Messenger v Goodman HC Auckland CIV-2009-404-3974 [2011] NZHC 1626 (20 October 2011)

Last Updated: 30 March 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2009-404-3974}

BETWEEN JAMES MESSENGER AND JUNE MARY MESSENGER

Plaintiffs

AND JOHN MARTIN GOODMAN AND DEBORAH LEE RATTRAY Defendants

Hearing: 18 - 21 July 2011

Appearances: B M Stewart and P Hall for the Plaintiffs

The Defendants in person

Judgment: 20 October 2011

_{RESERVED JUDGMENT OF PRIESTLEY J}

This judgment was delivered by me on Thursday 20 October 2011 at 11.00 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:...............................

Counsel:

B M Stewart, Simpson Western, Takapuna. Email: [e-mail]. P Hall, Simpson Western, Takapuna. Email: [e-mail]

MESSENGER AND ANOR V GOODMAN AND ANOR HC AK CIV-2009-404-3974 20 October 2011

[1] Mr and Mrs Messenger (the plaintiffs) claim damages from Mr Goodman and Ms Rattray (the defendants) of $2,861,708. The plaintiffs allege that they sustained a financial loss as a result of the defendants breaching their obligations under a contract for the sale and purchase of land.

[2] The plaintiffs were the owners of a valuable coastal property at 29 Muritai Road, Milford. On 1 December 2006 the plaintiffs and defendants signed an agreement for sale and purchase. The agreement was on the 7th edition of the standard form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society. The plaintiffs were to be the vendors of the property and the defendants the purchasers. Various modifications and additions were made to the document before the parties signed it. Such changes lie at the centre of the parties’ dispute.

[3] The parties agreed on a purchase price of $5.995 million. Of that sum,

$2,750,000 was to be paid on 18 December 2006; eight quarterly instalments of

$61,875,000 were to be paid between March 2007 and December 2008; and the outstanding balance of $2.75 million was to be paid on 18 December 2008.

[4] Within a matter of days the parties and their legal advisers manifested disagreement on the fundamental issue of when it was that title would pass to the defendants. As a result, no monies were ever paid. Nor were steps taken by either party to cancel the agreement until 31 March 2009 when, having served a settlement notice on the defendants, the plaintiffs cancelled.

[5] In anticipation of the cancellation, the plaintiffs had resold the property for the lower sum of $4,430,000. The property market had deteriorated during the intervening two and a half years. That loss on the plaintiffs’ resale is the basis of their contract damages claim. If the defendants were indeed in breach of their contractual obligations then they would have no available defence to the plaintiffs’ claim. Whether the defendants were indeed in breach is the central issue of this proceeding.

[6] Under the heading “purchase price” on the first page of the agreement, the sale figure is expressed in handwritten figures (which the parties have initialled) as

$5,995,000. On the next line, also expressed in figures appears, $2,750,000, to be paid on 18 December 2006. The next operative line, again initialled by the parties, states “refer attached option two.” A separate typewritten page of the agreement headed “Option Two” refers to “Final Purchase price to show $5,995,000.00” then lists the various payments referred to in [3] with the first tranche of $2,750,000.00 being paid on 18 December 2006 and the last tranche, being one quarterly instalment of $61,875.00 plus the outstanding balance of $2,750,000.00, to be paid on 18

December 2008.

[7] “Possession date”, which appears on the front page of the agreement, has the handwritten date 18 December 2006.

[8] The General Terms of Sale are standard printed clauses, and include the

definition of “settlement date” in cl 1.1(3):

“Settlement date” means the possession date or such other date as the parties are to perform their obligations under subclause 3.7. Where the day nominated for settlement is not a working day the settlement date shall be the last working day before the day so nominated.

[9] Clause 3.7, to which cl 1.1(3) refers, is another of the standard terms. Clause

3.0 is headed “Possession and Settlement”. The subheading “Settlement” appears

above cls 3.5 – 3.7 which provide:

3.5 The purchaser shall prepare, at the purchaser’s own expense, a memorandum of transfer of the property, executed by the purchaser if necessary. The purchaser shall tender the memorandum of transfer to the vendor or the vendor’s solicitor a reasonable time prior to the settlement date.

3.6 The vendor shall prepare, at the purchaser’s own expense, a statement of apportionments, showing all outgoings and incomings apportioned at the possession date. The vendor shall tender the statement of apportionments to the purchaser or the purchaser’s solicitor a reasonable time prior to the settlement date.

