Armstrong v Mitchell [2018] NZHC 2353 (7 September 2018)

Last Updated: 13 September 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-3005 [2018] NZHC 2353

BETWEEN	ANTHONY JOHN RICHARD ARMSTRONG Appellant
AND	MICHAEL WILLIAM MITCHELL and EMMA MARIE MITCHELL Respondents

Hearing:	18 July 2018
Appearances:	K D Puddle and P Shanahan-Pinker for the Appellant H K Gladwell for the Respondents
Judgment:	7 September 2018

JUDGMENT OF PALMER J

This judgment is delivered by me on 7 September 2018 at 3.30 pm pursuant to r 11.5 of the High Court Rules.

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

Registrar / Deputy Registrar

Solicitors:

K3 Legal Limited, Auckland Insight Legal Limited, Auckland

ARMSTRONG v MITCHELL [2018] NZHC 2353 [7 September 2018]

Summary

[1] In 2017, Mr Michael Mitchell and Mrs Emma Mitchell bought a property in Mangawhai, Northland, from Mr Anthony Armstrong. Before settlement, they discovered two bays of the four-car garage, a water-tank and a fence may encroach onto a neighbour’s property. They sought compensation and $25,000 was withheld at settlement. They subsequently sued for pre-contractual misrepresentation and Mr Armstrong counterclaimed for the $25,000. Mr Armstrong sought summary judgment on the basis the Mitchells elected not to requisition the defect in title and are deemed to have accepted title under the standard form sale and purchase agreement (the Agreement). He was unsuccessful in the District Court and now appeals.

[2] Clause 6.2 of the Agreement deems the purchaser to have accepted the title of the vendor subject to any requisitions or objections within the specified timeframe. There was a defect in the title. While the Mitchells did not requisition the defect (ask for it to be remedied), they did object to it by text within the specified timeframe. Accordingly, they are not deemed to have accepted title under the Agreement. I decline the appeal.

What happened?

Negotiation for sale and purchase

[3] Mr Armstrong, a builder, bought a two-acre property at 56 Atkin Road, Mangawhai in 2013. He bought it when it was being subdivided and without surveying its boundaries. It had a house and four-car garage on it and a concrete water tank used for garden irrigation. Mr Armstrong replaced a wire fence, on what he says he thought was the boundary, with a wooden fence.

[4] In October 2016, Mr Armstrong listed the property for sale on TradeMe. The description included the four-car garage. Mr and Mrs Mitchell inquired about the listing through text exchanges. They viewed the property, by themselves. The garage was attractive to them as Mr Mitchell is a mechanic. By 16 December 2017, by text exchange, the Mitchells had agreed they would make a formal offer at $585,000.
[5] Over December 2017 and January 2018, there were continued texts. Mr Armstrong’s lawyers prepared a draft sale and purchase agreement in the ninth edition 2012 (5) of the Real Estate Institute of New Zealand (REINZ) Auckland District Law Society (ADLS) standard form contract. The Mitchells’ lawyers amended it. The purchase price was to be $585,000 with settlement on 10 March 2017 or earlier by agreement. Settlement was subsequently agreed to be 27 February 2017.

[6] On Friday 20 January 2017, the parties signed the Agreement. It was declared unconditional on 31 January 2017. The Agreement includes cl 6, governing titles, boundaries and requisitions, and cl 8, governing disputes, as reproduced in the annex to this judgment which, in particular:

(a) deem the purchaser to have “accepted the vendor’s title except as to objections or requisitions which the purchaser is entitled to make” in respect of which notice is given by the tenth working day after the date of the agreement (cl 6.2);¹

(b) prevents the purchaser from cancelling the Agreement for “error, omission or misdescription” except as provided by s 7 of the Contractual Remedies Act 1979 (cl 6.4) but provides compensation may be required if correctly claimed before settlement; and

(c) provides an experienced property lawyer appointed by the President of the New Zealand Law Society must determine an interim amount to be deducted on settlement until the amount of disputed compensation is determined, if the parties cannot agree (cl 8.4(3)).

