meeting the respondents signed a purchase option agreement for Lot 1 of Stage 3. They say they did so in reliance upon the discussions with the agents, the representations contained in the package of information, as well as the assurances given. The respondents were given an agreement for sale and purchase which they declined to sign at that time, saying that they would make another appointment after reading it through. They studied the material between 26 March and 2 April 2007.
[10] The respondents returned to the agent’s office on 2 April and both signed the agreement for sale and purchase of Lot 1 Stage 3 for a price of NZ$575,000. On 10 April they paid a deposit of $86,250, being 15 per cent of the purchase price.
[11] Later in 2007 the respondents became aware, through correspondence from the appellant, that Transit New Zealand (Transit) was proposing to build a bypass close to the Mapleham development. The respondents were shocked to learn this. They also found out that in March 2007, at the time of the exhibition and subsequent meeting with Mr Li, the appellant had been aware of the proposed bypass. This is established from the submissions made by the appellant to Transit which talk of the development being “compromised” by the proposed bypass.
[12] There is no dispute that the appellant had such knowledge prior to the time when the agents were dealing with the respondents in Hong Kong. In March 2006 Transit commenced a study of the transport system around Woodend, a town in the vicinity of the development, in order to manage and improve the roading system there. An issues paper was released in June. In November 2006 Transit released a summary of public feedback on Woodend transportation issues. This showed that 88 per cent of respondents preferred a bypass rather than an amended four lane highway through Woodend. Of those who had a preference as to where the bypass should be, over two thirds thought it should be situated to the east rather than the west of Woodend. In March 2007 Transit identified four roading options for further investigation, two of which were an eastern bypass. Of these two bypass options, one would be located 500 metres from the rear boundary of Lot 1, while the other option, known as the “long eastern bypass”, would pass within 50 metres or so of the front boundary.
[13] The appellant’s submission to Transit, in response to a second round of consultation, stated as follows:
Whilst we did [in 2004] receive a submission from Transit on the Mapleham application, it related specifically to the possibility of ball strike on SH1 from a neighbouring fairway and made no mention of any Transit concerns or the possibility that the Mapleham land could in the future be compromised with a bypass.
...
So it was with some degree of surprise and concern that in March 2007 PTL were formally notified by Transit of further consideration of a possible bypass bisecting the Mapleham & Pegasus Town developments – The Long Eastern Route.
...
... the intangible effect is that purchasers have [bought] residential lots in the golf course with the expectation of a private and quiet lifestyle only to find that potentially an open road speed motorway is running in many cases as close as 50-100m from their homes. This we believe is not workable given the impact both on residential lots and the golf course generally.
[14] Not surprisingly, the respondents were angry and upset to have entered into an agreement for sale and purchase to buy a lot in the development that carried the risks of two bypass proposals that could significantly affect both the value of the property and the lifestyle that they sought as had been represented by the promotional material and the agents. It is common ground between the parties that none of the plans or promotional material supplied to the respondents by the agents mentioned the Transit investigation or the proposed bypass options. The respondents’ position was that, had they been aware of the Transit proposals, they would not have signed the agreement for sale and purchase. It would have presented too much of a risk to the home they wished to build in a quiet, tranquil, rural setting.
[15] Following the discovery by the respondents of the Transit proposals, there followed an exchange of correspondence between the parties. This culminated in the respondents purporting to cancel the agreement for sale and purchase on the grounds of misrepresentation and misleading and deceptive conduct. The appellant disputed the respondents’ right to cancel. A statement of claim and application for summary judgment followed. This was opposed by the appellant supported by an affidavit of the general manager of the appellant. He stated that at the time the respondents raised their concerns, the construction of the long eastern bypass was “a possibility ... [but] an extremely unlikely possibility”. Further, as of June 2009, the appellant was informed by a Regional Planning Manager at the New Zealand Transport Agency (NZTA) that the long eastern bypass was definitely “off the table”. Thus the most likely option, according to the NZTA employee, was “the four lane option through the centre of Woodend rather than the Short Eastern by-pass”. Written confirmation of this was not available at the time of the High Court hearing.
