11 Maunganui Road Limited v Evaroa
[2012] NZHC 1540
•2 July 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-1678 [2012] NZHC 1540
BETWEEN 11 MAUNGANUI ROAD LIMITED Plaintiff
ANDKATHRYN LESLEY EVAROA AND WILLIAM MATAIOPO O TAKAU ARIKI EVAROA
First Defendants
ANDMALCOLM ELLERSLIE EDEN AND RAEWYN MAYVIS EDEN
Second Defendants
Hearing: 20 June 2012
Counsel: RJ Hollyman and DJ Pannett for plaintiff
TJ Rainey for second defendants
Judgment: 2 July 2012
JUDGMENT OF ASSOCIATE JUDGE FAIRE
[on application for order discharging order for specific performance]
Solicitors: McKechnie Quirke & Lewis, PO Box 242, Rotorua 3040
Rainey Law, PO Box 1648, Auckland 1140
11 MAUNGANUI ROAD LIMITED V EVAROA HC AK CIV-2010-404-1678 [2 July 2012]
The plaintiff ’s application
[1] The plaintiff applies for orders:
(a) Discharging the order for specific performance made by the Court on
20 September 2010 in respect of the agreement for sale and purchase between the plaintiff and the second defendants dated 23 January
2007.
(b)Declaring that the plaintiff is entitled to cancel the agreement for sale and purchase between the plaintiff and the second defendants dated
23 January 2007, and was entitled to do so on 17 May 2012.
[2] Directions for a fixture were given at a mention hearing on 26 April 2012. Those directions required a fixture for the determination of the plaintiff’s application on 20 June 2012. The directions have been affected by subsequent steps taken by the parties.
[3] An amended application was filed on 7 June 2012. It repeated the orders sought, referred to in [1] and added a further order sought “reserving leave to apply for further directions”.
[4] The grounds set out in the application are as follows:
(a) The second defendants (Mr and Mrs Eden) have refused/failed to comply with the order for specific performance.
(b)Where an order for specific performance has not been complied with, the Court may discharge the order and award damages in its place.
(c) Where a defendant repudiates an agreement which is under Court control (by virtue of the order for specific performance), the Court
may discharge the order for specific performance and confirm the
plaintiff’s entitlement to cancel.
(d)The plaintiff wishes to be able to offer the apartment for sale and mitigate its loss.
The opposition
[5] An amended notice of opposition and affidavits were filed on 14 June 2012. In it the second defendants opposed each of the orders sought by the plaintiff.
[6] The grounds advanced in the opposition are extensive. I will discuss them when I analyse the issues which require determination in relation to this application.
The second defendants seek a stay
[7] As part of the grounds in opposition, the second defendants invite the Court to stay this proceeding pending their completion to determination of an application that they have made pursuant to s 176 of the Building Act 2004 to the Department of Building and Housing for a determination. The purpose of the application to the Department of Building and Housing is to see whether a Code Compliance Certificate should have been issued by the local authority. The significance of this is that if the second defendants can obtain a ruling that the code of compliance certificate should not have been issued, they say that that provides them with grounds for justifiably refusing to comply with a decree for specific performance.
The second defendants’ application for inspection
[8] The second defendants have also recently filed an application for inspection of the subject property. Its purpose is to enable the application under s 176 of the Building Act 2004 to proceed.
The consequence of the amendments
[9] As a consequence of the material introduced in the second defendants’ amended documents, there are matters raised that the plaintiff has not had a proper opportunity to address. Nevertheless, counsel wish to proceed because there are a number of important issues that require early determination.
Background
[10] This proceeding relates to a unit in a substantial high rise property at
17/13 Maunganui Road and 6 Marine Parade at Mt Maunganui. The second defendants and the plaintiff are parties to an agreement for sale and purchase in respect of Apartment N9B for $1,910,000, including GST. The apartment is in one of the towers in the development.
[11] The background is set out in the judgment I gave on an application by the plaintiff for an order for specific performance of the agreement.[1] For that reason I will not repeat it in this judgment. That judgment concluded that the plaintiff is entitled to a decree of specific performance in respect of the contract. It is common ground that there has been no settlement of the contract.
Jurisdiction to determine this application
[1] 11 Maunganui Road Limited v Evaroa HC Auckland CIV-2010-404-1678, 20 September 2010.