Dispute over encroachment

[7] After the Agreement became unconditional, Mr Armstrong allowed the Mitchells to move some things into the property before settlement. 2 February 2017 was eight working days after the Agreement was signed. On that day, while the Mitchells were visiting the property, a neighbour told them part of the garage, the old

1. In cl 1.1(32) “working day” is defined to include provincial holidays. In Northland, that included 30 January 2017.

water tank and a line of trees encroached onto his property. They immediately raised this with Mr Armstrong by text, which led to this text exchange that day:

Mrs Mitchell: Hi, can you please call me asap. The neighbour has

told us that part of the garage, the water tank and the line of trees along the drive are not ours...

My email is [address] the neighbour reckons he could park in the garage if he wanted to

Mr Armstrong: He definitely can not do that the buildings are as I

brought the place well b4 he moved in that’s ridiculous it’s just the rear corner anyways and it’s considered an existing building in those situations so nothing [evidence of text cuts off]

Mrs Mitchell: Ok cool well just send me any info you have, really not up for another headache!

He said that the fence shouldn’t be there and we will have to take it down when he wants to get his 40ft container out...

Mr Armstrong The fence is on the shared driveway and that’s all that

idiot can complain about he has no right saying he could park in the garage

Mrs Mitchell: Ok will get my lawyer to have a look and might have

to get a surveyor out but i know that aint cheap

Mr Armstrong: Yeah that’s fine you don’t need a survivor [sic] as you

can get the info from the council and it show the a little bit of the garage onto the shared driveway but like I said I bought the place as is and it’s an existing building so nothing can be done about it

Just the fence he can have an issue with but if you talk to him he would let you fence up there anyways ???

I was going to build that fence all the way up to the letter box and he knew that and had no issue with it

??? Very strange he is being like that

Mrs Mitchell: Do you know if that row of trees is on your property

or not?

He said to my hubby it shouldnt be there... just worried if he did say it was ok then new owners brought it they might want it taken down etc and by the sounds of it he wants it down to get his container out

Mr Armstrong: I can take it down if you want then he can’t say

anything

Those trees sit right on boundary line I think

Mrs Mitchell Ill see what my lawyer says tomorrow, i just want to

get it fenced so my dogs dont get out & harass stock etc but if we put the fence back then surely it would block the garage!

Mr Armstrong: Yeah that’s fine

[8] That day Mr Armstrong also emailed the Mitchells a diagram by the neighbour showing the encroachment. Because he has not had a survey done, he does not know if it is correct. He agrees this proceeding can proceed on the assumption there is an encroachment.

[9] The next morning, on 3 February 2018, Mrs Mitchell contacted Mr Armstrong by text again. She said she had spoken to the Council and her lawyer, who would be contacting Mr Armstrong’s lawyer about the situation. She said:

[...] if we had [known about the boundary/garage situation] there is a high chance we would not have purchased the property as my husband is a mechanic & the 4 car garage was a big factor, to now find out that half of it is not even on the property and there is issues regarding the fencing has been a real let down. I hope this can all be sorted out fairly :)

[10] Mr Armstrong asked by text in response if they would rather not purchase the place anymore, to which Mrs Mitchell said “no we have to” as their home was now sold and they still liked it, but that they wouldn’t have offered what they had, as putting up a new garage would “cost us at least 20g worst case scenario”.

[11] The Mitchells did not provide a notice of requisition under cl 6.2 of the Agreement. They say their lawyers’ advice was they did not need to. Mr Armstrong says, if they had, he would have cancelled the Agreement and, as a builder, could have resolved the encroachment issue at minimal expense before selling the property.

