Batchelar Centre Ltd v Westpac New Zealand Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeSmith
Judgment Date25 Feb 2015
Neutral Citation[2014] NZHC 272
Docket NumberCIV-2014-454-41

[2014] NZHC 272

In The High Court of New Zealand Palmerston North Registry

CIV-2014-454-41

IN THE MATTER of The Fair Trading Act 1986

BETWEEN
Batchelar Centre Limited
Plaintiff
and
Westpac New Zealand Limited
First Defendant
Coast To Coast Limited
Second Defendant
Counsel:

G Mason for Plaintiff, for plaintiff

E Gellert for Defendant

R J Lattonfor Second Defendant

Application by defendants (bank and real estate agent) to strike out claims in breach of contract and misleading or deceptive conduct in breach of the Fair Trading Act 1986, following the cancellation of an agreement to sell property to the plaintiff in a mortgagee sale — first defendant as mortgagee entered into agreement to sell to plaintiff after property was passed in at auction — agreement contained a “better offer” condition, which had not been included in the auction terms and conditions — condition specified that if the vendor received a written offer for the property on terms that were no less favourable, the vendor could by notice in writing “to that effect” immediately cancel the agreement — meaning of “to that effect” — second defendant continued marketing property and first defendant received an offer from a third party — cancellation letter did not specify that the offer received had been in writing — plaintiff alleged that defendants misled it by failing to notify it of the “better offer” clause and that the second defendant was actively marketing the property and that it would put up sold signs on it — whether the agreement was validly cancelled in accordance with the requirements of the “better offer” condition — whether the failure to advise of the ongoing marketing of the property was misleading or deceptive — whether the first defendant had a good faith obligation to advise of ongoing marketing or that a better offer was received.

The issues were: whether Westpac had validly cancelled the Agreement in accordance with the requirements of the better offer condition; whether the failure to advise of the ongoing marketing of the property was misleading or deceptive; and, whether Westpac a duty to act in good faith;

Held:The better offer condition provided Westpac with a right of cancellation only in respect of third party offers (which it judged to be on no less favourable terms) which were in writing. The requirement was that the cancellation notice contained certain statements “to that effect”. The words “to that effect” could only mean that any written notice had to be “to the effect” that:

  • (i) the vendor had received a written offer to purchase; and

  • (ii) the terms of that written offer were considered by the vendor to be no less favourable than those specified in the agreement.

The dictionary definition the expression “to that effect” was “having that result or implication”. The breadth of that definition meant that the requirement was not a particularly difficult one to satisfy. It required no more than that the vendor's message would have been sufficiently understood (viewed objectively, and in the particular context) by the recipient of the notice (in this case BCL).

Although the notice given by Westpac's solicitors to BCL under the better offer condition did not state that the offer Westpac had received was a written offer, the notice did clearly imply that the offer Westpac had received was a written one. It was therefore a notice “to that effect”. BCL could not have been in any doubt that Westpac was telling it that it was entitled to cancel, and was cancelling, because the pre-conditions for cancellation set out in the better offer condition existed. The test was what a reasonable recipient possessing knowledge of all the relevant facts and terms of the agreement would understand ( Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd, per Lord Steyn). The use of the word “Accordingly” in the notice, followed immediately by the specific reference to the better offer condition and the cancellation itself, would have unmistakeably conveyed to any objective reader that the “offer” referred to was one which met the requirements of the better offer condition, and therefore had to have been a written offer.

Westpac's right to cancel under the better offer condition arose as soon as it received the written offer and formed the view that its terms were no less favourable than those specified in the BCL agreement. There was nothing in the better offer condition which precluded subsequent negotiations between Westpac and any third party offeror. The parties could not reasonably have intended that Westpac would have no ability at all to make changes to an offer made by a third party, especially if the changes were relatively minor and the third party offer was otherwise significantly superior to the purchase price and other terms provided in the agreement. Westpac's duty as mortgagee to secure the best price would potentially be compromised if the condition permitted it only to accept or reject a third party offer.

