CLEARY v EWART ( NZHC 3259, 16 December 2015
The Plaintiff (C) had entered into an agreement called an Option Deed with a Fijian company, (V). The deed gave V the option to enter into a sale and purchase agreement with C for the sale of land in Fiji if the relevant Land Trust Board approval was given. C had no right under the Option Deed to compel the option to be exercised in its favour.
C paid a large deposit to V, which under the Option Deed, would be returned if the Land Trust Board approval was declined.
Sometime after entering into the Option Deed, C says he and V orally agreed that C would surrender his rights under the Option Deed for substantially more than the deposit. C instructed Ewart & Ewart (E) to document the surrender.
Then V changed its mind and said it was no longer prepared to pay more than a refund of the deposit. C settled for this sum but subsequently sued E for negligence, claiming that E wrongly advised him on the constitution of the Option Deed. One of the causes of action sought the profit C said he would have earned on the purchase had he continued on with the agreement. So he claimed that he lost an opportunity to purchase the land due to E’s negligent advice.
This argument was rejected by the Court and this cause of action was struck out. The Court held that proper construction of the Option Deed was that it did not confer upon C the right to compel V to sell the property. Consequently E could not be liable to C for any loss arising from C’s inability to purchase the property.
Because the Option Deed did not provide C with the means to compelV to exercise the option in his favour, it follows that any failure to give advice regarding the other clauses of the Option Deed was irrelevant.
C argued that the cause of action ought not be struck out because expert evidence was required to interpret the Option Deed under Fiji law. This was rejected by the Court. The Court upheld E’s argument that C bears the onus of displacing the presumption that construction of the contract under Fijian law will be similar to NZ law. That onus had not been discharged.
Philippa Fee is acting as counsel for Ewart & Ewart in this case.