Diplomat Apartments Ltd v Cook Island Property Corporation (NZ) Ltd [2006] CKHC 26; CIV-2006-485-1312 (21 September 2006)

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY

CIV-2006-485-1312

UNDER the Land Transfer Act 1952

IN THE MATTER OF an application pursuant to section 145A of
the Act that Caveat 6852761.1 (Wellington Registry) not lapse

BETWEEN

THE DIPLOMAT APARTMENTS LIMITED
Applicant

AND

COOK ISLAND PROPERTY CORPORATION (NZ) LIMITED
Respondent

Hearing: 30 August 2006

Appearances: H.P. Holland for Applicant
T.C. Stephens and R.P. Brier for Respondent

Judgment: 21 September 2006

In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 3.00pm on the 21^st day of September 2006.

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

Introduction

[1] This is an application pursuant to s145A Land Transfer Act 1952 for an order that Caveat 6852761.1 registered against Certificate of Title WN35B/140 not lapse.

[2] This caveat claims an interest over a property at 56 Mulgrave Street, Wellington ("the property") currently owned by the respondent. The interest claimed by the applicant in the caveat is described as being:

Pursuant to an Agreement for Sale and Purchase dated 12 September 2005 in respect of the land contained in the above Certificate of Title made between the registered proprietor Cook Island Property Corporation (NZ) Limited as vendor and the abovenamed caveator as purchaser.

[3] The application is opposed by the respondent.

Background Facts

[4] For reasons which will become apparent later in this judgment, it is necessary to set out the background to this matter and the events which occurred at the operative times in some detail.

[5] The applicant is an incorporated company having its registered office at Wellington. A major player in the transaction which is the subject of this proceeding is one of the applicant's directors, a Mr Tepaki Nooapii Tepaki ("Mr Tepaki").

[6] The respondent is a company incorporated in New Zealand as a subsidiary of the Cook Islands Government Property Corporation, a statutory corporation owned by the Crown of the Cook Islands, and established by an Act of the Cook Islands Parliament.

[7] Mr Lloyd David Miles ("Mr Miles") also features prominently in this proceeding. He is employed in the role of Legal/Land Manager both for the respondent and for other related Cook Islands companies.

[8] The property at 56 Mulgrave Street, the subject of this proceeding, is currently owned by the respondent. The High Commission of the Cook Islands Government is located there.

[9] On 12 September 2005 the applicant and the respondent entered into a detailed Agreement for Sale and Purchase ("the Agreement") concerning the property. In essence the Agreement provided first, for the respondent to sell the property to the applicant, secondly, for the applicant to redevelop the property into a multi-storeyed unit titled commercial office and apartment complex, and thirdly, for the sale back to the respondent of the commercial office space and some of the apartments.

[10] The applicant's obligations under the Agreement were guaranteed by Mr Tepaki.

[11] The Agreement was a detailed document. It was conditional upon a wide range of conditions being satisfied or waived by varying dates. These conditions were set out in clause 5.2 and 5.2.1 of the Agreement in the following way:

5.2 This Agreement is subject to and conditional upon the following matters being satisfied by the relevant parties, but in any event all such matters are to be satisfied in all respects to the entire satisfaction of The Cooks [the respondent], at The Cooks' entire discretion:

5.2.1 The Diplomat [the applicant], and where relevant or appropriate, the Guarantor [Mr Tepaki]:

(a) obtaining all requisite zoning and resource and building consents including all requisite consents from the Wellington Tenths Trust and all other consents of any nature required to enable the Development to be undertaken by The Diplomat;

(b) obtaining full financing of the Development proposal from a reputable financier and of an amount sufficient to enable the Development to be undertaken by The Diplomat;

(c) entering into a fixed price construction contract for the Development with a contractor, first approved by The Cooks, with such fixed price construction contract to be for a price and on terms and conditions which shall enable the Development to be undertaken by The Diplomat with provision for sufficient profit margin to enable the undertaking of the Development to remain viable;

(d) obtaining sufficient presales of apartments to cover 100% of First Mortgage borrowing with such presales to be for prices and on terms and conditions entirely to the satisfaction of The Cooks including The Cooks' ability to pre-approve any proposed purchaser under any such pre-sale;

(e) obtaining unconditional agreement from all relevant parties including suppliers, contractors and subcontractors on all construction costs of all elements to be incorporated into and comprising the Development, including the obtaining of or provisioning for adequate contingencies;

(f) negotiating and reaching agreement with The Cooks on ordinary industry standards as to the content and timetable for construction of the Development in terms of the Programme as set out in clause 6 of this Agreement;

(g) negotiating and reaching agreement with The Cooks as to the terms and conditions of the Body Corporate Rules including provision for The Cooks to pre-approve subsequent sales of the Apartments, to apply to the Development;

