Recent Judgments Sale Of Farm: Claim For Unpaid Deposit

Press, Volume C, Issue 29515, 17 May 1961, Page 20

Recent Judgments Sale Of Farm: Claim For Unpaid Deposit

Macpherson v. McHaffie

[By a Legal Correspondent] Before Mr Justice Henry, at Timaru. As the consent to a sale of land had been given by a land valuation committee subject to a condition that the purchaser should divest himself of certain leasehold interests, a claim by the vendor against the purchaser for the unpaid deposit failed, as all the intended obligations under the sale and purchase agreement remained in a state of suspense until the consent of the Land Valuation Court had been given. Consequently, the vendor had no present right to enforce payment of moneys owing under the sale and purchase agreement, which would have no legal effect until the committee’s condition had been fulfilled by the purchaser.

This was an action In which the plaintiff claimed £5,663 being an unpaid deposit on the sale of a property and unpaid stamp duty amounting to £622 Ils which the defender had agreed to pay to the plaintiff. The plaintiff, the owner of a grazing property containing 602 acres known as “Hazelburn,” had offered it for sale by public auction. The reserve p’rice was not reached; but. immediately after the auction closed, the plaintiff and defendant entered into private negotiation. Conditions of Sale As a result, the defendant signed a “memorandum of contract” which was attached to and formed part of the conditions of sale. This document was also signed by the auctioneer. It was accepted that, in form, it constituted an agreement for sale and purchase at the price stated and upon the conditions of sale under which the property had been offered at auction. The memorandum of contract provided for immediate payment of a deposit of £5663 and Stamp Duty £622 Ils. The important provisions, in the opinion of Mr Justice Henry, were cis. 5 and 17 which respectively read as follows: “5. Each purchaser shall immediately upon the full of the hammer pay to the auctioneer a deposit of £lO per centum of his purchase price in part payment of the purchase money and shall then and there sign the subjoined Memorandum of Agreement to complete the purchase of the property or the lot purchased by him. Each purchaser shall in addition to the above deposit pay to the auctioneer a sum equal to the amount payable for stamp duty on such agreement in respect of this purchase to enable the vendor duly to stamp the same.” “17. The sale at the property and each lot thereof is made subject to the provisions of the Land Settlement Promotion Act 1952, and upon terms that both or all parties will immediately take all necessary steps to secure any consent that may be required and that if any necessary consent be refused the purchaser or purchasers shall be entitled to a refund of any moneys paid under the contract but without interest costs or other compensation.” The defendant did not pay the deposit, stamp duty, or any part of these amounts. Application for Consent Pursuant to ci.7 an application was filed seeking the consent of the Land Valuation Court to the sale. This application was heard by the appropriate land valuation committee on October 20. 1960.

In the meantime, the present proceedings were commenced by the plaintiff. The defendant admitted the transaction, but pleaded, first that c 1.5 provided for payment of such moneys not to plaintiff but to the auctioneers, Wright Stephenson and Company, Ltd., Timaru; and secondly, that there was no recoverable debt as claimed. The case came on for hearing on October 13. 1960. when, on the application of the defendant, the further bearing was adjourned to enable the pending application for consent to be dealt with. The plaintiff applied, with the consent of the auctioneers, Wright Stephenson and Company, Ltd., to have them joined as a further plaintiff. The defendant neither opposed nor consented to this application which was duly granted; and after hearing some evidence then tendered by the plaintiff, the further hearing was adjourned sine die. The pleadings were not otherwise amended. Court's Condition The application for consent has since been dealt with by the land valuation committee, and a decision given on October 21, 1960, in tiie following form: “Application consented subject to the condition that the purchaser forthwith enters into a bond with the registrar of the Land Valuation Court in the sum of £2OOO that he will sell his leasehold interests in the lease of perpetuity, at present occupied by him, within four months from the date of this order, such a bond is to be in a form and upon such terms and conditions as shall be approved by the registrar.” From this decision an appeal to the Land Valuation Court was filed, but it had not* yet been heard. In the meantime, the plaintiffs sought a further fixture, and, by consent, they put in the ‘records of the

