WT Trustee Company Limited v Cato [2014] NZHC 994 (14 May 2014)

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UNDER	the Land Transfer Act 1952
IN THE MATTER	of an application for an order that caveat 9615955.1 against dealings not lapse
BETWEEN	WT TRUSTEE COMPANY LIMITED Applicant
AND	BRUCE HILLIER CATO, GILLIAN SARAH LAWRIE and RICHARD GRAHAM COMPTON _Respondents

Hearing:	5 May 2014
Appearances:	W D Woodd for Applicant D J G Cox for Respondents
_Judgment:	_{14 May 2014}

This judgment was delivered by Justice Peters on 14 May 2014 at 10.30 am pursuant to r 11.5 of the High Court Rules

[1] I delivered a results judgment in this matter on 9 May 2014,¹dismissing an application by the Applicant (“WT”) for an order that caveat 9615955.1 (“caveat”) not lapse.²These are my reasons.

[2] The caveat is lodged against NA20A/238, being the title to a property on Waiheke Island (“property”). WT contends that it has a caveatable interest pursuant to an agreement for sale and purchase dated 12 January 2014 (“agreement”).

[3] The Respondents (“trustees”) are the registered proprietors of the property. They oppose the making of the order sought and contend that WT does not have a caveatable interest, as the parties did not enter into a binding agreement.

[4] The trustees are the trustees of the G S Lawrie Trust (“trust”). They are recorded on the certificate of title for the property as Gillian Sarah Lawrie, Bruce Hillier Cato and Richard Graham Compton.

[5] Affidavits have been sworn and filed by Mr Nixon of WT (in support and in reply), and by each of the trustees. Ms Lawrie adopts Mr Cato’s evidence, although she gives evidence of matters that occurred when neither Mr Cato nor Mr Compton were present. I have no reason to doubt any of the evidence before me. I record, however, that there is an important discrepancy in Mr Nixon’s affidavit as to when he signed the draft agreement at the centre of this dispute. Mr Nixon gives two different dates for this, being 9 January 2014 and then after Ms Lawrie and Mr Cato signed the draft agreement on 11 January 2014. This conflict is not determinative, given the view I take of the matter.

[7] As caveator, WT has the onus of demonstrating a reasonably arguable case for the interest that it claims in the caveat.³Even if it does so, the Court retains discretion to decline to make an order and to allow the caveat to lapse, although the Court will exercise that discretion cautiously.⁴

[8] In the present case, I do not consider that WT has demonstrated a reasonably arguable case for the interest that it claims in the caveat. Accordingly, it is unnecessary for me to consider the exercise of the Court’s discretion.

[9] The issue in the case is whether WT and the trustees entered into a binding agreement for sale and purchase at some time between 9 and 13 January 2014. The agreement or purported agreement (“draft agreement”) is in evidence and it has been executed by Mr Nixon for WT, as the company’s sole director, Ms Lawrie and Mr Cato. Mr Cato is Ms Lawrie’s husband. The draft agreement has not been executed by Mr Compton, and nor will it be, as he does not consider it to be in the best interests of the beneficiaries of the trust. I consider Mr Compton’s signature to be essential to a binding agreement, hence my decision to decline to make the order sought by WT.

[11] Ms Lawrie settled the trust in May 1999 and she, Mr Cato and Mr Compton have been the trustees from the outset. Mr Compton has been a friend and advisor to Mr Cato and Ms Lawrie for more than 27 years and has always taken an active role in trust affairs.

[12] Mr Cato and Ms Lawrie, who have lived in the property, wished to sell it. Mr Compton’s evidence is that the trustees agreed that Mr Cato and Ms Lawrie would select and appoint a local real estate agent for the purpose.

[13] On Tuesday, 7 January 2014 Mr Cato and Ms Lawrie signed an agreement with Cooper & Co Limited. This company holds the Harcourts’ franchise on Waiheke Island and I shall refer to it as “Harcourts”. The effect of the agreement was to appoint Harcourts as the exclusive agent to market the property for sale, for a period of two months. Ms Martick was recorded as the “listing agent”.

[14] It was agreed with Ms Martick that the level of interest in the property would be tested by open homes, with an auction to be held in mid-February if there were sufficient interest. Ms Martick said she considered the sale price was likely to be between $800,000 and $900,000. The first open homes were to be held during the forthcoming weekend, being 11 and 12 January.

[15] Ms Lawrie advised Mr Compton subsequently that she and Mr Cato had appointed Harcourts.

[16] On Thursday, 9 January 2014 Mr Nixon inspected the property. Mr Nixon then spoke to Ms Lawrie and said he proposed to make an offer for the property.

