BFMG Limited v Speirs [2014] NZHC 513 (19 March 2014)

Last Updated: 31 March 2014

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2014-485-2370 [2014] NZHC 513

BETWEEN BFMG LIMITED Plaintiff

AND DAVID JOHN CAMERON SPEIRS First Defendant

GEORGE SPEIRS Second Defendant

Hearing: 19 March 2014

Counsel: A Knowsley and N Manuel for the Plaintiff

M Freeman for the Defendants

Judgment: 19 March 2014

_{ORAL JUDGMENT OF MALLON J}

Introduction

[1] BFMG Limited (BFMG) seeks specific performance of an agreement for sale and purchase of a residential property. This order is sought on an interlocutory application for interim relief. It is sought on the basis that it is said to be clear that BFMG will succeed at trial and in those circumstances it is said that the purchasers should be held to their bargain.

Background

[2] BFMG owns a residential property on a hilly Wellington site. The first defendant, David Speirs, viewed the property on 25 October 2013. In the course of that day he made unconditional offers to purchase the property. BFMG accepted an offer of $1.3 million. The agreement for sale and purchase was signed. The

_{purchaser was David Speirs or his nominee. Settlement was to take place on}

BFMG LIMITED v SPEIRS [2014] NZHC 513 [19 March 2014]

24 January 2014 unless an earlier settlement date was mutually agreed. The deposit was paid on 29 October 2013.

[3] The dispute between BFMG and Mr Speirs concerns whether misrepresentations were made by the vendor’s real estate agents when the property was inspected on 25 October 2013. Mr Speirs says that he told the real estate agents that he wished to have the foundations checked and inspected before he put in an offer so that he would be able to put in a “clean offer”. He says that he was told by one of the real estate agents that the owner, who lives in Australia, was very particular and that soon after the earthquake in August 2013 she had got hold of an engineer and “a full inspection of the house had been done and they had reported that it was absolutely perfect and the foundation was 100 per cent fine”. Mr Speirs says that it was on this basis that he was prepared to enter into the contract. BFMG’s position is that nothing was said about the foundations until after the contract was signed. However, for the purposes of seeking interim relief, BFMG proceeds on the basis that there was a discussion as Mr Speirs contends.

[4] It is not in dispute that Mr Speirs subsequently received a copy of a letter from the Earthquake Commission (EQC) to BFMG dated 28 October 2013. This letter stated that it was in response to a claim which had been lodged with EQC for damage to the property relating to an earthquake on 16 August 2013. The letter advised that the EQC assessor who inspected the property concluded that “the damage was of a pre-existing nature and therefore was present at the time of the earthquake”. Apparently attached to the letter was a document entitled “Statement of Claim”. The document lists items under the headings “Internal Damage Items” and “External Damage Items”. Alongside each of these items there is an “Event Damage?” column and then a further column with a description of various matters. The document provides a description of some damage in relation to the lounge, the en suite, the toilets, the decks and the chimney/fireplace. In relation to each of those items it records “not EQ damage” except in relation to the fireplace where it simply states “no damage”. Alongside all of the listed items under the heading “Event Damage?” EQC has recorded “no”. Included in the items under “External Damage Items” is a line for “foundations”. As with the other items under the “Event Damage?” column “no” is recorded.

[5] Mr Speirs refused to settle. He gave notice of cancellation. BFMG does not accept that this is a valid cancellation.

Serious question to be tried

[6] There is a serious question to be tried. That question is whether Mr Speirs (the first defendant) and/or the second defendant (refer below) breached the agreement by failing to settle. Mr Speirs says he did not because he was induced to enter the agreement by a misrepresentation and he was entitled to cancel the agreement as a result.

[7] BFMG says that there was no misrepresentation. It contends that this is evident on the face of the EQC report. It says that it is evident from the report that EQC inspected all of the house including the foundations and that they have determined that there is no issue with the foundations by recording “no” alongside that item in the “Statement of Claim” document. BFMG further says that, even if there was a misrepresentation, that would not give the defendants the right to cancel the contract because there is no evidence that the parties expressly or impliedly

agreed that the truth of the representation was essential to Mr Speirs.¹

[8] Mr Speirs says that it cannot be determined on the face of the EQC letter and attached document that there was no misrepresentation. He submits that the context of the EQC letter and the “Statement of Claim” document is important and needs to be the subject of evidence at trial. He submits that on the face of the document it is concerned with whether there is “event damage” so it appears to be directed to whether there is earthquake damage (rather than any issue with the property at all). He says that there needs to be evidence as to the purpose of the report, the author of the report, the practice of EQC and what exactly was inspected before this document was completed.

