Hurlimann v Lilley
| Jurisdiction | New Zealand |
| Judge | Isac J |
| Judgment Date | 20 July 2022 |
| Neutral Citation | [2022] NZHC 1751 |
| Docket Number | CIV-2021-454-23 |
| Court | High Court |
| Year | 2022 |
[2022] NZHC 1751
Isac J
CIV-2021-454-23
IN THE HIGH COURT OF NEW ZEALAND
PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE PAPAIOEA ROHE
Contract, Property — application for removal of restrictive covenants — sale and purchase agreement — covenants related to nature and quality of the residential dwelling to be constructed — approach to contractual interpretation, and the admissibility of extrinsic evidence going to the common contractual intention — illegitimate pressure — exercise of contractual discretion — Land Transfer Act 2017
M Freeman for Plaintiff
D Shepherd for Defendants
Mr Hürlimann wanted to buy a lifestyle section so he could build a home. Mr and Mrs Lilley wanted to subdivide their seven-hectare rural property into four lots so they could sell three of them. These propitious circumstances culminated in an agreement for sale and purchase between the parties relating to a section that was yet to be created.
The agreement contained a provision dealing with the imposition of restrictive covenants. Mr Hürlimann considers the provision prevented Mr and Mrs Lilley from requiring covenants of any kind. Despite this, he agreed they could register a suite of them over the land he was to acquire. He then proceeded to settle the purchase and acquired his title subject to those covenants.
In this proceeding Mr Hürlimann now says the Lilleys breached the agreement by insisting on the covenants. He says their imposition amounted to a variation of the sale agreement that was unsupported by consideration because his consent was the product of illegitimate pressure. He seeks their removal from the title both under the law of contract and in terms of the Court's jurisdiction to remove covenants under s 317 of the Property Law Act 2007.
The primary issue I need to determine is the effect of cl 23 of the agreement for sale and purchase. It governed the imposition of restrictive covenants and the rights of the parties in relation to them.
The trial occupied one day. The evidence consisted of a largely contemporaneous documentary record of communications between the parties' solicitors as well as oral evidence from Mr Hürlimann, his solicitor at the time, Mr Matsis, and Mr Lilley.
My findings of fact are drawn almost entirely from the documentary record.
The areas of conflict between the witnesses were limited. The first area — relating to pre-contractual negotiations — is not relevant to the issues I have to determine. Mr Hürlimann has not brought a claim for misrepresentation or rectification, and the oral evidence does not establish a common pre-contractual understanding of the intended effect of cl 23. 1
The second area of conflict — relating to Mr and Mrs Lilley's true motivations for requiring the restrictive covenants — involved a challenge to Mr Lilley's credibility. As I record later in this judgment, I am not satisfied there is a safe basis on which to conclude that Mr Lilley was not truthful when giving his evidence so, again, I have not found the viva-voce evidence helpful.
Finally, Mr Hürlimann initially proceeded with his claim by way of summary judgment. In the course of dismissing the application, this Court noted that Mr Hürlimann's case relied on a contention that the legal advice he had received about the effect of cl 23 had been wrong. 2 This led the Associate Judge to observe that it would not be appropriate for the Court to embark on an assessment of that question without evidence from Mr Hürlimann's solicitor, Mr Matsis.
Subsequently, Mr Hürlimann appears to have waived privilege and called Mr Matsis as his witness. It follows that I have had the benefit of previously privileged communications between Mr Hürlimann and his lawyer which I have found helpful when considering the issues.
Mr Hürlimann is in his late 20s, and was practicing as a qualified pharmacist until recently.
In 2019 he became aware of a piece of land owned by Mr and Mrs Lilley on Kukutauaki Road, north of Levin, which had been listed for sale on TradeMe.
In August he met with Mr Lilley at the property. Mr Lilley had recently engaged a local firm to prepare survey plans to subdivide his land into four lots. The proposed subdivision looked like this:
After looking around the property together, Mr Hürlimann settled on an area that became Lot 3. Mr and Mrs Lilley already lived on the block, and in fact remain living in a home situated on Lot 1.
