Reid v Laurelwood Vicki Ltd

• Jurisdiction: New Zealand
• Court: High Court
• Judge: Dunningham J
• Judgment Date: 07 March 2025
• Neutral Citation: [2025] NZHC 441
• Docket Number: CIV-2023-409-468

Between

Stuart James Reid and Julie Ann Reid

Plaintiffs

and

Laurelwood Vicki Limited

Defendant

[2025] NZHC 441

Dunningham J

CIV-2023-409-468

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA

ŌTAUTAHI ROHE

Contract, Property — claim for return of deposit — breach of contract — notice to be given vendor's conditions were satisfied — affirmation — interpretation of contracts

Appearances:

C R Johnstone and J D Kaye for Plaintiffs

B G Walker for Defendant

Copy to:

C R Johnstone, Barrister, Christchurch

B G Walker, Barrister, Christchurch

Judgment entered for Laurelwood.

JUDGMENT OF Dunningham J

This judgment was delivered by me on 7 March 2025 at 3.45 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Introduction

1 This case involves a dispute over whether the plaintiffs were entitled to cancel 1 agreements to purchase two townhouses to be constructed because the vendor failed to formally notify them that the vendor's conditions had been satisfied.

2 The plaintiffs say they were so entitled and they sue the defendant, Laurelwood Vicki Ltd (Laurelwood), seeking return of the deposits they paid.

3 The defendant, Laurelwood, says that, interpreted properly, the agreements for sale and purchase did not require notice to be given that the vendor's conditions were satisfied. In any event, it says sufficient information was provided to the plaintiffs by the date of purported avoidance of the contract, to have satisfied any requirement to inform the plaintiffs of fulfilment of the relevant vendor conditions. Alternatively, if there has been a breach of the requirement for notification, the plaintiffs have subsequently affirmed the agreements.

4 Laurelwood counterclaims against the plaintiffs seeking to retain the deposits paid (plus accrued interest) and judgment for such additional sum as is required to compensate it for the commission paid on the sales to the plaintiffs, the costs of resale, and the loss it has suffered represented by the difference between the agreed sale price and the price achieved on a resale of the townhouses, when there were less favourable market conditions.

5 There is very little dispute over the factual circumstances relevant to the claim. The primary dispute is whether the plaintiffs were entitled to avoid the contracts in the circumstances that arose and in light of the terms of the sale and purchase agreements.

The parties

6 At the relevant time, the plaintiffs were married and living in West Melton. They were looking to purchase investment properties, having already purchased an

investment property in Rahera Street, Christchurch, in September 2021. They are now separated and Julie Reid has reverted to using her maiden name Julie Scott. In this judgment, I will refer to her by her maiden name

7 The defendant is a company incorporated on 3 June 2021 for the purposes of carrying out a townhouse development at 25 Vagues Road, Christchurch. The sole director of Laurelwood, Ms Kara Harper, explains that she is also the sole director of Laurelwood Ltd, which is essentially the “parent company” of a number of companies, including Laurelwood, each of which is incorporated to carry out a particular property development.

The agreements for sale and purchase

8 On 4 March 2022 the plaintiffs entered into two agreements with Laurelwood as vendor to purchase two of the four townhouses to be constructed by Laurelwood at 25 Vagues Road, Christchurch.

9 Both agreements were in the standard REINZ-ADLS form, 10 ^th Edition 2019, Version (2). However the agreements were also subject to a comprehensive set of 24 Further Terms of Sale which were drafted by Laurelwood's lawyers and added to the agreements. These included conditions described as “Vendor Conditions” (cl 23), and conditions described as “Purchaser's Condition” (cl 44).

10 The first agreement was for unit 1, a two-storey townhouse of 120.2 square metres. The purchase price for unit 1 was $799,000 including GST, with a deposit of $79,990 payable upon confirmation of the Purchaser's Conditions.

11 The second agreement was for unit 4, a single storey townhouse of 91 square metres. It was on essentially the same terms as the first, but had a purchase price of $739,000 including GST, and required payment of a deposit of $36,950 upon the confirmation of the Purchaser's Conditions, plus a further sum of $36,950 payable “if required for development funding”.

