Plowman v Franklin District Council HC Auckland CIV 2004-404-003044 [2009] NZHC 2634; [2010] 1 NZLR 537 (26 August 2009)

Last Updated: 23 January 2018

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV 2004-404-003044}

BETWEEN KENNETH NORMAN PLOWMAN Plaintiff

AND FRANKLIN DISTRICT COUNCIL Defendant

Hearing: 11-12 March and 6-8 July 2009

Appearances: K Johnston and C Jurgeleit (on 6-8 July 2009) for the Plaintiff

R Gapes and G Palmer for the Defendant

Judgment: 26 August 2009

_{(RESERVED) JUDGMENT OF ANDREWS J}

This judgment is delivered by me on 26 August 2009 at 4:30pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Counsel:

K Johnston, PO Box 5058, Wellington 6040

C R Jurgeleit, PO Box 5488, Lambton Quay, Wellington 6145

Solicitors:

_{Simpson Grierson, Private Bag 92518, Wellesley Street, Auckland 1141}

PLOWMAN V FRANKLIN DISTRICT COUNCIL HC AK CIV 2004-404-003044 [26 August 2009]

Introduction

[1] The issue in this proceeding is whether the plaintiff and the defendant entered into a contract in which the plaintiff agreed to sell, and the defendant agreed to buy, the plaintiff’s land.

Background

[2] In November 2006 Mr Alan Wallace, Manager: Network Infrastructure of the Franklin District Council (FDC), reported to the Council as to progress on planning and protecting a corridor for future construction of the Pukekohe Eastern Arterial, linking Pukekohe East Road and Manukau Road.

[3] The report listed six properties that were affected by the proposed route and noted that the Council needed to start the process of acquiring those properties to protect a road corridor for the future. It was recommended that $4,000,000 be allocated to the acquisition process. The report noted that it was considered unlikely that that sum would be sufficient to purchase all the properties, but would enable the process to commence.

[4] At its meeting on 27 November 2006 the Council directed that funding of

$4,000,000 be brought forward to provide $2,000,000 of each of the 2006/2007 and

2007/2008 years to commence the land acquisition process associated with the Pukekohe Eastern Arterial. Further, the Council delegated authority to the Chief Executive Officer of the FDC to start the acquisition process.

[5] The property owned by the plaintiff, Mr Plowman, at 124 Station Road, Pukekohe was one of the six affected properties listed in Mr Wallace’s report.

[6] Mr and Mrs Plowman had met with Mr Wallace and Ms Dawn Inglis (Unit Manager, Transportation) on 5 September 2006. Mr Plowman had heard rumours that his property would be affected by the Pukekohe Eastern Arterial project. Mr Plowman said in evidence that at that meeting agreement was reached “in principle” between himself and Mr Wallace and Ms Inglis, on behalf of the FDC, that the FDC would purchase his property at its market value. He further said that it was agreed

that the market value would be determined objectively by each of the parties obtaining and exchanging valuations from registered valuers, along the lines of the Public Works Act 1981.

[7] Mr Wallace and Ms Inglis both said in evidence that no agreement was reached at the meeting on 5 September 2006. They said that there was a discussion as to the possible acquisition of the property, and that they indicated that any acquisition would be by a process of negotiation rather than compulsory acquisition.

[8] In December 2006 the FDC instructed Marsh & Irwin Limited, Registered

Valuers, to provide a valuation of the property. The letter of instructions dated 11

December 2006 (sent by the FDC’s Property Manager, Mr Ward) said:

Council has motioned to acquire the property under the Public Works Act

1981, for the purposes of the ‘Eastern Corridor’ road.

In order to further proceed with the acquisition, would you please provide a valuation for acquisition purposes.

[9] Marsh & Irwin provided their valuation of the current market value of Mr Plowman’s property on 28 February 2007, at $1.313m inclusive of GST (if any). The valuation was sent to Mr Plowman on 8 March 2007.

[10] There were then further discussions between Mr Plowman and FDC officers. Mr Plowman took exception to the Marsh & Irwin valuation on the basis that it was a “cut and paste” of a valuation prepared some two years earlier for his sister, when he was in the process of acquiring the property from their father. Mr Plowman also said in evidence that he objected to the valuation on the basis that it did not take into account possible zoning changes that would affect his property. Mr Plowman said that it was agreed that the FDC would not rely on the 28 February 2007 Marsh & Irwin valuation.

[11] On 22 August 2007 Mr Plowman wrote to the FDC, as follows:

LAND PURCHASE – PUKEKOHE EASTERN ARTERIAL – 124

Station Rd

In September 2006 I met with Mr Wallace and Ms Inglis to discuss the implications for me – in terms of my property of the then – newly revised and resurrected Eastern Arterial Bypass proposal.