(h) negotiating and reaching agreement with The Cooks in respect of the provision of adequate security to the extent and of a nature entirely to The Cooks' satisfaction to secure The Diplomat's obligations for payment or satisfaction of the Purchase Price for the Property as set out in clause 9 of this Agreement;

(i) negotiating and reaching agreement with The Cooks for, or obtaining confirmation from The Cooks that The Cooks have obtained, relocation arrangements entirely to The Cooks satisfaction and in The Cooks discretion as set out in clause 12 of this Agreement;

(j) preparing at its cost and submitting to The Cooks for The Cooks' approval the Final Plans and Specifications which must be based on the Initial Plans and Specifications prior to submission of such Final Plans and Specifications to the relevant Authority for approval;

(k) preparing and providing to The Cooks for The Cooks' approval prior to submission to the relevant Authority for its approval the proposed unit title plans and associated documentation for the Apartments to enable the Subdivision to be effected by The Diplomat.

[12] Clause 5.4 of the contract provided that the conditions noted in paragraph [10] above under (a), (b), (d), (g), (h), (i) and (k) were to be satisfied or waived by 30 November 2005. In respect of the conditions in paragraphs (f), (j) noted in paragraph [10] above, these were to be satisfied or waived by 31 January 2006. The condition in paragraphs (c) and (e) of paragraph [10] above were to be waived or satisfied by 1 March 2006.

[13] The sequence of events after the contract was signed on 12 September 2005 is important. It was obviously important to the parties and their advisers to monitor progress in having the conditions satisfied, so arrangements for the development could proceed. No doubt with this firmly in mind, on 10 November 2005 the solicitors for the respondent e-mailed the solicitors for the applicant requesting advice as to progress in satisfying the initial conditions under the contract. A holding reply was provided, but no substantive reply received.

[14] Then on 30 November 2005 a meeting took place between Mr Tepaki for the applicant, Mr Miles for the respondent, and a third party, the financial manager of the respondent's parent company. There, Mr Tepaki confirmed that none of the conditions in the contract due to be satisfied by 30 November 2005 were going to be satisfied, and he sought a three month extension to all the conditional dates.

[15] Mr Miles has deposed that at that meeting he informed Mr Tepaki that he, Mr Miles, had no authority to agree to requests for any extensions, and that these were matters which had to go to the Cabinet of the Cook Islands Government. Mr Tepaki's request for an extension was accordingly to be taken to Cabinet.

[16] Subsequently, on 9 December 2005, Mr Miles communicated to the applicant the Cook Islands Cabinet's approval of the three month extension sought. This meant that the conditions which originally were to be satisfied under the Agreement by 30 November 2005 were now to be satisfied by 28 February 2006.

[17] On 23 January 2006 Mr Miles for the respondent wrote to the applicant's solicitors to remind them that the first extended date for satisfaction of the initial conditions was now 28 February 2006. In addition, he sought advice as to progress in satisfying those conditions. No reply was received to this request.

[18] On 6 February 2006 Mr Miles again e-mailed the applicant's solicitors setting out verbatim each of the conditions under the Agreement due to be satisfied by 28 February 2006, and again pointing out the date by which these conditions needed to be satisfied or waived. He requested a detailed note of progress.

[19] No response was received to this 6 February 2006 e-mail, so on 8 February 2006 Mr Miles re-sent it.

[20] On that date, 8 February 2006, the applicant's solicitors replied, simply saying that they were trying to get instructions.

[21] On 12 February 2006 Mr Tepaki purported to respond on behalf of the applicant. This response, however, provided no real details of any progress in satisfying the conditions.

[22] Given this response from Mr Tepaki, on 13 February 2006 Mr Miles e-mailed the applicant's solicitors asking (amongst other things) for:

a) Clear advice as to when the conditions were to be satisfied;

b) Details of progress in relation to each of the conditions;

c) If the applicant was intending to seek extensions on any of the conditions, an accurate indication of the length of time that would be sought.

[23] No response was received to this 13 February 2006 e-mail, so on 17 February 2006 Mr Miles again took the action of re-sending it.

[24] On 19 February 2006 the applicant's solicitors responded referring to a meeting which was to take place in Wellington on 22 February 2006. They indicated that:

...one would expect that there will be more clarity thereafter.

[25] On 20 February 2006 Mr Miles replied, referring again to his 6 February 2006 e-mail (noted at paragraph [18] above), and asking that each and every item be addressed. He also noted again that any anticipated extensions which the applicant might wish to request should be canvassed with him now rather than later.

[26] No response was received to this 20 February 2006 e-mail for several days. This was despite the indication that a meeting involving Mr Tepaki was to take place on 22 February 2006, so Mr Miles re-sent the e-mail twice on 23 February 2006.