3.7 On the settlement date:

(1) The purchaser shall pay or satisfy the balance of the purchase price, interest and other moneys, if any, due as provided in this agreement (credit being given for any amount payable by the vendor under subclause 3.9 or 3.10); and

(2) The vendor shall concurrently hand to the purchaser:

(a) the memorandum of transfer of the property provided by the purchaser under subclause 3.5, in registrable form; and

(b) all other instruments in registrable form required for the purpose of registering the memorandum of transfer; and

(c) all instruments of title –

the obligations in subclauses 3.7(1) and 3.7(2) being independent.

[10] Standard conveyancing practice usually envisages a purchaser paying the outstanding balance of the purchase price on the settlement date and receiving, concurrently from the vendor, an executed memorandum of transfer in registrable form. That is the mechanism whereby a purchaser of a property obtains the critical transfer document necessary to obtain title to the property. Clause 3.7 reflects this.

[11] So, what date, in terms of cl 1.1(3) did the parties nominate? Was it possession date (being clearly and indisputably 18 December 2006)? Or was it some other date?

[12] Highly relevant to these questions is cl 15.0, inserted into the agreement before the parties executed it, and providing:

15.0 The Purchaser acknowledges the Vendor shall put in place a Caveat over the property at 29 Muritai Road, Milford. Such Caveat will be prepared by the Vendors Solicitor at the expense of the Purchaser.

Whoever prepared the clause omitted the required apostrophe.

[13] Of relevance too is the General Term cl 1.3(3) which provides:

Where any inserted term (including any Further Terms of Sale) conflicts with General Terms of Sale the inserted terms shall prevail.

This clause, giving primacy to an inserted term which might conflict with a General Term, is of importance here. It reflects the common law canons of interpreting contracts. The parties’ intention is more likely to be reflected in an inserted negotiated clause than in common form printed terms.1 This is certainly the way cl 1.3(3) has been applied in High Court judgments.2

The evidence and relevant facts

[14] Given the issue I have summarised in the previous section, it is unsurprising that the evidence which the parties called, although useful by way of background, does not lend itself to determinative findings of fact.

[15] The plaintiffs called Mr James Messenger (who gave evidence by way of video link from the Channel Islands); a real estate agent, Mrs S D Campbell (who the plaintiffs, although they had exchanged a brief of her evidence, felt they need not call at trial. However, Mr Stewart, whose conduct has been exemplary, called Mrs Campbell because the defendants wished to cross-examine her); Mr G J Messenger, the son of the plaintiffs, who was a real estate agent and represented his parents’ interests in New Zealand; and Mr A R Prew, an experienced conveyancing solicitor who acted for the plaintiffs in the wake of the agreement’s execution. The defendant, Mr J M Goodman, gave evidence on behalf of the defendants.

[16] I have, of course, considered carefully and reviewed the evidence which was called.

[17] The fundamental positions of the parties to the agreement manifested themselves at an early stage. The agreement became unconditional on 8 September

2006 when Mr Stokes, the solicitor then acting for the defendants, declared it so.

_{The defendants, as purchasers, had the benefit of a “due diligence” clause (cl 16.0).}

1 H G Beale (ed) Chitty on Contracts (28th ed, Sweet and Maxwell, London, 1999) at 12 – 076. Lewison, The Interpretation of Contracts (4th ed, Sweet and Maxwell, London, 2007) at 9.10.

2 Kiwi Freeholds Queen Street Ltd v Shanti Holdings HC Auckland, CIV-2006-404-3340, 27 April

2007 at 37 (Keane J); Shao Zia Zen v Borman Residential Limited HC Auckland CIV-2009-404-1622,

25 May 2009 (Abbott AJ).

[18] Both Mr Stokes and the plaintiffs’ solicitor Mr Prew tried to vary or renegotiate the agreement. Their efforts came to naught.

[19] The stance of the defendants, advanced by Mr Stokes, was that title to the property should pass on possession date. The vendors’ unpaid interest was to be protected by a caveat in terms of cl 15.0. The plaintiffs’ position was that title should not pass to the defendants until the entire purchase price had been paid, with settlement being on the date stipulated for the payment of the last tranche, 18

December 2008.

