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A caveatable interest pursuant to an agreement for sale and purchase of a property- when does an agreement becomes a caveatable interest, by Eugene Duhovnikoff BA/LLB

As a general rule an agreement for sale and purchase of a property would be considered to be a caveatable interest when it is binding on the parties.

An agreement is binding when all registered proprietors must execute any agreement for sale and purchase before the vendors are bound to sell. It is usually presumed that any registered proprietor who does execute does so on condition that the other or others will do likewise. These principles are clear from the following.[1]

Wt Trustee Company Ltd v Cato contains a useful summary of New Zealand law on this matter:

“[49] First, in Burt v Henry,[2] Mr Burt as purchaser sought to maintain a caveat against land held by Mr Henry and Mr Taylor as trustees. Mr Burt alleged a binding agreement for sale and purchase. Only Mr Henry had signed the agreement.

At [22] Associate Judge Faire, as he was, said: [22] Mr Burt’s evidence and the course of correspondence through the emails indicates to me a clear understanding that the normal position in relation to a sale of rural land would apply, namely, that each registered proprietor would sign the sale and purchase contract and that until that stage had been reached no enforceable contract had been entered into. …

 

[50] Similarly, in Carruthers v Whitaker,[3] Richmond J said:

It is established by the evidence to which I have earlier referred that at the time when the parties instructed their respective solicitors they all had in mind only one form of contract which would govern the sale and purchase of the farm, namely, a formal agreement in writing to be prepared and approved by the solicitors. When parties in negotiation for the sale and purchase of property act in this way then the ordinary inference from their conduct is that they have in mind and intend to contract by a document which each will be required to sign. It is unreasonable to suppose that either party would contemplate that anything short of the signing of the document by both parties would bring finality to their negotiations. …. There is no evidence whatever in the present case to rebut this prima facie inference. …

[51] In Martinez v Rowland,[4] the Supreme Court of Queensland said: It is clear that the written confirmation of Domingo Martinez was not given (in substance or in form) so as to bind the other vendors. His signature was plainly the first step in the affixation of the three signatures that were required. Having regard to the sequence of events, and indeed the terms of the contract itself which require a subsequent mortgage to be given by all three vendors, his signature was obviously conditional upon the other two vendors agreeing to bind themselves to the same document. The affixation of his signature did not create a separate agreement between himself and the purchaser.

It was intended that there be three co-vendors.

Obviously one has to sign before the others. In a contract such as the present, usually the signature of the first co-vendor will be conditional upon signature by the others. … [52] In Dong v Sun,[5] Faire J said: [55] Where a co-owner signs a contract document, the presumption or presumed intention is that the signature is conditional upon the signature of the co-owner. That position is consistent with the analysis that I carried out in Burt v Henry. [56] The registered proprietors are trustees of a trust.

In McMorland, Sale of Land the learned authors said: Where either the vendor or the purchaser is a “trust”, the parties to the contract must be the trustees of the trust, the trust itself not being a legal person. The trustees of a trust are subject to their unanimity (all trustees must act in unanimous agreement) and non-delegation (a trustee may not delegate his or her powers or duties to a co trustee or to a stranger) principles, and each trustee must sign the agreement in the absence of a power for fewer to do so conferred by the trust deed, or under s 31 of the Trustee Act 1956. (footnotes omitted)

[53] In McMorland, Sale of Land,[6] the learned authors state:

If only one vendor has signed the contract, and no agent’s authority to contract between that vendor and the other non-signatory/vendor can be proved, there is normally not a contract between the signatory/vendor and the purchaser; there is normally a presumed intention that the signature is conditional upon signature by the other vendor(s), though this must always depend upon the construction of the events that have occurred between the various parties.”

 

When it comes to caveats what is important is that a caveator, has the onus of demonstrating a reasonably arguable case for the interest that it claims in the caveat.[7] Even if it does so, the Court retains discretion to decline to make an order and to allow the caveat to lapse, although the Court will exercise that discretion cautiously.[8]

 


 

[1] Wt Trustee Company Ltd v Cato[2014] NZHC 994 [14 May 2014] at para [48].

[2] Burt v Henry (2007) 8 NZCPR 573 (HC).

[3] Carruthers v Whitaker [1975] 2 NZLR 667 (CA) at 671 and 672.

[4] Martinez v Rowland [1983] 1 QdR 496 at 501 and 502.

[5] Dong v Sun [2014] NZHC 208.

[6] 12 D W McMorland, Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [4.17].

[7] Sims v Lowe [1988] 1 NZLR 656 (CA).

[8] Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA).

 

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