Mangawhai Developments Ltd ((in Receivership)) v Mark Robinson Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeWOODHOUSE J
Judgment Date16 February 2011
Neutral Citation[2011] NZHC 144
Docket NumberCIV-2009-404-005617 CIV-2009-404-007920
Date16 February 2011

[2011] NZHC 144

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-005617

CIV-2009-404-005989

CIV-2009-404-007920

BETWEEN
Mangawhai Developments Limited (In Receivership)
Plaintiff
and
Mark Robinson Limited
Defendant
AND BETWEEN
Mangawhai Developments Limited (In Receivership)
Plaintiff
and
Lance Stewart Bennett And Arlene Teresa Paki
Defendants
AND BETWEEN
Mangawhai Developments Limited (In Receivership)
Plaintiff
and
Mdj Properties Limited
Defendant
counsel:

P L Rice for the Plaintiff

G J Mercer for the Defendants

P J Andrew for the Securities Commission

Mr P L Rice, Barrister, Auckland

Mr G J Mercer, Barrister, Auckland

Mr P J Andrew, Barrister, Auckland

Application seeking orders for specific performance of sale and purchase agreements for sections in a residential lifestyle subdivision development with “communal facilities” including lake, tennis courts, a boat ramp etc — defendants claimed entitled to cancel because contract and representations made to them said that communal facilities would be completed prior to settlement— whether the defendants were entitled to cancel the agreements for breach of contract or misrepresentation.

At issue was whether the defendants were entitled to cancel the agreements on the grounds of breach of contract or misrepresentation.

Held: When the written agreements were construed as a whole, MD Ltd was not contractually bound to have completed any particular communal facilities by date of settlement. The express contractual obligation was to convey the designated section or sections. Clause 31.5 of the agreements wherein the vendor agreed “to transfer any Communal Facilities within the Development” prior to settlement did not encompass all the communal facilities, but rather any that may have been on the relevant lot at the date of settlement. Because it was not a term of the agreement that any particular facilities be completed prior to settlement, there could be no contingent condition to this effect. The defendants were not entitled to avoid settlement on the grounds that MD Ltd had failed to provide all or any particular of the facilities, prior to or at least by the date of settlement.

Misrepresentation could not succeed as a bona fide reason for cancelling the agreements, as it could not be shown that R was induced to enter into the agreement based on the misrepresentation. Most of the representations did actually come to fruition. R and MD Ltd did not expressly or impliedly agree that the truth of the misrepresentations were essential to R. In respect of Paki and Bennett, any representations that may have been made were not made through an agent of MD Ltd but through a third party acquaintance of Paki who had dealt with Blomfield. Arguments under the Fair Trading Act also failed. Valuation evidence was clear that the benefit and burden of the contract was not substantially different from what was represented or contracted for. The prerequisites for cancellation under s7 Contractual Remedies Act 1979 (cancellation of contract) were not made out.

There had been a breach of s37 Securities Act 1978 (void irregular allotments), as the agreements for sale and purchase of the sections, with the requirement that each purchaser become a member of a Society and pay a levy in order to share in the communal facilities, constituted an allotment of a security. MJD Ltd technically failed to meet the conditions in cl4(d)(ii) Securities Act (Residential Property Developments) Exemption Notice 1999 (cannot complete sale agreement unless conditions met), in respect of two properties purchased by third parties. Transfers were completed one day early. It was not clear that this necessarily constituted a breach that would result in the agreements with the defendants in this case being declared invalid and of no effect under s 37(4). However, proceeding on the basis that it would, the breach was essentially of a technical nature and in the circumstances of this case, relief should be granted under s37AH Securities Act (transitional provision for relief orders in respect of s37).

Orders for specific performance.

JUDGMENT OF WOODHOUSE J

This judgment was delivered by me on 16 February 2011 at 3:30 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

Introduction
1

The plaintiff developed a subdivision of residential lifestyle blocks on land near Mangawhai. In separate proceedings against Mr Robinson, MDJ Properties Limited, and Ms Paki and Mr Bennett, the plaintiff seeks orders for specific performance of agreements for sale and purchase of a number of sections entered into with each of the defendants.