As I understood it – the bypass would inevitably traverse my property. Also, although in previous discussions there was some hope it would not require all my land, the outcome of further studies was that this was not the case and FDC now wanted to purchase all my land.

It was agreed in principal [sic] that Franklin District Council would purchase my property and the valuation would take into account the District Growth Strategy – which was then supposed to be released shortly. The release of the District Growth Strategy only occurred however nearly one year later.

Would you please confirm in writing not later than close of business Friday the 31st of August 2007

1. Franklin District Council still wants to buy my property located at 124 Station Rd Pukekohe Lot 2 DP 110158

Area 4.257(Ha) VAL NO38706/004.10

2. Franklin District Council is prepared to pay the market price for the land

3. Franklin District Council is able to complete the purchase of my property within two months – this is by close of business Friday 28th of October 2007

Yours truly, Ken Plowman

[12] FDC’s response was dated 24 August 2007 and was as follows:

RE: LAND PURCHASE – 124 STATION ROAD, PUKEKOHE Thank you for your correspondence dated 22 August 2007.

In answer to your questions I can confirm as follows:

1. Franklin District Council wishes to purchase your property located at 124 Station Road for the purpose of constructing the Pukekohe Eastern Arterial at a future date.

2. Franklin District Council is prepared to pay the market value for the land. As is the usual manner market value will be established through the commissioning of a valuation by a registered valuer. I understand that a valuation report has been obtained and a copy supplied to you but that you were not happy with the report. A

further valuation is being undertaken and is expected to be available within 14 days.

3. The timeframe to complete the purchase is clearly dependent on agreement being reached with you as to the value of your property. As such clearly we can not commit to the purchase being completed within the 2 month timeframe you have requested as this is not

solely within our control. However as previously stated it is our desire to purchase your property and to reach

agreement at an amount that reflects the market value of

your property.

I appreciate that this matter has been underway for a while but I also understand that you have requested the matter be put on hold pending the completion of the District growth Strategy. As this is now completed we look forward to concluding this matter to our mutual satisfaction.

Yours faithfully

Ian Alexander

Acting Chief Executive Officer

[13] Mr Plowman obtained a valuation from Seagar & Partners, Registered

Valuers. Their valuation was dated 6 September 2007 and gave a market value of

$3.6m, exclusive of GST (if any).

[14] The significantly higher value from earlier valuations of the property is explained in the valuation as being the result of the release by the FDC of the Franklin District Growth Strategy document, a “non-statutory planning document”. The valuation recorded that the Growth Strategy document showed Council’s intent as to how and where Pukekohe would grow. It further noted that it was intended that the zoning of Mr Plowman’s property was to be changed from “Rural” to “Residential” between 2007 and 2014, and that land prices had increased in anticipation of a zoning change.

[15] Mr Plowman forwarded that valuation to the FDC on 17 September 2007. The FDC acknowledged receipt of the valuation by letter dated 20 September 2007, noting that it expected that its own “new valuation” would be delivered “early next week”, and that the FDC would be in contact “very soon thereafter”.

[16] Council officers expressed concern at the Seagar & Partners valuation, on the basis that the zoning had not, in fact, been changed, there was uncertainty as to when the zoning would change, and the need for other land to be available. These concerns were not passed on to Mr Plowman.

[17] A further valuation was provided to the FDC by Marsh & Irwin on 4 October

2007, giving a current market value of $1.503m (GST inclusive). It is recorded in the valuation that it was “difficult to add any significant premium onto the value of the property” for its having recently been identified as being within a “future growth area within the Franklin District Growth Strategy Plan”. This was because any future subdivision was “in the distant future”. The valuation also recorded that the requirements of the Pukekohe Eastern Arterial route had been ignored, as that was “not absolutely set in stone”. That valuation was not provided to Mr Plowman, nor was he advised of its existence.

[18] There were further discussions between Mr Plowman and FDC officers. On

22 November 2007 Mr Alexander wrote to Mr Plowman on behalf of the FDC, recording that as the Council had never purported to acquire the land under any statute, any party could choose to withdraw at any time. The letter further recorded that the Council was interested in continuing to discuss a purchase of the property with Mr Plowman, but would not consider purchasing “at an amount greater than fair market value”.

[19] Mr Plowman took exception to this letter. He said in evidence that the letter was the first indication he had had that the Council did not consider itself to be bound into the purchase of his property. He responded to Mr Alexander’s letter in a letter dated 27 November 2007, addressed to the Chief Executive Officer of the FDC, Ms Davis. He said that the Council’s position “from the start” had been that it would purchase his land at fair market value, to be established by professional valuers. Accordingly, he considered the comment that the Council would not consider purchasing “at an amount greater than fair market value” to be “inappropriate and rude”.

