Real Estate: Property Ventures v. Regalwood Hldgs

The shortcut summary judgment procedure used to enforce fixed sum contracts cannot be used for property transactions where the vendor is in breach of contract and the extent of the breach has not been quantified.

In 2006, Regalwood Holdings was disputing with Property Ventures settlement of a contract to buy a Christchurch property at a previously agreed price of $1.5 million. Property Ventures argued that the vendor, Regalwood, did not have the building up to Building Act standards, as required by the terms of the contract. Regalwood argued it was entitled to the full purchase price immediately, regardless of any alleged breach, and a cash adjustment could be made at a later date if found due.

The court was told that Property Ventures had plans to on-sell the property to the Christchurch City Council, but this fell through when the Council withdrew: the Council had blocked a building consent for alterations by Regalwood because extra earthquake strengthening was considered necessary.

As an opening shot in the legal war, Regalwood sued Property Ventures, using the High Court summary judgment procedure, seeking a court ruling that it had validly cancelled the sale because Property Ventures had failed to stump up the purchase price due on settlement date.

The Supreme Court ruled that there was no valid cancellation. In order to cancel, Regalwood must itself have been in a position to settle. It wasn’t, because of an alleged failure to have the building in compliance with the Building Act. When a vendor is in material breach of a contract, it cannot force the purchaser to pay the full amount due and argue about damages later.

It is back to the High Court for arguments over whether Regalwood is in material breach, and if so, what are the consequences.

Property Ventures v. Regalwood Hldgs – Supreme Court (28.04.10)

05.10.004