[20] In terms of conventional conveyancing practice, if title was to pass to a purchaser on possession date, any unpaid balance of the purchase price would be secured by a vendor mortgage (usually a second mortgage) with care being needed to ensure that any prior mortgage raised by the purchasers was not for so large a sum that the vendors’ interest as mortgagee secured insufficient equity to protect the unpaid sum. Given, that on the possession date spelled out in the agreement (18

December 2006), the purchasers would still have owed $3,245,000 of the $5.995 million purchase price, Mr Prew was understandably anxious.

[21] In the wake of Mr Stokes declaring the agreement unconditional, Mr Prew forwarded a settlement statement containing the normal apportionments and showing an unpaid balance (to be paid by the instalments set out in the agreement) of

$3.245 million. His letter to Mr Stokes contained in its heading “possession date –

18 December 2006 – settlement date – 18 December 2008.”

[22] Mr Stokes for his part dispatched on the same day a letter containing a transfer for the plaintiffs to execute. Mr Stokes’s position on the defendants’ behalf was:

I confirm that my clients are adamant that settlement is to be effected on 18

December 2006 and that the balance of the money is to paid on progress payments. I do confirm that the definition of settlement and possession is

quite clear in the agreement and there is no second date provided under the possession date for settlement. Secondly, obviously if settlement was not

intended for the 18 December 2006 there would be no purpose for clause 15 as why on earth would your clients put a caveat on a property that is owned

by your clients. Obviously this is to protect the unsecured debt.

[23] Mr Stokes went on to observe that he had discussed the agreement with two land agents involved with the agreement, Ms Allis (now the witness Mrs Campbell), and Mr Wayne Marmont, who were (said Mr Stokes) the plaintiffs’ agents. They were “quite adamant” (according to Mr Stokes) that the plaintiffs’ money was to be protected by the caveat, with settlement being in December 2006.

[24] Mr Prew’s advice, and presumably his instructions, were to the contrary. Endeavours by the solicitors to rescue the situation foundered, the defendants being resistant to providing information which Mr Prew requested in an endeavour to salvage the agreement by changing its structure.

[25] The stipulated possession date, 18 December 2006 came and went. Mr Prew, out of an abundance of caution, had taken steps to organise a discharge of a Westpac mortgage registered against the title of the plaintiffs’ property. On 19 December

2006 Mr Prew served on Mr Stokes a settlement notice. Mr Stokes retaliated the next day by serving a settlement notice on Mr Prew. On 22 December 2006 the defendants lodged a caveat against the title of the Muritai Road property. Neither the plaintiffs nor the defendants, however, took any steps formally to cancel the agreement.

[26] In April 2007 the defendants issued proceedings in the High Court seeking rectification of the agreement. Thirteen months later, after a number of case management conferences, the proceeding was discontinued without prejudice to the respective rights of both parties under the 1 December 2006 agreement for sale and purchase. The plaintiffs finally cancelled the agreement and resold their property (supra [5]) in 2009.

[27] I now turn to the evidence of how the parties concluded their contract on 1

December 2006. Unsurprisingly the witnesses can say little of a permissible nature.3

_{Both the plaintiffs and the defendants were relying to a large extent on the skill and}

3 In Boat Park Ltd v Hutchinson [1992] 2 NZLR 74 (CA), the Court of Appeal quoted with approval the decision of the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98, which held that the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. See also Pyne Gould Guinness Ltd v Montgomery Watson (NZ) Ltd [2001] NZAR 789 (CA) at [29].

expertise of the land agents (surprisingly several were involved). The parties have not, in my view, been served well.

[28] The plaintiffs, Mr James Messenger and his wife, live in Guernsey in the Channel Islands. Their son, Mr Gary Messenger, with his wife and children, live in New Zealand. The plaintiffs purchased the Muritai Road property with a view to spending New Zealand summers there close to their family. Health difficulties, however, made it difficult for Mr Messenger to travel, so the plaintiffs decided to sell the property. Gary Messenger, who was a real estate agent attached to a North Shore firm, was appointed as his parents’ attorney.

[29] A listing agreement between the plaintiffs and Bayleys North Shore was signed in April 2006. Bayleys apparently agreed to pay 20% of the total commission as a referral fee to Mr Gary Messenger if they were able to secure a sale. Bayleys had prepared marketing and sales proposals. The marketed sale price was

$5.995 million.

[30] No offers were made on the property for some months. In November 2006, however, there was a flurry of activity. Two unconditional offers had been presented by Mrs Sheryl Campbell but at figures considerably below the plaintiffs’ asking price.

