Dunder Holdings Limited v Dexter Holdings Limited [2012] NZHC 2373 (14 September 2012)

Last Updated: 21 September 2012

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2011-419-000216 [2012] NZHC 2373

BETWEEN DUNDER HOLDINGS LIMITED Plaintiff

AND DEXTER HOLDINGS LIMITED First Defendant

AND GRANT JAMES FLETT Second Defendant

Hearing: 20, 21, 22 and 23 August 2012

Counsel: R J Hollyman and S D Williams for Plaintiff

T M Braun and K I Bond for Defendants

Judgment: 14 September 2012

_{JUDGMENT OF WOOLFORD J}

This judgment was delivered by me on Friday, 14 September 2012 at 3:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Spencer Legal, Barristers and Solicitors, Auckland

R Hollyman, Barrister, Auckland.

Harkness Henry, Barristers and Solicitors, Hamilton.

DUNDER HOLDINGS LIMITED V DEXTER HOLDINGS LIMITED HC HAM CIV 2011-419-000216 [14

September 2012]

Introduction

[1] These proceedings pit father against son and nephew. They relate to the results of a mediation held in Auckland on 16 and 17 July 2009, which attempted to settle myriad disputes between the parties. A heads of agreement was signed at the mediation. However, a further dispute has arisen over one aspect of the heads of agreement, which relates to a block of land on the corner of Woodcock and Windmill Roads, at Tamahere near Hamilton, owned by Dexter Holdings Limited (Dexter).

[2] The heads of agreement provided that Dunder Holdings Limited (Dunder), of which Mr Graeme Hodge is the sole director, would buy the block of land for an agreed sum of $2.4 million from Dexter. Mr Graeme Hodge’s son, Mr David Hodge, and nephew, Mr Grant Flett, are the two directors of Dexter. Mr Flett had built a house for himself and his family on the land and so as part of the agreement, Dunder agreed to sell the house and section on which it was built back to Mr Flett for

$700,000.00. The sum of $2.4 million was to be paid by Dunder to Dexter in two lots - $700,000.00 upon the sale of the house and section to Mr Flett and the balance of $1.7 million by 31 March 2010.

[3] The sale of the land has not settled, largely because of what Mr Graeme Hodge says were misrepresentations by his son and nephew about the value of the land. Because of Dunder’s failure to settle the sale, Dexter has purported to cancel the agreement.

[4] The statement of claim contains six causes of action. The first two causes of action turn on misrepresentations allegedly made about the value of the land. The first cause of action is brought under the Contractual Remedies Act 1979. Dunder alleges that representations were made on behalf of Dexter that the market value of the land was $2.4 million. That is said to be a contractual misrepresentation, which was a significant factor in inducing Dunder to enter into the agreement. Dunder seeks an order for damages representing the difference between $2.4 million and what it says was the true market value of the land together with other relief.

[5] The second cause of action alleges that the same representations made on behalf of Dexter were misleading and deceptive in contravention of s 9 of the Fair Trading Act 1986. Dunder seeks relief under s 43 of that Act to have the agreement varied by adjusting the purchase price to be paid for the land to reflect, what it says, was the true market value and an order that Dexter pay damages representing the value of the lost opportunity to develop and subdivide the land.

[6] The third and fourth causes of action are brought in the alternative and turn on whether Dunder (or in the case of rectification, both parties) was operating under an actionable mistake in relation to the true value of the land. The third cause of action is brought under the Contractual Mistakes Act 1977. The basis of Dunder’s claim is that it was influenced in entering into the agreement by a unilateral mistake as to the true value of the land and the existence of that mistake was known to Dexter. Alternatively, that same mistake as to the true market value has affected all parties. It is further alleged that the mistake (unilateral or mutual) resulted at the time in a substantially unequal exchange of values. Dunder, therefore, seeks relief under s 7 of the Contractual Mistakes Act that the agreement be varied by adjusting the purchase price to reflect its true market value. Consequential orders directing Dexter to transfer the land to Dunder and for Mr Flett to purchase the house and section are also sought.

[7] In respect of the fourth cause of action, Dunder seeks the equitable remedy of rectification to reflect what is said to have been the common intention that the purchase price to be paid for the land would be the market value then prevailing.

