Cox v Coughlan [2014] NZHC 164 (14 February 2014)

Last Updated: 6 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3083 [2014] NZHC 164

BETWEEN GARY DAVID COX, STEVE COWIE AND GARY DAVID SUTCLIFFE First Plaintiffs

GARY DAVID COX Second Plaintiff

AND MICHAEL JOHN COUGHLAN AND ANNEMARIE ELIZABETH WILSON Defendants

CONVEYANCING SHOP LAWYERS LIMITED

Third Party

Hearing: 4 February 2014

Counsel: R O Parmenter for Plaintiffs

D G Collecutt and M Beresford for Defendants

No appearance for Third Party

Judgment: 14 February 2014

_{JUDGMENT OF RODNEY HANSEN J}

This judgment was delivered by me on 14 February 2014 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors: Daniel Overton & Goulding, Onehunga

Simpson Dowsett Mackie, Mt Roskill.

COX, COWIE AND SUTCLIFFE v COUGHLAN AND WILSON [2014] NZHC 164 [14 February 2014]

Introduction

[1] The first plaintiffs, as trustees of the family trust of the second plaintiff (Mr Cox), own a holiday home at Pauanui. The defendants own a tenanted residential property at Army Bay, Whangaparaoa. In 2012 the defendants were looking for a holiday home. Mr Cox was interested in acquiring an investment property and the family trust wanted to divest itself of the Pauanui property. As the properties were of an approximately equal value, the parties negotiated to swap.

[2] Solicitors were instructed on both sides and agreements, expressed to be collateral, were prepared and exchanged. However, what was signed did not incorporate a series of proposed variations to the terms as originally drafted. Although arrangements were made to settle, ultimately the defendants declined to proceed. They resist the plaintiffs’ proceedings for specific performance of the agreement and damages on the grounds that:

(a) No binding agreement was concluded.

(b) If agreement was reached, it was not enforceable as it did not satisfy the requirements of s 24 of the Property Law Act 2007 for contracts for sale of land to be recorded in writing.

(c) If there was an enforceable agreement, it was validly avoided by the defendants after the plaintiffs failed to give notice that a condition inserted for their benefit had been satisfied.

[3] The plaintiffs’ position is that an agreement was concluded and evidenced in writing. They say, in the alternative, that the defendants are estopped from denying that there is a binding agreement.

[4] If the plaintiffs are able to establish that there is an enforceable agreement, the defendants accept that specific performance and damages should follow but there is a dispute as to the basis on which damages should be calculated.

Binding agreement?

Background facts

[5] Negotiations for the swap had begun in May 2012 after Mr Coughlan and Ms Wilson were introduced to Mr Cox as prospective purchasers by the real estate agent engaged to sell the Pauanui property. Solicitors were instructed by the parties in November 2012. Ms Tara Wratten, of Daniel Overton and Goulding, acted for the Cox interests. Mr Paul Jennings, of Conveyancing Shop Lawyers, was instructed by Mr Coughlan and Ms Wilson.

[6] On 7 December 2012, Mr Jennings sent standard form agreements¹ for sale and purchase for each property to Ms Wratten. Both had been signed by Mr Coughlan and Ms Wilson. The purchase price for Pauanui was stipulated at

$425,000. The price of Army Bay was $419,000. Before the agreements were sent, Ms Wratten had advised Conveyancing Shop by email that Mr Cox would be purchasing Army Bay in his own name as his co-trustees were unwilling to provide the personal guarantees sought by the bank as part of the funding arrangements for the purchase of the Army Bay property. That was not reflected in the agreement prepared by Mr Jennings which showed the trustees as purchasers of the property.

[7] The agreement also failed to include a condition raised in earlier correspondence that Mr Coughlan and Ms Wilson would arrange for the withdrawal of a building consent for works at Army Bay that were never carried out. A third issue the agreement failed to address was an agreement reached by the parties with regard to the chattels to be included in the Pauanui sale. It had been agreed that chattels recorded in a list prepared by Ms Wilson would not be included and would be disposed of by the Cox interests prior to settlement. This was not reflected in the agreement drafted by Mr Jennings.