Land Valuation Court and then closed their case. The defendant called no evidence. The Court was then asked to give judgment against the defendant for the sums claimed, on the ground that they were debts due payable by the defendant. It was conceded by the plaintiffs that any judgment must and could only be for payment to the added plaintiff, Wright Stephenson and Company, Ltd., which must hold the moneys as a stakeholder for both the vendor and the purchaser. Not a Consent In . his judgment, Mr Justice Henry said that though the land valuation committee had purported to consent couditionally, this decision was not in itself a consent to the sale in terms of the provisions of Part II of the Land Settlement Promotion Act. 1952. Such a consent must be by formal order of the Land Valuation Court. It was common ground, therefore, that the stage had not yet been reached where it can be predicted that the consent has either been granted or refused. The learned Judge then considered the relevant provisions of the Land Settlement Act, 1952. Sections 23 and 24 define the transactions which are either subject to or excepted from the provisions of Part II of the Act. (It was conceded that this transaction was subject to the Act. Clause 17 ex. pressly recognised that fact). The important provision in the statute is 5.25 which is stated to be a provision prohibiting transactions without the consent of the <Land Valuation) Court. Subsection (1) states the circumstances under which transactions are deemed to be entered into contravention of Part II of the Act. It was accepted that the present transaction had not been entered into and was not deemed to be entered into.in contravention of Part II of the Act. (Sub-sections (2) (3) and (4) were not relevant to the present inquiry). His Honour said that sub. (5) was crucial. It reads: “(5) Where any transaction to which this Part of this Act applies is entered into subject to the consent of the Court, the transaction shall not have any effect unless the Court consents to it and the conditions upon or subject to which the consent is granted are complied with. A fair reading of c 1.17 shows that the transaction was entered into subject to the consent of the Land Valution Court. Debt Irrecoverable In Mr Justice Henry’s view, the agreement for sale and purchase evidenced by the executed document was subject to a condition precedent that, to use the exact words of sub. (5), “the transaction shall not have any affect unless the Court consents to it and the conditions upon or subject to which the consent is granted are complied with.” If the Court should grant the relief sought by the plaintiffs, it would be giving effect to the provisions of c 1.5 The plaintiffs had proved no more than a contract which was subject to a condition precedent, so they could not succeed unless they show that the condition had been fulfilled. In his Honour’s view, there was no binding contract; and therefore, no recoverable debt under c 1.5. unless and until the Land Valuation Court consents to the transaction and the

conditions upon or subject to which the consent is granted are complied with. The fate of the condition as to consent was still pending, he added, and quoted from a recognised authority on contracts that "while the condition is thus pending, the obligation to which it is attached is merely conditional, and performance of it cannot be required or enforced. To an action for the enforcement of it, it would be a good plea that a condition of the obligation was still pending and unfulfilled.” Where a transaction is entered into in contravention of the Act, 5.25 (4) provides as follows: “i 4 Where any transaction is entered into in contravention of this Part of this Act, or where any condition upon or subject to which the Court grants its consent to any transaction is not complied with, the transaction shall be deemed to be unlawful and shall have no effect.” State of Suspense

Mr Justice Henry said that the words “shall have no effect” had been considered by the Courts in a number of cases. The construction placed on those words supported the view that they! prevent the contract or agreement evidenced between the parties from acquiring any legal effect. It seemed to the learned judge that all intended obligations concerning the sale and purchase remained in a state of suspense until and unless to quote the words of subs. (5), ‘‘the Court consents to it and the conditions upon or subject to which the consent is granted are complied with.” These words in his view engraft on the transaction a statutory condition which must be complied with before an action will lie for nonperformance. His Honour held accordingly that the plaintiffs had failed to prove that they had at present any right to enforce payment of the moneys claimed. The action was dismissed, and judgment was entered for the defendant with costs according to scale, with witnesses’ expenses and Court disbursements to be fixed by the registrar. Counsel: For the plaintiff. Barrer; for the added plaintiff, Raymond; for the defendant, Perry. Solicitors: For the plaintiff, Barrer and Thompson (Christchurch); for the added plaintiff: Raymond, Tweedy and Hay (Timaru); for the defendant. Wilding. Perry and Acland (Christchurch).