2

Part of the subdivision proposal was to provide what are referred to in the agreements as “communal facilities” on lot 51 in the subdivision, an area of approximately 22.5 hectares surrounded by the individual lifestyle blocks. These communal facilities are the land itself and a lake and there were proposals for further facilities such as tennis courts and a boat ramp.

3

The defendants' resist the applications for orders for specific performance principally on the basis that the plaintiff was bound to provide a substantial number of identified individual facilities, was bound to have completed all of the specified facilities “prior to settlement”, and failed to do so. In consequence, the defendants contend they were entitled to cancel the agreements, and did so. These defences raise issues relating to construction of the agreements, implication of terms, whether particular representations were made which became terms of the agreements, and whether there were misrepresentations.

4

There are further defences of estoppel and under the Fair Trading Act. In large measure these stand or fall on the outcome of the arguments founded on breach of contract and misrepresentation. There is a separate issue raised by the defendants under s 37 of the Securities Act. And Mr Robinson and Ms Paki also contend that, if orders for specific performance would otherwise be justified, the orders should not be made against them because they do not have the money to settle. I note that Ms Paki and her former partner, Mr Bennett, entered into an agreement with the plaintiff as joint purchasers. Mr Bennett took no part in the proceeding, although a joint statement of defence was filed for Ms Paki and Mr Bennett.

Facts
5

In the first half of 2005 the plaintiff entered into an agreement to purchase a block of approximately 125 hectares of rural land at Devich Road, Mangawhai. The plaintiff's intention was to proceed with subdivision in two stages. The first stage involved subdivision of part of the land into 47 residential sections, described as rural lifestyle blocks. It was also proposed that purchasers of the sections would have access to lot 51 to use the lake and any other facilities within lot 51.

6

The plaintiff had a proposed plan of subdivision completed. It then proceeded with the necessary application under the Resource Management Act 1991. At about the same time the plaintiff proceeded with marketing the sections identified in the proposed plan of subdivision. For the purposes of marketing the plaintiff did two things relevant to this case. One was to appoint two sales agents. The other was to get a standard form agreement for sale and purchase completed as the document to be presented to prospective purchasers.

Sales agents
7

The plaintiff engaged two sales agents. One was an agent with the real estate agency Barfoot and Thompson. Some advertisements from Barfoot and Thompson were put in evidence for the defendants. However, there is no evidence that any of the defendants saw these advertisements or had any dealings with a Barfoot and Thompson agent. For that reason it is unnecessary to refer further to this evidence.

8

The other sales agent was Matthew Blomfield. Around mid-2005 Mr Blomfield was engaged as a sales agent through his company, M J Blomfield Limited. Mr Blomfield's company was engaged for a period of six months on a monthly retainer of $10,000. His company was to be paid $5,000 per sale provided it met a minimum of two sales per month averaged over the six month period, with provision for reduction of the retainer if the target was not met.

9

Mr Blomfield produced a marketing brochure of five pages. It had photographs of the land and the adjoining area. One of the photographs is an aerial photograph with the proposed subdivision superimposed on the photograph, being the proposed subdivision at June 2005. There is a limited amount of text. The only text of relevance is a heading “Common Areas” under which are the words: “tennis court, jogging/walking track, picnic tables, childrens playground, basketball courts, boat ramp”.

10

Darren Wallbank was a director of the plaintiff. He gave evidence that the plaintiff's sales agents were instructed that they could market the sections using the brochure produced by Mr Blomfield and the standard form, draft agreement for sale and purchase. Mr Wallbank's evidence was not contradicted in any material way by Mr Blomfield, being the only witness who might have challenged this evidence. I regarded Mr Wallbank as a credible and reliable witness and I accept his evidence on this point. In this context it may be noted that Mr Blomfield was the only agent appointed by the plaintiff who dealt with any of the defendants, and his dealings were with Mr Robinson and MDJ Properties.

The standard form agreements for sale and purchase
11

It is also of some significance in this case that Mr Blomfield was asked by the plaintiff to arrange preparation of a standard form agreement for sale and purchase. The instructions to the plaintiff's solicitors were given to the solicitors by Mr Blomfield on behalf of the plaintiff. The standard form, draft agreements for sale and purchase are the ones that were completed by...

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