[8] Ms Wratten made handwritten amendments to the agreements to reflect the three proposed changes. The Pauanui agreement was amended to delete the chattels

_{listed and substitute “Chattels as agreed”. The Army Bay agreement was amended to}

¹ The Ninth Edition 2012 of the form approved by the Real Estate Institute of New Zealand

Incorporated and the Auckland District Law Society Incorporated.

substitute Mr Cox as purchaser and to add a special condition that prior to settlement the vendors would provide written confirmation that the building consent had been withdrawn. Mr Cox signed both agreements, the Pauanui agreement on behalf of the trustees. They were dated 10 December 2012, the date of execution by Mr Cox.

[9] On 11 December, Ms Wratten sent the two agreements to Mr Jennings. She asked him to:

Please confirm the amendment to the contracts (requiring withdrawal of consent) is agreed and countersigned.

She recorded that they had discussed a possible settlement the following day but that settlement the day after may be required.

[10] Mr Jennings immediately sent the agreements electronically to Ms Wilson. She and Mr Coughlan were resident in Sydney. All dealings with Mr Jennings were conducted by Ms Wilson either by telephone or email. His email to Ms Wilson read:

Please see the attached signed agreement.

Settlement is currently scheduled for tomorrow however we are unsure if this will be sufficient time for your bank to arrange the transfer. Can you please confirm the contact details for the person at your bank who will be dealing with this matter?

[11] There was no request for Mr Coughlan and Ms Wilson to sign what is accepted to have been a counter-offer and there is no record of a response by Ms Wilson. However, the following day she advised Mr Jennings that she had spoken to the Auckland Council regarding withdrawal of the building consent and had been told that the Council would, that day, email confirmation that the consent had been withdrawn.

[12] Mr Jennings did not respond directly to Ms Wratten’s request that he confirm that the amendment requiring withdrawal of consent had been agreed and countersigned. The ensuing correspondence was directed to settlement. Mr Jennings simply advised (on 12 December) that he was waiting to hear from the bank and asked whether settlement could be delayed until 14 December 2012.

[13] As it turned out, another issue arose the same day which required settlement to be delayed until the New Year. It concerned the tenancy of the Army Bay property. Although the Army Bay agreement did not refer to a tenancy, it had been agreed between the parties that the property would be subject to an existing tenancy. Indeed, Mr Cox wanted the Army Bay property tenanted as his bank borrowings assumed a rental income. This was yet another respect in which the agreements as drafted did not reflect the wishes of the parties.

[14] On 12 December, Ms Wilson advised Mr Cox that the tenant at Army Bay had given notice. It was agreed that settlement should be delayed until she had found a new tenant. Later that day, Ms Wratten sent the following email to Mr Jennings:

My client advises that it was agreed between him and your client that the property would be purchased tenanted. He understood that the tenant had been in there a year and recently signed a new agreement. He was not aware of any issues with paying rent.

He has obtained finance for the purchase based on the rental.

Can we please agree that the agreement should be conditional upon a new tenant being in the property and exchange of a tenancy agreement. My client will not be able to settle in the present situation.

Please keep us informed of progress.

[15] Mr Jennings replied shortly afterwards as follows:

Thanks for the email. I have updated my client and they will try to secure a new tenant once they sort out the issues with the current tenant.

We will keep you updated but we don’t expect any news prior to the end of

year break.

[16] Early the following day, Ms Wratten sought confirmation of the proposed variation, writing to Mr Jennings as follows:

I’ve spoken again to my client. Can we please confirm a variation to the agreements that the property swap is conditional upon my client being satisfied in all respects with the tenancy arrangements regarding the property.

This may be in relation to the existing tenant or a new one, depending on the reasons for the current default and how it is being remedied.

My client understands that your client was planning on spending the Xmas period at the Pauanui property. He is happy to consider a rental arrangement for this purpose and suggests a rental of $400 per week (equating I understand to the rental on your client’s own property). Can you please take instructions and advise on this also.

