Cullinane v McGuigan

Cullinane v McGuigan is a cited case in New Zealand regarding the requirement under section 7(4)(b) of the Contractual Remedies Act 1979 that a breach of contract must be "substantial" for a contract to be cancelled, and that "substantial" was not limited to a comparison of monetary values.

Background
The Cullinanes in 1995 auctioned their unfinished Christchurch house, that due to matrimonial problems, had remained an unfinished shell since 1991.

On the day of the auction, the auctioneer told the bidders there was a letter from the council that they should first read before bidding. McGuigan did not read the letter, and was the winning bidder at the auction for $37,000.

Later, when he read the letter, which concerned defects to the exterior cladding, that needed to be rectified before the building consent would be granted, with an estimated cost of up to $14,000, he canceled the contract and sought the refund of his $37,000 deposit.

The Cullinanes claimed it was not a substantial breach to justify the cancelling of the sale contract, adding that the argument was immaterial anyway, as they claimed one of the letters by McGuigan's solicitors discussing settlement amounted to affirmation.

"'We enclose copy of letter from the City Council dated 20 November 1995 containing many requisitions which were not brought to the attention of Mr and Mrs McGuigan by your clients. There was a letter of 21 November 1995 from Lovell-Smith & Cusiel Limited (copy enclosed) which was circulated at the auction, but does not satisfy the matters referred to in the Council's letter of 20 November. Further, we enclose a Council Memorandum dated 27 November which rejects the letter from Lovell-Smith & Cusiel Limited.

A recent check by Mr McGuigan of the Council's records show that there is no record of previous inspections in regard to foundations or framing. Mr Cullinane has advised Mr McGuigan that inspections have taken place, but the owners copy of plans with inspections notices thereon is apparently with Mr Cullinane's builder, Mr Craig Milner, who cannot be located.

Settlement is set down for 31 March 1996, and we advise that our clients will not be prepared to settle unless all the requisitions noted in the Council's letter have been satisfied. We also require confirmation that all required inspections at foundation and framing stages have taken place to the satisfaction of the Council.'"

In the District Court, it was ruled the solicitors letter amounted to affirmation of the contract. However, on appeal, the High Court ruled that the contents of the letter could have been interpreted in numerous ways, setting aside the affirmation ruling, and instead ruling that the defects involved were substantial in nature, and that McGuigan was entitled to cancel the contract, and was duly awarded a refund of his deposit.

The Cullianes appealed.

Held
The court dismissed the appeal.