[8] Pursuant to the fifth cause of action, Dunder seeks a declaration that the agreement remains in force together with an order for specific performance of the sale and purchase of the land in accordance with the heads of agreement. This cause of action necessarily involves the Court determining whether Dexter’s purported cancellation of the agreement was valid.

[9] As to the final cause of action, were I to conclude that Dexter had validly cancelled the agreement, Dunder seeks relief under s 9 of the Contractual Remedies Act 1979. The specific remedy sought is an order that the land be vested in Dunder,

that Dunder pay to Dexter a purchase price reflecting its true market value and that

Mr Flett purchase the land on which he has built his house from Dunder.

[10] Counsel for Dunder has usefully summarised the issues for decision by the

Court as follows:

(a) Whether there was a representation that $2.4 million was the market value for the land;

(b) Whether there was a valuation provided by or on behalf of the defendants to support that representation;

(c) Whether there was a common mistake as to the market value for the land (both sides separately intending to come to market value);

(d) If any of the above arise, whether the relevant cause of action is made out;

(e) Whether the cancellation by Dexter is effective; and

(f) What remedy or relief should be afforded to the plaintiff, including issues as to:

(i) Price;

(ii) Adjustment to the Flett house section boundary; and

(iii) Specific performance.

Was there a representation that $2.4 million was the market value for the land?

[11] Mr Graeme Hodge gave evidence on behalf of Dunder. Dunder’s solicitor, Mr Graeme Steed and Dunder’s counsel, Mr Peter Gorringe, who were both present at the mediation, also gave evidence. Mr Flett and Mr David Hodge gave evidence

for Dexter, as did Mr Bill Nabney, who was instructed as Dexter’s counsel at the

mediation.

[12] This case turns primarily on the issue of whether there was a representation that $2.4 million was the market value for the land. Dunder’s case is that Dexter was negotiating on the basis that a market price was to be paid for the land and that its representatives made a verbal representation during the course of the mediation that

$2.4 million was the true market value of the land. That representation is said to be untrue. Dunder pleads a secondary misrepresentation in relation to a written market valuation allegedly produced by Dexter at the mediation to support its primary verbal representation that the true market value of the land was $2.4 million. At the outset, Dunder’s counsel acknowledged that evidence in relation to this secondary misrepresentation was not clear cut due to the inexact recollection of Dunder’s lawyers of the valuation and the fact that neither Dexter nor its valuers have discovered a valuation that accords with Mr Steed’s recollection of a valuation that he was shown at the mediation.

[13] For Dunder, Mr Graeme Hodge said he recalls his son and nephew telling him at mediation that they wanted $2.4 million for the land, which they insisted was the market value. He said they also put forward the figure of $700,000 for the house and section to be bought by Mr Flett. Mr Graeme Hodge said he is sure that this took place in one of the face-to-face discussions at the mediation. Mr Graeme Hodge said that he told his lawyers he was prepared to pay the market value for the land but initially thought that $2.4 million was not the market value. At some stage during the negotiations, Mr Gorringe met with Mr Nabney on a counsel to counsel basis. When Mr Gorringe came back from that meeting, Mr Graeme Hodge said that Mr Gorringe told him that he had been shown a current market valuation that supported $2.4 million. Mr Graeme Hodge said he complained about not being permitted to see the valuation but was eventually reassured by the fact that Dunder’s lawyers had seen the valuation and told him that it supported Dexter’s representation of $2.4 million as being the current market value. He said he therefore signed the agreement on that basis.

[14] Mr Steed said that he recalled Mr Gorringe coming into a breakout room during the course of the mediation and telling him that Dexter wanted $2.4 million for the land. Mr Graeme Hodge apparently told Mr Steed that Dexter’s asking price was too high and that the land could not be profitably developed at that price. There were then several exchanges between the parties over the price with Mr Gorringe acting as the go between. At one point, Mr Steed said that Dexter produced a valuation on the basis that it could not be shown to Mr Graeme Hodge. He said that Mr Gorringe brought it back into the breakout room following a meeting with Mr Nabney. Mr Steed thought that it was a valuation by a firm of valuers called Ashworth Lockwood. He said he distinctly recalls Mr Gorringe coming into the breakout room and stating “I have a valuation but it is only available for counsel to see”. Mr Gorringe then handed the valuation to Mr Steed, who flicked through it quickly. On the second page it had a two component breakdown of the value. Mr Steed cannot exclude the possibility, however, that the valuation related to another block of land altogether over which price negotiations were also being undertaken, the so-called homestead block. Mr Steed said that he had no doubt that Mr Graeme Hodge agreed to pay $2.4 million on the basis that it was current market value for the land although he had initially been reluctant to accept that.