[17] Mr Jennings sought instructions from Ms Wilson, writing as follows:

The purchaser of your property has asked if we can vary the agreement to add a clause that the agreement is conditional upon the approval of a tenancy (either the current one or any new one).

Additionally they have asked if you would still like to use the property over the Christmas period. They have suggested a rental of $400.00 per week should you wish to.

[18] Ms Wilson responded:

This is exactly what we were thinking also.

With the fact that we have already set up Electricity to the house, I will buy a cheap lounge suite to get us through just in case the deal falls over after Xmas.

This sounds fair. As the rental side of things has nothing to do with Solicitors or Real Estate Agents I will call Brenda to ask for Gary’s direct details to organise.

[19] This led to Mr Jennings advising Ms Wratten:

Our client agrees to make the arrangements conditional upon the approval of the tenancy for the property.

Our client is interested in renting your clients property for the Christmas period. They have said they will contact your client directly to try and arrange something.

[20] The parties agreed on the rental of Pauanui over the holiday period for $390 per week. Mr Cox said this was well below the market rate of $225 per night. It was agreed on the basis that this would have been the rent Mr Cox could have expected to receive from the Army Bay property if settlement had taken place before Christmas.

[21] On the assumption that a new tenancy would be in place early in the New Year and unexpected complications regarding the withdrawal of the consent resolved, Mr Coughlan and Ms Wilson agreed that settlement could take place on

8 February 2013. On 4 February, Ms Wilson sent Mr Cox the new tenancy agreement for Army Bay and told him the building consent issue had been resolved. She said:

There are no outstanding council requirements. All good to go.

[22] On the basis of settlement on 8 February, settlement statements were exchanged. However, because of the price differential, they highlighted that, contrary to the understanding of Mr Coughlan and Ms Wilson, the transaction did not involve a straight swap of properties. There was a difference of $6,000 in favour of the Cox interests. Mr Cox proposed that the parties compromise by splitting the difference. That was rejected. Ms Wilson told Mr Cox she and Mr Coughlan were “walking away”. Mr Jennings confirmed that they:

... no longer wished to go through with the property swap due to the number of issues that have arisen.

[23] On 14 February, Ms Wratten advised Mr Jennings that the Cox interests intended to hold his clients to the agreements but would be prepared to settle on the basis of equal values. That was rejected and subsequent discussions failed to achieve a solution. The Cox interests lodged a caveat over the Army Bay property. After a defended hearing, the application was upheld by Associate Judge Bell on 2 May

2013.²

Discussion

[24] The defendants say that they did not agree to the counter-offer which incorporated the three changes to the two documents they had signed. They say their solicitor had no authority, actual or ostensible, to accept the counter-offer on their behalf. Mr Collecutt submits that the Conveyancing Shop had authority only to prepare draft agreements for perusal, approval and execution by the parties. He says they had no authority to send correspondence which contained the terms of the

_{contracts and bound the defendants to the contracts.}

² Cox v Coughlan and Wilson [2013] NZHC 973.

[25] Mr Collecutt relied on a line of authority beginning with Smith v Webster³

and including such cases as New Lynn Borough v Auckland Bus Company Limited,⁴

Carruthers v Whitaker⁵ and Concorde Enterprises Limited v Anthony Motors (Hutt) Limited.⁶ He referred me to the following passage in Carruthers v Whitaker as stating the common practise of solicitors in New Zealand: ⁷

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 by both parties would bring finality to their negotiations. Furthermore both parties would expect their solicitors to handle the transaction in a way which would give them proper protection from the legal point of view. There is no evidence whatever in the present case to rebut this prima facie inference. On the contrary, and as found by Wilson J, the parties in fact expected that the contract would eventually be signed by both vendor and purchasers. The Judge then observed that this expectation was “merely a reflection of common practice”. With respect, I would prefer to put it that the parties intended to contract in accordance with 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. (emphasis added.)

