BROKEN CONTRACT.

Waikato Times, Volume 108, Issue 18076, 21 July 1930, Page 6

BROKEN CONTRACT.

SALE OF LAND. A £22,000 DEAL. SPECIFIC PERFORMANCE SOUGHT. An action to compel specific performance of a contract to purchase a block of over 2,000 acres of land at Eureka, known as Waverley Islands, was brought in the Hamilton Supreme Court, to-day. Plaintiff was Frederick Edwin Bishop Lovelock, farmer, Eureka, and defendants, Henry Martin Boyle and James Glenny Boyle, contractors, of Christchurch, trading as. Boyle Brothers. The total sum involved was £22,437. . Plaintiff was represented by Mr F. L. G. West (Auckland) and Mr H. T. Gillies, and defendants by Mr A. H. Donnelly, of Christchurch, and with him, Mr A. W. Brown, Christchurch. The statement of claim set out that on December 20, 1929, defendants agreed to purchase 2,483 acres of land at Eureka, from plaintiff at £9 an acre, the money to be paid over on February 1, 1930, On February 17 last, defendants in a letter renounced the contract and absolutely refused to perform their part of it. The defence was that the sale was made subject to the consent of the Public Trustee. A clause in the mortgage stated that the Public Trustee must give his consent in writing before the sale. The defendants alleged that this had not been done. It was further contended that the purchaser was required to sign a certain deed of covenant by the mortgagee to pay the mortgages. This he refused to do on the grounds that he did not contract with reference to those deeds of covenant. Preliminary Contract Entered Into. Mr West said there was a first mortgage of £7,500 to Ihe Public Trustee and a second one of £3,500 to Mr F. W. Burley, in December of last year the property was not actually for sale, but an agent obtained an authority to sell from the vendor. The following day the property was inspected by one of the defendants. . On the same day a short preliminary contract was entered into. The terms were to be cash above the mortgages. The next day a proper agreement of sale and purchase was drawn up. On the same day defendants’ solicitor searched the title in Auckland. The only stipulation in the Public Trust mortgage was that before the land was transferred a covenant must be entered into. The same position arose with regard to the second mortgage, except that the covenant was to he given before the purchaser entered into possession. There was nothing to be done by plaintiff until registration of the transfer. His Honour: What if the Public Trustee had withheld his consent? Mr West: He has given his consent and all along lias been agreeable to the sale. His Honour: And what about the second mortgagee? Mr West: His consent was not necessary to effect a sale.

Mr West added that in the North Island such covenants were customary in transactions of this nature.

Counsel quoted correspondence which showed that on January 10, 1930, the solicitor for the purchasers asked for a copy of the contract in order to make arrangements for the payment of the money. On January 14, the solicitor for the purchasers forwarded £224 to stamp the contract. The solicitors for the purchasers next sent a draught transfer and instructed that this could be treated as final. This amounted to an acceptance of the title and of the accompanying mortgages.

No Objection to Completition. Up till this time, said Mr West, defendants obviously had no objection to completing the contract- It was not until February 1 that any intimation was given that defendants were not prepared to complete, when a letter was received from defendants’ solicitors to the effect that his clients objected to signing any personel deeds of covenant and that they had not been informed, that such were required. Mr West pointed out that there was no objection mentioned of refusal to take over the liability under the mortgages and there was no suggestion that the title was not in order. In this case time was not the essence of the contract, and defendants had actually in their correspondence, kept open the lime. Subsequent correspondence showed that defendants were not willing to complete, even if the Public Trustee and the second mortgagee were willing to waive the personal covenants. It was on the purchasers to do whatever was necessary to complete the terms of their mortgage in the terms of the contract they had entered into. Plaintiff had even been prepared to overcome the difficulty of the personal covenants by paying off the mortgages himself, if necessary. Only One Matter in Controversy. His Honour: There is only one matter in controversy—the existence of this mortgage deed containing a clause which imposed an obligation on the purchaser to execute a personal covenant to the Public Trustee, undertaking to pay the principal and interest and carry out other such requirements under the mortgage. Mr West said he was prepared to call evidence, if necessary to show that such a covenant was usual in conveyancy practice in the North island, and was general in ihe Dominion where mortgages held by the Public Trustee were concerned. Mr • Donnelly agreed that such a covenant was general in Public Trust mortgages. Mr Donnelly said there were two distinct clauses in the Public Trust mortgage in this case—one, that plaintiff would not sell without the consent in writing of the Public Trustee and the other, providing that the mortgagor (plaintiff) would, prior to registration, obtain a covenant, in the terms set out.