[9] Mr Speirs says that it is not apparent that this is a report saying that the foundations “were 100 per cent fine” and, as that is the only report that has been put

_{forward to support the representation made by the real estate agents on the day of}

¹ Contractual Remedies Act 1979, s 7(4)(a).

inspecting the property, a misrepresentation may well be established at trial. The evidential basis for contending that it was expressly or impliedly agreed that the truth of the representation was essential to him is the affidavit from Mr Speirs as to the discussions which led to the clean offer that was made. In his evidence Mr Speirs says that he made it clear that he would get an engineer to look at it straightaway so that he could put in an unconditional offer and that, in light of the real estate agent’s response, he replied that “if that was the case, I was prepared to enter into a contract”.

[10] I am satisfied that this is not a case where I can be confident that the evidence at trial will not support Mr Speirs’ position. It is not so clear cut that I can say that BFMG would succeed.

Balance of convenience

[11] BFMG’s principal argument in support of interim relief was the strength of its case. But, apart from that, it contends that the balance of convenience favours it because Mr Speirs’ failure to settle has caused it loss and because the property may now be difficult to sell.

[12] BFMG has itemised a number of items of loss that it is incurring pending settlement. These cover loss of rental income from a tenancy which was terminated because Mr Speirs required vacant possession of the property, ongoing loan repayments for borrowing secured against the property, ongoing maintenance costs, ongoing insurance costs and ongoing rate costs. These are all items that can be met by an award for damages. BFMG accepts that. There is no evidence that Mr Speirs

would be unable to meet an award for damages.² As counsel for Mr Speirs submits,

BFMG is seeking payment of the purchase price of $1.3 million. There must be a belief that Mr Speirs is in a position to make that payment. If that is the case, the inference is that he could meet an award for damages for these various ongoing

_{items that BFMG will incur in the interim.}

2. As indicated to counsel at the hearing an affidavit from Mr Speirs setting out his financial position and an undertaking as to damages would have been helpful to confirm this.

[13] In respect of the loss of sale, in the affidavit evidence the principal of BFMG was concerned that the property might now be tainted. There is no evidence to support that concern. It is not unusual for contracts to purchase residential properties to fall through for one reason or another. Houses are able to be remarketed and sold. If the foundations are in fact “100 per cent fine”, this will not be an issue for other purchasers. BFMG further submits that in this market it may be difficult to secure another sale at all or at the agreed price. However, if the property is sold prior to trial for less than the $1.3 million agreed to, the difference in price can be met by an award for damages if BFMG succeeds at trial. Alternatively, if the property is not sold, then it may be that BFMG will succeed in an order for specific performance. Whether or not it will is a matter appropriately determined on the evidence and arguments at trial.

[14] If, on the other hand, an interim order by way of specific performance is granted, it would mean that Mr Speirs would pay the settlement money and take transfer of the property. That transfer would then have to be unwound if ultimately Mr Speirs was successful at trial. There is an undertaking as to damages from BFMG but that is from a company, the principal of which is resident in Australia. There is no information before the Court as to the assets of BFMG apart from this property and there may be difficulties in enforcing an order for damages.

[15] Interim relief ought to preserve the position in a way that involves the least harm pending trial. In this case the balance of convenience favours the status quo. If Mr Speirs is ultimately unsuccessful, he will face a damages award and potentially an order for specific performance. The overall interests of justice do not favour granting specific performance on an interim application.

Other matters

[16] There are two final matters. The first is simply to note that Mr Speirs is in the process of obtaining an engineer’s report about the foundations. That report was not available before today’s hearing. It may be that that report will resolve matters. If it does not, it is important that this proceeding be set down for an early fixture. Counsel should agree timetable orders to enable that to occur. If there is any

difficulty reaching agreement on timetable matters, it should be referred to a duty

Chambers list.

[17] The second matter is to note that it is unclear whether the second defendant is appropriately a party or not. BFMG says that the second defendant has been nominated under the agreement for sale and purchase. BFMG contends that, as he is nominated, he is entitled to enforce the contract and he also ought to be subject to its obligations. The defendants contend that a nomination is not a novation and that the second defendant therefore does not have obligations under the contract. He is simply there to receive the property if that is the will of the first defendant. That issue, if it is not able to be resolved by the parties, may need to be the subject of an application.

Result

[18] The application is dismissed. Costs are reserved to be determined at the substantive trial if not resolved by agreement earlier. Category 2B costs is the appropriate category.

Mallon J