[15] Mr Gorringe said that he does not remember any such valuation although he was unable to exclude the possibility that it did exist. He said he had no recollection of how the price payable by Dunder for the land was agreed at the mediation although he expects that Dexter would have nominated the figure they wanted Dunder to pay. Mr Gorringe does recall a valuation, but to the best of his recollection, this valuation was for the homestead block.

[16] For Dexter, Mr Flett categorically denied that either he or Mr David Hodge said they had a valuation of the land valuing it at $2.4 million. He said he certainly did not provide Mr Nabney with a valuation to support that claim because no such valuation existed. He said that the price for the land was set by Mr Graeme Hodge and that he and Mr David Hodge agreed to the price based on the back of the envelope calculations they had undertaken.

[17] Mr David Hodge confirmed the evidence of Mr Flett. He said it was his clear recollection that it was his father, Mr Graeme Hodge, who had put forward the figure of $2.4 million. That offer was presented to them by Dexter’s counsel, Mr Nabney, in a breakout room. He and Mr Flett discussed that figure and did some quick calculations on what sort of profit would likely be realised from its subdivision. Contrary to what his father claimed, Mr David Hodge said that he never stated that they thought the market value of the land was $2.4 million. He said that they did not have any firm idea what the market value of the land was at the time although he now thinks that it would have been pretty close to $2.4 million. He said he definitely did not refer or instruct Mr Nabney to refer to a valuation valuing the land at $2.4 million because no such valuation existed.

[18] Finally, Mr Nabney said his recollection was that Mr Graeme Hodge was the person who was setting all the prices for the various assets with little or no input from himself or his clients. Although Mr Flett and Mr David Hodge were unhappy with some of the prices put forward by Mr Graeme Hodge, overall they were happy that the heads of agreement was a deal that they could live with and they decided to accept the prices that Mr Graeme Hodge had put forward. Mr Nabney said he could categorically say that neither he nor Mr Flett nor Mr David Hodge made any representation regarding the value of the Dexter property. Mr Nabney said that it made no sense that either Mr Flett or Mr David Hodge would make or ask him to make such an representation because as far as he was aware neither of them had obtained any valuation of the property in anticipation of the mediation. To his knowledge, any valuations that were in existence at the time and were held by his clients, were dated, and had, in any event, formed part of the discovery in the underlying proceedings. He said the only valuations that he had in his possession were copies of those that had been discovered.

[19] Mr Nabney recalls there was discussion about the price being offered by Mr Graeme Hodge and he believes that he pointed out that a 2006 Ashworth Lockwood valuation had valued a slightly larger block of land (which included the land at issue) at $3.8 million. Mr Nabney surmised that this was the valuation that Mr Steed refers to but he said there was no suggestion of any secrecy about the document because it had been discovered. Mr Nabney said it was simply not true

that he had provided a valuation on the basis that it was for counsel’s eyes only. He could not see any basis on which he or his clients would refuse to allow Mr Graeme Hodge to see it.

[20] Having reviewed the evidence of the witnesses and analysed the documentation, I have reached the conclusion that Dunder has failed to establish that there was any material misrepresentations made by Dexter at the mediation as to the market value of the land. In reaching that conclusion, I have taken into account the following factors:

(a) As acknowledged by Dunder’s counsel, its witnesses were not wholly consistent in their evidence. In particular, Mr Graeme Hodge at times was clearly confused by the questions asked of him. Overall, the evidence for the plaintiff on the issue of such a representation was vague and contradictory.

(b) On the other hand, the evidence on behalf of Dexter was consistent.

It’s witnesses all said that it was Mr Graeme Hodge who put forward the prices for all assets covered by the heads of agreement, including the land at issue.

(c) Mr Graeme Hodge knew the land well, having being involved in the subdivision of an adjourning block of land into five lots for on-sale. I infer that he had a good appreciation of the land’s value.

(d) The price of $2.4 million is described in the heads of agreement as “the agreed sum”. There is no mention of market value in the document.