Preliminary point
[16] For the appellant, Mr Lester in his written submissions took the point that the only relief granted to the respondents was under s 7(4)(a) of the Act. While the Judge stated that the same reasoning would apply to the FT Act cause of action,[3] Mr Lester noted that no notice to support the judgment on alternative grounds had been filed.[4]
[17] Mr Till QC for the respondent submits that judgment was given under both the Act and the FT Act. This was on the basis that there was uncontested evidence of misleading and deceptive conduct in the misleading responses to the respondents’ questions of the appellant’s agents and by silence in the face of specific questions about any proposals that might impact on the development. Various parts of the judgment under appeal are referred to as confirming that the Judge was dealing with both causes of action.[5] Mr Till submits that it is plain from the judgment as a whole that the Judge was prepared to use the powers under the FT Act to give effect to the cancellation of the agreement for sale and purchase and to order the return of the deposit.[6] The fact that the Judge did not do so expressly does not alter the position.
[18] We agree with the submissions of Mr Till on this point. We consider that it is clear from the judgment as a whole that the Judge found both that the FT Act cause of action was made out and that the appellant had no arguable defence to that second cause of action. It is true the Judge did not refer expressly to the remedial powers under s 43 of the FT Act. Neither did she formally make orders under that provision. Rather, the Judge made the orders sought by the respondents, without referring expressly to statutory provisions under either Act, when confirming the respondents’ right to cancel and ordering the return of the deposit together with interest.[7] The crucial question is whether the Judge had jurisdiction to make such orders, once she had found that the respondents had established liability under both causes of action and that the appellant had no arguable defence to either.
[19] At the hearing, Mr Lester accepted that leave should be granted to the respondents to support the judgment under appeal on the basis of the FT Act. But Mr Lester argued that no order should have been made under the FT Act. He submitted that the fatal flaw with that cause of action is that, as the respondents have not established loss or likelihood of loss at this stage, there should be no relief granted under s 43 of the FT Act.
Disclaimers and exclusion clauses
[20] Because of their importance to issues raised by the appellant, it is convenient to set out the detail of the disclaimers and exclusion clauses relied upon. The promotional material received by the respondents at the exhibition in Hong Kong contained disclaimers. These included:
DISCLAIMER Proposed plans subject to council and development requirements. Plans, areas, dimensions and times may change to incorporate survey, development or local government requirements. This publication does not constitute an offer or contract. All drawings are artist impressions only.
DISCLAIMER: While every effort is made to ensure the information summary is true and correct, no responsibility will be taken for any errors, omissions or changes. This information does not constitute an offer and does not form any part of any contract.
[21] Mr Lester acknowledged that, if these disclaimers were the only basis available to the appellant, the appeal would not have been pursued. The more important provisions were the exclusion clauses contained in the agreement for sale and purchase between the parties. The first of these, clause 7, provided under the heading of ‘Exclusion of Warranties’ that:
The Purchaser acknowledges that the Purchaser purchases the property solely in reliance upon the Purchaser’s own judgment and not upon any representation or warranty made by the Vendor or any agent of the Vendor.
[22] The second, clause 20, was titled ‘Entire Agreement’. It stated:
This Agreement comprises the entire Agreement between the Vendor and Purchaser. No variation representation or undertaking by the Vendor or any person purporting to be acting on behalf of the Vendor shall be binding on the Vendor unless in writing and signed by an authorised Director of the Company. No person is authorised to commit the Vendor in any way in relation to this Agreement or matters supplemental to it unless signed off in writing by an authorised Director of the Vendor Company. This agreement shall not be binding on the Vendor unless signed off in such manner.
Relevant legislation
[23] The appellant relies on arguments raising issues under s 4 and s 7 of the Contractual Remedies Act. These provisions relevantly state:
4 Statements during negotiations for a contract
(1) If a contract, or any other document, contains a provision purporting to preclude a Court from inquiring into or determining the question—
- (a) Whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or
- (b) Whether, if it was so made or given, it constituted a representation or a term of the contract; or
- (c) Whether, if it was a representation, it was relied on—
the Court shall not, in any proceedings in relation to the contract, be precluded by that provision from inquiring into and determining any such question unless the Court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to all the circumstances of the case, including the subject-matter and value of the transaction, the respective bargaining strengths of the parties, and the question whether any party was represented or advised by a solicitor at the time of the negotiations or at any other relevant time.