[27] On that date, 23 February 2006, the applicant's solicitors sent a further holding response.

[28] On 24 February 2006 Mr Miles e-mailed in reply, indicating that a meeting of the respondent's Board was to take place that day, and progress (or lack of it) with the Agreement would be discussed. The Board was then to report to the Cook Islands Cabinet which was to meet on 28 February 2006. Mr Miles also indicated in that e-mail that the applicant would evidently need to seek an extension of time for satisfying the conditions, and he asked for a detailed progress report and a realistic suggestion as to the extension dates requested so as to avoid having to go back to Cabinet again. In that e-mail Mr Miles stated specifically:

Given the lack of progress, Tepaki will obviously need to extend and indeed, as you are aware, we have requested Tepaki to formally request those before the satisfaction dates.

[29] In response, on 26 February 2006 the applicant's solicitors e-mailed Mr Miles asking for a one month extension.

[30] On 27 February 2006 Mr Miles replied by e-mail to the following effect:

a) He suggested that the applicant might consider asking for more than a month's extension to avoid him having to go back to the Cook Islands Cabinet later asking for more extensions.

b) He asked the applicant's solicitors to reply at their earliest convenience, and in any event, by the end of the day.

c) He described in detail the process by which the Cook Islands Cabinet must agree to any requests for extensions.

[31] No reply was received to this e-mail, so on 28 February 2006 Mr Miles again re-sent the 27 February 2006 e-mail three times (and in the third e-mail he gave another e-mail address for himself as he was to be on leave for the next month).

[32] Nothing further appeared to happen until the end of March 2006.

[33] And it was again Mr Miles who instigated matters at that time. He e-mailed the applicant's solicitors, this time on 29 March 2006, saying that a month had gone by and he was unaware of any developments. He indicated that a Cabinet submission would need to be made, and he had nothing to tell them.

[34] In reply, on that date, the applicant's solicitors said that they had not received any recent instructions on this project.

[35] The next event occurred some two days later. This was in the evening of 31 March 2006 when Mr Tepaki telephoned Mr Miles at home. The evidence of Mr Miles and Mr Tepaki with respect to this 31 March 2006 telephone conversation is important.

[36] As to this conversation, Mr Miles in his affirmation dated 27 June 2006 states:

25. In the evening of 31 March 2006, Mr Tepaki telephoned me at home. He said that he had heard a rumour that Cabinet was going to cancel the agreement. I told him that I was not aware of any proposal to cancel the agreement. I did however tell Mr Tepaki that I would have to advise Cabinet that none of the conditions in clauses 5.2.1 had been fulfilled (despite several of them needing to be satisfied by 28 February 2006) and that I had no information to pass on to Cabinet regarding progress of the project. Mr Tepaki told me that good progress had been made with the project but DAL needed to review the project for its commercial viability. He told me that he would prepare a report and send it to me over the weekend. I told him that a report would be helpful.

26. At paragraph 10 of his affidavit, Mr Tepaki states that I told him that 'the conditions were extended in anticipation of a report from the purchaser'. I said nothing of the sort. I deny categorically that I agreed (on behalf of CIPNZ or at all) to extend the due date for satisfaction of the conditions in the agreement or said anything that could be construed as such. As I have explained in paragraph 8 above (and in my e-mail to DAL's solicitors of 27 February annexed to Mr Tepaki's affidavit as exhibit S and to Mr Tepaki earlier at our meeting of 30 November 2005), I did not have CIPNZ's authority to agree to the extension of the date for satisfaction of conditions. This decision needed to be made by Cabinet. I am also aware of the potential legal consequences for the essentiality of time of agreeing to an extension for the fulfilment of conditions without reference to a particular date. Given my experience with Mr Tepaki, I would never contemplate an extension for the fulfilment of conditions of the agreement which merely referenced the time by which Mr Tepaki chose to provide me with his report.

[37] Mr Tepaki in his affidavit dated 20 June 2006 takes a different approach. He says in part at paragraph 10 of this affidavit:

Lloyd Miles, on behalf of the vendor, told me just prior to his e-mail of 4 April 2006 the conditions were extended in anticipation of receipt of a report from the purchaser. That is confirmed in Lloyd Miles e-mail of 4 April 2006. Instead of that, shortly afterwards the Deputy Prime Minister for the Cook Islands announced to the media that the project was cancelled.

[38] What happened next is important.