[31] The defendants were undoubtedly interested in the property. There had been text exchanges between Mr Gary Messenger and the defendant, Deborah Rattray, on

29 and 30 November 2006 about the availability of a registered valuation. On the afternoon of 30 November 2006, the defendants, together with Ms Rattray’s mother, two builders, Mrs Campbell, and Mr Wayne Marmont (who was engaged by Prestige Realty), visited 29 Muritai Road to inspect it.

[32] Two hours later the defendants met Mr Marmont at the offices of Prestige Realty in Milford. Mr Marmont (who was not called by either side to give evidence) had apparently prepared an agreement. He drafted the additional clauses (including cl 15) and the payment options after discussions with the defendants. Mr Goodman, for his part, saw cl 15 as designed to give the vendors security to protect their unpaid

balance once settlement had occurred on 18 December 2006. Clause 16 was a standard due diligence clause.

[33] Later on 30 November Mr Gary Messenger telephoned his father again in respect of two further offers which Mrs Campbell had presented. One, from a previous offeror was at the increased sum of $4.8 million. The second offer was one received from the defendants.

[34] The defendants’ offer was in fact two options and therefore two alternative offers, both of which had been prepared on the instructions of the defendant Mr Goodman. The purchase price of the first offer was $6,017,275 of which

$2.75 million was to be paid on 18 December 2006 and the balance on 18 December

2008. The second offer (being Option Two (supra [6])) was the one which was eventually accepted, detailed earlier in this judgment.

[35] Mr Messenger’s calculations were that the second offer was preferable for cash flow reasons, having regard to the sum the plaintiffs owed their mortgagee, Westpac, and the interest which would continue to run under that mortgage.

[36] Late that night Mr Marmont endeavoured to persuade the defendants to reduce the due diligence period from seven working days to 48 hours, but that was unacceptable to them.

[37] At noon on 1 December the defendants signed the agreement. There were various amendments not relevant to the issue. The Option Two purchase price, the possesion date, and cl 15 remained unaltered.

[38] I found the most helpful account of what occurred was given by Mrs Campbell. To some extent Mrs Campbell refreshed her memory from electronic notes and appointment records which she made at the time. This reconstruction by Mrs Campbell of her notes into written form did not occur until 21 January 2007. My minute (No 2) of 18 July 2001 gives some of the background.

[39] Being a reconstruction, and with no production at all of the base computer records, I treat Mrs Campbell’s notes with some caution. Those who have been involved over the years with litigation involving agreements for sale and purchase will be familiar with the phenomenon that land agents are seldom expansive in the evidence which they give and tend to steer a course down the middle, rather than saying much which would be helpful to either party. That said, I found Mrs Campbell a credible witness.

[40] I am satisfied Mrs Campbell has, to the best of her ability, given me a truthful account, and that her recollection of what occurred has not been coloured by reference to her transcribed notes. Mr Stewart explained to me from the Bar that he had experienced difficulty in obtaining satisfactory discovery and disclosure of Mrs Campbell’s notes from Bayleys. I do not consider her notes have been falsified or modified to slant her recollection of events.

[41] Mrs Campbell was aware that the defendants were expressing an interest in the property in early August 2006. Mr Marmont advised her that the defendants were two prospective purchasers. At that stage Bayleys had the sole listing. However, after discussions with Mr Marmont, it was agreed that any vendors’ commission from a sale effected by Mr Marmont would be split equally between Bayleys and Mr Marmont’s firm, Prestige, after payment of the 20% referral commission to Gary Messenger. Thus we now have three land agents with a financial stake in the sale, one being the vendors’ son.

[42] The defendants first inspected Muritai Road on 14 August 2006. There matters, so far as the defendants were concerned, stalled until 29 November 2006 when Mrs Campbell received a further call from Mr Marmont advising her that the defendants were still interested and wanted to see the property again the next day. This time frame, of course, coincides with the two offers Mrs Campbell had received (supra [30]). On 30 November Mrs Campbell, the defendants, and Mr Marmont inspected the property again. Shortly thereafter, Mr Marmont advised her he was meeting with the defendants that evening with a view to preparing an offer. Mrs Campbell informed Mr Gary Messenger accordingly.