(2) If a contract, or any other document, contains a provision purporting to preclude a Court from inquiring into or determining the question whether, in respect of any statement, promise, or undertaking made or given by any person, that person had the actual or ostensible authority of a party to make or give it, the Court shall not, in any proceedings in relation to the contract, be precluded by that provision from inquiring into and determining that question.
...
[24] Section 7 of the Act relevantly provides:
7 Cancellation of contract
(1) Except as otherwise expressly provided in this Act, this section shall have effect in place of the rules of the common law and of equity governing the circumstances in which a party to a contract may rescind it, or treat it as discharged, for misrepresentation or repudiation or breach.
(2) Subject to this Act, a party to a contract may cancel it if, by words or conduct, another party repudiates the contract by making it clear that he does not intend to perform his obligations under it or, as the case may be, to complete such performance.
(3) Subject to this Act, but without prejudice to subsection (2) of this section, a party to a contract may cancel it if—
(a) He has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to that contract; or
(b) A term in the contract is broken by another party to that contract; or
(c) It is clear that a term in the contract will be broken by another party to that contract.
(4) Where subsection (3)(a) or subsection (3)(b) or subsection (3)(c) of this section applies, a party may exercise the right to cancel if, and only if,—
(a) The parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the [term] is essential to him; or
(b) The effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be,—
(i) Substantially to reduce the benefit of the contract to the cancelling party; or
(ii) Substantially to increase the burden of the cancelling party under the contract; or
(iii) In relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.
...
High Court proceedings
The respondents’ claim
[25] In seeking summary judgment, the respondents contended that they had a right under the Act to cancel the sale and purchase agreement due to pre-contractual misrepresentations. They initially relied on s 7(4)(b), namely, that the misrepresentation substantially reduced the benefit of the contract to the respondents. But because of potential issues regarding proof of a substantial reduction in benefit, at the summary judgment stage, the respondents were given leave to rely on s 7(4)(a).[8] This provision requires proof that the parties expressly or impliedly agreed that the truth of the representation was essential to them. The respondents also relied on s 4 of the Act as a means of negating the effect of the disclaimers. As noted, the second cause of action relied on was misleading and deceptive conduct under s 9 of the FT Act.
[26] Three instances of misrepresentation were advanced. The first involved the express statements made in the promotional material concerning the restful, natural environment of the development. The second involved an implied statement that there was a present lack of proposals that would affect the Mapleham development and its proposed attributes such as tranquillity. The third instance of misrepresentation was Mr Li’s express statement that there were no proposals that would affect the nature of the development. These representations were said to be false and misleading, as such proposals clearly did exist at the time. The respondents further alleged misrepresentation by silence or half-truth. These representations were relied on, the parties agreed that the truth of the representations was essential to them and, as a result, the respondents were induced to enter into the contract.
The Judge’s decision
[27] The appellant advanced numerous arguments that this claim was not amenable to summary judgment. French J rejected most of these, including the argument that in the circumstances it was not objectively reasonable for the plaintiffs to have relied on the representations. In respect of the right of cancellation under s 7 of the Act, the Judge concluded that it was beyond argument that the parties impliedly or expressly agreed that the truth of the representations were essential to the respondents.[9] The Judge recognised that background circumstances included the existence of the disclaimers in the promotional material and the exclusion clauses in the contract. However, the Judge held that, while it would have been unreasonable for the respondents not to have expected minor changes to the nature of the development, the proposed bypass constituted a “major departure”.[10]
[28] With respect to the disclaimers, the Judge considered the appellant’s argument that matters of fairness and reasonableness under s 4 of the Act were properly matters for trial, but concluded:[11]
[58] Of all the arguments raised by Mr Lester, I consider this to be the strongest, and it has certainly given me pause for thought. However, there are two points to be made. The first is that it is not possible to contract out of the Fair Trading Act obligations, so that these clauses would not be a defence to that claim, albeit relevant to reasonableness of reliance. Secondly, in my view this is one of those cases where the facts are so clear-cut that taking a robust and realistic view I think it can be said with the degree of certainty required for summary judgment that s 4 would apply.