[20] Mr Plowman wrote to Ms Davis again on 3 December 2007, expressing concern at the FDC’s delay in obtaining a valuation. He said that as the valuation was not available, he expected the FDC to “commence negotiations forthwith for the purchase of my property on the basis of the Seager & Partners valuation”. He asked the FDC confirm acceptance of his position by 7 December 2007. He went on to say:

If Council will not accept this position I assume that it is breaking off negotiations for the purchase of my property. Please confirm this in writing by the same schedule, and also that Council will not interfere with the sale of my property to other interested parties.

[21] Instructions for a valuation were given by the FDC to Telfer Young

(Auckland) Limited on 13 February 2008. Their valuation was provided on 22

February 2008 and assessed the current market value at $3.275m (GST inclusive). The valuation noted the release of the Franklin District Growth Strategy and the anticipated zoning change, and the siting of the Pukekohe Eastern Arterial.

[22] Discussions and meetings continued between Mr Plowman and the FDC. From early 2008 Mr Plowman was assisted by Mr Peter Jackson, a property advisor. Mr Jackson is also a former registered valuer. In a letter dated 12 March 2008 Mr Jackson noted that the report to the Council in November 2006 had stated that it was unlikely that the $4m committed would be sufficient for all the purchases identified, and suggested that options such as delayed settlement, vendor finance or land swap be investigated.

[23] Council officers briefed Ms Davis in a memorandum dated 17 March 2008. The officers set out their view that the Telfer Young valuation had significantly overstated the value of Mr Plowman’s property by “a lack of understanding of the effect and meaning of the Franklin District Growth Strategy”, leading to residential properties being used as comparators. That led to there being “a gap of at least $1m in [FDC’s] perception of value and Mr Plowman’s perception of value” which could not be negotiated through or resolved. The officers recommended that the Council not purchase the property “at this stage”.

[24] Mr Alexander responded to Mr Jackson on behalf of the FDC on 19 March

2008. His letter included the following statements:

It has now become apparent that given the time pressures and financial constraints on Council we are unable, at this point in time, to consider an outright purchase of the Plowman property. ...

... Unfortunately at this point in time, given the uncertainty in the availability of funding and the timeline for construction of the more eastern parts of the [Pukekohe Eastern Arterial], Council is not in a position to commit an outright purchase of 124 Station Road or a purchase using any other purchase options.

[25] Mr Jackson and Mr Plowman then sought confirmation from the FDC as to Council’s intentions regarding the property. Mr Jackson was told by the Council’s solicitor on 20 March 2008:

I can confirm that at this point in time the only document that would indicated [sic] the future for the property is the Franklin District Growth Strategy. ... I can also confirm that at present there are no designations on the Plowman property.

[26] Mr Plowman had sought confirmation that “there is no intention that in the future my property will be required for roading by the Council.” He received a somewhat equivocal response in a letter from Ms Davis, dated 26 March 2008. Ms Davis said:

... As you have been advised, due to the limited resources available to Council, it is not presently in a position to purchase your property at the price you have indicated. However, if the price was close to the original Marsh and Irwin valuation, we would take a different view.

[27] As to Mr Plowman’s specific question regarding Council’s intentions, she said:

To clarify, this does not mean that at some future date Council will not be interested in purchasing the land for roading or indeed for other purposes. We currently have no structure plan, designation, or other formal town planning document showing that your land will be required for roading purposes. Therefore, you are free to deal with the land in the open market without reference to Council in any way.

[28] On 2 April 2008 the FDC posted an article on Council’s website headed

“Pukekohe East Arterial” which included the statement:

The Pukekohe Eastern Arterial between Crosbie Road and Manukau Road will be undertaken within the next three to five years, with the completion of the remaining route anticipated to be required before 2021.

[29] The article was accompanied by a map which shows the route of the

Pukekohe Eastern Arterial passing through the whole of the Plowman property.

The issue

[30] Mr Plowman’s amended statement of claim (dated 10 December 2008)

pleaded as a first cause of action that an agreement was reached at the September

2006 meeting and/or in the correspondence of 22 and 24 August 2007 under which the FDC was to buy his property. The second cause of action alleged that the FDC was estopped from withdrawing from the process of acquiring the property. A third cause of action, based on s 9 of the Fair Trading Act 1986, was abandoned.

[31] At the hearing, Mr Johnston, counsel for Mr Plowman acknowledged that Mr Plowman’s case stands or falls on contract principles, and nothing would be achieved by restating it on alternative bases. Accordingly, the issue for determination is whether Mr Plowman and the FDC entered into a contract for the sale and purchase of his property.