[43] Mrs Campbell collected later that day the defendants’ offer from Mr Marmont which was in a sealed envelope. Similarly sealed was the $4.8 million unconditional offer which Mrs Campbell had received from another potential purchaser. Mrs Campbell then travelled to Mr Gary Messenger’s home at Dairy Flat, arriving at about 9.30 pm. The offers were opened and inspected by Mr Gary Messenger and his wife. Mrs Campbell confirmed that the defendants’ offer contained the two options as to purchase price and its payment, together with cl 15.0 and the 16.0 due diligence clause.

[44] Mr Gary Messenger then telephoned his father in Guernsey with whom there were lengthy discussions by telephone involving both him and subsequently his wife.

[45] Mrs Campbell’s evidence was that she too spoke to Mr James Messenger. She pointed out to Mr Messenger the advantages of the unconditional $4.8 million cash offer which had a short settlement date. Mrs Campbell knew the prospective purchasers and was confident they would be able to settle. This, in her view, contrasted favourably with the two-year wait for the higher purchase prices being offered by the defendants. Mrs Campbell was also concerned over the due diligence clause (cl 16) which would have enabled the purchasers to pull out for any reason.

[46] The instructions which Mr James Messenger gave were to accept Option Two of the defendants’ agreement but to delete the due diligence clause. The clause was thus deleted and initialled by Mr Gary Messenger. Mrs Campbell then travelled to Mr Marmont’s office. By this time it was approximately 11 pm. Mrs Campbell stayed in her car whilst the defendants discussed matters with Mr Marmont in his vehicle. The proposed amendment was unacceptable to the defendants. The deleted cl 16 had the words written across it “reinstated 30-11-2006 11.00 pm”.

[47] The next morning at 6.30 am Mrs Campbell telephoned Mr James Messenger in Guernsey. Mr Messenger made it very clear he wished to proceed with the defendants’ offer. He agreed to the reinstatement of cl 16. The reinstatement inscription was countersigned by Mr Gary Messenger, as were two additional clauses inserted at Mr James Messenger’s request, being a confidentiality clause and a

standard escape clause should another offer be received during the time the agreement remained unconditional. These alterations were acceptable to the defendants, who initialled the changes.

[48] Mrs Campbell’s brief of evidence is, unsurprisingly perhaps since it was prepared by the plaintiff ’s solicitor, silent on the issue of cl 15. However, the issue of the interpretation of cl 15 arose at the hearing. Mrs Campbell’s opinion in evidence, for what it is worth, was that she considered cl 15 had been inserted into the agreement by Mr Marmont on the defendants’ behalf. Its purpose was to protect the vendor. Therefore, during her involvement in December 2006, Mrs Campbell’s opinion was that title to the property would pass on 18 December 2006. At the hearing, Mrs Campbell gave evidence that she told Mr Messenger during their 30

November telephone conversation that this date might not be particularly clear because of the way that the contract was written, but because of the caveat clause she assumed that was the case.

[49] On this aspect Mrs Campell’s viva voce evidence was somewhat vague. However, Mr James Messenger denies that the question of when title would pass was ever raised in the course of discussions with his son, daughter-in-law, or with Mrs Campbell. Mr Messenger’s evidence, so far as cl 15 is concerned was that, although he noticed the clause, he had no idea what a caveat was and was unfamiliar with property transactions in New Zealand. He did not give the matter any thought. Mr Messenger’s evidence in chief was that “there were absolutely no question of title being given to the purchasers before the full amount of the purchase price had been paid on the settlement date of 18 December 2008.”

[50] So far as the conflict of evidence between Mrs Campbell and Mr James Messenger is concerned, I prefer the evidence of Mrs Campbell. I consider that she believed the agreement, which as the vendors’ agent she had given to the Messengers in the form of an offer, and cl 15 in particular, had the effect of requiring settlement on 18 December 2006 rather than two years later. I also find that she proffered some very brief advice along those lines to Mr James Messenger, coupled with the suggestion that he should seek legal advice on the topic if it was relevant. I reject Mr James Messenger’s evidence that there was no discussion about cl 15 or about

settlement date. However, in fairness to Mr Messenger, it is very clear that his main pre-occupation during the telephone conversations was to assess which of the two offers he should accept, and which option contained in the defendants’ offer was the preferable one. He was concerned with issues of cash flow and price. I consider that Mrs Campbell’s brief comments to him on the issues of clause 15 and settlement date would have passed him by.

[51] The evidence of Mr Goodman was that Mr Marmont drafted the additional clauses on their behalf on 30 November and also the two payment options; that 18

December 2006 was entered on the agreement as both settlement and possession date; and that the purpose of cl 15 was to protect the vendors’ unpaid balance of the purchase price on settlement that occurred on 18 December.