(e) The heads of agreement sought to resolve a myriad of disputes between the parties. Some aspects of the agreement may therefore have been favourable to one party while other aspects may have been favourable to the other party. There was obviously an element of give and take in the process of negotiation and agreement. An example of

that is the boundary adjustment between what is described as the nursery land and the property at 22 MacFarlane Street, for which no consideration was to be paid by Dunder. Dexter also submits that the price Dunder was to pay for the homestead block was under market value, although I do not think it is necessary for me to determine whether that was in fact the case.

(f) The parties did not obtain any up-to-date valuation of the land for the purposes of the mediation in July 2009.

(g) It is unlikely that Dexter’s counsel, Mr Nabney, would have shown a valuation to Dunder’s counsel, Mr Gorringe, and stated that it was for his eyes only. Mr Gorringe’s evidence on this issue was equivocal. He was unable to recall receiving a valuation “for counsel’s eyes only” but could not exclude the possibility that it happened. I prefer the evidence of Mr Nabney when he said that he would never under any circumstances tell Mr Gorringe that a valuation was for his eyes only because a valuation was something that clearly affected both parties.

(h) Dunder’s solicitor, Mr Steed, told Mr Graeme Hodge at the mediation that he thought $2.4 million was a fair market price for the land. He said both he and Dunder’s counsel, Mr Gorringe, were at some pains to convince Mr Graeme Hodge to accept that price.

Was there a valuation provided by or on behalf of Dexter to support a representation that $2.4 million was the market value for the land?

[21] There were a number of valuations in the possession of the parties prior to the mediation. Some related to the land at issue but each was different in that they were undertaken on different dates, they related to slightly different blocks of land, used different valuation methods or were based on different theoretical assumptions. There was, therefore, no existing valuation of direct and immediate relevance to the market value of the land at the time of the mediation.

[22] Counsel for Dunder accepted that, on the evidence before the Court, the valuation that Mr Nabney referred to in his discussions with Mr Gorringe would have been either of two valuations – a 2006 Ashworth Lockwood valuation for $3.8 million or a 2008 Darragh valuation for $2.3 million. Both these valuations were for a block of land that was larger than the land at issue in that it included another approximately four hectares of land, which was to be transferred to Dunder as part of the heads of agreement. Mr Nabney was categorical in saying that he would not have had the Darragh valuation in his possession as he had not included it in an affidavit of documents he had sworn in the proceedings. He said that if he had a copy of the Darragh valuation, he would have disclosed it to Dunder.

[23] I find, therefore, that there was not a valuation of direct relevance to the price paid which was put forward by Dexter in support of any representation that the market value of the land was $2.4 million. It is likely, however, that Mr Nabney did, in fact, make reference to the 2006 Ashworth Lockwood valuation. He specifically recalls taking it out of his folder at one point in the discussion and saying to either Mr Gorringe, Mr Steed, or both of them, “Look you know, you guys have seen this valuation, um, it’s quite a significant, you know, it’s significantly higher than what you are willing to offer, your client’s willing to offer”. In the context of a mediation, the use of the 2006 valuation in this way is not a representation as to the market value as at the date of mediation. There was no confidential valuation, which was shown to Mr Gorringe and Mr Steed on a counsel’s eyes basis only. The 2006

Ashworth Lockwood valuation had been discovered in the proceedings and a copy was in the possession of Dunder.

[24] Accordingly, I find that there was no misrepresentation which arose through the use of a written valuation on the part of Dexter.

Was there a common mistake as to the market value for the land?

[25] Dunder submits that it is clear from the evidence that the common intention of the parties was that the purchase price to be paid by Dunder for the land would be the market value then prevailing. It submits that each side sought to identify and settle on a market value for the land.

[26] In the context of a mediation which sought to resolve a myriad of disputes between the parties, however, it is my view that the agreement on a price of $2.4 million (including GST) for the land must be seen in the wider context. Each party knew that the other would be endeavouring to secure for themselves a good deal in relation to each of the assets being discussed. However, the resolution of all disputes meant that there had to be an element of give and take. Market value, although relevant, was not the sole factor in the decisions on the prices to be paid for the various assets. As an example, the house and section that Mr Flett was to purchase from Dunder for $700,000.00 in terms of the heads of agreement has subsequently been valued at $565,000.00 or $580,000.00. The sum of $700,000 was therefore at least 17% in excess of the market value, if the subsequent retrospective valuations are accepted.

[27] Were the Court to accept that Dunder is entitled to relief in relation to the sum of $2.4 million to be paid for the land, then counsel for Dunder accepted that an adjustment in the form of a reduction may also need to be made to the price to be paid by Mr Flett for his house and section.