[12] On 10 February 2017, the Mitchells’ lawyer sent a letter seeking a reduction in purchase price to take account of the cost of remedying the encroachment, though that communication is not in evidence. By that time, the Mitchells had sold their previous house. Mr Armstrong says this and other communications are privileged because they were marked “without prejudice”. I do not need to determine that point.
[13] The Mitchells applied under cl 8.4 for appointment of a third party to determine the quantity of a deduction to be retained from settlement. On 24 February 2017, the President of the New Zealand Law Society appointed Mr Ian Haynes to do so. Mr Armstrong’s lawyers challenged Mr Haynes’ jurisdiction on the basis there was no valid claim under cl 6.4 of the Agreement.

[14] On 28 February 2017, Mr Ian Haynes found the encroachment was an error that related to the nature of the property, rather than the title, and came within cl 6.4 of the Agreement. He directed $25,000 be deducted on settlement, noting the Mitchells were making a claim for compensation under cl 6.4. Settlement occurred that day, with the $25,000 being withheld. It is still withheld.

Proceedings

[15] In May 2017, the Mitchells commenced proceedings in the District Court against Mr Armstrong, seeking $88,000 for remedying the encroachment by moving the garage and water tank, and general damages, on the basis of misrepresentation under the Contractual Remedies Act 1979. They no longer pursue a claim under cl 6.4 of the Agreement. Mr Armstrong counterclaimed for the $25,000, interest and indemnity costs.

[16] In July 2017, Mr Armstrong applied for summary judgment as defendant to the Mitchells’ claim and as plaintiff in his counterclaim. His position was any encroachment is a defect in title under cl 6.2 which the Mitchells are deemed to have accepted in the absence of service a notice of objection or requisition.

[17] In an oral judgment on 20 November 2017, Judge N R Dawson in the District Court declined Mr Armstrong’s application for summary judgment.² Judge Dawson considered Mr Armstrong had not distinguished King v Wilkinson, where a claim based on misrepresentation of a boundary succeeded.³ He had not discharged the onus on him to prove on the balance of probabilities the Mitchells cannot succeed.⁴ Mr Armstrong appeals to the High Court.

² Mitchell v Armstrong [2017] NZDC 29739.

³ At [9] citing King v Wilkinson HC Christchurch, CP 134/92, 1 June 1994.

⁴ At [9].

Relevant law of summary judgment, misrepresentation and requisition

Summary judgment principles

[18] There is no dispute over the legal principles governing summary judgment applied by the District Court. Under r 12.2 of the District Court Rules 2014:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.

(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.

[19] Paraphrasing the Court of Appeal’s summary of the legal principles in Krukziener v Hanover Finance Ltd:⁵

(a) The question is whether there is no real question to be tried. The court must be left without any real doubt or uncertainty.⁶

(b) The onus is on the applicant but where its evidence is sufficient, the respondent will have to respond to defeat the application.⁷

(c) The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence inherently lacking in credibility, for example evidence that is inconsistent with undisputed contemporary documents or other statements by the same deponent or that is inherently improbable.⁸

(d) The court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it.⁹

5. Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]; Deng v Ye [2018] NZHC 391 at [29].

⁶ Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1 (CA) at 3.

⁷ MacLean v Stewart (1997) 11 PRNZ 66 (CA) at 69.

⁸ Eng Mee Young v Letchumanan [1980] AC 331 (PC) at 341.

⁹ Bilbie Dymock CorpLtd v Patel (1987) 1 PRNZ 84 (CA).

[20] Issues of law can be determined on an application for summary judgment, even when difficult.¹⁰ The question for me on appeal is whether the District Court’s decision was wrong.¹¹

Pre-contractual misrepresentation

[21] Under the Contract and Commercial Law Act 2017 (C&CL Act), which consolidates the predecessor Contractual Remedies Act 1979:

(a) liability for pre-contractual misrepresentation requires there to be a misrepresentation which induced the plaintiff to enter the contract (s 35);

(b) the parties to a contract can expressly provide for a remedy for misrepresentation or breach of contract which overrides that (s 34);

(c) a court is not precluded from determining reliance on a pre-contractual representation by a contractual provision unless it considers it is fair and reasonable that the provision should be conclusive (s 50).