[26] The Carruthers v Whitaker approach is frequently adopted in contracts for the sale of land. As Professor McMorland explains, the requirement for writing gives rise to an inference that the parties to an agreement for the sale and purchase of land do not intend to be bound until their agreement is in writing and signed by both.⁸ However, this inference does not prevail if there is clear evidence of a

contrary intention. As was said in Carruthers v Whitaker per Richmond J: ⁹

The true test must be to ascertain the intention of the parties as to the time when and the manner in which they will become bound by contract.

_{The inference will be displaced if it appears that the parties have turned their minds}

³ _{Smith v Webster (1876) 3 ChD 49.}

⁴ _{New Lynn Borough v Auckland Bus Company Limited [1964] NZLR 511.}

⁵ _{Carruthers v Whitaker [1975] 2 NZLR 667 (CA).}

⁶ _{Concorde Enterprises Limited v Anthony Motors (Hutt) Limited [1981] 2 NZLR 385 (CA).}

⁷ _{Carruthers v Whitaker, above n 5, at 671.}

⁸ _{DW McMorland, Sale of Land (3}^rd _{ed, Cathcart Trust, 2011) at 3.11.}

⁹ Carruthers v Whitaker, above n 5, at 672.

to the question and the Court can confirm objectively that they had a common intention that their consensus should constitute a binding contract.¹⁰ It is permissible also to look at the subsequent conduct of the parties towards one another, including what they have said to each other after the date of the alleged contract.¹¹

[27] The question is then whether it can be concluded from the course of dealings between the parties and their solicitors that the counter-offer comprised in the agreements dated 10 December was accepted by the defendants.

[28] Mr Coughlan was the only witness called by the defendants. Ms Wilson did not give evidence. This was surprising as she had all the dealings with the Conveyancing Shop and, as the foregoing narrative shows, most of the direct dealings with Mr Cox. She was present in Court for the hearing and no explanation was given for the failure to call her. I infer that her evidence could not have helped the defence case.¹²

[29] Mr Coughlan said that he did not authorise either Ms Wilson or the Conveyancing Shop to agree on his behalf to the counter-offer or any other agreement. He said he did not become aware of the counter-offer until it was produced in evidence for the purpose of the caveat proceedings. He acknowledged that Ms Wilson could communicate with the Conveyancing Shop on his behalf but said he reserved the right to make his own decisions. He said he read few of the emails which were exchanged, although he was happy for Ms Wilson to continue dealing with their solicitor until a final agreement was produced.

[30] I do not accept Mr Coughlan’s evidence. I found implausible his insistence that he was unaware of what was going on and that Ms Wilson was not authorised to act on his behalf. I believe Ms Wilson had full authority to instruct the Conveyancing Shop on their behalf. The terms of her communication with

_{Mr Jennings and with Mr Cox make it clear she spoke for both defendants.}

¹⁰ _{Verissimo v Walker [2006] 1 NZLR 760 (CA) at [31] – [34].}

¹¹ _{Fletcher Challenge Energy Ltd v ECNZ Ltd [2002] 2 NZLR 433 (CA) at [56].}

¹² In terms of the so-called rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298; [1959] ALR 367 as explained in Ithaca (Custodians) Ltd v Perry Corporation [2004] 1 NZLR 731 (CA) at [146] – [156].

Mr Jennings certainly had no reason to doubt that and did not hesitate to accept and act on her instructions on that basis.

[31] It is also clear that the authority of the Conveyancing Shop was not simply confined to preparing the documents and presenting them for execution, as it was initially instructed to do. That task was carried out with such conspicuous carelessness that matters already agreed and documented were omitted. I refer in particular to the requirement to withdraw the building consent and the omission of the tenancy of Army Bay. What is clear, however, from the subsequent course of dealing is that the Conveyancing Shop’s agency extended well beyond the preparation of documents and included authority to bind their clients. That is clear from the exchanges which led to Mr Jennings confirming that the agreement was conditional on approval of the new tenancy of Army Bay.