[12] The plaintiff makes this application on the basis that there has been an election for specific performance and a decree has been made. The plaintiff’s case is that the contract becomes within the control of the Court and accordingly any subsequent discharge of the order for specific performance and award of damages for loss of a bargain is dependent upon an order of the Court: Johnson v Agnew;
Chatfield v Jones.[2]
[2] Johnson v Agnew [1980] AC 367 (HL);; Chatfield v Jones [1990] 3 NZLR 285 (CA) at 290. See also Austins of East Ham Ltd v Macey [1941] Ch 338 (CA) at 341 and Singh (Sudagar) v Nazeer [1979] Ch 474 (Ch) at 480.
[13] Both counsel agree that the jurisdiction that I am invited to exercise on the plaintiff’s application is that given to me by s 26I(1)(a) of the Judicature Act 1908. That is that I must consider this application as part of the plaintiff ’s application for summary judgment. I proceed on that basis.
Analysis
[14] The starting point for a consideration of the application is the order made in my judgment of 20 September 2010.
[15] The judgment analyses the grounds in support and opposition to the application for summary judgment which sought an order for specific performance. I recorded my conclusion as follows:[3]
I conclude that the plaintiff is entitled to a decree of specific performance in respect of the three contracts. Counsel requested that I simply make such a ruling. They informed me that it was not necessary for me to make specific directions to implement such a decree. In particular, no submissions were advanced as to the steps required to specifically perform and the time within which those steps were to be completed. In the circumstances, I accordingly reserve leave to the plaintiff to apply for a telephone conference with counsel for both parties if the form of the order is not agreed to by counsel. My intention would be to allow counsel to address on the form of order and then to formally pronounce it.
[3] Above n 1, at [102].
[16] No step has been taken to formalise the judgment. It follows that the defendants have never been served with an order that sets out the requirements that the Court orders them to undertake in respect of the agreement for sale and purchase.
[17] There is, however, a complication. The absence of an order for specific performance is not a matter relied upon in the amended notice of opposition to the plaintiff’s application. Paragraph 18 of the amended notice of opposition records:
The contract was subject to orders for specific performance at 17 May 2012 and could not be cancelled without leave of the Court.
That is pleaded as a bar to the plaintiff’s attempt by notice to cancel the contract on
17 May 2012.
[18] In the affidavits that have been filed the second defendants acknowledge an order for specific performance was made by the Court. An example is paragraph 3 of Mr Eden’s affidavit of 8 June 2012, which is filed specifically in his application for an order for inspection.
[19] Mr Rainey advised me that the second defendants did not oppose a declaration that no order for specific performance has been made by the Court. Indeed, he indicated that his clients would be pleased to have the Court make such a declaration.
[20] The second defendants’ position is that they wish the Department of Building and Housing to make a determination under the Building Act 2004. Their ability to seek such a determination arises as a result of an amendment to the definition of “owner” contained in s 7 of the Building Act 2004. The amendment, which came into force on 13 March 2012, added s 176 to the sections referred to in the definition of
“owner” under clause (b)(ii) of s 7 of the Building Act 2004.[4] The result is that a
person who is a purchaser, whether conditionally or unconditionally, may now be a party to a determination which relates to:
[A] provision in the Building Code that has the purpose of protecting other property, the owner of the other property.[5]
[4] Building Amendment Act 2012, s 6(a).
[5] Building Act 2004, s 176(e)(i).
[21] The position prior to the amendment was correctly stated by the solicitors for the plaintiff, who wrote to the Department of Building and Housing on 30 November
2009. I set out the letter in detail.
RE: APPLICATION FOR DETERMINATION: FIRE MATTERS,
11 MAUNGANUI ROAD, MOUNT MAUNGANUI (YOUR REFERENCE
2144)
We write further to your email advice of 27 November 2009 advising that the application has now been formally accepted as determinable.
Under section 176 of the Building Act 2004, the relevant parties in relation to a determination are specifically defined.
We understand that the issue in question is the waiver provided by the Tauranga City Council from the obligations to comply with clause C3.1(c) of the Building code which provides that the object of that clause is to
“…protect adjacent household units…and other property from the effects of
fire…”
It is important to note that the waiver which is the subject of the application is not a waiver that relates to the provision of access and facilities for people with disabilities. That being the case section 176(f) does not apply.
Section 176(e) only provides that the owner of other property may be a party in relation to a determination.
As discussed with you, the whole of the building, and all the units situated on the land, are owned by our client, 11 Maunganui Road Limited. Current search copies of titles can be provided to you should you wish to confirm the same.
Accordingly, we are of the view that Mr and Mrs Evaroa, and Mr and
Mrs Eden do not come within the meaning of “party” as set out in section
176.
Your letter of 27 November 2009 addressed to Mr Evaroa requests confirmation from them whether they own an apartment in the building or if they have signed an Agreement for Sale and Purchase and that either would confirm their status as an owner and therefore party to the matter.