[39] Mr Miles in his affirmation states at paragraphs 27 and 28:

A more substantive response to my e-mail of 29 March arrived from DAL's solicitors on Saturday 1 April 2006. I saw this e-mail when I came into the office on Monday 3 April and I replied that morning. I confirmed I had spoken directly to Mr Tepaki and was awaiting a report from him. Contrary to paragraph 10 of Mr Tepaki's evidence, I did not in that e-mail state or suggest that the agreement's deadlines for the satisfaction of conditions had been extended. I said that the agreement was 'in limbo', by which I meant that it could be avoided or the dates extended as CIPNZ saw fit. These e-mails are annexed to Mr Tepaki's affidavit as exhibit T.

On 4 April 2006, Cabinet met and decided to cancel the agreement. The media was advised of Cabinet's decision immediately after the Cabinet meeting and that is how I learnt of Cabinet's decision. Mr Tepaki called me the same day. I explained to Mr Tepaki that as I had been awaiting his report, I had not made a submission on behalf of CIIC or CIPNZ to Cabinet. I explained that Cabinet was entitled to make the decision to cancel the agreement because none of the conditions that were due to be satisfied by 28 February 2006 had been met and no extension had been granted.

[40] Then on 10 April 2006 the applicant's solicitors wrote to the respondent's solicitors asserting that:

(a) The conditions in the contract had been extended until 31 March 2006.

(b) The conditions have been extended again until such time as Mr Tepaki provided a report as to progress.

(c) The development could not progress during the earlier audit process which the Cook Islands Government had instituted.

[41] On 18 April 2006 Mr Tepaki finally provided his report.

[42] On 20 April 2006 the Board of the respondent company resolved to avoid the Agreement in accordance with the earlier Cook Islands Cabinet decision.

[43] On 27 April 2006 Mr Miles forwarded a letter to the applicant's solicitors giving a formal notice on behalf of the respondent pursuant to clause 8.7(5) of the General Terms of Sale avoiding the Agreement. The letter accompanying this notice stated:

We confirm your understanding that Cabinet has in essence declined your application for an extension of the conditional dates and has instead decided to cancel the agreement. Cabinet's resolution was considered by the Board of the Cook Islands Investment Corporation Board at their Board meeting on Thursday 20^th inst. We have been directed to formalise Cabinet's decision.

[44] Since that time, the respondent's position has been that it has validly cancelled the Agreement on the grounds of non-fulfilment of the conditions, and thus the applicant does not have an interest in the property capable of sustaining the caveat in question.

[45] In turn, the applicant's position is that the Agreement remains on foot because either:

a) An extension of the relevant conditional dates was granted by the respondent beyond the date of the purported cancellation of the Agreement; or

b) The respondent waived the essentiality of time for fulfilment of the conditions or, put another way, that by the respondent's conduct it is estopped from denying the applicant further time to fulfil the conditions.

Counsel's Arguments and My Decision

[46] The present application seeking an order that the applicant's caveat not lapse is made pursuant to s145A Land Transfer Act 1952. Although the jurisdiction not to lapse caveats triggered by s145A is relatively new, the Courts have applied the same principles to applications under that section as are applied under applications made pursuant to s143 and s145.

[47] And, as Hinde McMorland & Sim "Land Law in New Zealand" vol. 1 at para 10.020 makes clear, the principles upon which the jurisdiction to remove or extend a caveat is to be exercised, although not set out in s145, s145A or s143 Land Transfer Act 1952, have been developed by the Courts over the years and are now reasonably well settled - Holt v Anchorage Management Limited [1987] 1NZLR 108.

[48] The general approach to these applications to remove or extend caveats under the Land Transfer Act 1952 was settled in Sims v Lowe [1988] NZCA 253; [1988] 1 NZLR 656 where on an application under s143 Somers J at page 660 said:

The caveator seeks to clog or fetter the proprietary interest of another. As a matter of principle, it seems right that he must justify the continued existence of his caveat. He will do that if he can show he has a reasonably arguable case for the interest he claims.

[49] The applicants have the burden of establishing a "reasonably arguable case" that they have a caveatable interest in the property, and that the caveat should be sustained - Hinde McMorland & Sim "Land Law in New Zealand" Vol. 1. Para 10.020. An order for removal or lapse of a caveat is not to be made unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it, or that no such ground may exist now - Re Graham (1912) 14 GLR 806; New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA).

[50] As Hinde McMorland & Sim "Land Law in New Zealand" Vol.1 Para 10.020(b) states:

(b) The caveator must show a reasonably arguable case

...in order to sustain a caveat it is not necessary for the caveator definitely to establish his or her right to the estate or interest claimed in the caveat. What it is necessary for the caveator to do is to show a reasonably arguable case for the claim. The onus under each provision rests on the caveator to establish - normally by affidavit and documentary evidence - a reasonably arguable case. ...

If the caveator does not establish an arguable case, the caveat will be removed (under s143) or allowed to lapse (under ss145 or 145A). If the caveator does establish an arguable case, the caveat will be sustained, unless the Court exercises a residual discretion to remove the caveat or to allow the caveat to lapse. ...

