Purchase of real estate: High Court reminder of what not to do when another party tries to cancel an agreement
By: Shane Campbell
Published: 16/03/2018
Associate Judge Sargisson's decision in Sutton v van Der AA [2017] NZHC 3006 is a timely reminder of how parties should act if they do not accept a repudiation (cancellation) of an agreement by the other party.  In essence, if you do not accept the repudiation then you should conduct yourself that way by your words and actions.

In this case, Mr Guy Sutton (Mr S) and Ms Maria Van Der AA (Ms V) entered into an oral agreement for sale and purchase of a property at 44 Kutai Street, Turangi.  Mr S was to pay $235,000 for the property with a deposit of $5,000.  Everything was proceeding until Ms V changed her mind and communicated to Mr S she would no longer be selling the property to him.  To this end she gave Mr S a cheque for his $5,000 – this was a return of the deposit paid by Mr S.  The cheque was accepted and Mr S knew what it was for.  From there the following occurred:
  • The next morning Mr S discovered the cheque contained an error (it was in his name personally rather than the name of his family trust).  He called Ms V to obtain a new cheque then drove to her house and collected it.
  • After collecting the second cheque Mr S drove to a bank in Hamilton.  At this time Mr S says he was going to the bank to deposit the cheque, but was still deciding whether he actually would.
  • Before he could bank the cheque Mr S discovered an error in the spelling of the trust's name.  He could not bank it.  Mr S took this as a sign he should not give up on owning the property.
  • Mr S then called Ms V to inform her of the mistake.  Whatever happened in that conversation, it is clear that Ms V stated she would write out a new cheque.  There is no indication Mr S objected to this.
  • Mr S then went to see a lawyer about this and then resolved to pursue his claim against Ms V.  A caveat was lodged on the title.

The Court proceeded on the basis that the oral agreement to sell, coupled with the payment of the $5,000 deposit, was sufficient part-performance in terms of s 26 of the Property Law Act 2007 for there to be an enforceable contract.

The real question was whether Mr S accepted the repudiation by Ms V with the result that the contract was at an end.  The Court concluded that he did.  In summary, this is because of the unquestioning acceptance of the first cheque, the requesting a second cheque, only not banking the second cheque because of the error in the name, and raising no objection to being sent a third cheque.  At no point did Mr S communicate that he did not object to the repudiation.  Indeed, he appeared to accept the new state of affairs.  The Court therefore concluded that Mr S's claim must entirely fail.

The facts in this case are stark.  But they serve to highlight that if you are faced with a party cancelling, or trying to cancel, an agreement then you need to decide what outcome you actually want, and then act accordingly.  This means telling the other party expressly and also conducting yourself in a manner consistent with your actions.

The law around cancellation, repudiation, specific performance and damages can be very complex.  If you are faced with this situation we recommend you seek legal advice. 
 
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