A court has ordered a couple to pay about $3 million for a seaside mansion in Auckland that they never owned or lived in.
The legal stoush began after John Goodman and Deborah Rattray agreed to buy the Milford Beach property for almost $6 million in 2006 and pay for it over two years.
After receiving no payments, owners James and June Messenger cancelled the agreement in 2009 and sold the 810sq m home for $4.4 million to new buyers.
The Messengers then went to court asking for Goodman and Rattray to pay the difference between the two sale prices and associated costs.
A Court of Appeal judgment issued yesterday ordered Goodman and Rattray to pay $2.8 million.
The sum includes the shortfall in the sale price, interest on that amount and legal fees.
They were also ordered to pay interest for the time between the date of the resale and the date of the judgment, bringing the total to about $3 million.
The property at the centre of the six-year dispute is an architect-designed house on Muritai Rd, Milford Beach with five bedrooms, an indoor pool, tropical courtyards, a wine cellar and four living areas.
The Messengers, who live on Guernsey, one of the Channel Islands between England and France, bought it in 2004 to use as a holiday home when they visited family in Auckland and refurbished the interior.
They and Goodman and Rattray agreed on an unconditional sale in December 2006.
But a dispute arose over whether possession and title were to be given then, or two years later when the final payment was due.
Goodman and Rattray said the Messengers had an obligation to transfer the title to them on December 18, 2006 but the Messengers replied that the purchaser had an obligation to pay money on that date - which they did not do.
Goodman and Rattray lodged a caveat on the property to stop the Messengers selling it to anyone else until the issue was resolved.
In 2009, with no resolution in sight, the Messengers cancelled the agreement, had the caveat removed and sold the property to new buyers for $4.4 million.
Yesterday's court judgment said a drop in the property market was probably to blame for the $1.56 million difference in selling prices.
The Messengers then went to the High Court seeking the difference from Goodman and Rattray.
When they lost, they took their case to the Court of Appeal.
Yesterday's decision, by Justices Stevens, French and Venning, found payment, not settlement date, was the key issue. They said Goodman and Rattray broke the agreement because no money changed hands.
The Messengers' lawyer, Brian Stewart, said he was delighted with the Court of Appeal ruling.
Goodman and Rattray are believed to live in Sydney and could not be contacted.
They did not appear at the Court of Appeal ruling and had no lawyer.
At the hearing, Mr Stewart argued that they "remained in breach throughout, and the loss suffered on the resale of the property was a direct consequence of their failure to settle the transaction".
The court agreed, overturning the High Court decision.
"It is for the purchaser to begin the process of settlement by taking or transmitting the settlement sum to the vendor. Money goes to documents," it said.
"In our view, the loss suffered by the Messengers on the resale of the property was as claimed a direct consequence of Mr Goodman and Ms Rattray's failure to settle."
Real Estate Institute chief executive Helen O'Sullivan said the case was unusual.
"The question came down to, did the purchasers fail to complete their obligations or did the vendors fail to complete their obligations?
"The principle that they (the judges) quote is 'documents follow money'."
The outcome was a "stern lesson", she said.
Property lawyer Tony Steindle said it was unusual for settlement and title transfer not to happen simultaneously.
"I'd say it's a bit of a risky if you're selling a property, to leave the bulk of the price not payable for a couple of years."
- APNZBy Abby Gillies Email Abby