Objections and requisitions regarding defects in title

[22] A person who sells a property impliedly undertakes they can provide good title to it.¹² If they do not, at common law, a purchaser is able to object to a defect in the title, which preserves the purchaser’s remedies for it.¹³ Alternatively, such a purchaser can requisition the defect in title; that is, request the defect be remedied. Importantly, the Court of Appeal found in Holmes v Booth a purchaser does not need to use a particular form of words explicitly to object or requisition; they may be construed to have done so by their words and conduct.¹⁴

¹⁰ International Ore & Fertilizer Corp v East Coast Fertiliser Co Ltd [1986] NZCA 115; [1987] 1 NZLR 9 (CA) at 16.

¹¹ Austin, Nichols & Co Ltd v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.

12. Hayes v Ross (No 2) [1919] NZGazLawRp 98; [1919] NZLR 777 (SC) at 780; Lawson v Tupe [2009] NZHC 2620; (2009) 11 NZCPR 119 (HC) at [42]–[43].
13. DW McMoreland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) [McMoreland] at 380– 381.
14. Holmes v Booth (1993) 2 NZ ConvC 191,633 (CA) at 191,636 per Casey J, at 191,642 per Gault J and at 191,646 per Tipping J.

[23] Under s 37 of the C&CL Act, a purchaser of a property with a defect in title can cancel the sale and purchase agreement if the statutory pre-conditions are satisfied. However, the vendor cannot. If a purchaser objects to, or requisitions, a defect in title without cancelling the agreement the vendor will be required to perform the agreement and either compensate the purchaser for the defect or remedy it. Since its inception, the REINZ ADLS sale and purchase standard form contract has softened the impact of this legal situation on a vendor by:¹⁵

(a) imposing a time limit on a purchaser to object or requisition a defect in title; and

(b) empowering the vendor to cancel the Agreement if the vendor is unable or unwilling to remove or comply with the objection or requisition.

[24] McMoreland on Sale of Land states “[t]he purpose of the requisitions clause was to prevent the purchaser from being able to acquire the property at a lesser figure than the purchase price by compelling the vendor to pay compensation for the defect in the title”.¹⁶ The vendor cannot rely on that clause if they entered the agreement recklessly or in bad faith.¹⁷

[25] Since its sixth edition in 1995, the REINZ ADLS contract has also empowered the purchaser to cancel the contract, even though the purchaser had contractual remedies anyway, in order to deal with complications with cross-leases.¹⁸

[26] There are defects in title and there are defects in title. A defect in title that is material and substantial, going “to the root” of the title, entitled the purchaser, under the common law rule in Flight v Booth, to cancel the contract independently of the requisition clause for a defect so extreme the purchaser might never have entered the contract at all.¹⁹ A defect that is a “misdescription”, which is comparatively trivial in

¹⁵ This is reflected in cls 6.2(1) and 6.2(3) of the 2012 (5) version of the contract used here.

¹⁶ McMoreland, above n 13 at 406.

¹⁷ Peter Blanchard “The Requisitions Clause” (1968) 1 AULR 1 at 11, citing Nelthorpe v Holgate (1844) 1 Coll 203, (1844) 63 ER 384; Sivewright v Casey [1949] NSWStRp 15; (1949) 49 SR (NSW) 294; Orchard v Taylor [1909] NSWStRp 12; (1909) 10 SR (NSW) 93; Re Jackson and Haden’s Contract [1906] 1 Ch 412; Re Des Reaux and Setchfield’s Contract [1926] 1 Ch 178 and Baines v Tweddle [1959] 1 Ch 679.

¹⁸ At 406. This is reflected in 6.2(3)(c) of the 2012 (5) version of the contract.

¹⁹ Flight v Booth [1834] EngR 1087; (1834) 131 ER 1160 at 1162–1163

the circumstances, gives rise only to a right of compensation, rather than a right of cancellation.²⁰ This is reflected in cl 6.4 of the version of the contract used here which provides an error, omission or misdescription may entitle the purchaser to compensation, but not to cancel the contract except under the right to cancel the contract under (what is now) ss 36 and 37 the C&CL Act.