[59] In coming to that conclusion I have been particularly influenced by the following:
[60] I accept that the disparity of bargaining power is not as significant as it is in some of the other cases on s 4, and there is also the fact that the plaintiffs did have an opportunity to take legal advice. However, in my view the cogency of the other factors that I have mentioned means I can be confident that s 4 is applicable and should be applied to prevent the defendant from relying on its exclusion clauses in all the circumstances.
[61] Mr Lester contended it would be unfair and impractical to require a developer to disclose every single possible contingency, given the nature of the project which as I have said was to build a new town. I agree. However, this contingency or possibility was in a different category. It was a major matter, the defendant’s own submission being incontrovertible proof of that. It would undoubtedly be unreasonable and unfair for the defendant to be able to rely on its exclusion clause in connection with this matter.
[62] As I have said, I am left in no doubt that s 4, in these circumstances, must apply.
Discussion
First issue – essential nature of truth of representation
[29] The appellant submits first that there was no express agreement. Further, the Judge’s finding that there was an implicit agreement that the truth of the representation was essential to the respondents per s 7(4)(a) of the Act is not supported by the evidence and is an issue unsuitable for summary judgment. Mr Lester argues that, when Mr Draper made his enquiries as to the existence of any proposals that would impact upon the development, the context was one of general enquiry where the respondents had yet to make a commitment. Thus there was nothing to suggest that the appellant, through its agents, had agreed that the truth of the representation was essential to the respondents. The generality of the exchange between Mr Draper and the appellant’s agents further negates a finding that the requirements of s 7(4)(a) were satisfied.
[30] In the same context, Mr Lester submits that the disclaimers and exclusion clauses in the contract for sale and purchase prevent the existence of an implied agreement of essentiality as the respondents had actual notice that the representations made by the appellant’s agent were not to be relied upon. He submits, without the benefit of any authority on the point, that s 4 of the Act has no bearing on this issue, as it is not concerned with whether the contractual context permits an agreement of essentiality to be implied. Mr Lester argues that the respondents can only call in aid the provisions of s 4(1) on the issue of reliance, but not in relation to the issue of essentiality under s 7(4)(a) of the Act.
[31] In reply the respondents submit that there was ample evidence for the Court to infer an agreement as to the essentiality of the representation required by s 7(4)(a) of the Act. The representations went to the core of the contract and it is inconceivable that such representations would not be essential to the purchaser of land. The fact that the appellant had written to Transit expressing concern over the proposed bypass shows non-disclosure of this risk was a major matter for it too. It was “disingenuous” for the appellant to argue that it did not at least impliedly agree to the essentiality of the agreement when it had specifically and extensively represented the development as “the epitome of tranquillity and natural peace”. The exchange between Mr Draper and the appellant’s agents was also “anything but general”. The respondents had expressed their desire to live in a peaceful, tranquil, quiet pastoral setting and Mr Draper’s enquiries were as precise as he could make them. It was thus reasonable for both he and his wife to presume that the agents would relay anything of major importance.
[32] We agree with the Judge’s conclusion that it is “beyond argument that the parties impliedly or expressly agreed that the truth of the representation was essential to [the respondents]”.[12] We are satisfied that there is clear evidence from which such conclusion may be inferred. The appellant’s agents in Hong Kong specifically asked the respondents their reasons for wanting to purchase Lot 1. In reply, the respondents’ emphasised the importance to them of the natural, tranquil, pastoral setting. Mr Li’s colleague assured the respondents it was “truly a very quiet rural environment”. Following this exchange, Mr Draper asked directly whether there were any proposals that might impact upon the development’s nature. Given that the respondents had communicated their strong desire to live in a peaceful environment and posed direct questions as to the existence of any detrimental proposals, as well as the agents’ assurance that the site was a tranquil one, we are satisfied that the respondents are able to establish that the parties expressly or impliedly agreed that the truth of the representations were essential to these respondents.
