Birdwood Rodney Trustee Ltd v Blue Moon Ltd

• Jurisdiction: New Zealand
• Court: High Court
• Judge: Associate Judge Gardiner
• Judgment Date: 18 January 2022
• Neutral Citation: [2022] NZHC 23
• Docket Number: CIV-2021-404-001172

UNDER Section 143 of the Land Transfer Act 2017

Between

Birdwood Rodney Trustee Limited as the trustee of The Birdwood Rodney Trust

Applicant

and

Blue Moon Limited

Respondent

[2022] NZHC 23

Associate Judge Gardiner

CIV-2021-404-001172

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Contract, Property — application for a caveat not to lapse — the applicant declared a sale and purchase agreement with the respondent unconditional — the respondent considered the agreement had come to an end for failure to fulfil a due diligence condition — sufficient notice requirements for cancellation — when cancellation takes effect — Contract and Commercial Law Act 2017 — Land Transfer Act 2017

Appearances:

R B Hucker and M W Swan for the Applicant

D R Bigio QC and Y Mortimer-Wang for the Respondent

JUDGMENT OF Associate Judge Gardiner

This judgment was delivered by me on 18 January 2022 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date

Introduction

1 On 9 June 2021, Birdwood Rodney Trustee Limited ( Birdwood) declared unconditional an agreement it had with Blue Moon Limited ( Blue Moon) to buy a development property in Wellsford. It said it was ready to pay the deposit. This came as a surprise to Blue Moon, who considered that the agreement had come to an end many months earlier. It had moved on.

2 Birdwood maintains that the agreement was still on foot when it declared it unconditional. It remains ready, willing and able to settle the transaction. To protect its claimed equitable interest, it has lodged a caveat against the title of the property. 1 Blue Moon has applied to the Registrar for the caveat to lapse. Birdwood has applied to this Court for an order that the caveat not lapse. 2

3 In this decision, I find that Blue Moon became entitled to avoid the agreement when Birdwood did not fulfil a due diligence condition (the DD Condition) by the agreed date of 30 October 2020. I find that to avoid the agreement, Blue Moon needed to serve written notice under cl 1.3 of the agreement for sale and purchase. I reject Blue Moon's submission that the agreement automatically terminated after the expiry of the DD Condition on 30 October 2020.

4 I further find that Blue Moon did not serve written notice avoiding the agreement on Birdwood. I conclude that Birdwood's email in February 2021 to say that “there is no current land purchase contract…” did not meet the requirements of |a notice under cl 1.3 of the agreement. Nor did a subsequent text message in March 2021.

5 I conclude that separately, Blue Moon became entitled to cancel the agreement when Birdwood breached a term of the agreement requiring it to pay Auckland Council rates for the property.

6 I find that because the agreement does not expressly provide how Blue Moon was to cancel for breach of the term requiring Birdwood to pay Council rates, this situation is governed by s 41 of the Contract and Commercial Law Act 2017 ( the CCLA). Cancellation takes effect when it is “made known” to the other party, by words or conduct showing an intention to cancel, or both.

7 I find that Birdwood has a tenable argument that the February 2021 email and March 2021 text message did not evince an intention to cancel the contract as required by the CCLA. As I am required to sustain the caveat unless it is patently clear that it cannot be maintained, I order that the caveat not lapse. I require Birdwood to prosecute a claim for specific performance without delay.

Issues

8 The main issue is whether the agreement for sale and purchase dated 19 September 2019 was terminated before Birdwood purported to declare it unconditional and take steps to pay the deposit on 9 June 2021.

9 Within the main issue are these issues:

• (a) Did Blue Moon have the right to avoid or cancel the agreement after 30 October 2020?

• (b) If so, how was it to exercise that right?

• (c) Did Blue Moon affirm the contract by its conduct over November and December 2020?

• (d) Did Blue Moon have the right to cancel the agreement because Birdwood had not paid rates invoices according to the agreement?

• (e) Did Blue Moon avoid or cancel the agreement by its 10 February 2021 email and subsequent text message?

• (f) Did Mr Chevin have authority to receive notices from Blue Moon for Birdwood?

