Black Diamond Technologies’ neighbour on Parliament Street in Lower Hutt was under no obligation to extend time for due diligence on a $1.5 million purchase and was free to sign up a new buyer offering an extra $100,000.
Black Diamond carries on business at numbers one & three Parliament Street. It was looking to extend operations, buying number five next door. In December 2019, neighbour Anthony John Hall agreed to sell number five for $1.5 million to a related Black Diamond company: Melco Property Holdings. The contract contained a wide-ranging ‘due diligence’ clause. Black Diamond had fifteen working days, expiring on 9 January 2020, to investigate the merits of its proposed purchase. It late December, Mr Hall was approached: there would be a delay in getting assessors’ reports; would Mr Hall agree to extending due diligence deadline to 17 January? Mr Hall indicated that did not seem a problem, but he would first have to get advice from his lawyer when he returned to work in the New Year.
The High Court was told another prospective buyer approached Mr Hall in early January, offering a better price. Mr Hall told his lawyer not to respond to any request for a due diligence extension. Telephone calls from Black Diamond’s lawyer went unanswered. When the deadline passed, Mr Hall cancelled the Black Diamond deal and sold to his second buyer for $1.6 million.
Associate judge Paulsen dismissed Black Diamond’s claim seeking to enforce its contract. Mr Hall was under no obligation to tell Black Diamond he would not grant an extension. This advice would potentially have seen Black Diamond waive its due diligence requirement prior to deadline. Agreements for sale and purchase of land are not contracts requiring good faith, Judge Paulsen said.
The court was told the second sale at $1.6 million fell over following Melco’s refusal to remove a caveat lodged on title to number five seeking to protect what proved to be its unsuccessful claim to ownership.
Melco Property Holdings (NZ) 2012 Ltd v. Hall – High Court (29.10.20)
20.170