The definition of “owner” in section 7 of the Building Act 2004, which includes a person who has agreed in writing whether conditionally or unconditionally to purchase the land, only applies for the purposes of specific sections. These are section 32 (Owner may apply for project information memorandum), section 44 (When to apply for Building Consent), section 92 (Application for Code Compliance Certificate), section
96 (Territorial Authority may issue Certificate of Acceptance in certain circumstances), and section 97 (How to apply for Certificate of Acceptance).
Sections 32, 44, 96 and 97 do not seem applicable in the current circumstances. Section 92 otherwise sets out the owner’s obligation to apply for a Code Compliance Certificate after all building work to be carried out under the Building Consent granted to that owner is completed.
We do not see how that section would apply to Mr and Mrs Evaroa or
Mr and Mrs Eden.
That being the case, we do not consider the Evaroas or the Edens would have standing to make an Application for Determination for the waiver given by the Tauranga City Council in relation to clause C3.1(c) of the Building Code.
Moreover, in any event, and as indicated above, the waiver given the Tauranga City Council is not in relation to the provision of access and facilities for person with disabilities.
We therefore request that the Department of Building and Housing rescind their initial acceptance of the Application for Determination.
Please do not hesitate to contact us should you wish to discuss further.
We otherwise look forward to receiving your response and would appreciate it if this matter could be dealt with as a matter of strict urgency.
[22] If the Edens remain a party to the contract then their rights to obtain an order under s 176(e) would appear still to exist. That has a consequence because if their application to the Department is successful, orders could be made under s 177 of the Building Act 2004. The effect would be that the plaintiff would not be in a position to comply with the settlement obligations of the sale and purchase agreement. That is because s 177 of the Building Act 2004 could have the effect of reversing the decision of the Territorial Authority. In short, the event which triggers the right to call for settlement will not have occurred.
[23] If the second defendants are successful, the situation that I have outlined is fortuitous to say the least. That is, because on the analysis undertaken in my summary judgment decision I concluded that there was no basis for opposing the making of a decree of specific performance. Indeed, from an evidential position, that is still the case although there is now an available procedure by which the question of whether or not specific performance should now be ordered can be tested via the application to the Department of Building and Housing.
[24] The current position raises a number of possibilities:
(a) If I apply my judgment of 20 September 2010, there has in fact been no order for specific performance because the decree was not then perfected at the request of the parties. If there are no other matters to be taken into account, that creates the position where there is no order that is required to be discharged and therefore no basis for making the first order sought in the plaintiff’s amended application, which is an order discharging the order for specific performance made by the Court on 20 September 2010 in respect of the agreement for sale and purchase between the plaintiff and the second defendants;
(b)The second position that needs to be considered is that the plaintiff has proceeded on the basis that there is a decree of specific performance by making the application that has been made. In their
affidavit evidence the second defendants proceed on the basis that the Court did make a decree of specific performance. They say, however, that the matter should be stayed pending the determination by the Department of Building and Housing. If they are unsuccessful, then they now say they will settle the contract. If they are successful they say the plaintiff is not in a position to comply with the terms of the contract and therefore there is no question of it being specifically performed. It does seem to me, however, that there is a problem with this second possibility because although there has, in principle, been an acknowledgement that the second defendants would not comply with specific terms for settlement, the opportunity to comply has not specifically been provided to them in the evidence so far made available to me;
(c) The third possibility is that if I determine there has been no formal decree of specific performance, I must determine whether the plaintiff was entitled to cancel the contract as at 17 May 2012. The plaintiff’s grounds for issuing the notice of cancellation is set out in paragraph 5 of the plaintiff’s solicitor’s letter to the second defendants’ solicitors wherein they record:
5.Your clients have repeatedly repudiated the agreement and refused to comply with the orders of the Court. They continue to make it clear that they have no intention of completing the purchase, and that they do not wish to purchase the property. They have done so most recently in Mr Eden’s affidavit dated 23 April 2012.
6.Given your clients’ repeated repudiation of the sale and purchase agreement, the plaintiff hereby gives notice of cancellation of that agreement. A declaration confirming the plaintiff’s entitlement to do so will be sought at the next hearing.