[32] The background facts are not in dispute. There is no dispute that Mr Wallace and Mr Inglis met Mr and Mrs Plowman in September 2006 and discussed the implication for Mr Plowman’s property of the Pukekohe Eastern Arterial. Mr and Mrs Plowman were shown an “indicative” route for the Eastern Arterial that crossed their land. They were not shown any other route.

[33] There is also no dispute that Mr Wallace reported on the Pukekohe Eastern Arterial to a Council meeting on 28 November 2006. Mr Plowman’s property was identified as one of six affected properties for which approval was sought to commence the land acquisition process, and was identified as one that it was “highly desirable” that the Council acquire. Further, there is no dispute that at that meeting, the Council resolved to allocate funding, and to delegate authority to the Chief Executive of the FDC to commence the land acquisition process.

[34] It is also not disputed that there was an exchange of letters between Mr Plowman and Mr Alexander (on behalf of the FDC) on 22 and 24 August 2007, that valuations were obtained by the FDC and Mr Plowman, and that there were subsequent exchanges of correspondence.

[35] However, the parties dispute whether Mr Plowman and the FDC reached a binding agreement for Mr Plowman to sell his property and for the FDC to purchase it. Both counsel drew on contemporaneous documents as providing objective evidence in support of their respective clients’ contentions.

[36] Mr Johnston submitted that an oral agreement was reached in September

2006 that Mr Plowman would sell and the FDC would buy the property, at its market value, which was to be determined by valuation. He submitted that it could be implied that the sale and purchase was to be completed within a reasonable time after the market value had been established. Mr Johnston submitted, further, that the agreement was expressed in writing in the exchange of correspondence on 22 and 24

August 2007, thus satisfying the requirements of s 2(2) of the Contracts Enforcement Act 1956 (which continues to apply in this case by reason of s 367 of the Property Law Act 2007).

[37] On behalf of the FDC Mr Gapes submitted that no binding agreement had been reached: there was no intention to be contractually bound, no certainty as to the terms of the alleged contract, and no (or insufficient) compliance with the Contracts Enforcement Act.

[38] In deciding whether a binding agreement was reached it is appropriate to turn, as counsel did in their comprehensive and helpful submissions, to consider whether the essential elements of a contract are present.

Was there an intention to be bound?

[39] It is a prerequisite for a contract that, at the time that it is said to have been made, the parties intended to be bound in a contract. This is made clear in the judgment of Blanchard J for the majority of the Court of Appeal in Fletcher

Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd¹. At [53] His

Honour said:

The prerequisites to formation of a contract are therefore:

(a) An intention to be immediately bound (at the point when the bargain is said to have been agreed); and

(b) An agreement, express or found by implication, or the means of achieving an agreement (eg an arbitration clause), on every term which;

(i) was legally essentially to the formation of such a bargain; or

(ii) was regarded by the parties themselves as essential to their particular bargain.

...

[40] With respect to deciding whether the parties intended to be immediately bound His Honour said, at [54]:

Whether the parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively. In considering whether the negotiating parties have actually formed a contract, it is permissible to look beyond the words of their “agreement” to the background circumstances from which it arose – the matrix of facts. This can include statements the parties made orally or in writing in the course of their negotiations and drafts of the intended contractual document.

[41] In his dissenting judgment (in which he would have upheld the trial Judge’s finding that the parties intended to be bound, whereas the majority allowed an appeal against that finding) Thomas J agreed at [127] that “The first question is whether the parties intended to be bound at the time of their agreement”. His Honour also agreed, at [140]-[142] that the question whether parties intended to be bound is not determined subjectively, as a matter of credibility of the evidence of the opposing parties, but by reference to extrinsic evidence.

[42] The agreement to be bound must, of course, be mutual. There will be no binding agreement if it is found that one party agreed to be bound but the other did not.

¹ [2001] NZCA 289; [2002] 2 NZLR 433.

[43] Mr Johnston submitted that a distinction is to be drawn between two classes of case: “domestic” (between family members or close friends) and “commercial” (arms length). In the former, he submitted, the law tends to presume that the parties did not intend to create legal relations (that is, intend to be bound) unless the evidence indicates otherwise. In the case of the “commercial” class, he submitted, the presumption is the reverse, such that it will normally be presumed that the parties

did intend to be bound.² He submitted that the present case falls into the

“commercial” class, so that the FDC is required to rebut the presumption that at the relevant time, that is September 2006, the parties intended to create a binding agreement.