[32] This correspondence clearly proceeded on the basis that there was an agreement which could be varied. While Ms Wratten had asked for confirmation that the amendment in relation to withdrawal of the consent was agreed and the contracts countersigned, and should have insisted on a response, the only inference to be drawn from subsequent dealings, is that all matters were agreed and the counter-offer, as set out in the amended documents, was accepted. That included the substitution of Mr Cox as the purchaser of Army Bay. In all subsequent communications and documents he, and not the trustees, was referred to as the

purchaser.¹³ The solicitors on both sides addressed arrangements for settlement and,

when it arose, the variation to deal with the new tenancy, on the basis that agreement had been concluded.

[33] The words and conduct of Ms Wilson (in her dealings with Mr Jennings and directly with Mr Cox and others) and of Mr Jennings, provide compelling evidence that the counter-offer was accepted and a binding contract concluded. I am satisfied that from no later than 12 December 2012 the parties regard themselves as bound by

_{the terms of the counter-offer.}

¹³ See [40] above.

Agreement in writing

[34] The requirement for the agreement to be in writing requires separate consideration.¹⁴ The agreement, though binding, will not be enforceable unless it complies with s 24 Property Law Act 2007 which relevantly provides:

(1) A contract for the disposition of land is not enforceable by action unless—

(a) the contract is in writing or its terms are recorded in writing;

and

(b) the contract or written record is signed by the party against whom the contract is sought to be enforced.

...

[35] The record can be made at any time after the contract was made as long as it comes into existence before proceedings to enforce the contract commenced.¹⁵ The writing can be in any form and had come into existence for any purpose. The sole issue is whether it provides evidence of the contract.¹⁶ The written record may be in electronic form.¹⁷ Similarly, signing may be effected by electronic signature.¹⁸ An electronic signature will be considered adequate if the Court is satisfied that its insertion was intended to signify adoption of the electronic note or memorandum of which it forms part or with which it is otherwise associated.¹⁹ It is not in dispute that

_{emails passing between the parties and their solicitors}²⁰ _{may constitute the written}

record signed by the party.

[36] By s 6 of the Property Law Act, anything that must or may be done by or to a person under the Act may be done by or to the person’s attorney or agent if it is within their authority. Accordingly, the written record may have been created by

_{either the defendants or their solicitor.}

¹⁴ _{McMorland, above n 8, at 4.02.}

¹⁵ _{McMorland, above n 8, at 4.03.}

¹⁶ _{McMorland, above n 8, at 4.04.}

¹⁷ _{Electronic Transactions Act 2002, s 19.}

¹⁸ Electronic Transactions Act 2002, s 22 and see the discussion in Welsh v Gatchell [2009] 1

_{NZLR 241, [2007] NZHC 1898; (2007) 8 NZCPR 708, 5 NZ ConvC 194,549.}

¹⁹ _{Welsh v Gatchell at [75].}

²⁰ As their agents pursuant to Property Law Act 2007, s 6.

[37] In order to meet the requirements of the Property Law Act and the Electronic Transactions Act, the written record must show that the terms of the counter-offer were accepted. There can be no issue that the additional term relating to the tenancy agreement was recorded. The requirement for writing relates to the amended sale and purchase agreements.

[38] The written record may be made up of two or more documents provided the documents are sufficiently connected.²¹ Professor McMorland identifies four alternative means by which such a connection may be established, two of which were relied on by Mr Parmenter. The first is if there is express or implied reference in one document to the others. Such reference must be in the document containing the signature of the party to be charged and may be express or implied. The second method of establishing a sufficient connection is to show an express or implied reference in the signed document to the transaction itself. The essential requirement

is that it be evident from the face of the document that it was brought into being with reference to the particular transaction in question.

[39] In my view, the written record is established in this case by both means. The agreements for sale and purchase which comprised the counter-offer were referred to, expressly or impliedly, in a series of documents, which, when read together, make it clear that the terms of the contract are as set out in the counter-offer, subject only to the variation which was separately documented.

