Waitaki developers seek cheque mate

Chris Hutching

Saturday 17th April 2004

Auckland developer Symphony Group and its principal, Colin Reynolds, are embroiled in a dispute over a valuable Waitaki Valley property in South Canterbury that will hinge on whether the Appeal Court accepts that a personal cheque is good legal tender.

The property in question is in the heart of a newly developing grape-growing subdivision called Waitaki Valley Estates that was pioneered by the late Howard Paterson of Dunedin and business partners Messrs Reynolds and Stephen Cozens. Since Mr Paterson died in mid-2003, his two partners have continued the legal action and there is a good chance it will end up in the Supreme Court because of the accelerating value of the land.

Grape-growing trials last year confirmed the land values set by Otago Station Estates of $30,000/ha and marketing manager Steve Harrop said recent sales achieved that level.

The stoush over the cheque involves farmers (and the defendants in the action) John and David Parker, who entered into a contract to sell two farms to the development company Otago Station Estates. On the advice of their lawyer, the Parkers rejected the personal cheque for reasons outlined by their counsel, Nick Davison QC, last year in the High Court.

The unsuccessful plaintiffs in the action (Messrs Reynolds, Cozens and Mr Paterson's estate), via their company Otago Station Estates, recently took the matter to the Appeal Court and a judgment is awaited.

There is widespread interest in the outcome because of the implications for payments in all business dealings, not just those involving property.

In his judgment last year, High Court Justice Lester Chisholm ruled in favour of the Parkers, who were vendors of two Otekaieke properties in the Waitaki Valley a 70ha property valued at $600,000 and a 385ha neighbouring farm valued at $2.9 million.

The sale and purchase agreements became unconditional in March 2001 but the parties deferred settlement until early in 2002 when Otago Station Estates gave notice that it was ready to settle and in October initiated legal action to enforce the contracts.

The solicitor acting for the Parkers then gave notice to Otago Station Estates that the contracts would be cancelled for non-payment of the deposit unless it was paid within three working days. On the final day for payment, the Otago Station Estates solicitors sent a personal cheque (from the company) as a deposit payment but it was rejected by the Parkers.

Justice Chisholm accepted their argument that although payment by personal cheque is common commercial practice there is a difference when the deposit is being sent in response to a default notice. The payment was close to expiry of the deadline and there was no prospect of the personal cheque being cleared within the requisite period. A bank cheque of direct electronic cash transfer would have been more acceptable because of the relatively negligible commercial risk, he said. Justice Chisholm ruled that the three-day notice required "a more robust contractual regime ..." Justice Chisholm referred to Tyree's Banking Law in New Zealand (second edition) "... if the creditor does accept payment by cheque, then the payment which is effected when the cheque is delivered is conditional.

The condition to which the payment is subject is a subsequent condition namely that the cheque will be met upon proper presentation for payment."

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