[52] On 8 December, before instructing his solicitor Mr Stokes to declare the contract unconditional, Mr Goodman inquired whether the caveat would be an issue. He was assured by Mr Stokes it would not be and that a first mortgage would go on the title first ahead of the caveat. It was not until four days later that the defendants were advised by their solicitors that there was a dispute over the 18 December 2006 settlement date.

Discussion

[53] The plaintiffs carry the onus of establishing on the balance of probabilities that the defendants have breached their contractual obligations.

[54] Although the defendants, throughout this proceeding, have been at a considerable disadvantage because they have acted for themselves, their defence is tolerably clear. I specifically record that Mr Stewart has acted in an exemplary fashion and has not sought in any way to exploit the clear disadvantage under which the defendants have laboured.

[55] The plaintiffs’ statement of claim conventionally pleads contract; pleads a settlement date on 18 December 2008; pleads the defendants’ failure to perform payment of the purchase price; and finally pleads cancellation of the contract and

sale of the property at a loss. The statement of defence pleads the contract’s proper construction provided for settlement date on 18 December 2006 and if there was indeed to be settlement two years later, then the contract should be rectified. The defendants further plead that the contract is void for uncertainty. Finally they plead that they were not under any contractual obligation to make payments under the contract until title was transferred and thus are not in breach. Further defences were pleaded which I do not need to recite.

[56] The plaintiffs’ reply is a denial that the agreement did not reflect the parties’ intention; denial that the agreement is void for uncertainty; and broad pleadings to the effect that cl 15 of the contract should be disregarded or alternatively that its meaning is limited to providing protection to the defendants as purchasers, not to the plaintiffs as vendors.

[57] The pleadings, however, do not really advance matters significantly. I accept, without the need to give reasons, Mr Stewart’s submission this is not a suitable case for rectification.

[58] I accept also Mr Stewart’s analysis in closing that the first and fundamental issue for the Court is to determine the correct settlement date. Was it 18 December

2008 as the plaintiffs contend? Was it two years earlier as the defendants contend? Or was the agreement void for uncertainty because (as pleaded by the defendants in the alternative) the settlement date cannot be discerned.

[59] There have been unsatisfactory features in the way the evidence has been presented. Mr Wayne Marmont (whom on the evidence I am satisfied is responsible for inserting cl 15 into the defendants’ offer) has not been called by either party. The pattern of dealings between him and Mrs Campbell were such as to suggest that he was really acting as the defendants’ real estate agent and adviser. Certainly it was he who prepared the offer on the defendants’ behalf. Yet there may have been some force in Mr Stokes’ observation (supra [22]) that Mr Marmont was acting for the vendor since an arrangement had been made between him and Bayleys that the commission payable by the vendor would be shared equally. I hesitate, however, to

hold that Mr Marmont was acting as the plaintiffs’ agents. The arrangement between him and Bayleys may well have been one to which the plaintiffs were oblivious.

[60] But the absence of evidence from Mr Marmont does not really affect the interpretation of the 1 December 2006 agreement, the final form of which all parties signed. Nor is the interpretation of that agreement dependent on the tentative assessment of it made on the evening of 30 November by Mrs Campbell.

[61] I am satisfied that the telephone discussions which took place in the home of Mr Gary Messenger and his wife on the evening of 30 November (which discussions included Mrs Campbell) were primarily focused (as I have held (supra [50])), on first, which of the two presented offers the plaintiff should accept, and secondly, particularly having regard to the plaintiffs’ Westpac mortgage obligations, which of the two options presented by the defendant was preferable. I am satisfied that Mrs Campbell, in a tentative way did convey to Mr James Messenger her understanding of the meaning and effect of cl 15 and that, for understandable self-protective reasons, she suggested that any legal advice on the meaning of the clause and the issue of settlement date should be left to the plaintiffs’ solicitor.

[62] I consider that, because of the tentative nature of Mrs Campbell’s comments and because the issue was peripheral to Mr James Messenger’s primary concerns, the full import of what Mrs Campbell was saying passed him by. In that regard, I reject Mr James Messenger’s evidence that on that evening “there was absolutely no question of title to the property being given ... before the full amount of the purchase price had been paid on the settlement date of 18 December 2008”. I consider that evidence of Mr Messenger, although not designed to mislead, is quite simply a product of him being wise after the event. As he candidly accepted, he had no knowledge of what a caveat was; he did not turn his attention to cl 15; and the subtle distinction between settlement date and possession date was not a matter which would have concerned him. In any event, as I have found, Mrs Campbell did alert him to the issue.