[44] Mr Gapes submitted that there is no such presumption. He referred to the judgment of Blanchard J in Fletcher Challenge Energy at [58]:

The Court has an entirely neutral approach when determining whether the parties intended to enter into a contract.

[45] It can be noted that the authors of Law of Contract in New Zealand state at

5.2 that in both the “domestic” and “commercial” classes, the intention of the parties is to be objectively ascertained.³ They also suggest at 5.4 that in the “commercial” class the same result would be reached, whether that be by a presumption from the fact of making a commercial agreement, or after an objective facts-based investigation.

[46] In this case it is, in my view, appropriate to answer the question whether the FDC and Mr Plowman intended to create a binding agreement by reference to the objective evidence of what was said and done at the time (September 2006) and subsequently.

[47] It is, first, relevant to note that no contemporaneous written record, signed by both parties, was made of any agreement reached in September 2006, nor did either party make any written record of having reached an agreement with the other, or of having had discussions with the other, leading to an “agreement in principle”. That

² _{Citing Law of Contract in New Zealand, Burrows Finn & Todd 3 ed (2007) at 5.1-5.4.}

³ Citing Fleming v Beevers [1994] 1 NZLR 3785 at 390.

factor may count against the parties’ having intended, in September 2006, to enter into a binding agreement.

[48] Mr Johnston referred to the following matters:

a) In November 2006, in his report to the Council, Mr Wallace sought Council’s approval to “commence the land acquisition process” and approval was given to the Chief Executive in those terms at Council’s meeting on 28 November 2006. Mr Johnston submitted that this gave the Chief Executive authority to purchase Mr Plowman’s property.

b) When the FDC’s Property Manager, Mr Ward, commissioned a valuation from Marsh & Irwin he said in his letter of 11 December

2006:

Council has motioned to acquire [Mr Plowman’s] property under the Public Works Act 1981, for the purposes of the proposed ‘Eastern Corridor’ road.

Mr Johnston submitted that this letter (although mis-stating the position somewhat in referring to the Public Works Act) made it clear that the FDC officers regarded the FDC as being bound to purchase the property.

c) The exchange of letters between Mr Plowman and Mr Alexander on

22 and 24 August 2007 recorded the parties’ commitments:

i) Mr Plowman said “it was agreed in principal [sic] that [FDC] would purchase my property” and asked for confirmation that “[FDC] still wants to buy my property”.

ii) Mr Alexander said in response “[FDC] wishes to purchase your property”, “[FDC] is prepared the pay the market value of the land ... further valuation is being undertaken”, “it is our desire to purchase your property and to reach agreement at an amount that reflects the market value of the property”.

Mr Johnston submitted that there was nothing in Mr Alexander’s letter that refuted the existence of an agreement to buy and sell.

d) Mr Plowman’s correspondence after August 2007 continued to assert the existence of an agreement, and that was not challenged by the FDC until after the FDC had received the valuation commissioned by Mr Plowman, in November 2007. Mr Johnston submitted that right up until Mr Alexander’s letter of 22 November 2007 both parties proceeded as if there had been a exchange of commitments. It was only then that Mr Alexander said “Council has never purported to acquire the land under any statute, and therefore each party can choose to withdraw from the discussions at any time”.

[49] Accordingly, Mr Johnston submitted, the extrinsic evidence showed that the

FDC and Mr Plowman intended to enter into a binding agreement in September

2006, and that they were agreed as to the key terms of the contract as to the parties, the subject matter of the contract, and the mechanism for determining consideration.

[50] Mr Gapes submitted that the extrinsic evidence showed that the parties did not in September 2006 (or subsequently) intend to be bound:

a) Mr Gapes first submitted that it could not be said that as at September

2006 Mr Wallace and Ms Inglis had any authority to enter into a contract on behalf of the FDC. No authority was given, of any description, until the Council’s meeting of 28 November 2006. Even then, the authority was only to “commence the process of acquisition”. Accordingly, Mr Gapes submitted that it is unlikely that the FDC would have intended to be bound as at September 2006, because no one had any authority to bind the Council. He submitted that this supported the FDC’s contention that the discussions in September 2006 were preliminary, only, and the outcome of that discussion was only that the FDC would get a valuation of the property.

b) Mr Gapes submitted that the letters of 22 and 24 August 2007 only noted the Council’s interest. He pointed to the wording of Mr Alexander’s letter: “Council is still interested in purchasing ...” He pointed out that nowhere in the letter is it said, expressly, that the Council had agreed to purchase Mr Plowman’s property.

c) Further, Mr Gapes submitted that the subsequent exchanges between Mr Plowman and the Council confirm that neither party intended to be bound as at September 2006. He noted that in Mr Plowman’s letter of

27 November 2007 to Ms Davis (in response to Mr Alexander’s letter of 22 November) Mr Plowman said:

Please make the appropriate FDC staff aware that I am now under no pressure to sell my property as this whole process has taken so long that I have had to make arrangements to stay on in New Zealand and of course I can always sell to another party if no agreement can be reached with Council.