[51] In the present application before the Court, the principal grounds listed by the applicant to justify sustaining the caveat are set out in the following way:

a) That the applicant has an arguable case to sustain the caveat and that the caveat should not lapse;

b) That it is not patently clear that the caveat should lapse;

c) That the applicant has an equitable interest in the land subject to the caveat, or a claim to an interest in the said land;

d) That the applicant and the respondent are parties to an agreement dated 12 September 2005 for the sale and purchase of the land subject to the caveat;

e) That the respondent has purported to avoid the said agreement, but that the respondent's purported avoidance is not valid and the applicant has not accepted the purported avoidance, and therefore the said agreement remains on foot;

f) That the respondent has granted extensions of time for satisfaction of the conditions or has waived the essentiality of time with respect to the conditions of the agreement.

Section 137 Land Transfer Act 1952

[52] The starting point here must be a consideration of s137 Land Transfer Act 1952. Under this section, a general power to lodge and maintain caveats to protect equitable interests in land is conferred. To support its claim to the caveat, the applicant is required under s137 to have "a claim to an interest" in the property.

[53] Since the decision of the Court of Appeal in Bevin v Smith [1994] 3 NZLR 648 (CA), it is clear that purchasers under certain types of conditional agreements for sale and purchase have an equitable interest in land capable of supporting a caveat under s137.

[54] But, whether an equitable interest has come into being depends upon the terms of the contract itself. At p665 of Bevin v Smith Gault J stated:

There will be some conditional contracts, particularly those subject to true conditions precedent, where the parties cannot be regarded as intending that equitable title will pass to the purchaser until the condition is waived or fulfilled.

[55] In McDonald v Isaac Construction Company Ltd [1995] 3 NZLR 612 at 619 Tipping J observed:

In the usual case where the parties intend to be bound and to remain bound subject to the condition, equitable interests in land can arise by means of such conditional contracts.

[56] This passage from McDonald v Isaac Construction Company Ltd is referred to at paragraph 2.148(f) of Butterworths Land Law in New Zealand 1^st ed. Wellington 1997, where the learned authors state:

Applying this test, it will no doubt be found that most conditional contracts are intended to pass the equitable title to the purchaser and hence give the purchaser a caveatable interest.

[57] The note related to this quotation from paragraph 2.148(f) goes on to state:

Contracts which are made subject to statutory consents being obtained, or to finance being raised by the purchaser, will generally pass the equitable estate and thus support caveats.

[58] The question of whether an equitable interest passes under a conditional contract must always depends upon the terms of the contract and the nature of the conditions. As Gault J noted in Bevin v Smith, if the nature of those conditions is such that until fulfilment it can be said that the parties did not intend to create any interest in land, then there will be no caveatable interest unless and until the condition is fulfilled.

[59] That said, before me the respondent argued that the conditions in question here must be seen as reserving very significant matters either for the further agreement of the respondent, or alternatively for a decision which is at the respondent's entire discretion, this agreement or decision being subject only to a requirement that the respondent acts in good faith and not arbitrarily or vexatiously.

[60] As a result, the respondent argues that although the conditions in the contract were expressed to be "conditions subsequent", they were in fact conditions first that were of an entirely different character from those referred to in McDonald v Isaac Construction Company Ltd (noted at paragraph [55] above) and secondly they fell within the exception contemplated in Bevin v Smith. The respondent's position is that while these broad matters of negotiation agreement and discretion required to fulfil a number of the contractual conditions were left with the respondent, the parties could not be taken to have intended that equitable title in the property would pass to the applicant.

[61] The conditions in the Agreement (which I have outlined at paragraph [11] above) were extensive.

[62] Although there may be some substance in the respondent's arguments advanced at paragraphs [59] and [60] above, for the reasons which appear later in this judgment I need not finally decide those issues here. For the purposes of the present application, I am prepared to accept that the types of conditions in the Agreement noted at paragraph [11] above are such as to confer an interest in the property capable of sustaining the caveatable interest claimed by the applicant. This decision proceeds on that basis.

[63] I turn now to consider the principal issues argued before me which relate to the status of the Agreement. As I have noted, the respondent claims to have validly avoided the Agreement on the basis of failure to satisfy the conditions outlined there. In turn, the applicant's position is that either:

a) An extension of the relevant dates for satisfying these conditions was granted beyond the date of the purported avoidance; or

b) The respondent waived the essentiality of time for fulfilment of the conditions in question - the respondent is estopped from denying the applicant further time to fulfil the conditions.

[64] I now consider each of these matters in turn.

Was the date for fulfilment of the conditions in question properly extended?