[40] That series of documents begins with Mr Jennings’ email to Ms Wilson enclosing the amended agreements.²² It is followed by a succession of letters directed to arranging settlement later that week and, after difficulties with the tenancy arose, for 8 February 2013. The correspondence directed to settlement can be referable only to the two agreements that comprise the counter-offer. The record of the variation also refers to “agreements” which, can be referable only to the amended agreements.²³ At the time Ms Wilson also referred to the variation in a

_{letter to the real estate agent involved. She said:}

²¹ _{McMorland, above n 8, at 4.05.}

²² _{See [10] above.}

²³ See [15] – [18] above.

The S&P’s are being updated to reflect a NEW clause stating the agreement becomes unconditional upon a new Tenancy Agreement being signed at Army Bay.

Again, the reference to the sale and purchase agreements can be referable only to the amended agreements sent to the defendants by their solicitor.

[41] Following the defendants’ decision not to proceed to settle in February 2013, further documents came into existence which acknowledge the existence of a binding agreement in December. On 16 February 2013, Ms Wilson wrote to Mr Jennings making numerous references to the agreement for sale and purchase and instructing him to give notice to Mr Cox’s solicitors of claimed breaches of the contract. She then advised him that she and Mr Coughlan had advertised Army Bay for sale and had decided to sell to an interested buyer. That agreement, entered into shortly afterwards, contained the following condition, inserted on the advice of Mr Jennings:

18.0 This agreement is conditional upon a prior agreement for sale and purchase dated 10^th December 2012 between the Vendors and Gary David Cox being cancelled by the 5^th day of July 2013 and the Caveat registered on title under Ref No. 9315888.1 being released. This condition is inserted for the sole benefit of the purchasers.

[42] In reply to Ms Wilson’s instruction to give notice of breach, Mr Jennings

advised her that, while a settlement notice could have been issued after 12 December

2013:

At that stage you did not want to cancel the agreements and were still intending to settle.

[43] The requirement for signed record in writing is established by the numerous subsequent references to the counter-offer documents in terms which acknowledge that they record a binding agreement.

Whether contract validly avoided

[44] As earlier discussed, the contract was varied to make it conditional upon

Mr Cox approving the tenancy of Army Bay. The defendants say the condition was

not fulfilled in time and the defendants validly exercised their right to avoid the agreement.

[45] The operation of the condition is governed by cl 9.8 of the agreement for sale and purchase which provides:

9.8 If this agreement is expressed to be subject either to the above or to any other condition(s), then in relation to each such condition the following shall apply unless otherwise expressly provided:

(1) The condition shall be a condition subsequent.

(2) The party or parties for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.

(3) Time for fulfilment of any condition and any extended time for fulfilment to a fixed date shall be of the essence.

(4) The condition shall be deemed to be not fulfilled until notice of fulfilment has been served by one party on the other party.

(5) If the condition is not fulfilled by the date for fulfilment, either party may at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this agreement the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement and neither party shall have any right or claim against the other arising from this agreement or its termination.

(6) At any time before this agreement is avoided the purchaser may waive any financial condition and either party may waive any other condition which is for the sole benefit of that party. Any waiver shall be by notice.

[46] The parties did not specify the date by which the condition must be satisfied. The settlement date is the latest available date²⁴ and is accepted as the date for fulfilment in this case. However, if fulfilment occurs after that date but before avoidance, the right to avoidance is lost.²⁵

[47] Clause 9.8(4) provides that a condition shall be deemed to be not fulfilled unless notice of fulfilment has been given. It appears that notice must be in writing²⁶

²⁴ _{McMorland, above n 8, at 5.08.}

²⁵ _{McMorland, above n 8, at 5.2.}

²⁶ Pillay v Economy Taxi Ltd (2004) 5 NZCPR 902 at [21].

although a recipient of an oral notice may become estopped by their subsequent conduct from denying the validity of the notice.²⁷ The defendants say no such notice was given and they validly exercised their right under cl 9.8(5) to avoid the contract.