Facts

10 The facts are set out in affidavits of Peter Chevin and Alexander Constable for Birdwood and Nigel Muir and Peter Inger for Blue Moon. Mr Chevin's affidavit in support of the application is remarkably brief. Mr Muir's is more fulsome, and exhibits correspondence between himself, Mr Inger, Mr Chevin and their lawyers. Mr Chevin has filed an affidavit in reply. The parties' respective lawyers have not filed affidavits.

11 Because so much turns on the precise words of some of these communications, I set them out in detail in the following paragraphs.

The Agreement

12 Birdwood and Blue Moon entered into a conditional Agreement for Sale and Purchase dated 19 September 2019 on the standard ADLS/REINZ form of Agreement for Sale and Purchase 3 relating to three lots of land running from 259 Rodney Street, along past 3 El Hama Road, to 33 Totara View in Wellsford (the Property). The purchase price was $6,500,000. The agreement was conditional on the purchaser completing due diligence to its satisfaction. A deposit was to be paid when the agreement was declared unconditional by the purchaser. The settlement date was to be 90 calendar days after that.

13 The standard terms of the ADLS form include the following:

1.3 Notices

The following apply to all notices between the parties relevant to this agreement, whether authorised by this agreement or by the general law:

(1) All notices must be served in writing.

(2) Any notice under section 28 of the Property Law Act 2007, where the purchaser is in possession of the property, must be served in accordance with section 353 of the Act.

(3) All other notices, unless otherwise required by the Property Law Act 2007, must be served by one of the following means:

(a) on the party as authorised by sections 354 to 361 of the Property Law Act 2007, or

(b) on the party or the party's lawyer:

(i) by personal delivery; or

(ii) by posting by ordinary mail; or

(iii) by facsimile; or

(iv) by email; or

(v) in the case of the party's lawyer only, by sending by document exchange or, if both parties' lawyers have agreed to subscribe to the same secure web document exchange for this agreement, by secure web document exchange.

(4) In respect of the means of service specified in subclause 1.3(3)(b), a notice is deemed to have been served:

(a) in the case of personal delivery, when received by the party or at the lawyer's office;

(b) in the case of posting by ordinary mail, on the third working day following the date of posting to the address for service notified in writing by the party or to the postal address of the lawyer's office;

(c) in the case of facsimile transmission, when sent to the facsimile number notified in writing by the party or to the facsimile number of the lawyer's office;

(d) in the case of email, when acknowledged by the party or by the lawyer orally or by return email or otherwise in writing, except that return emails generated automatically shall not constitute an acknowledgement.

2.0 Deposit

2.1 The purchaser shall pay the deposit to the vendor or the vendor's agent immediately upon execution of this agreement by both parties and/or at such other time as is specified in this agreement.

2.2 If the deposit is not paid on the due date for payment, the vendor may at any time thereafter serve on the purchaser notice requiring payment. If the purchaser fails to pay the deposit on or before the third working day after service of the notice, time being of the essence, the vendor may cancel this agreement by serving notice of cancellation on the purchaser. No notice of cancellation shall be effective if the deposit has been paid before the notice of cancellation is served.

2.3 The deposit shall be in part payment of the purchase price.

10.0 Conditions and mortgage terms

Operation of Conditions

10.8 If this agreement is expressed to be subject either to the above or to any other condition(s), then in relation to each such condition the following shall apply unless otherwise expressly provided:

(1) The condition shall be a condition subsequent.

(2) The party or parties for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.

(3) Time for fulfilment of any condition and any extended time for fulfilment to a fixed date shall be of the essence.

(4) The condition shall be deemed to be not fulfilled until notice of fulfilment has been served by one party on the other party.

(5) If the condition is not fulfilled by the date for fulfilment, either party may at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this agreement, the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement and neither party shall have any right or claim against the other arising from this agreement or its termination.

(6) At any time before this agreement is avoided, the purchaser may waive any finance condition and either party may waive any other condition which is for the sole benefit of that party. Any waiver shall be by notice.

14 In addition to the standard terms, the parties inserted several further terms and conditions, including:

(a) Clause 19, the DD Condition. The original due diligence date under cl 19, being seven months from the date of the Agreement (19 September 2019), was 19 April 2020. There was a right under cl 19.3 for the purchaser to request an extension of five...