[65] There is a clear conflict in the evidence before the Court on this central issue. The applicant's position seems to be that an extension was granted by the applicant through its agent Mr Miles in his telephone conversation with Mr Tepaki on 31 March 2006. This extension was to be until such time as the applicant provided the respondent with a report as to progress.

[66] Mr Tepaki says at paragraph 10 of his affidavit that on 31 March 2006 Mr Miles on behalf of the respondent told him that:

...the conditions were extended in anticipation of receipt of a report from the purchaser.

[67] Mr Miles, however, at paragraph 26 of his 27 June 2006 affidavit, categorically denies that he agreed either on behalf of the respondent, or at all, to extend the due date for satisfaction of the conditions, or indeed that he said anything that could be construed as such.

[68] Although it is clear that the Court is always reluctant to resolve conflicts of evidence in a summary process such as the present one, given the absence of oral evidence and cross-examination, nonetheless an applicant must pass a threshold of credibility and cannot rely on a bald assertion of a factual dispute - Eng Mee Young v Letchumanan [1980] AC331, Parakai Trust Limited v Draper & Anor (HC AK, CIV-2004-404-6796, 16 December 2004, Heath J).

[69] The respondent contends that a careful review of the evidence before the Court here demonstrates that the applicant's assertions are simply not credible. The respondent says there can be no doubt that it validly cancelled the Agreement by its notice dated 27 April 2006 on the ground of non-fulfilment of the contractual conditions.

[70] The respondent's position is that the history of events leading up to the 31 March 2006 telephone conversation between Mr Tepaki and Mr Miles shows clearly that for the previous five months Mr Miles acted meticulously in his management of matters surrounding the Agreement and the applicant's need for extensions of time to satisfy the conditions in question. The respondent contends that Mr Miles had been very careful throughout to convey to Mr Tepaki and the applicant that any decisions as to extensions were decisions for the Cook Islands Cabinet on behalf of the Government shareholder in the respondent. Further, the respondent argues that Mr Miles acted scrupulously throughout to preserve the essentiality of time in respect of these conditions in the Agreement.

[71] The respondent's argument is that given the diligent and precise manner in which Mr Miles had approached matters, the applicant's contention that the Court should now accept that Mr Miles, in effect, took leave of his senses on the evening of 31 March 2006 and with no approval from the Cook Islands Cabinet or authority from the respondent and acting entirely on his own accord decided to grant the applicant an extension of time for satisfying conditions in the Agreement until a date when Mr Tepaki chose to provide him with a report as to progress. According to the respondent, this is simply not credible. I agree. I reach this conclusion for the following reasons.

[72] From a review of all the evidence before the Court, in my view the following matters become apparent:

a) There can be no doubt here that Mr Miles clearly communicated to the applicant, its solicitors and to Mr Tepaki that he did not have authority from the respondent to agree to requests for extensions under the Agreement. These were decisions which needed to be made by the Cook Islands Cabinet – Mr Miles e-mails of 24 and 27 February 2006 (referred to at paragraphs [28] and [30] above) outline these matters in detail. Further, the initial extension granted until 28 February 2006 was explained by Mr Miles in his e-mail dated 9 December 2005 (referred to at paragraph [16] above) as a decision reached by the Cook Islands Cabinet. Further, Mr Miles' e-mail of 29 March 2006 (referred to at paragraph [33] above) also referred to the need to inform Cabinet about progress of the development.

b) Throughout, it is clear to me that Mr Miles corresponded diligently with the applicant in order to manage the need for extensions under the Agreement. This must be contrasted with what I can only conclude was a cavalier attitude by the applicant with respect to fulfilment or extension of the conditions in question.

c) The claim from the applicant and Mr Tepaki that the respondent extended the time for satisfaction of the conditions in the Agreement from 28 February 2006 for a further month does not, in my view, stand up to close scrutiny. What appears plain to me is that:

i) In their e-mail of 26 February 2006 the applicant's solicitors requested an extension of time for one month.

ii) In his e-mail of 27 February 2006 (noted at paragraph [30] above) Mr Miles clearly explained that the decision was one for Cabinet and not for him.

iii) In that 27 February 2006 e-mail Mr Miles suggested that the applicant might ask for a longer extension to avoid the need to keep going back to Cabinet for a decision on more extensions.

iv) Despite being asked for a response to this suggestion, and being chased three further times for a reply, the applicant's solicitors never responded to Mr Miles' suggestion.

v) The Cook Islands Cabinet, it seems, never made a decision to grant an extension beyond 28 February 2006.

[73] Given all the matters that had gone before, in particular the aspects I have noted at paragraphs [13] to [34] above, to me it seems simply not plausible that on or around 31 March 2006 Mr Miles, with no approval from the Cook Islands Cabinet or authority from the respondent, and acting of his own accord agreed to grant the applicant an extension until whenever Mr Tepaki chose to provide him with a report as to progress.