[17] Mr Nixon then inspected the file for the property held at the Auckland Council (“Council”) office on Waiheke. It appeared to Mr Nixon that some work had been done to the downstairs part of the dwelling without building consent. These works were completed prior to Ms Lawrie purchasing the property. Whether they required building consent at the time is unclear but, in any event, I shall refer to them as the “unauthorised works”.

[18] Ms Stewart prepared an offer by WT to purchase the property for $750,000. The offer was unconditional and in the form and on the terms of the ADLS agreement for sale and purchase, 9th edition. The vendors were shown as:

[19] Mr Nixon states that he signed the offer on behalf of WT and noticed that three individuals were shown as the vendors, and that he thought that those individuals might hold the property as trustees.⁵As I have said, on the face of Mr Nixon’s affidavit it is unclear whether he did sign the offer on 9 January. Later in his affidavit, at [15], Mr Nixon says he recalls signing the document on 11 January. Mr Cato’s evidence is consistent with this,⁶as he says Mr Nixon’s signature and initials were added after he and Ms Lawrie had signed the draft agreement on

[20] At some time after Mr Nixon’s inspection, Ms Lawrie reported to Mr Compton that a potential purchaser (Mr Nixon) had already viewed the property and had indicated he would make an unconditional offer to purchase for $750,000, subject to his viewing the Council file. Mr Compton told Ms Lawrie that the offer was too low and suggested a counter offer of $950,000. Mr Compton also told Ms Lawrie that he was going to Taupo for the weekend and would be leaving the following day, Friday, 10 January.

[21] On 10 January 2014, Ms Stewart informed Mr Nixon that another person was showing interest in the property and proposed to make an offer. Ms Stewart invited Mr Nixon to increase WT’s offer which Mr Nixon declined to do.

[22] Later that morning Ms Martick and Ms Stewart presented WT’s offer to Mr Cato and Ms Lawrie. Mr Cato and Ms Lawrie considered the purchase price to be too low, with Ms Stewart responding that Mr Nixon considered the unauthorised

[23] After the agents had left, Mr Cato telephoned Mr Compton and advised that the person who had viewed the property the day before (Mr Nixon) was suggesting that the unauthorised works were a risk and that his offer stood at $750,000. Mr Compton’s evidence is that the trustees were aware that an issue might be raised regarding the unauthorised works and that the property had been marketed as having only one bedroom and bathroom for that reason. Mr Compton reiterated to Mr Cato that the offer was too low, said that he had suggested a counter offer to Ms Lawrie and he expressed concern that the market was not being tested as no open homes had been held. Mr Compton also informed Mr Cato that he was leaving for Taupo that morning and that he would be back on Monday, being 13 January.

$710,000, which Mr Cato and Ms Lawrie rejected. During that discussion Ms Stewart advised that Mr Nixon would raise WT’s offer to $775,000 subject to obtaining a valuation. Mr Cato responded that they wished to proceed with the open homes scheduled for that weekend before making any decision.

[26] Mr Nixon’s evidence is that later in the day Ms Stewart advised him that the vendors had decided not to accept either offer and were going to conduct the open home scheduled for the following day before making any decision. Mr Nixon told her that he would try to obtain an online valuation overnight and come back to her.

[27] At 8.20 am on Saturday, 11 January, Mr Nixon emailed Ms Stewart setting out why he considered WT’s offer of $750,000 to be a good one. In his email Mr Nixon said that he did not wish people at the open homes to be told of or to see the unauthorised works, as that might lead to the Council becoming involved.

[28] Mr Nixon’s evidence is that Ms Stewart telephoned him mid-morning and that, during this discussion, he asked whether Mr Cato and Ms Lawrie had authority to bind all three vendors. Mr Nixon says he was aware that Mr Cato and Ms Lawrie

lived at the property, he had the impression that there had been ongoing communications with Mr Compton and he was concerned to know whether WT would be able to reach a binding agreement before the open home.

[29] Mr Nixon says that Ms Stewart assured him that Ms Lawrie and Mr Cato had authority to bind the third vendor. Mr Nixon said that WT would withdraw its offer unless it had an answer prior to the open home. Ms Stewart asked him to increase the offer to $775,000 and he said that any increase would be conditional on receipt of a satisfactory valuation. Matters were left on the basis that Ms Stewart would telephone Mr Nixon again, which she did at about 11 am.

[30] All trustees are adamant that neither agent had discussed with them whether Mr Cato and Ms Lawrie had authority to bind Mr Compton and that Mr Compton had not given them such authority in any event.