[28] In any event, I am not satisfied that the sum of $2.4 million (including GST) was significantly out of kilter with the market value at the time. In November 2011, Dunder commissioned a retrospective market valuation for the land from a registered valuer, Chris Coakley. Using a comparable sales approach, Mr Coakley valued the land including Mr Flett’s house and section at between $1.7 million and $1.8 million excluding GST ($1,912,500.00 - $2,025,000 including GST at 12.5%). Mr Coakley adopted the lower figure of $1.7 million excluding GST on the basis that a hypothetical sub-division calculation resulted in a slightly lower figure. Mr Coakley also valued Mr Flett’s house and section at $580,000.00 or $120,000.00 less than Mr Flett had agreed to pay to Dunder.

[29] There were, in fact, two valuations commissioned a month after the mediation by the mortgagee from another registered valuer, John Darragh. Mr Darragh valued Mr Flett’s house and section at $565,000.00 and the remainder of the land at $1,430,000.00 excluding GST ($1,608,750.00 including GST). The total value of the two pieces of land was therefore assessed by Mr Darragh as

$2,173,750.00 including GST. Mr Flett had, however, agreed to pay $700,000.00 for his house and section, so if that sum is added to $1,608,750.00 (the GST inclusive price for the remainder of the land), the value of the land was $2,308,750.00 (which is only 4% less than the agreed sale price of $2.4 million).

[30] Although the original settlement date was 31 March 2010, Dexter did not call for settlement until September 2010 because of delays in having a separate title issued for Mr Flett’s house and section. In August 2010, a month before settlement was called for, Mr Darragh produced another valuation for the mortgagee. The value of the remainder of the land assessed on a comparable sales basis had increased from

$1,430,000.00 excluding GST to $1,556,000.00 excluding GST ($1,750,000.00

including GST). If the price of Mr Flett’s house and section is added to

$1,750,500.00 (the GST inclusive price for the remainder of the land) the value of the land was $2,450,500.00 at the date settlement was called for by Dexter, which is slightly more than the agreed sale price of $2.4 million.

[31] Although preferring a comparable sales basis for his August 2010 valuation, Mr Darragh also calculated a hypothetical sub-division value which valued the remainder of the land at $1,906,000.00 excluding GST. Again, GST and the value of Mr Flett’s house and section needs to be added to that figure to obtain a value for the land.

[32] Mr Steed, Dunder’s solicitor who was present at the mediation, gave evidence to say that he had sought to persuade Mr Graeme Hodge to agree to the price of $2.4 million for the land as he considered it to be a fair market value for the land. Mr Steed had acted for Dunder since 2002 and said that because of his long association with Mr Graeme Hodge he was familiar with the background to the various disputes between the parties.

[33] It should also be noted it was clear that prior to the mediation that both Dunder and Dexter had plans to sub-divide the land and that, at the mediation, Mr Graeme Hodge, Mr David Hodge and Mr Flett all said that they conducted hypothetical sub-division calculations in assessing the price to be paid by Dunder for the land. An argument could therefore be made that, notwithstanding that a

comparable sales approach is generally the best method of calculating values, in the present case because of both parties’ intentions that the land be sub-divided greater weight should be given to a calculation of the land’s value on a hypothetical sub- division basis.

[34] In all those circumstances, therefore, I find that there was not a common mistake as to the market value for the land. The value of the land was assessed in the context of a wide ranging mediation. Both parties were familiar with the land. Both parties intended that the land should be sub-divided. Both parties had experience of property development to a greater or lesser extent. Mr Graeme Hodge may have subsequently had second thoughts about the price Dunder was to pay for the land but I am not satisfied that those second thoughts are a valid basis for challenging the agreed price in the heads of agreement.

Is the cancellation by Dexter effective?

[35] On 29 September 2010, Dexter’s solicitors wrote to Dunder’s solicitors as

follows:

2. Our client hereby cancels the agreement between Dexter Holdings as vendor, and Dunder Holdings as purchaser, for the sale and purchase of the land described in the heads of agreement.

3. This does not affect the remaining provisions of the heads of agreement, and your clients’ remaining obligations under that agreement.