[27] So, in Property Ventures Investments Ltd v Regalwood Holdings Ltd, the Supreme Court said: ²¹

A court will generally order a land sale contract to be performed notwithstanding some deficiency in the property as compared with the way it was described in the contract, for example when the area able to be conveyed is less than stated in the contract. That is subject to two important qualifications. First, such an order will not be made against an unwilling purchaser if the deficiency in the description of the property is so substantial that the purchaser will receive a property entirely different from that contracted for. Secondly, the purchaser is entitled to be compensated by the vendor for the deficiency by way of an abatement of the price otherwise due on settlement.

[28] There is potential overlap between the availability of cancellation for objections and requisitions under cl 6.2 and the availability of compensation but not (unless the C&CL Act applies) cancellation under cl 6.4, because misdescriptions may also disclose defects in title. If such a defect is requisitionable, the purchaser must object or requisition within the set period to avoid losing the right to compensation by dint of cl 6.2. ²²

Should I grant summary judgment to Mr Armstrong?

Submissions

[29] Mr Puddle, for Mr Armstrong, relies on Li v Forde for the proposition an encroachment of an improvement onto a neighbouring property is a defect in title which can be requisited under cl 6.2.²³ He submits the Mitchells did not requisition

²⁰ Gardiner v Orchard [1910] HCA 18; (1910) 10 CLR 722 (HCA). See Peter Blanchard “The Requisitions Clause” (1968) 1 AULR 1 at 6 and JF Burrows “Rescission for Defect in Title Under the Torrens System” [1971] AdelLawRw 6; (1971) 4 Adel L Rev 130 at 131–133.

²¹ Property Ventures Investments Ltd v Regalwood Holdings Ltd [2010] NZSC 47, [2010] 3 NZLR 231 at [55] (footnotes omitted).

²² McMoreland, above n 13, at 331.

²³ Li v Forde [2017] NZCA 426.

and so must be deemed to have accepted Mr Armstrong’s title under cl 6.2(1). He submits, under s 35, ss 35 to 49 of the C&CL Act must be read subject to the Agreement. He distinguishes King v Wilkinson on the basis it did not concern an encroachment. On the authority of McMoreland’s commentary on the effect of cl 6.2,²⁴ he submits the Mitchells have no ability to claim compensation for a defect in title where the defect has been accepted. Due to their failure to requisition, Mr Armstrong was denied his right to cancel the contract and the Mitchells are asking the Court to enforce an agreement neither party agreed to. He therefore submits the District Court erred in declining Mr Armstrong’s application for summary judgment.

[30] Mr Gladwell, for the Mitchells, submits they did not waive their rights in respect of misrepresentation under the C&CL Act, the Agreement does not offer a remedy for misrepresentation and they claimed compensation prior to settlement. He submits King v Wilkinson is on point and it will frequently be the case a defect in title will not be apparent until after settlement. He submits cl 6.2 applies to matters registered against the title which are readily discoverable by search. On the authority of McMoreland he submits, where a purchaser has a right to cancel for a defect going to the root of the title, the vendor has no right to insist on recourse to the requisitions clause. He submits the Mitchells did not accept the defect in title but objected to it. He submits the Mitchells are simply asking to receive what Mr Armstrong represented he was selling them.

Decision

[31] The parties have agreed to proceed for the purposes of this application on the assumption the garage did encroach on the neighbouring property. An encroachment is a requisitionable defect in title.²⁵ There is no doubt the parties agreed to sell and purchase the garage as part of the property. Mr Armstrong could not transfer title to all of the property he contracted to sell, because he did not have title to part of it. It did not have to be on the title, as made clear by O’Regan J in Walton Mountain Ltd v Apple New Zealand Ltd.²⁶ The defect did not go to the root of the title. But it was more than trivial. The garage was an important reason for the Mitchells’ offer.

²⁴ McMoreland, above n 13, at [9.07].