[74] Instead, what seems to me to be entirely plausible and consistent with the evidence before the Court, is that Mr Tepaki told Mr Miles that he would provide a report as to progress, and Mr Miles said that such a report would be helpful, in the sense that it would assist the Cook Islands Cabinet if the report was in front of it when it made a decision on whether to grant the applicant another extension beyond 28 February 2006.

[75] Certain other matters are relevant here. In particular:

a) Since 6 February 2006 and earlier it is undisputed that Mr Miles had been requesting a progress report with respect to each of the outstanding conditions in order to be able to take matters further by reference to the Cook Islands Cabinet.

b) Rather surprisingly, in their e-mail dated 1 April 2006, the applicant's solicitors say nothing of the granting of any extension to the conditional date. It seems strange that if in fact the respondent had already at that time extended the conditional date as Mr Tepaki and the applicant allege, this being a matter of crucial importance to the continuation of the Agreement, that the applicant's solicitors would not have been quick to confirm this in their 1 April 2006 e-mail.

c) At various times Mr Miles characterised the Agreement as being "in limbo". As I see it, a fair interpretation of this expression is that as the conditional date had passed, the Agreement could be avoided or the dates for satisfaction of the conditions extended as the applicant saw fit. Once the 28 February 2006 had passed, the Agreement was clearly voidable at the option of the applicant pursuant to clause 5.4, and clause 8.7(5) of the general terms of sale. Under the circumstances at the time, the applicant had an election to make - whether to cancel the Agreement or to extend the dates again. Accordingly the status of the Agreement was that it was in limbo while the applicant was put to its election.

d) In the meantime, while Mr Tepaki prepared his report, the respondent had not elected one way or the other. It was always open to the respondent to avoid the Agreement, and this was a risk that the applicant took. By failing to deal with the matter in a timely manner and to respond in any real way to Mr Miles' correspondence in January, February and March 2006, as I see it the applicant placed itself in a vulnerable position. This was a predicament entirely of its own making.

[76] The applicant's response is that Mr Tepaki's report of 17 April 2006, described as a detailed one, was undertaken on the understanding that an extension was in place. Mr Tepaki says that he had been told by Mr Miles that he was "awaiting the report".

[77] In my view, this does not in any way change the position. I have found that despite Mr Tepaki's contention, no extension was granted on 31 March 2006. And, Mr Miles and the respondent's consistent position has been that the Board of the respondent met and resolved on 20 April 2006 to avoid the Agreement with the Cook Islands Cabinet's earlier decision. Formal notice of this cancellation of the Agreement for non-fulfilment of the conditions was given to the respondent on 27 April 2006 pursuant to clause 8(7)(v) of the Agreement.

[78] I am satisfied that this was a valid cancellation of the Agreement by the respondent. The applicant therefore does not have an interest in the property capable of sustaining the caveat, and the present application must fail.

[79] This is sufficient to dispose of the present application. Notwithstanding that, I turn now to briefly consider the alternative arguments raised.

Alternatively, was an extension granted until the progress report was provided?

[80] In the alternative, the respondent argues that if the Court does find that the applicant has an arguable case that the conditions in the contract were extended by the respondent in the manner in which the applicant asserts, then in any event, the extension was only until the time at which the applicant provided its progress report, and this period has also elapsed without any of the conditions in question being fulfilled.

[81] In considering the applicant's position that the extension of these conditions was until the report was provided, what was to happen then would seem to be rather unclear. What does appear to be beyond doubt is that the relevant conditions were not satisfied by 17 April 2006 when the report was actually provided.

[82] It must follow, therefore, that in any event the respondent was entitled to cancel the Agreement for non-fulfilment of the conditions when it did so by formal notice dated 27 April 2006.

[83] On this ground, also, I find that the applicant does not have an interest in the property capable of sustaining the caveat and its present application must fail.

[84] But, before me, the applicant endeavoured to raise two additional arguments in support of the current application. As I see it, they are of little substance, but for the sake of completeness I now deal with these.

Did the respondent waive essentiality as to time?

[85] There is no argument and the applicant accepts that upon the Agreement being signed, time was of the essence so far as satisfaction of the conditions in the Agreement were concerned.

[86] The applicant contends, however, that this position changed following expiry of the original extension to 28 February 2006. The applicant argues that the dates for compliance were then put at large, and that the respondent at least by 4 April 2006 prior to the Cook Islands Cabinet decision had waived the essentiality as to time.

[87] In my view, this argument is quickly disposed of. Here, the date for fulfilment of the initial conditions was initially extended to 28 February 2006.