[36] The letter clearly purports to cancel only part of the heads of agreement. Dunder submits that the Contractual Remedies Act 1979 does not provide for the partial cancellation of contracts. According to Dunder, the Act makes clear that cancellation extinguishes all unperformed obligations by providing that in the event of cancellation no party shall be obliged or entitled to perform the contract further. Dunder submits that the purported cancellation of part of the agreement is not cancellation at all as that term is defined in the Contractual Remedies Act 1979.

[37] On the other hand, Dexter submits that the heads of agreement was not one contract but a series of independent contracts which can be separately enforced or

cancelled. Dexter submits that there have been other breaches of the heads of agreement by entities controlled by Mr Graeme Hodge which have not resulted in cancellation and that most, if not all, of the relevant contracts set out in the heads of agreement have now been completed.

[38] It is my view, however, that the heads of agreement should be seen as a single indivisible contract. It is clearly expressed to be entered into by Mr Graeme Hodge, Mr David Hodge and Mr Flett in their various different capacities and for themselves personally. The preamble also states that the parties in their different capacities were involved in a complicated constellation of trust companies and other holdings of property and business arrangements and that they wished to finally, fully and completely settle all the differences between them. I agree with counsel for Dunder that the most that can be said is that the heads of agreement is a multi-lateral contract between numerous different parties entered into by the principals in their various respective capacities. As noted above, there was clearly an element of give and take in the negotiations which led to the signature of the heads of agreement. It was intended to be an overall settlement.

[39] As the letter of 29 September 2010 purported to cancel only part of the heads of agreement, I find that it was ineffective as a cancellation of the entire contract. It was also ineffective as a cancellation of only part of the heads of agreement because it was a single indivisible contract.

[40] Recognising its difficulties, Dexter has, during the course of the trial, written to Dunder by letter dated 21 August 2012 purporting to cancel the heads of agreement in its totality. The letter states in part:

7. Without prejudice to our position that the Dunder/Dexter transaction has already been cancelled, and in the event that the Court finds that our client has in any way affirmed that agreement, we hereby cancel the contract on behalf of our client based on your client’s continuing repudiation.

8. Without prejudice to our position that the Dexter/Dunder transaction constitutes a separate contract and in the event that the Court finds that the heads of agreement is a single, indivisible contract and it has been affirmed by our client, please treat this letter as our client’s acceptance of your client’s continuing repudiation of the heads of agreement as a whole.

[41] Dunder’s position is that the purported cancellation by letter dated 21 August

2012 is ineffective because these proceedings were brought with Dexter’s consent. Dunder submits that Dexter affirmed the heads of agreement in December 2010 by consenting to Dunder’s caveat over the land being sustained on the basis that these proceedings be brought in order to resolve the position once and for all. It also submits that Dexter has affirmed by acquiescence and delay. Finally, and in any event, Dunder submits that the bringing of these proceedings by Dunder cannot constitute repudiation of the heads of agreement. Dunder has not at any point sought to avoid the purchase of the land and has not threatened to breach that part of the heads of agreement. Rather, Dunder submits that by bringing these proceedings, it has quite properly sought the Court’s assistance in determining exactly what price is owed for the property.

[42] The repudiation relied upon by Dexter is Dunder’s refusal to settle the purchase of the land at the agreed price. Dexter submits that cancellation of the entire contract would have little effect for two reasons:

(a) In accordance with s 8(3) Contractual Remedies Act 1979 cancellation of a contract does not involve an unwinding of the obligations already performed. In that regard, all other obligations have already been performed.

(b) The heads of agreement operated as an accord and satisfaction immediately on execution and any underlying rights the parties may have had against one another have merged in that document.

[43] Notwithstanding the comprehensive submissions of Dunder’s counsel, I am of the view that Dunder has repudiated the heads of agreement by refusing to settle the purchase of the land at the agreed price. The fact that Dexter consented to Dunder’s caveat over the land being sustained is not an affirmation of the heads of agreement. It was a decision obviously taken on legal advice and after the first cancellation letter of 29 September 2010 in an attempt to avoid the unnecessary costs of a separate hearing in relation to Dunder’s application to maintain the caveat.

[44] Although there was also some delay in Dexter calling for settlement, that was due to efforts made by Dexter to subdivide the section on which Mr Flett had built his family home. Both Mr David Hodge and Mr Flett gave evidence that at the time they signed the heads of agreement they thought that there was an existing resource consent which would enable subdivision to be promptly completed. Unbeknown to them, however, it had lapsed and a fresh application for resource consent had to be lodged with the Council.