[63] Turning to the centrally relevant terms of the offer which the defendants had placed before the plaintiffs on 30 November, I accept that the offer was designed, so

far as they were concerned, to allow them to take title to the property on possession date, namely 18 December 2006. There can be no doubt, and I accept Mr Prew’s unchallenged evidence in that regard, that the offer and in particular cl 15 were ineptly drafted. Given the large amount of the purchase price which would remain unpaid after 18 December 2006, it would be remarkable if any competently advised vendor would accept an offer drawn in those terms. Other than the protection afforded by lodging a caveat, the unpaid purchase price was unsecured. The defendants would have been unrestricted as to the secured sum they could have raised by mortgage, such sum clearly having the potential to diminish any security for the unpaid purchase price owing to the plaintiff. Nonetheless, that was the offer which the plaintiffs were prepared to accept that night. Subsequent amendments and counter-amendments related to the due diligence clause and the insertion of cls 17 and 18 relating to confidentiality and the ability of the plaintiffs to resell before the agreement became unconditional. No changes were made to the critical clauses relating to possession date, settlement date, or cl 15.

[64] So, the agreement between the parties, in final form, was clear and unambiguous on its face. The critical terms on which the parties agreed were:

[a] Possession date was stipulated as 18 December 2006 in terms of the

General Term cl 1.1(3).

[b] Settlement date, which was the date on which the parties were to perform their respective obligations under cl 3.7, was possession date. The contract did not specify any other date on which the parties were to perform their settlement obligations (supra [8] where the terms of cl 1.1(3) are set out).

[65] The defendants’ solicitors did provide a transfer for the plaintiffs to execute prior to 18 December 2006. Ironically, the plaintiffs had made the necessary arrangements, if so required, to give clear title to the defendants (supra [25]). Settlement, as envisaged by the contract on 18 December 2006, did not occur.

[66] Clause 1.1(3) of the agreement clearly stipulates that settlement date is also possession date. The clause allows for the parties to agree on “such other date” or the performance of their cl 3.7 settlement obligations. But no such date is stipulated. Certainly 18 December 2008 was the agreed date for the payment of the balance of the purchase price. But that event was clearly not agreed by both parties as a settlement date. It would be wrong to impute to the parties such an intention. To do so would be to read down and render nugatory cl 15. As cl 1.3(3) provides, conflicts between an inserted term (which cl 15 is) and General Terms of Sale (which cls 1.1(3) and 3.7 are) should be resolved by the inserted term prevailing. Clause 15, as I have stated, was inserted to protect the plaintiffs for the unpaid portion of the purchase price.

[67] Certainly, the defendants and their solicitor, Mr Stokes, from the earliest stages were consistent in their view that the offer they had presented and, indeed, the agreement as signed in its final form, envisaged a settlement date with title being given to them of 18 December 2006. And, as I have analysed it, there is nothing in the agreement to the contrary.

[68] Despite the ineptly drawn nature of the defendants’ offer, the wording of cl 15 bolsters the interpretation that settlement date was indeed to be 18 December 2006. If title was not to pass on that date, there would be no reason whatsoever for the defendants to acknowledge that the plaintiffs were entitled to place a caveat on the Muritai Road property. A vendor of realty would remain the registered proprietor until such time as the title was cleared and a transfer provided and registered. The only function of a caveat, in the context of the parties’ dealings, would be to protect the plaintiffs’ interest, by giving notice to the world at large (the purpose of a caveat under the Torrens system) of the unpaid purchase price still owing to the plaintiffs’, in a situation where title had already passed to the defendants. The stipulation in cl 15 that the caveat would be prepared by the vendors’ solicitor reinforces that interpretation. The fact that the expense of the caveat preparation would be borne by the purchasers (the defendants) is unremarkable. It was they who still owed money. Mr Stewart’s submission that the purpose of cl 15 was to protect the defendants’ interests as purchaser is untenable and totally contrary to what the clause stipulates.