[33] We do not accept the appellant’s submission that agreement could not be inferred because the respondents were making general enquiries only. By the end of the crucial meeting in Hong Kong on 26 March 2007, the respondents had signed an option to purchase agreement and were supplied with a sale and purchase agreement for Lot 1. They signed the latter document a short time later and paid the deposit. Like the Judge, we are satisfied that Mr Draper was as precise in his queries as he could be. Only the appellant had the exclusive knowledge that could engender an even more specific enquiry. The statements the respondents made concerning their desire for a tranquil, pastoral setting and the information Mr Li’s colleague gave concerning the Mapleham site were unambiguous and sufficiently specific.
[34] We are also satisfied that the presence of the disclaimers and the exclusion clauses in the agreement for sale and purchase do not prevent an agreement of essentiality being established. In terms of analysis, we consider that such clauses are more pertinent to the issue of reliance in this case and do not preclude the parties from agreeing that the truth of a representation made in pre-contractual negotiations is essential. The fact that the respondents may not be able to rely on s 4(1) to soften the impact of the disclaimers or exclusion clauses does not assist the appellant. We are satisfied that such clauses are not, in the circumstances of this case, sufficient to negative the element of essentiality.
[35] The appellant also relies on the recent Supreme Court decision of Mana Property Trustee Ltd v James Developments Ltd[13] to suggest that the contractual context is important in determining whether there was an agreement of essentiality. We agree. That case identifies as relevant certain factors, such as the surrounding circumstances when the contract was made and whether the cancelling party would more probably than not have declined to enter into the contract unless the term in question was agreed to be essential, in determining whether there was such an agreement.[14] These factors emphasise that a more contextual approach is needed when determining whether there was an agreement of essentiality, rather than a bright-line approach where the existence of exclusion clauses automatically preclude such an agreement. As the Supreme Court said, it is a question of interpretation: the Court must ascertain “the intention of the parties as to the essentiality of the particular term from its language read in the context of the whole contract and the surrounding circumstances when the contract was made”.[15]
[36] We consider the circumstances surrounding the meetings in Hong Kong and the respondents direct dealing with the agents, as well as the specificity of the inquires about whether there were any proposals that might affect the nature of the development, are such as to underscore the importance and essentiality of the representations made, despite the disclaimers and the exclusion clauses. In no sense could it be suggested that the representations were trumped by the effect of the disclaimer or the exclusion clauses, or that the causative effect on the respondents was thereby negatived.
Second issue – reliance
[37] The appellant next contends that the issue of reliance, together with the issues to be considered under s 4(1) of the Act, made the proceeding unsuitable for summary judgment, particularly when the respondents have the onus on them of showing reliance and that any of the relevant factors in s 4(1) of the Act applied. Mr Lester also submits that in any event the presence of the disclaimers and the exclusion clauses in the agreement for sale and purchase are sufficient to negative the element of reliance. In support he relied on the decision of the High Court in WaikatoLink Ltd v Comvita New Zealand Ltd.[16]
[38] In response, Mr Till submits that, depending on the nature of the evidence before the Court, the element of reliance may be established on an application for summary judgment. The Judge’s findings on this issue were justified and appropriate on the facts. Moreover, there was no need for the respondents to provide direct evidence of their understanding of the disclaimers or the exclusion clauses. It was open for the Judge to apply the provisions of s 4(1) of the Act to the circumstances and it was open to the Judge to use inferences when so doing. The Judge properly found that, if the exclusion clauses in this case were such as to exclude reliance, then s 4 would be pointless.
[39] We agree with the Judge’s approach and her conclusion that in this case “the facts are so clear-cut that taking a robust and realistic view I think it can be said with the degree of certainty required for summary judgment that s 4 would apply”.[17] It is true that summary judgment may not be appropriate where the issues are intensely factual. But here there was uncontroverted evidence from the respondents that allowed the Judge to assess the questions of fairness and reasonableness arising as part of the analysis for the application of s 4 of the Act.
[40] The approach adopted in the High Court in the WaikatoLink case does not assist the appellant. That case involved commercial parties said to be “relatively sophisticated” who had chosen to regulate their relationship according to a structured contractual framework.[18] By contrast, here the situation involves two buyers at a distance from New Zealand dealing with two professional agents of the appellant in circumstances where there was a clear asymmetry of information between the parties. The respondents were reliant upon the promotional material and the responses by the agents to their specific inquiries.