That proposition has difficulties so far as a determination on what is a summary judgment application. There was clearly an affirmation of the contract at the time the plaintiff appeared and invited the Court to make a decree of specific performance. By the operation of s 7(5) of
the Contractual Remedies Act 1979, the plaintiff at that time ceased to be entitled to cancel the contract because of its affirmation of it. The question then is whether there has been a subsequent repudiation of the contract by the second defendants which justifies the plaintiff’s cancellation of the contract on 17 May 2012. The plaintiff’s notice was given against a background that there had been an order of specific performance made in this case;
(d)A fourth possibility, but one which is not raised specifically by the application now made or the notice of opposition, but does arise by inference from the second defendants’ advice that, if the ruling by the Department of Building and Housing is contrary to their position, they would perform the contract, is that the second defendants in fact be given the opportunity to perform. If they settled the contract they may potentially have a claim for damages if in fact they find that there has been a breach of warranty on behalf of the plaintiff in respect of the sale and purchase agreement. The possibility of this course occurring arises by virtue of the fact that by clause 14.2 the sale and purchase agreement has a no merger provision with the result that the agreement remains in full force and effect after settlement has been effected.
(e) A further possibility arises and that is that the judgment I delivered on
20 September 2010 by the principle of res judicata bars the defendants from raising a point that was specifically determined in the summary judgment application:[6]
[6] Arranmore Development Ltd v Zeeland Development Ltd (No 2) (2011) 11 NZCPR 825 at [21].
Any questions as to the validity of the agreement or the vendor’s to give good title can no longer be an issue once the order for specific performance has been given
The immediate problem with this possibility is the fact that the judgment itself was not a final judgment and required the making of a
specific order for specific performance.
The orders proposed by the plaintiff
[25] Mr Hollyman helpfully provided me with a series alternative orders that he invited the Court to consider as follows:
Orders
(a) Discharging the order for specific performance made by the Court on
20 September 2010 in respect of the agreement for sale and purchase between the plaintiff and the second defendants dated 23 January
2007, or, declaring that there was and is no order for specific performance
and, awarding damages to the plaintiff in lieu of specific performance
reserving leave to apply for further orders on the summary judgment; or
(b) Declaring that the plaintiff is entitled to cancel the agreement for sale and purchase between the plaintiff and the second defendants dated 23 January 2007 and was entitled to do so on 17 May 2012;
(c) Reserving leave to the plaintiff to apply for further directions.
Conclusions
[26] The conclusion I reach is that in view of the fact that this is part of, or an extension of, my summary judgment jurisdiction it is not appropriate to do anything more than to declare that the Court did not issue a final judgment for specific performance but simply indicated that when further information was placed before the Court such an order would be made.
[27] That conclusion leaves open for the future a decision by the plaintiff as to whether the plaintiff seeks to have the Court make a final order for specific performance as was indicated in my judgment. If the plaintiff elected not to do that then the relief sought in the application for summary judgment would not have been granted and the matter would then proceed to trial on the basis that no order for summary judgment had been made. That then leaves open separately the determination of the other possibilities that I have referred to in this judgment.
[28] In addition, it seems to me appropriate that if such a declaration was made, the application for stay, and the application for leave to inspect, and the proceeding itself should be adjourned so that appropriate directions for their disposal can be made once the parties have given consideration to the ruling contained in this judgment.
Orders
[29] I order:
(a) And declare that the Court did not issue a final judgment for specific performance but simply indicated that when further information was placed before the Court such order would be made;
(b)The second defendants’ application for stay and applications for inspection are adjourned to a telephone case management conference with counsel at 9:30am on 13 August 2012. At that time the following matters will be discussed:
(i)disposal of, or allocation of a fixture in respect of the application for stay and inspection;
(ii)if appropriate, interlocutory orders and directions in relation to the substantive proceeding;
(iii) settlement;
(iv) the issues requiring resolution at trial;
(v)trial duration, the fixing of the trial date and the making of any special trial directions that are required. In respect of these matters counsel should have available the number of witnesses to be called and the general scope of the evidence to be covered by them so that an accurate assessment can be made
of trial duration. In addition, counsel should be in a position to indicate if any order should be made In relation to experts pursuant to r 9.44.
Because the issues requiring resolution at trial will be considered at the conference, memoranda shall be filed on a sequential basis so that the second defendants have the opportunity of commenting upon the plaintiff’s summary of the trial issues. To achieve this the plaintiff’s memorandum dealing with the above matters shall be filed and served by 30 July 2012 and the second defendants’ memorandum dealing with the above matters and, in particular, commenting upon, conceding or adding to the list of issues shall be filed and served by
6 August 2012.
Costs
[30] I reserve costs. I record the position as agreed by counsel, namely that the quantum of costs should be fixed on a 2B basis and based on a three-quarter day hearing. If counsel are unable to agree on the appropriate course to be followed in relation to costs, memoranda shall be filed and served in support, opposition and
reply at seven-day intervals.
JA Faire
Associate Judge
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