[69] Mr Stewart submitted that, were I to hold that cl 15 did indeed provide for a vendor’s caveat with settlement date being 18 December 2006, then the proper interpretation was that the agreement by the defendants to the plaintiffs’ lodging a caveat, ipso facto gave rise to an equitable charge. In support of that proposition, Mr Stewart cited the New South Wales Court of Appeal authority of Troncone v

Aliperti.4 That authority was cited with approval by Baragwanath J in Ross Bindon

Ltd v P B & C S Properties Ltd.5

[70] The determinative issue in both those cases was the somewhat obvious proposition that if parties agreed that one party might be able to lodge a caveat, then there was a necessary implication that the caveator was entitled to a proprietary interest or equitable interest which was sufficient to sustain a caveat.

[71] I have no difficulties with that proposition. However, the subtle submission that Mr Stewart developed was that cl 15 was not designed for the simple purpose of protecting the plaintiffs’ interest as unpaid vendor. Rather, it was designed to create a separate equitable interest which would have had priority over any third party mortgage the defendants might have taken out. In that regard, Mr Stewart relied on the Equity principle that equitable interests arising first in time are accorded priority

over subsequently created equitable interests.6

[72] In counsel’s submission the plaintiffs’ interest (being the equitable interest created by cl 15) was first in time and would be prior to any subsequent equitable interest created by the defendants in favour of a mortgagee. It is on this issue of priority that Mr Stewart’s submission becomes faulty. There is certainly a respectable argument that the plaintiffs, in respect of the unpaid purchase price, were entitled to an equitable interest in the land and would have been entitled (cl 15 acknowledging this) to protect that equitable interest by a caveat. The authorities cited by Mr Stewart would reinforce the plaintiffs’ equitable claim. But it is drawing

_{a long bow to suggest that cl 15 additionally was designed to ensure the plaintiffs’}

4 _{Troncone v Aliperti [1994] 6 BPR 13,291 (CA).}

5 _{Ross Bindon Ltd v P B & C S Properties Ltd [2006] NZHC 1582; (2006) 7 NZCPR 850 (HC).}

6 References also made to s 37(2) of the Land Transfer Act 1952 (priority of registered instruments)

and the well known authority of Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 (HC).

unregistered equitable interest would not lose priority against a subsequent charge which the defendants, as registered proprietors, might want to create.

[73] I reject, in the circumstances of this case, Mr Stewart’s submission. As I have said, the critical clauses of the agreement, and cl 15 in particular, were ineptly drafted. To suggest that the purpose of cl 15 was to create a discrete equitable interest in favour of the plaintiffs which would rank ahead of any subsequent interest of the defendants’ third party mortgagee is untenable. The commercial reality would be that no prospective mortgagee would be prepared to lend on those terms. Nor would any properly advised vendor be satisfied with an equitable interest of that type, protected by a caveat, where more conventional forms of security would have been available.

Result

[74] It thus follows, for the reasons I have given, that the defendants have not breached their contractual obligations. They were entitled to take title on the stipulated possession date (which was also the settlement date) of 18 December

2006. The plaintiffs failed to give them title. The consequential loss to the plaintiffs on resale of the property was not attributable, in my judgment, to any contractual breach on the defendants’ part. Rather, it was attributable to the plaintiffs’ failure to settle as they are obliged to do and their cautious approach to hang on to the property, rather than to negotiate a cancellation, for another two years.

[75] In short, on the balance of probabilities and having regard to the terms of the

1 December 2006 agreement for sale and purchase and its context, I am not satisfied that the plaintiffs’ cause of action for contractual damages flowing from the defendants’ alleged breach, has been made out.

[76] Were I to have been of the view that the combined effect of the stipulated possession date, cls 1.1(3), cl 3.7 and cl 15 left unresolved, as a matter of contractual interpretation, precisely what the settlement date was, then I would unhesitatingly have concluded that this fundamental aspect of the parties’ contract was uncertain and therefore the contract was void. However, given the findings and conclusions I

have reached, it is unnecessary for me to describe the more obscure route by which I

would have come to the same result.

[77] There will be judgment for the defendants.

Costs

[78] Because the defendants represented themselves, they are not entitled to party and party costs. They are, however, entitled to their reasonable disbursements. These I assess would amount to any filing fees they have paid and reasonable photocopying charges.

[79] I invite the defendants to itemise these and enter into a dialogue with

Mr Stewart.

[80] Only if the parties are unable to agree on the defendants’ reasonable disbursements, will I need to address them. Any such dispute must be referred to me within 20 working days of the release of this judgment.

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Priestley J