Counsel submitted (1) that the contract of sale was subject to a condition subsequent, namely the unconditional consent of the Public Trustee that the contract had been discharged by the non-fulfilment of this condition and that the consent obtained, did not fulfil the condition and was, in any event, too late. (2) That the defendants', being entitled to an unconditional consent, they were not bound to accept what, in fact, a qualified consent conditional on entering into the deed of covenant, unless it was proved (a) that, they had waived their right; (b) agreed subsequently to the contract, to accept a qualified consent and its attached condition- (2) The exceptions were not proved here, and the essential clement of the proof of either of them was not a bare eon-

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structive notice on the title, but agreement and acceptance after full knowledge. (3) That the buyer of an equity of redemption, when he agreed to take over existing mortgages, did not, except by express, words, contract to execute the deed of covenant with the mortgagee. Liability of Transferee. Mr Donnelly contended Ibat the liability of Ibe transferee was limited to the indemnity implied by law under | section 88 of the Land Transfer Act. His Honour: What do the words “ the purchaser to take over existing mortgages ” imply. Mr Donnelly submitted that the words implied the taking over of existing mortgages ■ as an indemnifying party giving a statutory indemnity. Counsel said the public trust mortgage was pretty wide. The practice may have grown up in the north of accepting a personal covenant, but he submitted it was not general. Matter of Consent. Mr Donnelly said that under the mortgage the written consent of the Public Trustee was required prior to the sale. Under the contract between plaintiff and defendants consent was a condition subsequent, subject to the consent of the Public Trustee. If the vendor had transferred, without prior consent of the Public Trustee, or withon the Public Trustee having subsequently waived the breach, then there was a breach of the covenant in the mortgage and the Public Trustee was entitled to exercise whatever rights he had for such breach- Defendants did not have the written consent of the Public Trustee of the date for completion and it had not been submitted until to-day. There was nothing in the correspondence to show that Ihe consent of the Public Trustee was ever asked at all. The only thing the Public Trustee was asked was to waive the deed of covenant. Assuming that no written consent had been •obtained, and the transfer took place, it would have been open to the Public Trustee to have said—l have never given my assent. The general rule was that such consent should be in hand at the date set down for completion. Consent had only been procured this morning. His Honour asked what the position of defendants was now that consent had been given. Mr Donnelly held that the consent was still based on confusion as to the rights of the Public Trustee, which seemed to be present in the minds of the parties during the negotiations about the beginning of February. Mr West said the Public Trustee had always been ready to give his consent. His written consent was only necessary at the settlement. His Honour: We had better hear the Public Trustee on the matter. Douglas R. Wood, solicitor for Public Trustee in Hamilton, said it was reported to the Public Trustee early in January last, that a sale on the property had been made from Lovelock to Boyle Brothers. The Public Trustee was prepared to consent to the sale, unconditionally, except, of course subject to the usual clause requiring the personal covenant. In answer to Mr Donnelly, he said it was competent and the Public Trustee in Wellington, to waive the personal deed of covenant. The District Public Trustee had the right to give consent to the transfer of a property, it was correct to say that no express consent in writing to the sale had been given until that day. There was an implied consent in the correspondence. He did not know if (here was a verbal consent. Ilis Honour: Was your office approached for consent. Witness: There was a letter from Gillies and Tanner. Ilis Honour intimated that he would take time to consider his judgment.