[48] After attempts to settle in December 2012 were frustrated, the parties agreed to settlement on 8 February 2013, a Friday. On Monday, 4 February, Ms Wilson sent the new tenancy agreement to Mr Jennings and also sent a copy to Mr Cox. In her covering letter to Mr Cox she went to some lengths to explain the steps he needed to take in order to transfer the tenancy when settlement took place.

[49] Neither Mr Cox nor his solicitor gave express notice that the condition had been fulfilled. However, following receipt of the tenancy agreement, Ms Wratten advised Mr Jennings that she thought Mr Cox “is going to continue with them to begin with”. The reference to “them” is clearly to the new tenant, to whom Mr Cox had the right to give four weeks’ notice. In my view, it was implicit in Ms Wratten’s advice that the tenancy agreement was accepted, notwithstanding that Mr Cox had not made a final decision to continue with the tenancy. That is plainly how Ms Wratten’s advice was understood as Mr Jennings responded by sending an amended settlement statement in anticipation of settlement on 8 February.

[50] As previously mentioned,²⁸ progress towards settlement was interrupted only when the defendants realised (following the exchange of settlement statements) that there was a price differential that would require them to pay $6,000 on settlement when it had previously been assumed that the agreements would provide for a straight swap. Through the lawyers and in discussion with Mr Coughlan, Mr Cox made it clear that he wished to proceed, albeit that he was prepared to accept $3,000 instead of the full amount of the differential. That was unacceptable to the defendants who gave notice that they did not wish to proceed. There was no

_{suggestion to that point that Mr Cox had failed to give notice of fulfilment.}

²⁷ _{Brunt v Corkin (1991) 4 PRNZ 598 and see McMorland, above n 8, at 5.13.}

²⁸ See [22] above.

Damages

[51] It follows that the defendants were in default in failing to settle on 8 February

2013. It is accepted that in that event an order for specific performance should follow on terms that require settlement to occur within four weeks of this judgment or within ten working days of the defendants notifying the plaintiffs’ solicitors that they are ready, willing and able to complete settlement. It is also accepted that the plaintiffs are entitled to recover damages. The basis for calculating damages is, however, in issue.

[52] Mr Cox claims damages comprising rent payable under the tenancy agreement from the date of settlement until the day the property is transferred to him. The tenancy agreement entered into by Mr Coughlan and Ms Wilson in December

2012 was for a term of 13 months to 29 January 2014 at a rental of $380 per week. Mr Parmenter argues that the appropriate measure of damages is the rental that would have been payable under this lease from 8 February 2013 to the date settlement takes place pursuant to the order for specific performance.

[53] It transpires that the defendants decided to terminate the tenancy agreement when the settlement did not proceed probably, it would seem, in order to enable them to complete settlement of the agreement for sale and purchase they had entered into in February 2013 under which the property was sold with vacant possession. The property was not relet until 18 July 2013. The tenancy was for a rental of $420 per week. However, a schedule presented at the hearing shows that the tenant has not been reliable. There are substantial arrears. The total sum received is $11,760.

[54] The defendants say that only rent actually paid is recoverable. They rely on cl 3.13 of the agreement for sale and purchase which provides for the consequences of “Vendor Default: Late Settlement or Failure to give Possession”. Clause 3.13(5) provides:

If this agreement provides for the property to be sold tenanted then, provided that the purchaser provides reasonable evidence of the purchaser’s ability to perform the purchaser’s obligations under this agreement, the vendor shall on settlement account to the purchaser for incomings which are payable and received in respect of the property during the default period less the outgoings paid by the vendor during that period. Apart from accounting for

such incomings, the vendor shall not be liable to pay any other moneys to the purchaser but the purchaser shall pay the vendor the same amount as that specified in subclause 3.13(2)(b) during the default period.

[55] By cl 3.13(1)(a)(iii), the default period in subclause 3.13(5) is the period from the settlement date until the date when settlement occurs.