The use of the word “immediately” in the better offer condition was intended only to convey the right to cancel arose as soon as the better offer had been received and the vendor judged its terms to be no less favourable than those specified in the agreement, and that once those pre-conditions were met, no intermediate steps had to be taken by the vendor (e.g. notifying the purchaser of the better offer and/or giving it an opportunity to amend its purchase price or other terms). In that sense, the vendor was entitled to cancel the agreement “immediately” by giving the requisite notice. The fact that the right to cancel arose immediately did not deprive the vendor of a reasonable time to decide whether it would cancel.

As settlement under the BCL agreement was not scheduled to take place until April 2014, the delay between the receipt of the offer from Brian Green on 31 January 2014 and the cancellation on 11 February 2014 did not deprive Westpac of its right to cancel.

BCL's first cause of action, that Westpac's cancellation of the agreement under the better offer condition was invalid, was clearly untenable and should be struck out.

Coast and Westpac did not have a complete defence to the FTA pleadings, and in particular as to why no sold signs were put up at the property. It was arguable that a reasonable person in M's position would have assumed that Coast's stated willingness to put a “sold” sign on the property meant that Coast was not marketing the property to other prospective purchasers, and that, subject only to settlement, BCL had secured the property. To tell M that Coast would arrange to have a “sold” sign put up when Coast was aware that the property had been sold (or was on the point of sale) to Brian Green, was to give M only part of the full story, and arguably misled or deceived him (and therefore BCL).

It was arguable that BCL had lost the chance to try to purchase the property when it was put back on the market at the end of January 2014. BCL had made a written offer of $750,000 for the property before the auction, and it seemed at least possible that BCL would have made a significantly higher offer for the property if it had known that Westpac was looking elsewhere. On the evidence produced, it could not be said with any confidence that any misleading or deceptive conduct on the part of Coast in respect of the “sold” sign, and/or the provision of advance access, had not caused BCL loss.

The defendants had not shown that they had a complete defence to all of BCL's allegations against them and their summary judgment applications had to be dismissed.

In respect of the strike out application, the claim that Coast (and vicariously Westpac) engaged in misleading and deceptive conduct by not advising BCL of the better offer condition was not arguable. First, there was no suggestion that BCL was told that the offer form was in the same terms as the particulars and conditions of sale that applied to the auction. Secondly, the two forms did not look remotely like each other. The directors of BCL were very experienced commercial property investors with experience with mortgagee sales. The FTA did not provide a guarantee to purchasers who failed to look after their own interests, and there was no obligation on Coast to volunteer information about this written contract. A reasonable person in the position of the directors when they signed the agreement (that person being a sophisticated and experienced commercial property investor) would not be likely to have been misled or deceived by a failure to draw the better offer condition to their attention.

Coast was entitled to assume that BCL's experienced directors were aware of the better offer condition. An experienced commercial property investor who was aware of the better offer condition would not be likely to have been misled by the statement allegedly made that the contract was unconditional.

The cause of action based on these allegations would not be struck out.

It was not misleading or deceptive for Coast to enter into a confidentiality agreement with Brian Green. If any such confidentiality agreement with Brian Green existed, it could not have conveyed any misrepresentation to BCL, who at all material times was unaware of it. BCL might argue that any such confidential agreement supported an “intention to conceal”, but s9 FTA was not directly concerned with a defendants’ intentions — it was the likely and actual impact of the conduct on the plaintiff which was primarily relevant.

The FTA did not expressly oblige a commercial party dealing at arm's length with another commercial party to “act in good faith”, or to “deal fairly” with that other commercial party. The only relevant obligation was not to engage in conduct which was likely to be misleading or deceptive.

BCL had no tenable cause of action on allegations in its statement of claim (other than those relating to the sold signs and the failure to advise BCL that it was marketing...

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