However I did agree to give Council the opportunity to buy my property now, which is of huge benefit to Council. ...

I will seriously consider terminating the process if I am subjected to any more uninformed bluster from FDC staff regarding the value of my property. ...

Finally I think we should agree a date by which Council will have in place an agreement to buy my property or at which Council will withdraw the plan to have a road traversing it.

Mr Gapes submitted that this letter, and subsequent correspondence to a similar effect (for example Mr Plowman’s letter of 3 December

2007), reflects the common position of the parties, that neither considered itself to be party to a binding agreement, well after September 2006.

d) Mr Gapes also referred to correspondence between the Council and Mr Jackson. Mr Jackson also attended a meeting with Council officers in March 2008. Mr Gapes noted that there was no assertion, either in Mr Jackson’s letters, or in the course of the meeting, that there was a binding agreement in existence.

e) Mr Gapes also referred to the fact that on 27 March 2008 the Council expressly resolved to give the Chief Executive delegated authority to enter into “the necessary arrangements to complete the required land purchases associated with Stage 1 of the Pukekohe Eastern Arterial project”. There was no such resolution in respect of Stage 2, which includes Mr Plowman’s land.

f) Mr Gapes also submitted that the first occasion on which it was asserted that there was a concluded agreement between the FDC and Mr Plowman was in a letter from Mr Plowman’s solicitors to the Council, dated 1 April 2008. He submitted that despite all of the exchanges between Mr Plowman and the Council this was the first occasion on which it was claimed that there was a binding agreement to purchase his land.

Mr Gapes noted that in his oral evidence at the hearing, Mr Plowman asserted that an agreement “in principle” had been reached, and that he was aware that Mr Alexander took a different view. Mr Gapes also submitted that even in the letter from Mr Plowman’s solicitors, the events prior to August 2007 were characterised as “preliminary discussions” and it was not until Mr Plowman’s amended statement of claim was filed on 10 December 2008 that there was any claim that an oral agreement had in fact been made in September 2006. Mr Gapes

referred to the Court of Appeal’s judgment in Verrissimo v Walker⁴ in

which the Court referred, at [41], to a similar omission in a solicitor’s letter as being a “significant pointer” against the existence of a contract.

[51] Accordingly, Mr Gapes submitted, all of the matters referred to above are inconsistent with the FDC and Mr Plowman having intended to, or reached, a binding agreement as at September 2006 on the terms alleged by Mr Plowman, or indeed on any other terms. He submitted that the matters are consistent with the

parties being in the early stages of negotiations, and with the obtaining of valuations as being one step in that process.

[52] Having considered all of the matters referred to me, I have concluded that, as at September 2006, Mr Plowman and the FDC did not intend to, and did not in fact, enter into a binding agreement for the sale and purchase of Mr Plowman’s property. I am satisfied that when Mr Wallace and Ms Inglis spoke with Mr Plowman in September 2006 they did so only for the purpose of preliminary discussions as to the implications of the proposed Eastern Arterial. They did not intend to enter into a binding agreement.

[53] None of the subsequent correspondence or other dealings shows that, as at September 2006, an oral agreement was reached. Significantly, Mr Plowman referred in his letter of 22 August 2007 to no more than an “agreement in principle”. I accept Mr Gapes’ submission that an agreement “in principle” is not a legally binding agreement. That is clear from the judgment of the Court of Appeal in

Oracle New Zealand Limited v Price Waterhouse Administration Limited⁵ where

McKay J said at 7:

[The phrase “in principle”] is commonly used to distinguish a non binding understanding from a binding commitment. It is an indication that there is no serious objection or obstacle, and that the party is willing to enter into a contract once details are settled. ... there is no contract until all issues have been settled. To regard an agreement in principal as binding would be to deprive the qualifying words “in principle” of any meaning at all.

[54] Mr Plowman’s letter of 22 August 2007 cannot be taken as being confirmation of an agreement reached in September the previous year. Mr Alexander’s response of 24 August 2007, whilst confirming the FDC’s interest in purchasing the property, makes it clear that the parties have yet to reach a final agreement.

[55] On the basis of the above finding Mr Plowman’s claim must fail. However, in case it should be necessary for the matter to be considered further, I set out my findings on two further matters covered in counsels’ submissions. These are questions of whether it should be inferred that there was no binding contract until

such time as a written Agreement for Sale and Purchase was signed by the parties, and of actual or ostensible authority.