[56] Subclause 3.13(2)(b), incorporated by reference into subclause 3.15(5)

provides:

The purchaser shall pay the vendor an amount equivalent to the interest earned or which would be earned on overnight deposits lodged in the purchaser’s lawyer’s trust bank account on such portion of the purchase price (including any deposit) as is payable under this agreement on or by the settlement date but remains unpaid during the default period less:

(i) any withholding tax; and

(ii) any bank or legal administration fees and commission charges; and

(iii) Any interest payable by the purchaser to the purchaser’s lender during the default period in respect of any mortgage or loan taken out by the purchaser in relation to the purchase of the property.

[57] Mr Collecutt submits that damages should be calculated in accordance with cl 3.13(5). However, Mr Cox is not confined to the remedies provided by cl 3.13. Subclause 3.13(6) provides:

The provisions of this subclause 3.13 shall be without prejudice to any of the purchase’s rights or remedies including any right to claim for any additional expenses and damages suffered by the purchaser.

If delay in settlement has been caused by the vendor’s default, the purchaser may sue at common law to recover damages for delay.²⁹I accept Mr Parmenter’s submission that damages should be calculated by reference to the rental that would have been payable under this lease. Mr Cox’s losses will, however, be reduced by the interest which would or could have been earned on the purchase price. This is in line with the amount by which rental paid would have been reduced if recovered under

cl 3.13(5) and 3.13(2)(b). I leave it to the parties to calculate that sum, reserving

_{leave to apply in the event they are unable to agree.}

29. Raineri v Miles [1981] AC 1050, [1980] 2 All ER 145, HL and see McMorland, above n 8, at 11.20.

[58] The trustee owners of Pauanui disclosed that they have let the property since

5 September 2013 for $800 per month. Mr Parmenter argued that there should be no credit for this rental income as Pauanui was not sold subject to tenancies. That seems to be the effect of cl 3.12 of the standard form agreement for sale and purchase which applies when a purchaser is in default.³⁰ The vendor is not obliged to pay the purchaser any amount for remaining in possession unless the agreement relates to a tenanted property.

[59] Mr Parmenter sought an award of interest on damages, suggesting 5 per cent per annum with monthly rests. However, I consider the award of damages is sufficient to effect a fair adjustment of the parties’ right. I have particular regard to the benefit accruing to the first plaintiffs as a result of the delay in transferring the Pauanui property.

Result

[60] I make an order that the defendants specifically perform the agreements for sale and purchase of the properties at Pauanui (identifier SA13D/1350) and Army

_{Bay (identifier NA64A/420), settlement to occur within the earlier of four weeks}

³⁰ Clause 3.12 reads as follows:

If any portion of the purchase price is not paid upon the due date for payment, then, provided that the vendor provides reasonable evidence of the vendor’s ability to perform any obligation the vendor is obliged to perform on that date in consideration for such payment:

(1) The purchaser shall pay to the vendor interest at the interest rate for late settlement on the portion of the purchase price so unpaid for the period from the due date for payment until payment (the default period) but nevertheless this stipulation is without prejudice to any of the vendor’s rights or remedies including any right to claim for additional expenses and damages. For the purposes of this subclause, a payment made on a day other than a working day or after the termination of a working day shall be deemed to be made on the next following working day and interest shall be computed accordingly.

(2) The vendor is not obliged to give the purchaser possession of the property or to pay the purchaser any amount for remaining in possession, unless the agreement relates to a tenanted property, in which case the vendor must elect either to:

(a) Account to the purchaser on settlement for incomings in respect of the property which are payable and received during the default period, in which event the purchaser shall be responsible for the outgoings relating to the property during the default period; or

(b) Retain such incomings in lieu of receiving interest from the purchaser pursuant to subclause 3.12(1).

from the date of judgment or ten working days of the defendants notifying the plaintiffs that they are ready, willing and able to complete settlement.

[61] The defendants must pay the second plaintiff damages calculated in accordance with paras [57] – [59] of this judgment.

[62] The defendants must pay the plaintiffs’ costs on a category 2 band B basis.

[63] I reserve leave to the parties to apply for further orders or directions in relation to relief.