Thereafter, the parties negotiated and signed an agreement for sale and purchase. Mr Hürlimann's solicitors prepared the agreement. An original draft contained the following provision: 3
No land covenants are to be registered over the property unless required by the local authority.
Mr Hürlimann was unhappy with this drafting. He did not know the form of covenants the Council might require or whether they would be acceptable to him. So a new cl 23 was introduced. It provided:
The Vendor agrees not to allow any land covenants, easements or Council consents to be registered over the Property without the prior written consent of the Purchaser. If the Purchaser objects to any of the proposed land covenants, easements or Council consents which are required to be registered on the title, the Purchaser may cancel this agreement and receive a full refund of deposit paid.
By cl 22 of the agreement, Mr Hürlimann also had the right to cancel the agreement if the Lilleys failed to obtain a certificate of title for Lot 3 within nine months. And cl 25 contained a number of vendor warranties requiring, amongst other things, Mr and Mrs Lilley to fence the property and fell a shelter belt of trees on the southern boundary.
The purchase price was $223,000, and a substantial deposit, $50,000, was due on execution of the agreement. 4
The agreement was finally signed on 13 January 2020, although it is dated 22 November 2019 (for reasons which are unclear). There is no evidence
Initially the relationship between Mr Hürlimann and the Lilleys was constructive. Over the following months Mr Hürlimann and his partner, and their respective parents, would visit the section to undertake work improving it. They laid telephone cables, weeded and began clearing trees felled by Mr Lilley.
However, by late July or early August 2020, Mr Hürlimann felt his relationship with the Lilleys had become strained for reasons he did not understand. He began to get the impression that Mr Lilley no longer liked him.
On 9 September 2020, the Lilleys' solicitor emailed Mr Hürlimann's advising that for health and safety reasons Mr Hürlimann would need to give notice before visiting Lot 3. The communication also asked for Mr Hürlimann's response in these terms: 5
We refer to clause 24 and 23. Is your client satisfied with the survey plan and easements and consents to be registered?
…
We look forward to hearing from you shortly regarding clause 23 and 24.
It is common ground between the parties that:
-
(a) at the date of this communication, Mr and Mrs Lilley had not sought to impose restrictive covenants on Lot 3 of any kind; and
-
(b) the only “easements and consents” in existence, and to which the Lilleys' solicitors were referring in their email, were those required by the local authority.
This prompted a detailed response from Mr Hürlimann to Mr Matsis. In it, Mr Hürlimann set out in detail some of the difficult interactions that had recently arisen with Mr Lilley. He concluded:
I also feel that [Mr Lilley] knows that he can sell the property for a lot more as Lot 2 (half the size) sold for $265,000 (mine was $223,000) and is trying to push me out of the deal.
…
Moving forward:
It seems that the subdivision will proceed as he has sold Lots 2 and 4 also. 6
It seems that all of the property is in [Mrs Lilley's] name.
1. Does the property being in [Mrs Lilley's] name (alone) change anything?
2. Would it be recommended to put a caveat on the new title once it releases to prevent sale to another party? I imagine there is no benefit putting a caveat on the parent title as it is/should be about to pass through LINZ?
3. In the longer term, would the property be able to be inherited with the caveat on it (or would they have to sell) and can my agreement be held indefinitely (and passed on)?
What are your recommendations?
…
Mr Matsis recommended lodging a caveat. 7 On 11 September 2020, Mr Hürlimann registered a caveat over the property. The evidence is unclear as to whether the caveat was lodged over the entire seven-hectare block of land to be subdivided, or simply Lot 3. Mr Freeman submitted the caveat was only over Lot 3, but this submission is not consistent with the evidence, which suggests that titles had not yet issued. In addition, there are references in subsequent correspondence to the caveat creating delays to the settlement of the sales of other lots.
Regardless, it seems Mr Hürlimann's decision to lodge a caveat was not well received by Mr and Mrs Lilley. On 22 October 2020, the Lilleys' solicitors sent an
The covenants were extensive. They included:
-
(a) a restriction on erecting any buildings “other than a new residential home”;
-
(b) a requirement to construct the new home from high...
To continue reading
Request your trial