[31] Ms Martick and Ms Stewart advised Mr Cato and Ms Lawrie that WT’s offer of $775,000 was withdrawn (if one was ever made). They also advised that WT’s offer of $750,000 was open for acceptance only if the open homes did not proceed as Mr Nixon was concerned the Council might learn of the unauthorised works. Ms Stewart advised that the vendors could protect themselves in respect of those works by including what was described as an “as is, where is” clause.

[32] Mr Cato and Ms Lawrie had a private discussion. Ms Lawrie was concerned as to the effect of the unauthorised works on potential buyers. Mr Cato was opposed to acceptance of the offer but advised Ms Lawrie that he would support her decision. Mr Cato states that he and Ms Lawrie agreed to make a counter offer for $750,000 on the basis that a condition would be added that the purchaser accepted the property “as is, where is”. Ms Stewart added to the draft agreement the words:

The purchaser accepts the property as is where is, with full knowledge that the downstairs is unpermitted.

[33] Mr Cato and Ms Lawrie signed and initialled the draft agreement. Mr Cato’s

evidence is that Mr Nixon’s signature and initials were inserted subsequently.

[34] Ms Martick asked how Mr Compton’s signature was to be obtained. Mr Cato advised that Mr Compton was away for the weekend. They gave Mr Compton’s cellphone number to Ms Martick but asked that she not telephone him over the weekend. Matters were left on the basis that Ms Martick would contact Mr Compton on Monday, 13 January, and fax the document to him for signature.

[35] Ms Stewart telephoned Mr Nixon and advised that the vendors would accept WT’s offer of $750,000 if the draft agreement were amended as mentioned above. Mr Nixon advised that WT would. They agreed Ms Stewart would email the draft agreement “for signature by WT”.⁷During the conversation Mr Nixon arranged with Ms Stewart to bring his family over to view the property on Sunday, 12 January. Although Mr Nixon states that he had advised Ms Stewart that he would bring his family only if he knew that a binding agreement were in place, in my view he could not have believed that there was such an agreement during that discussion. At the

very least WT would have needed to initial the additional clause and, of course, execute the draft agreement if it had not already done so.

[36] Mr Cato’s evidence is that he and Ms Lawrie did not know that Ms Stewart proposed to send the document to Mr Nixon before the document had been put to Mr Compton.

[37] Ms Stewart did email the agreement to Mr Nixon and asked him to initial the “as is, where is” clause. In [15] of his affidavit Mr Nixon says he recalls that he signed it later that day. Mr Nixon dated the draft agreement “12 January 2014”.

[39] On Sunday, 12 January Mr Nixon and his family visited the property. Mr Nixon’s evidence is that the “For Sale” sign outside the property had a “Sold”

_{sticker on it and that Ms Lawrie said to him words to the effect that
the house is}

“yours now” and “I hope you will be happy here”. Ms Lawrie acknowledges suggesting that the Nixon family would be happy at the property.

[40] Having returned to Auckland, Mr Nixon scanned the agreement and attached it to an email to Ms Stewart which said “Signed and sent back”.

13 January he emailed the scanned document to Ms Stewart (or emailed it again), saying:

[42] The draft agreement provided that the deposit was payable “upon acceptance”. WT paid the deposit to Harcourts on 13 January 2014.

[43] Ms Martick telephoned Mr Compton and said that Mr Cato and Ms Lawrie had signed an agreement for sale and purchase and that she would email the agreement to him for him to sign and return. On receipt of the document, Mr Compton was surprised to find that the purchase price was $750,000. Mr Compton telephoned Mr Cato and said he would not sign until the trustees had met to discuss the matter. That meeting occurred later in the day.

[45] Mr Compton has declined to execute the agreement and will not agree to a sale of the property for $750,000.

[46] If Mr Nixon signed the draft agreement on 9 January 2014, WT made an offer to purchase for $750,000, the offer being made to the vendors:

[47] The effect of the addition of the “as is where is” clause to the draft agreement and execution by Ms Lawrie and Mr Cato was to reject WT’s offer (if it had ever been made, given the lack of clarity as to when WT executed the document) and to commence the process of making a counter offer.

[48] As a general rule, all registered proprietors must execute any agreement for sale and purchase before the vendors are bound to sell. It is usually presumed that any registered proprietor who does execute does so on condition that the other or others will do likewise. These principles are clear from the following.

[49] First, in Burt v Henry,⁸Mr Burt as purchaser sought to maintain a caveat against land held by Mr Henry and Mr Taylor as trustees. Mr Burt alleged a binding agreement for sale and purchase. Only Mr Henry had signed the agreement. At [22] Associate Judge Faire, as he was, said:

[22] Mr Burt’s evidence and the course of correspondence through the emails indicates to me a clear understanding that the normal position in relation to a sale of rural land would apply, namely, that each registered proprietor would sign the sale and purchase contract and that until that stage had been reached no enforceable contract had been entered into. ...