[88] In the general conditions of contract which form part of the Agreement, paragraph 8.7(5) states:

(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 purchase shall be entitled to the return of the deposit and any other monies paid by the purchaser and neither party shall have any right or claim against the other.

[89] In addition, paragraph 8.7(3) of these general conditions specifically provides that:

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

(emphasis added)

[90] In passing I note also clause 23.1 of the Agreement which states:

23.1 Failure by either party on any occasion to enforce or require strict or timely compliance with any provision of this Agreement shall not affect or impair that provision in any way or the rights of that party to avail itself of the remedies it may have in respect of any breach of any such provision.

[91] There can be no doubt, as I see it, that by the extension to 28 February 2006 the quality of essentiality was not lost. At best, for the applicant it might be argued that after 28 February 2006 the date for fulfilment of the conditions was at large. But certainly, even on the applicant's argument, the date became fixed when the report was provided on 18 April 2006 prior to cancellation. And subsequently, as I have found, the Agreement was appropriately terminated on 27 April 2006. Further, as I have noted on a number of occasions earlier in this judgment, it is undisputed that Mr Miles several times communicated to the applicant through its solicitors and Mr Tepaki that he had no authority with respect to the conditions in the Agreement. He stressed throughout and quite specifically that all decisions needed to be made by the Cook Islands Cabinet. This must have been known fully to the applicant. In light of this, to suggest now that Mr Miles was able to waive the essentiality of time for fulfilling the conditions or mislead the applicant as to this, as I see it, is unsupportable.

[92] In my view, there was no effective waiver on the part of the applicant of essentiality as to time here or any estoppel to an extent that would assist the applicant in its present application. As I have noted earlier, it is hard to escape the conclusion that the applicant through its repeated failures to communicate with the respondent and to react to warnings and invitations to progress dealings under the Agreement in a commercial and businesslike manner must be seen as the author of its own misfortune.

Implied good faith and lack of negative interference on the part of the respondent?

[93] Finally, the applicant raised a further submission before me. This was to the broad effect that the conditional dates in the Agreement required to be extended to accommodate the applicant because any delays which occurred resulted from negative publicity and difficulties arising over the arrangements between the parties which were generated solely by the respondent.

[94] Although this does not appear to be pleaded in the present application, nevertheless, the applicant's argument before me seemed to be based on the suggestion that a Cook Islands Audit report which came out around 16 January 2006 and accompanying publicity placed a negative gloss on the Agreement and arrangements between the applicant and respondent. According to the applicant, this in turn made it difficult for the applicant to satisfy the conditions in the contract, and hence extensions were required.

[95] The applicant's argument seems to be that it must be implied in contracts such as the present one that both parties will use their reasonable endeavours to fulfil conditions on time, and will not interfere with the ability of the other party to satisfy those conditions. The applicant appears to be suggesting that the actions of the respondent breached those obligations here, and the respondent in cancelling the Agreement is seeking to benefit from its own breach - Barber v Crickett [1958] NZLR 1057.

[96] The respondent's position is that this argument is entirely without merit; it is unsupported by any evidence whatever, and indeed is a red herring here. The respondent says that the only assertion to this effect is made by Mr Tepaki at paragraph 5 of his affidavit where he refers obliquely to "political interference" and "various rumours concerning the development", and it does not stand up when a consideration of all the other documentation and evidence provided to the Court is considered. I agree.

[97] The Audit Report in question was released around 16 January 2006 when the applicant, in the meantime, had already obtained a three month extension to 28 February 2006 for satisfying the conditions.

[98] Further, as I understand the position, nowhere in the parties e-mail exchanges where later extensions were requested was any mention made of complaints the applicant may have had over the Audit Report or surrounding publicity. If indeed these matters were of significant concern to the applicant, then one imagines they would have been raised at that point.

[99] In conclusion, I find that there is also nothing in this point to assist the applicant.

Conclusion

[100] For the reasons I have outlined, I am satisfied that the applicant has been unable to establish a reasonably arguable case that it has a caveatable interest to the property. If the applicant had an equitable estate or interest in the property when the Agreement was signed on 12 September 2005, this clearly came to an end when the Agreement was validly cancelled by the respondent for non-fulfilment of the conditions on 27 April 2006. The application by the applicant to sustain the caveat must fail.

[101] There was an earlier interim order that the caveat in question was not to lapse until further order of this Court was made. That interim order must now come to an end.

[102] An order is now made that Caveat No. 6852761.1 registered against Certificate of Title WN35B/140 (Wellington Registry) shall lapse.

[103] As to costs, I see no reason why costs should not follow the event in the usual way. Costs are therefore ordered against the applicant on a category 2B basis, together with disbursements (if any) as approved by the Registrar.

Associate Judge D.I. Gendall