Inference regarding Agreements for Sale and Purchase

[56] Mr Gapes submitted that it has long been accepted customary practice in New Zealand that potential vendors and purchasers of land intend only to be bound when each has signed a written agreement of sale and purchase (“ASP”) – now almost universally a standard form agreement. Mr Johnston submitted that there was no reliable evidence before the Court in this case that either party considered that there would be no binding agreement between them until an ASP was signed. Further, he submitted that there was no reason for a formal ASP in this case.

[57] Mr Gapes drew support for his submission that in the present case, the FDC intended that there would be no contract until an ASP was signed by both parties, from Mr Plowman’s letter to the Chief Executive of the FDC on 27 November 2007:

Despite my view Council was insistent that the procedure would be for a Valuer representing me and one representing the Council to each value the property and that those valuations would establish the perimeters [sic] of the potential settlement to be finalised by our respect lawyers ...

and

... we should agree a date by which Council will have in place an agreement to buy my property ...

[Emphasis as per Mr Gapes’ submissions.]

[58] Mr Gapes referred to the judgment of the Court of Appeal in Carruthers v Whittaker⁶ in which the Court held that there was no binding contract between the parties as they had not intended to be bound until they signed a written agreement. At 671 Richmond J said:

It is established by the evidence to which I have earlier referred that at the time when the parties instructed their respective solicitors they all had in mind only one form of contract which would govern the sale and purchase of the farm, namely a formal agreement in writing to be prepared and approved by the solicitors. When parties in negotiation for the sale and purchase of

property act in this way then the ordinary inference from their conduct is that they have in mind and intend to contract by a document which each will be required to sign. It is unreasonable to suppose that either party would contemplate that anything short of the signing of the document would bring finality to their negotiations.

His Honour went on to say, at 672:

... the parties intended to contract in accordance with the common practice, which in New Zealand is to obtain the signatures of both vendor and purchaser to both copies of the agreement, one copy being of course for the vendor and the other for the purchaser.

[59] Mr Gapes noted that the approach taken in Carruthers had been affirmed by the Court of Appeal in Shell Oil New Zealand Limited v Wordcom Investments Limited⁷ and in Verrissimo v Walker. Mr Gapes submitted that it is “well settled” that it will be inferred that there is no contract between potential vendors and purchasers of land until both parties have signed a written ASP, unless the evidence demonstrates the contrary.

[60] Mr Johnston submitted that the present case is not comparable to the cases relied on by Mr Gapes. He submitted that in those cases there was evidence that the parties did not intend to be bound until such time as they signed an ASP. Here, he submitted, there was no such evidence. Further, in the light of the circumstances of the FDC’s intention to purchase Mr Plowman’s land for the Eastern Arterial (which could be achieved, if necessary, by compulsory acquisition) there was no need for a formal ASP and the contents of the standard form ASP (in particular as to warranties) were inappropriate.

[61] Mr Johnston referred to the judgment of Fisher J in Dean & Ors v Auckland

City Council⁸ in which His Honour set out the general effect of Whittaker at 26-27:

First, whether parties intended to be contractually bound by their informal communications without the further execution of a formal document is a question of fact to be determined in each case. Secondly, having regard to current usages in New Zealand one would not expect that ordinary persons negotiating over the sale of land would normally intend to be bound before the execution of a formal agreement for sale and purchase. Thirdly, what might loosely be described as a rebuttable presumption to that effect is

⁷ _{[1992] NZLR 129.}

⁸ HC AK CP 663/83, 15 June 1990.

reinforced if, ... the parties have already wholly or partly conducted their negotiations in the form of an exchange of formal agreement for sale and purchase documents.

[62] However, in the case before him, which was not a “conventional sale on the open market between strangers” but rather arose in the context of the Public Works Act, His Honour held that the “rebuttable presumption” did not apply, and the formal document contemplated was “intended to do no more than record in a more reliable and detailed form a transaction which would by that stage be already irrevocably agreed upon.”

[63] On either approach, it is clearly necessary to consider the facts of the individual case. In cases such as Whittaker the evidence was that the parties clearly intended that a formal contract was to be executed before they were bound. In Dean the evidence was that the Council was proceeding under the Public Works Act, the Council being required to offer the land involved back to former owners, following an earlier compulsory acquisition. The Council had, by resolution, delegated authority to a Council officer to sell the property at a specific price.

[64] In the present case there is no “clear” evidence that the parties intended any agreement to be subject to the execution of a formal ASP. But neither can it be said that this case is analogous to Dean where the Council was following the Public Works Act procedure. The Court is left in the position of considering the particular circumstances in order to determine whether, and if so when, the parties intended to be bound. That issue has already been considered.