²⁵ Li v Forde, above n 23.

²⁶ Walton Mountain Ltd v Apple New Zealand Ltd (2004) 5 NZ ConvC 193, 853.

[32] Although the defect was not readily discoverable by search, it was discovered in fact by the Mitchells on 2 February 2018. The Mitchells did not requisition the defect and did not cancel the Agreement. But, by their words and conduct, they objected to the defect within the period specified in cl 6.2(1). Their immediate and continuing texts on 2 and 3 February 2017 demonstrate that clearly.

[33] Similarly, there is a good argument Mr Armstrong notified the Mitchells of his inability to remove or comply with the objection under cl 6.2(3)(b) by his words and conduct. If he did, the Mitchells did not waive their objection under cl 6.2(3)(c) but maintained it. If he did not, under cl 6.2(3)(b), Mr Armstrong would be deemed to have accepted the Mitchells’ objection. Either way, the Mitchells are entitled to pursue their remedies because they are not deemed to have accepted title under cl 6.2. Clause
6.4 affirms that. The interim amount of compensation of $25,000 was deducted accordingly under cl 8.4, at the direction of Mr Haynes.

[34] Mr Armstrong has not been deprived of an opportunity to cancel the Agreement. If he is taken, by his conduct, to have given a vendor’s notice, under cl 6.2(3)(c) both he and the Mitchells had the power to cancel the Agreement but did not. If he is not, he is deemed to have accepted the Mitchells’ objection.

[35] Accordingly, I am a long way from being satisfied the Mitchells’ cause of action cannot succeed or that they have no defence to Mr Armstrong’s counterclaim. Rather the reverse, on the facts as presented to me.

Result

[36] I decline the appeal.

[37] If costs cannot be agreed I reserve leave for the Mitchells to file submissions of up to 10 pages within 10 working days of the date of the judgment and Mr Armstrong to file submissions in reply of up to 10 pages within five working days of that.


Palmer J

Annex: Clauses 6 and 8 of REINZ ADLS Standard Form Ninth Edition 2012 (5)

6.0 Title, boundaries and requisitions

6.1 The vendor shall not be bound to point out the boundaries of the property except that on the sale of a vacant residential lot which is not limited as to parcels the vendor shall ensure that all boundary markers required by the Cadastral Survey Act 2002 and any related rules and regulations to identify the boundaries of the property are present in their correct positions at the settlement date.

6.2 (1) The purchaser is deemed to have accepted the vendor’s title except as to objections or requisitions which the purchaser is entitled to make and notice of which the purchaser serves on the vendor on or before the earlier of:

(a) the tenth working day after the date of this agreement; or

(b) the settlement date.

(2) Where the transfer of the property is to be registered against a new title yet to be issued, the purchaser is deemed to have accepted the title except as to such objections or requisitions which the purchaser is entitled to make and notice of which the purchaser serves on the vendor on or before the fifth working day following the date the vendor has given the purchaser notice that the title has been issued and a search copy of it as defined in section 172A of the Land Transfer Act 1952 is obtainable.

(3) If the vendor is unable or unwilling to remove or comply with any objection or requisition as to title, notice of which has been served on the vendor by the purchaser, then the following provisions will apply:

(a) the vendor shall notify the purchaser (“a vendor’s notice”) of such inability or unwillingness on or before the fifth working day after the date of service of the purchaser’s notice.

(b) if the vendor does not give a vendor’s notice the vendor shall be deemed to have accepted the objection or requisition and it shall be a requirement of settlement that such objection or requisition shall be complied with before settlement.

(c) if the purchaser does not on or before the fifth working day after service of a vendor’s notice notify the vendor that the purchaser waives the objection or requisition, either the vendor or the purchaser may (notwithstanding any intermediate negotiations) by notice to the other, cancel this agreement.
(4) In the event of cancellation under subclause 6.2(3), the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid under this agreement by the purchaser and neither party shall have any right or claim against the other arising from this agreement or its cancellation. In particular, the purchaser shall not be entitled to any interest or to the expense of investigating the title or to any compensation whatsoever.