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. .... There is no evidence whatever in the present case to rebut this prima facie inference. ...

It is clear that the written confirmation of Domingo Martinez was not given (in substance or in form) so as to bind the other vendors. His signature was plainly the first step in the affixation of the three signatures that were

required. Having regard to the sequence of events, and indeed the terms of the contract itself which require a subsequent mortgage to be given by all three vendors, his signature was obviously conditional upon the other two vendors agreeing to bind themselves to the same document. The affixation of his signature did not create a separate agreement between himself and the purchaser. It was intended that there be three co-vendors.

Obviously one has to sign before the others. In a contract such as the present, usually the signature of the first co-vendor will be conditional upon signature by the others. ...

[55] Where a co-owner signs a contract document, the presumption or presumed intention is that the signature is conditional upon the signature of the co-owner. That position is consistent with the analysis that I carried out in Burt v Henry.

[56] The registered proprietors are trustees of a trust. In McMorland, Sale of Land the learned authors said:

Where either the vendor or the purchaser is a “trust”, the parties to the contract must be the trustees of the trust, the trust itself not being a legal person. The trustees of a trust are subject to their unanimity (all trustees must act in unanimous agreement) and non-delegation (a trustee may not delegate his or her powers or duties to a co trustee or to a stranger) principles, and each trustee must sign the agreement in the absence of a power for fewer to do so conferred by the trust deed, or under s 31 of the Trustee Act 1956.

If only one vendor has signed the contract, and no agent’s authority to contract between that vendor and the other non-signatory/vendor can be proved, there is normally not a contract between the signatory/vendor and the purchaser; there is normally a presumed intention that the signature is conditional upon signature by the other vendor(s), though this must always depend upon the construction of the events that have occurred between the various parties.

[54] On the application of these principles, it would be necessary for Mr Compton to execute the draft agreement before any binding agreement could exist. For the

¹²D W McMorland, Sale of Land (3^rded, Cathcart Trust, Auckland, 2011) at [4.17].

following reasons, I do not consider these principles are displaced on the facts of this case.

[55] First, I am satisfied that Mr Compton did not (even if he could, as a trustee) authorise his fellow trustees to bind him to an agreement for the sale of the property, whether on the terms of the draft agreement or otherwise.

24. (a) SUBJECT to clause 24 (b) [inapplicable] if there are at any time more than two Trustees then the decision of sixty per cent or more of them shall during the lifetime of the Settlor bind all of the Trustees and be final.

[57] Counsel for WT submits that, in executing the draft agreement, Ms Lawrie and Mr Cato evidenced a decision to sell on those terms, that this is a “decision” for the purposes of clause 24(a) of the trust deed, and that it is binding on all trustees and final accordingly.

[58] In response to this submission, counsel for the trustees submitted that even if a trust deed contains provision for trustees to be bound by a majority decision, there must still be prior consultation with all trustees. Counsel submitted that there had been no such consultation with Mr Compton. It is unnecessary for me to express a view on the legal or factual merits of that submission because I do not consider that the decision Ms Lawrie and Mr Cato made is that identified by counsel for WT.

[59] To the extent that Mr Cato and Ms Lawrie made any decision, I consider they decided to sell on the terms of the draft agreement only if Mr Compton agreed to do likewise. This is evidenced by the discussion with Ms Martick to which I have referred in [34] above. That discussion would have been unnecessary if the two trustees were to bind the third.

[60] I do not consider Ms Lawrie’s words to Mr Nixon to the effect that “you will be very happy here” or the property is “yours now” alters the position. There was no binding agreement then nor after.

[61] Thirdly, I do not accept the submission of counsel for WT that Ms Lawrie and/or Mr Cato had ostensible or apparent authority to bind Mr Compton to an agreement for the sale of the property. Such authority must originate from some act or representation of the principal, in this case Mr Compton.¹³Ms Stewart’s advice to Mr Nixon that such authority existed does not suffice.

[62] For these reasons, I do not consider WT has a reasonably arguable case for the interest that it claims in the caveat.

[63] The parties being agreed that costs should follow the event, WT must pay the

¹³Peter Watts and F M B Reynolds Bowstead & Reynolds on Agency (19^thed, Sweet & Maxwell, London, 2010) at [8-013] - [8-048].

High Court of New Zealand Decisions

WT Trustee Company Limited v Cato [2014] NZHC 994 (14 May 2014)