12 On the first page of each agreement, the box entitled “Conditions”, and which cross-references to cl 9.0, had a diagonal line drawn through it. Thus, instead of relying on the General Terms of Sale as to, for example, purchaser finance at cl 9.1, a number of those matters were governed by the Further Terms of Sale which had been added to the agreements. There is an issue as to whether the deletion of the box which refers to the cl 9 conditions is intended to delete all of cl 9, or simply to indicate that the specific conditions referred to in the box are deleted.

13 What was described as the “Purchaser's Condition” was set out in the Further Terms at cl 44.1 through to 44.3. Those provisions read as follows:

44 Purchaser's condition

44.1 This agreement is conditional on the purchaser approving at its sole discretion all matters that it considers may touch, concern or affect the property or the commercial viability of the transaction within fifteen (15) working days from the date of this agreement. This condition is inserted for the sole benefit of the purchaser.

44.2 This agreement is conditional on the purchaser arranging finance on terms and conditions satisfactory to itself within fifteen (15) working dates [sic] from the date of this agreement. This condition is inserted for the sole benefit of the purchaser.

44.3 On confirmation or waiver of the purchaser's conditions under this agreement, the purchaser hereby warrants that it has the financial means to meet the purchaser's obligations under this agreement. If requested by the vendor, the purchaser will provide information to support this warranty within five (5) working days of such request.

14 The Vendor Conditions which were set out in the Further Terms at cl 23 read as follows:

23 Vendor Conditions

23.1 There are certain milestone dates in the programme which are particularly important to the vendor for determining whether the Development can be subdivided substantially in accordance with the Plans and Specifications, and the agreement is conditional on the vendor satisfying the following:

• (a) Consents: obtaining Resource Consents relating to the Development at the vendor's expense and approving any terms and conditions imposed by the relevant Authority and granting the Resource Consents relating to the Development. The purchaser will not be entitled to challenge or seek to have reviewed, the decisions of the vendor under this clause by 29th April 2022;

• (b) Feasibility: confirming to the purchaser that the vendor is satisfied (in its sole and absolute discretion) that the Development is feasible, having regard to the level of sales, subdivision costs, finance costs and terms, availability of Consents and any other matter(s) the vendor considers prudent or appropriate to consider. If this condition is not fulfilled, the vendor shall not be required to disclose any reason for such determination by 29th April 2022;

• (c) Title: obtaining a separate record of title for the Townhouse by 30 September 2024;

• (d) Code of Compliance: applying for and obtaining a Code Compliance Certificate for the Townhouse by 30 September 2024; and

• (e) Practical Completion Certificate: obtaining a Practical Completion Certificate for the Townhouse by 30 September 2024.

23.2 The conditions in clauses 23.1(a) to 23.1(e) are for the sole benefit of the vendor and may be waived or satisfied at the vendor's option.

23.3 If this agreement is cancelled pursuant to clauses 23.1(a) to 23.1(e) the purchaser will be entitled to the return of any deposit paid together with the Net Interest earned thereon, and apart from the obligation to make such payment, neither party will have any right or claim against the other as a result of such cancellation.

15 I note at this juncture that cls 23.1(a) and (b) are awkwardly worded because the date for fulfilment is inserted at the end of each subclause rather than after the first sentence in the subclause. As a consequence, in cl 23.1(a), it suggests there is a time-related qualification to the purchaser's right to challenge a decision under that clause, rather than that the date, is the date for the condition to be either satisfied or waived.

16 The last sentence in cl 23.1(b), reads even more confusingly. It says:

If this condition is not fulfilled, the vendor shall not be required to disclose any reason for such determination by 29 April 2022.

Again, this suggests the date is related to the vendor giving (or not giving) reasons for its decision rather than being the date for the condition to be either satisfied or waived.

17 However, it was common ground that the parties intended the deadline of 29 April 2022 to relate, in each case, to the first part of the condition, being, for cl 23.1(a), the obtaining of suitable resource consents and, for cl 23.1(b), the vendor being satisfied that the development was feasible. I proceed on this basis.

18 I also set out cl 9.10 because the plaintiffs submit that this clause remained operative and governed the parties' obligations in terms of both the Vendor's and Purchaser's Conditions. Clause 9.10 reads as follows:

9.10 Operation of conditions

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...