6.3 (1) If the title to the property being sold is a cross lease or a unit title and there are:

(a) in the case of a cross lease title:

(i) alterations to the external dimensions of any leased structure; or

(ii) buildings or structures not intended for common use which are situated on any part of the land that is not subject to a restricted user covenant;

(b) in the case of a unit title, encroachments out of the principal unit or accessory unit title space (as the case may be):

then the purchaser may requisition the title under subclause 6.2 requiring the vendor:

(c) in the case of a cross lease title, to deposit a new plan depicting the buildings or structures and register a new cross lease or cross leases (as the case may be) and any other ancillary dealings in order to convey good title; or

(d) in the case of a unit title, to deposit an amendment to the unit plan, a redevelopment plan or new unit plan (as the case may be) depicting the principal and/or accessory units and register such transfers and any other ancillary dealings in order to convey good title.

(2) The words “alterations to the external dimensions of any leased structure” shall only mean alterations which are attached to the leased structure and enclosed.

6.4 Except as provided by section 7 of the Contractual Remedies Act 1979, no error, omission or misdescription of the property or the title shall enable the purchaser to cancel this agreement but compensation, if claimed by notice before settlement in accordance with subclause

8.1 but not otherwise, shall be made or given as the case may require.

6.5 The vendor shall not be liable to pay for or contribute towards the expense of erection or maintenance of any fence between the property and any contiguous land of the vendor but this proviso shall not enure for the benefit of any subsequent purchaser of the contiguous land;

and the vendor shall be entitled to require the inclusion of a fencing covenant to this effect in any transfer of the property.

[...]

8.0 Claims for compensation

8.1 If the purchaser claims a right to compensation either under subclause

6.4 or for an equitable set-off:

(1) the purchaser must serve notice of the claim on the vendor on or before the last working day prior to settlement; and

(2) the notice must:

(a) in the case of a claim for compensation under subclause 6.4, state the particular error, omission or misdescription of the property or title in respect of which compensation is claimed;

(b) in the case of a claim to an equitable set-off, state the particular matters in respect of which compensation is claimed;

(c) comprise a genuine pre-estimate of the loss suffered by the purchaser; and

(d) be particularised and quantified to the extent reasonably possible at the date of the notice.

8.2 For the purposes of subclause 8.1(1), “settlement” means the date for settlement fixed by this agreement unless, by reason of the conduct or omission of the vendor, the purchaser is unable to give notice by that date, in which case notice may be given on or before the last working day prior to the date for settlement fixed by a valid settlement notice served by either party pursuant to subclause 11.1.

8.3 If the amount of compensation is agreed, it shall be deducted on settlement.

8.4 If the amount of compensation is disputed:

(1) an interim amount shall be deducted on settlement and paid by the purchaser to a stakeholder until the amount of the compensation is determined;

(2) the interim amount must be a reasonable sum having regard to all of the circumstances;

(3) if the parties cannot agree on the interim amount, the interim amount shall be determined by an experienced property lawyer appointed by the parties. The appointee’s costs shall be met equally by the parties. If the parties cannot agree on the appointee, the appointment shall be made on the application of

either party by the president for the time being of the New Zealand Law Society;

(4) the stakeholder shall lodge the interim amount on interest- bearing call deposit with a bank registered under the Reserve Bank of New Zealand Act 1989 in the joint names of the vendor and the purchaser;

(5) the interest earned on the interim amount net of any withholding tax and any bank or legal administration fees and commission charges shall follow the destination of the interim amount;

(6) the amount of compensation determined to be payable shall not be limited by the interim amount; and

(7) if the parties cannot agree on a stakeholder, the interim amount shall be paid to a stakeholder nominated on the application of either party by the president for the time being of the New Zealand Law Society.

8.5 The procedures prescribed in subclauses 8.1 to 8.4 shall not prevent either party taking proceedings for the specific performance of the contract.