Batchelar Centre Ltd v Westpac New Zealand Ltd
| Jurisdiction | New Zealand |
| Judge | Smith |
| Judgment Date | 25 February 2015 |
| Neutral Citation | [2014] NZHC 272 |
| Docket Number | CIV-2014-454-41 |
| Court | High Court |
| Date | 25 February 2015 |
IN THE MATTER of The Fair Trading Act 1986
[2014] NZHC 272
CIV-2014-454-41
In The High Court of New Zealand Palmerston North Registry
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.
G Mason for Plaintiff, for plaintiff
E Gellert for Defendant
R J Lattonfor Second Defendant
JUDGMENT OF ASSOCIATE JUDGE Smith
The defendants, Westpac New Zealand Limited (Westpac) and Coast to Coast Ltd (Coast), apply to strike-out the plaintiff's (BCL's) claims. In the alternative, they apply for summary judgment.
In 2013, Westpac held a first registered mortgage over a commercial property at 33 Broadway Avenue, Palmerston North (the property). The mortgagor defaulted on its obligations under the mortgage, and Westpac served Property Law Act 1952 notices on it. Those notices expired unremedied on 31 July 2013.
Westpac then set about effecting a mortgagee sale of the property. On 15 October 2013, it appointed Coast (which is the Bayleys Real Estate Ltd franchisee in the Manawatu and Hawkes Bay and trades as “Bayleys Real Estate”) as the real estate agent to marketand sell the property. The property was marketed for a four to five week period, with an auction scheduled for 12 December 2013.
Various offers were made to purchase the property before the auction, but none resulted in agreement. One of the offers was an offer of $750,000 (plus GST) made by Mr Warren McLaughlin (a director of BCL). It was withdrawn on 11 November 2013.
The property did not sell at the auction. It was passed in when the bidding reached $400,000. BCL was the only bidder. The only other prospective buyer at the auction was a representative of Brian Green Properties (Palmerston North) Limited. I will refer to that company in this judgment as “Brian Green”.
Mr Cameron of Coast entered into negotiations with BCL's directors within minutes after the auction. He presented the directors, Mr McLaughlin and Mr Charles, with a form of agreement for the sale and purchase of the property at a price of $400,000, being the amount of the highest bid made (by BCL) at the auction.
The form of agreement which Mr Cameron gave Messrs Charles and McLaughlin was different from the terms on which the auction had just been conducted. Specifically, it contained a “better offer” condition which had not been included in the auction terms and conditions.
The better offer condition was contained in the “Special Conditions of Contract”, at clause 8. It read:
8 BETTER OFFER
8.1 If before settlement of this agreement is effected, the Vendor receives a written offer to purchase the Property on terms considered by the Vendor to be no less favourable than those specified in this agreement, the Vendor may by notice in writing to that effect, given to the Purchaser, immediately cancel this agreement.
8.2 If this agreement is cancelled by the Vendor pursuant to this clause 8.0 then:
(a) the deposit shall be refunded to the Purchaser;
(b) this agreement shall be at an end; and
(c) neither party shall have any claim or further right against the other.
It appears that neither Mr McLaughlin nor Mr Charles appreciated that the form of agreement contained the better offer condition, although Mr Charles acknowledged in his evidence that he has seen clauses like it before. He explained that because he and Mr McLaughlin were negotiating with Coast directly after the auction, he did not expect to be seeing any clauses in the documents which were different from the clauses which would have applied if the property had sold at the auction.
Mr Charles and Mr McLaughlin went ahead and signed the form of agreement, initialling each page, and left the signed offer with Coast.
Westpac did not immediately accept BCL's offer. It wanted the settlement date brought forward to 9 January 2014. BCL rejected that counter-offer, saying that it could not settle earlier than 1 April 2014. Westpac then accepted BCL's terms, and the agreement was completed on 17 December 2013.
Mr Charles says that when Westpac completed the agreement with BCL on 17 December 2014, Mr Cameron told him that the contract was then “unconditional in all respects”.
Although the Agreement required immediate payment of a ten per cent deposit, the deposit was not paid until 4 February 2014.
By late January 2014, the delay in paying the deposit was apparently causing Westpac some concern. On 30 January 2014, Bayleys’ regional manager, Mr Van Dyk, discussed the matter with Mr Tony Bayley, who had charge of Bayleys’ relationship with Westpac. Mr Bayley raised the question of whether a better offer might be obtained from another party, and Mr Van Dyk then briefed three Coast agents to see if they could find anyone else who might be interested in the property.
Coast received a written offer for the purchase of the property from Brian Green. Mr Wiseman, Westpac's solicitor, says that this offer was received by Coast on 31 January 2014, and contained a purchase price of $405,000 and a proposed settlement date of 3 March 2014. Mr Wiseman produced a copy of what is said to be the written offer made by Brian Green. The document is signed on behalf of the purchaser, and each page contains one set of initials (presumably those of the person who signed the agreement for Brian Green). A typewritten purchase price of $400,000 has been crossed out and replaced with a handwritten “$405,000”.
Mr Tuck, a senior associate employed by Westpac's solicitors who was involved in the legal aspects of the transaction with Brian Green, provided a reply affidavit confirming Mr Wiseman's evidence on this point. Mr Tuck's evidence is that Westpac received the offer from Brian Green with the typed purchase price of $400,000 crossed out and replaced with the handwritten purchase price of $405,000. Mr Tuck made some amendments to the form of offer, had it signed by Westpac, and returned it to Coast on 5 February 2014. The amendments included two apparently minor amendments relating to the vendor's GST status, and the addition of a special “back-up” clause making the agreement conditional on Westpac's agreement with BCL being cancelled by Westpac within three working days of acceptance of the Brian Green agreement. The clause provided that Westpac would take all steps necessary to cancel the BCL agreement as soon as reasonably possible.
The amended terms of agreement, signed on behalf of Westpac, were apparently accepted by Brian Green, and the agreement was formally completed and dated 7 February 2014.
On 10 February 2014, Westpac's solicitors wrote to BCL's solicitors purporting to cancel the Agreement (the cancellation letter).
The critical words in the cancellation letter were these:
Westpac has received an offer on terms no less favourable than those specified in the agreement. Accordingly, in terms of special condition 8 of the agreement, we hereby give you notice of cancellation of the agreement.
Coast then returned the deposit to BCL.
BCL's solicitors acknowledged receipt of the cancellation letter on 12 February 2014. They asked for written evidence that a better offer had been received. A day later, they advised that they were instructed to lodge a caveat over the title to the property, unless more evidence was provided to substantiate Westpac's claim that it had received an offer which entitled it to cancel under the better offer condition.
On 14 February 2014, Westpac's solicitors responded, stating that the Brian Green agreement met the criteria of the better offer condition. They contended that BCL had no caveatable interest in the property, as BCL's agreement had been validly cancelled under the better offer condition.
Brian Green and Westpac settled the transaction the same day, some seventeen days earlier than the settlement date provided for in their agreement.
BCL's solicitors sought confirmation, by way of a solicitor's undertaking, that the offer received from Brian Green on which Westpac had acted had been made in writing. Westpac's solicitors responded the same day, confirming that a written offer had been received, that the offer had been accepted, and that the sale of the property had been settled.
Mr Charles and Mr McLaughlin were surprised and annoyed by this turn of events. They thought BCL had a binding...
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