Authority

[65] Mr Gapes submitted that even if there were a concluded agreement between the FDC and Mr Plowman, it is unenforceable because the Council officers involved did not have either actual or ostensible authority to bind the Council. Mr Johnston submitted that the evidence showed that they had both actual and ostensible authority.

Actual authority

[66] Mr Johnston submitted that the Council’s resolution of 28 November 2006 gave the Chief Executive Officer of the FDC specific authority to purchase Mr Plowman’s property.

[67] The first point to note in relation to that submission is that the resolution was passed some two months after September 2006 when, Mr Johnston submitted, the FDC and Mr Plowman had reached a binding agreement. The resolution is not expressed to have any retrospective effect. Mr Wallace’s report to the Council, considered at its meeting on 28 November 2006, made no mention of an agreement having been reached with Mr Plowman. It cannot be concluded that the Council understood that it was ratifying an agreement already entered into.

[68] Secondly, Mr Johnston’s submission that the resolution gave specific authority for the purchase of Mr Plowman’s property cannot stand in the face of the wording of the resolution, which was “to commence the land acquisition process”. I accept Mr Gapes’ submission that, in its terms, the resolution did not authorise a specific purchase. It was limited to “commencing” the process.

[69] It is apparent from the Minutes of Council meetings produced at the hearing that at no time did the Council ever pass a resolution specifically authorising the purchase of Mr Plowman’s land. By contrast, the Council did resolve to give delegated authority to the Chief Executive to purchase a specified property, at a specified price, on 20 December 2007 and, on 27 March 2008, gave the Chief Executive delegated authority to enter into agreements to complete land purchases required for Stage 1 of the Eastern Arterial. As noted earlier, Mr Plowman’s land was not within “Stage 1”.

[70] Accordingly, it cannot be concluded that the FDC officers had actual authority to enter into an agreement to buy Mr Plowman’s land, either as at September 2006, or at any other time.

Ostensible authority

[71] In this case “ostensible authority” requires there to have been a representation by the principal (the FDC) to the contractor (Mr Plowman) that an agent (an FDC officer) had authority to enter into a contract on behalf of the FDC. The representation can have been by words or conduct, and can have been express or implied from a course of dealing. However, it must be a representation by the principal. Whether a person has ostensible authority, and whether there has been a representation, is judged from the point of view of a reasonable person dealing with

the alleged agent.⁹

[72] Mr Johnston submitted that, at least when he signed the letter of 24 August

2007, Mr Alexander had ostensible authority to bind the Council to a purchase. He submitted that the required representation was to be found in the Minutes of the Council’s meeting of 28 November 2006, which gave the Chief Executive of the Council authority “to commence the land acquisition process”.

[73] However, the point at which the question of ostensible authority must be considered is the same as that at which the question of actual authority was considered. That is September 2006 when, Mr Plowman claimed, he and the FDC entered into an agreement for the sale and purchase of his land. Mr Alexander’s letter of 24 August 2007 was submitted to be confirmation of the earlier agreement, not an independent agreement for sale and purchase.

[74] In relation to the meeting in September 2006, Mr Wallace’s evidence was that he advised Mr Plowman at that meeting that there was no funding for an acquisition in the Council’s budgets, and that the Council would have to approve funding and the acquisition itself. Mr Plowman said that “there was no mention at all of the authority for funding or such things”.

[75] Nothing was put before the Court to support a submission that, as at September 2006, Mr Wallace and Ms Inglis had ostensible authority to bind the Council. In the light of both Mr Wallace’s and Mr Plowman’s evidence on the point,

⁹ See The Law of Contract (fn 2) at 16.4.1 and Laws NZ Agency, para 37-38.

it must be concluded that there are no grounds on which it could be held that a reasonable person in the shoes of Mr Plowman would have considered that Mr Wallace and Ms Inglis had ostensible authority to bind the Council as at that time.

[76] The conclusion must, therefore, be that the FDC officers had neither actual nor ostensible authority to bind the Council.

Result

[77] I am not satisfied that in September 2006 Mr Plowman and the FDC entered into an agreement whereby he would sell and the FDC would buy his property. Accordingly, Mr Plowman is not entitled to the declarations and orders sought, and judgment must be given in favour of the defendant.

[78] Neither counsel made submissions as to costs. My view, subject to any such submissions, is that costs should follow the event. I note that the proceeding was fixed as a Category 2 proceeding at a Case Management Conference before Associate Judge Faire on 23 July 2008. If the parties cannot agree on costs then memoranda should be filed, incorporating an indication as to whether the costs may

_{be determined on the papers.}

Andrews J