[41] We agree with the reasoning of the Judge, referred to at [28] above, as to the applicability of s 4 of the Act to prevent the appellant relying on the exclusion clauses in the agreement for sale and purchase. In particular, the respondents are residents of Hong Kong, were not familiar with New Zealand and were heavily dependent upon the appellant and its agents for information concerning the real nature of the development and any threat posed by proposals that might impact on its essential features and qualities. The nature of the conduct of the appellant is also significant. Either the appellant did not inform its agents of what it knew about the Transit proposals in March 2007, or it did so and must accept responsibility for the conduct of the agents in not passing it on to the respondents.
Third issue – s 9 of the Act
[42] The appellant submits that, even if the submissions on reliance are not accepted, the relief should not be granted to the respondents under s 9 of the Act because any relief should be based upon what the parties bargained for. As that could now be achieved because Transit is not going to proceed with the long eastern bypass (being the option that would have the greatest impact on the respondents’ property), discretionary relief should be denied. Mr Lester submits that the respondents were ignorant of this proposal when they bought the property and now that it is no longer a possibility, it is not unjust for the Court to hold them to their original contract with the appellants. In fairness, Mr Lester did not press this point with great vigour at the hearing.
[43] In reply, Mr Till submits that it was appropriate for relief to be granted in this case. The appellant ought to have ensured that the Transit proposals were disclosed to the respondents by the agents so that the respondents could make an informed choice as to whether to enter into the contract. The evidence is that they would not have entered the contract if they had known about the proposals. It would not be just to re-impose the contract on them, especially since two and a half years have elapsed since they cancelled.
[44] We are satisfied that there is no unfairness in this case in confirming the respondents’ right to cancel the contract and ordering the return of the deposit they paid. We consider that on the facts of this case the critical time was in 2008 when the respondents were considering whether to cancel the agreement for sale and purchase. In any event, neither at the hearing in the High Court or before us, was there any firm evidence as to what Transit may now be proposing. While the long eastern bypass may be off the table, there remains uncertainty about other possibilities, including the second bypass proposal. We consider that the orders made by the Judge in reliance on the Act were entirely justified. This is not an appropriate case to interfere with the exercise of the discretion under s 9 of the Act.
Second cause of action
[45] We agree with the Judge’s findings discussed at [17] and [18] above that the elements of the second cause of action were made out by the respondents. These factual findings meet all of the requirements for liability under s 9 of the FT Act as discussed by this Court in AMP [19]nance NZ Ltd v Heaven.19
[46] In terms of misleading and deceptive conduct, it is clear that the existence of Transit’s proposals were known to the appellant in March 2007. The appellant itself considered they would have a detrimental effect on the development. This is seen by the submission it made to Transit as described earlier. The appellant failed to inform the respondents of this proposal. The respondents purchased the land in the not unreasonable belief, gleaned from both the promotional material and the discussions with the appellant’s agents, that a tranquil lifestyle in pastoral surroundings would be afforded by purchasing Lot 1 of Stage 3 of the development.
[47] This cause of action is advanced by the respondents as an alternative basis for the analysis of the disclaimers and exclusion clauses in the relevant documents and whether they afford the appellant with a defence to this claim. It is clear that the appellant cannot contract out of its obligations under the FT Act.[20] In the same case, this Court confirmed that the presence of disclaimers and exclusion clauses is relevant to the s 9 analysis. The principles to be applied were described as follows:[21]
[62] Drafters have attempted to circumvent the restriction on contracting out through various mechanisms. For example, there may be a requirement that parties take their own independent advice; or a clause which states that the parties (or one of them) have entered into the transaction on the basis of their own judgement and not on the basis of anything said or done by the other; or an “entire agreement” clause; or a clause which states that any information that one party has provided to the other was supplied in good faith on the basis of information provided by an identified third party.