[45] It is my view that Dunder should have chosen to settle the purchase of the land upon request and then issued proceedings alleging a misrepresentation as to the market value of the land if it wished to preserve the contract it had made. In fact, after the initial complaints by Dunder about misrepresentation, Dexter had, prior to its cancellation letter of 29 September 2010, offered to settle the purchase on the basis that $400,000.00 would be retained in Dexter’s solicitors’ trust account provided Dunder issued proceedings within 15 working days of settlement. Provided proceedings were commenced by Dunder, Dexter’s solicitors were prepared to undertake to pay out the $400,000.00 only in the event of agreement between the parties, or by order of the Court or in the event Dunder’s misrepresentation claim failed. That offer was refused outright by Dunder which went on to state that it was willing and able to settle but would only do so at some unidentified future date.

[46] Although professing to be willing and able to settle the purchase of the land, I find that Dunder’s continuing refusal to settle at the agreed price amounted to an implicit repudiation of the heads of agreement. A reasonable inference is available that Dunder no longer intended to perform the existing contract. Dunder wanted a new contract at a substantially lower price.

[47] Dunder may not have implicitly repudiated the heads of agreement if the contractual terms were truly ambiguous. As noted by Buckley J in Sweet & Maxwell

_{Ltd v Universal News Services Ltd :}[1]

If A and B, parties to a contract, form different views as to the construction and effect of their contract, and A demands performance by B of some act which B denies he is obliged to perform upon the true interpretation of the contract, then, if B says “I am ready and willing to perform the contract according to its true tenor, but I contend that what you, A, require of me is not obligatory upon me according to the time construction of the contract” and if in so saying he is acting in good true faith, he does not manifest the intention to refuse to perform the contract. On the contrary, he affirms his readiness to perform the contract, but merely puts in issue the true effect of the contract.

[48] In this case, however, there is no doubt as to the agreed price to be paid for the land. There is no issue as to the true construction of the words “for the agreed sum of $2.400,000.00 (Two million four hundred thousand dollars inclusive of GST).” Dunder seeks damages representing the difference between $2.4 million and what it says is the market value of the land or alternatively a variation to the agreement to lower the purchase price to reflect the land’s true market value.

[49] The result of the implicit repudiation is that Dexter acquired an immediate cause of action. But Dexter need not have enforced it. In terms of the Contractual Remedies Act 1979, Dexter could either have affirmed or cancelled the contract. Here Dexter has chosen to cancel the contract. I find that the letter of 21 August

2012 is effective as a cancellation of the entire contract. The heads of agreement is now at an end.

What remedy or relief should be afforded the Plaintiff?

[50] Dexter having validly cancelled the contract, Dunder applies for relief under s 9 of the Contractual Remedies Act 1979. Section 9 gives wide powers to the Court to do justice following the cancellation of a contract. It provides:

9 Power of Court to grant relief

(1) When a contract is cancelled by any party, the Court, in any proceedings or on application made for the purpose, may from time to time if it is just and practicable to do so, make an order or orders granting relief under this section.

(2) An order under this section may—

(a) Vest in any party to the proceedings, or direct any such party to transfer or assign to any other such party or to deliver to him the possession of, the whole or any part of any real or

personal property that was the subject of the contract or was the whole or part of the consideration for it:

(b) Subject to section 6 of this Act, direct any party to the proceedings to pay to any other such party such sum as the Court thinks just:

(c) Direct any party to the proceedings to do or refrain from doing in relation to any other party any act or thing as the Court thinks just.

(3) Any such order, or any provision of it, may be made upon and subject to such terms and conditions as the Court thinks fit, not being in any case a term or condition that would have the effect of preventing a claim for damages by any party.

(4) In considering whether to make an order under this section, and in considering the terms of any order it proposes to make, the Court shall have regard to—

(a) The terms of the contract; and

(b) The extent to which any party to the contract was or would have been able to perform it in whole or in part; and

(c) Any expenditure incurred by a party in or for the purpose of the performance of the contract; and

(d) The value, in its opinion, of any work or services performed by a party in or for the purpose of the performance of the contract; and

(e) Any benefit or advantage obtained by a party by reason of anything done by another party in or for the purpose of the performance of the contract; and

(f) Such other matters as it thinks proper.

(5) No order shall be made under subsection (2)(a) of this section that would have the effect of depriving a person, not being a party to the contract, of the possession of or any estate or interest in any property acquired by him in good faith and for valuable consideration.

(6) No order shall be made under this section in respect of any property, if any party to the contract has so altered his position in relation to the property, whether before or after the cancellation of the contract, that, having regard to all relevant circumstances, it would in the opinion of the Court be inequitable to any party to make such an order.

(7) An application for an order under this section may be made by—

(a) Any party to the contract; or

(b) Any person claiming through or under any such party; or

(c) Any other person if it is material for him to know whether relief under this section will be granted.

[51] Dunder seeks orders under s 9 that:

(a) Dexter sell the land to Dunder;

(b) Dunder pay Dexter a purchase price for the land reflecting its true market value as at the date of the heads of agreement or such other price as the Court deems appropriate; and

(c) Such further and/or relief as to the Court seems just.

[52] Dunder submits that the orders sought, which are effectively orders for specific performance, ought to be made to recognise the justice of the case. Dunder points to the following factors in support of its submission:

(a) The parties intended that Mr Graeme Hodge should have the opportunity to subdivide the land;

(b) The parties have, despite all their difficulties, managed to perform all of the other obligations under the heads of agreement. This is the last of the obligations to be performed; and

(c) The proceedings could have been resolved sometime ago if there had been proper disclosure of documentation rather than denial and dismissal of the issues.

[53] Dexter submits that the onus is on Dunder to establish that the discretion under s 9 of the Contractual Remedies Act should be exercised in its favour. Dexter submits that Dunder has not provided evidence of any actual loss to Dunder through cancellation of the contract. Dexter also submits that it is not permissible for a Court to grant, in effect, specific performance in circumstances where specific performance would not otherwise be available.

[54] Dexter submits that a final matter telling against any relief under s 9 is Mr Graeme Hodge’s position that, even should the total purchase price be reduced from $2.4 million to $1.7 million (or another figure), the price for Mr Flett’s house and section should remain at $700,000.00.

[55] Section 9 provides the Court with power to adjust the position of the contracting parties after cancellation by various means, if it is just and practicable to do so. Its broad purpose is to allow the Court to remedy any particular injustice which results from the operation of the ordinary rules pertaining to the effect of cancellation.[2]

[56] I am of the view, however, that Dunder has not established any particular injustice which results from the operation of the ordinary rules pertaining to the effect of cancellation. Dunder submits that it is clear that the heads of agreement, although involving various apparently self contained transactions, was at least partly premised on allowing Mr Graeme Hodge the opportunity to subdivide the land so that he could generate the profits needed to pay for the homestead block. The evidence on this aspect of the case is, however, vague and insubstantial. I also do not think that a loss of an opportunity is sufficient to warrant the making of an order under s 9 in order to do justice between the parties.

[57] Although it appears that the parties managed to perform all of the other obligations under the heads of agreement, Dunder acknowledges that this was not without difficulty. Dexter refers to other breaches of the heads of agreement in respect of which Dexter chose not to cancel the contract. The fact that Dexter may have affirmed the contract on earlier occasions does not in my view have any relevance to the claim for relief under s 9.

[58] I am also unpersuaded that the proceedings could have been resolved sometime ago if there had been proper disclosure of documentation. Dunder did seek disclosure of the valuation which it thought that Mr Nabney had used in order

_{to support a market value of $2.4 million for the land. Dexter had consistently}

maintained that there was no such valuation which led Dunder to make application for and obtain third party discovery orders against various valuers. The discovery orders did not lead to the disclosure of a valuation of direct and immediate relevance to the market value of the land at the time of the mediation. I have found that the valuation used by Mr Nabney was probably the 2006 Ashworth Lockwood valuation, which was always in the possession of Dunder.

[59] Finally, Dunder has also not produced any evidence relating to any particular damage it has suffered through non-completion of the agreement. In those circumstances, I decline to make any orders under s 9 of the Contractual Remedies Act 1979 in favour of Dunder.

Conclusion

[60] Dunder’s claim fails in its entirety. The proceedings are dismissed. Costs should follow the event. If the parties are unable to agree, I will receive memoranda.

.....................................

Woolford J

---

[1] [1964] 2 QB 699 (EWCA) at 737.

[2] Garratt v Ikeda [2002] 1 NZLR 577 (CA) at [6].