[63] While such mechanisms are not determinative, it has been accepted that they are relevant to the s 9 analysis. For example, in Kewside Pty Ltd v Warman International Ltd (1990) ATPR (Digest) 46-059 (FCA), French J said (at 53,222):
A disclaimer or exclusion clause will affect liability for misleading or deceptive conduct only if it deprives the conduct of that quality or breaks the causal connection between conduct and loss. Whether it has that effect in a given case is a question of evidence and not a question of law.
See also Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [50]–[51] (HCA). But a disclaimer or similar clause may be overwhelmed by oral assurances or other conduct – see Phyllis Gale Ltd v Ellicott (1997) 8 TCLR 57 at 65–66 (HC) and Cornfields at [41].
[48] We are satisfied that in this case it is impermissible to give weight to the disclaimers in the promotional material and the exclusion clauses for the following reasons. First, there was significant information asymmetry between the respondent and the appellant. In response to specific questions about proposals that might impact on the feature of the development that was important to them, the respondents were plainly misled. Second, this was a case of either deliberate or negligent misrepresentation. The appellant knew the facts about the Transit proposals in March 2007. The appellant itself did not tell the respondents before they became committed under the agreement for sale and purchase. Moreover, as already noted, the appellant either deliberately chose not to tell the agents (despite knowing that they would be engaging with potential purchasers who lived overseas) or if they did tell, the agents must be stuck with their conduct in not passing it on to the respondents. Third, the misleading and deceptive conduct occurred before the respondents signed the option or the agreement for sale and purchase. Fourth, we consider that the disclaimers and exclusion clauses were overcome by the oral assurances and the silence of the agents on the question of possible proposals. In this case the disclaimers and exclusion clauses were not such as to deprive the conduct of the quality required by the FT Act.
[49] The final question under the second cause of action is the availability of relief under s 43 of the FT Act. This requires proof that the respondents have suffered, or are likely to suffer, loss or damage by the conduct of the appellant. Mr Lester submits that on the present state of the evidence the respondents have failed to establish the likelihood of loss or damage. Further, even if loss or damage were to be established, Mr Lester submits relief should not be granted because there was a lack of proportionality between the loss and damage (particularly given the present uncertain status of the bypass proposals) and the remedy of cancellation. However, because we are satisfied that the orders made by the Judge could properly be made under the Contractual Remedies Act, we do not find it necessary to make conclusive findings on the question of relief under s 43 of the FT Act, particularly as this point was not expressly dealt with by the Judge.
Result
[50] Despite the comprehensive and thoughtful arguments advanced by Mr Lester, the appellant’s submissions cannot succeed. We agree that this was an appropriate case to be determined by summary judgment, given the factual circumstances including the uncontradicted evidence from the respondents on key aspects of essentiality of the representations and reliance. The appellant cannot avoid liability under the Contractual Remedies Act by virtue of the disclaimers or the exclusion clauses.
[51] The orders made by the Judge at [69] were appropriately made. The appeal is accordingly dismissed.
[52] The respondents are entitled to costs for a standard appeal on a band A basis plus the usual disbursements. We certify for second counsel.
Solicitors:
Berry & Co, Oamaru for Appellant
Corcoran
French, Christchurch for Respondents
[1] Draper v
Pegasus Town Ltd HC Christchurch CIV-2008-009-3832, 17 February
2010.
[2] At
[69].
[3] At
[68].
[4] Under
r 33 of the Court of Appeal (Civil) Rules
2005.
[5] Including
the discussion and findings at [25], [26], [58], [66] and
[68].
[6] For
example, the powers contained in s 43(2)(a) to (c) of the FT
Act.
[7] At
[69].
[8] At
[27].
[9] At
[63].
[10] At
[54].
[11] At
[58]–[62].
[12]
At [63].
[13] Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 90, [2010] 3 NZLR 805.
[14] At
[24]–[25].
[15]
At [24].
[16]
WaikatoLink Ltd v Comvita New Zealand Ltd (2010) 12 TCLR 808
(HC).
[17] At
[58].
[18] At
[4].
[19] AMP
Finance NZ Ltd v Heaven (1997) 8 TCLR 144
(CA).
[20]
David v TFAC Ltd [2009] NZCA 44, [2009] 3 NZLR 239 at
[60].
[21] At
[62]–[63].
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