7 Farms Limited v TCD 2015 Limited (in liquidation)

[2024] NZHC 1094

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2021-470-000131

[2024] NZHC 1094

BETWEEN

7 FARMS LIMITED

Plaintiff

AND

TCD 2015 LIMITED (IN LIQUIDATION)

First Defendant

JAMIE MARK THOMAS

Second Defendant

Hearing:	On the papers
Appearances:	A T Grant for Plaintiff
Judgment:	6 May 2024

JUDGMENT OF ANDREW J

This judgment was delivered by Justice Andrew on 6 May 2024 at 3.00 pm

pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar

Date ……………………………

7 FARMS LTD v TCD 2015 LTD (IN LIQ) [2024] NZHC 1094 [6 May 2024]

Introduction

[1]On 14 March 2024, the plaintiff, 7 Farms Ltd (7 Farms), applied for orders:

(a)Dissolving a prior specific performance order of the court;

(b)Cancelling the agreement between 7 Farms and the first defendant, TCD 2015 Ltd (in liquidation) (TCD 2015) that formed the basis for the specific performance order; and

(c)Awarding 7 Farms damages against TCD 2015.

[2]        In a minute dated 16 April 2024, La Hood J directed that in the event that no notice of opposition to the application was filed by the second defendant, Mr Thomas, by 23 April 2024, then counsel for 7 Farms was to:

(a)Set out in a memorandum the factual and legal basis for the orders sought in the application; and

(b)Address whether the orders sought in the application should be made on the papers.

[3]        No notice of opposition has been filed by Mr Thomas. 7 Farms has filed a memorandum in accordance with La Hood J’s directions.

[4]        I am determining the application on the papers; I accept that it is appropriate to do so. The law regarding the dissolution of a specific service order and cancellation of the agreement is consistent and uncontroversial. The evidence in this case is also very clear. It is identical to that before Lang J when the specific performance order was made.

Basis for the orders sought

[5]        The factual basis for the orders sought is set out in the affidavit of the representative of 7 Farms, Mr Turner (affirmed on 13 March 2024).

[6]        In summary, the application relates to an agreement between 7 Farms and TCD 2015 dated 9 July 2020 (the agreement). Under the agreement, 7 Farms paid TCD 2015, $244,000 in consideration for which TCD 2015 was obliged to:

(a)Drill two-meter-deep-bores at the property of 7 Farms; and

(b)Supply 7 Farms with a bore log confirming that the bores had been drilled (the Obligations).

[7]        Pursuant to a guarantee dated 27 October 2020, Mr Thomas guaranteed, as principal and not as surety, all of TCD 2015 obligations under the agreement.

[8]        Contrary to the requirement of the Obligations, the bores were not drilled to the agreed depth, nor was a bore log supplied. Accordingly, neither defendant performed the Obligations. Attempts by 7 Farms to compel such performance during 2020 and 2021 were unsuccessful.

[9]        In late 2015, 7 Farms applied to this Court for an order that the defendants specifically perform the Obligations. On 1 December 2021, Lang J ordered both defendants to perform the Obligations immediately. Following his Honour’s specific performance order, 7 Farms attempted through repeated correspondence from a solicitor to compel the defendants’ compliance with it. These attempts were unsuccessful in procuring performance.

[10]      On 9 August 2022, TCD 2015 was placed into liquidation. The performance of the Obligations became impossible.

[11]      Despite repeated efforts, 7 Farms has not been able to procure performance of the Obligations, as required by Lang J’s specific performance order, from either defendant.

Decision

Dissolution of a specific performance order

[12]      As the Court held in Mayoral Drive Trustee Ltd v Lal,1 there is clear authority for the proposition that if an order for specific performance is not complied with, the

1      Mayoral Drive Trustee Ltd v Lal HC Auckland CIV-2007-404-1902, 19 December 2007, at [2], referring to Johnson v Agnew [1979] 1 All ER 883 and D’Arcy-Smith v Stace HC Wellington, CP63/03, 8 September 2003.

party who obtained the order has the choice to dissolve the order and put an end to the contract. This principle has been affirmed by a number of decisions of the Court.2

[13]      I find that that principle applies to the facts of this case. Here, 7 Farms has previously attempted to procure both defendants’ compliance with a specific performance order by demanding they perform their Obligations. However, despite such efforts those Obligations remain unperformed.

[14]      I find that it is appropriate in these circumstances that the specific performance order be dissolved. Here, 7 Farms does not wish to incur further expense enforcing the order and wishes to cancel. It does so in light of repeated indications that further pursuit of enforcement would be fruitless.3

Cancellation of the agreement and damages

[15]It is clear that the Court has the power to cancel the contract.4

[16]      I find that the contract here should be cancelled. The Obligations were the fundamental requirement of TCD 2015 under the Agreement. Its ongoing failure to perform constitutes a material breach and forms the basis for 7 Farms to seek the agreement’s cancellation.

[17]      Where orders dissolving the earlier specific performance order and cancelling the contract are obtained, the authorities also confirm that the non-breaching party is also entitled to an award of damages reflecting the loss “as a consequence of breach and cancellation”.5

[18]      As Lang J noted in a minute immediately preceding the specific performance order, 7 Farms paid $244,000 under the agreement with the expectation that TCD 2015 would perform the Obligations in return. Having not received those services from TCD 2015 (and in breach of the agreement), the properly assessed loss of 7 Farms is

$244,000 together with interest.

2      Strand Corporation v Dickson HC Auckland CIV-2008-404-7707, 14 June 2010.

3      Mayoral Drive Trustee Co Ltd v Lal, above n 1, at [1].

4      Investment Specialist Ltd v Kumaran (2009) 10 NZCPR 658.

5      Investment Specialist Ltd v Kumaran, above n 4, at [6].

[19]      The evidence of the loss is provided in Mr Turner’s affidavit. It was relied upon by Lang J when his Honour issued the specific performance order and found that TCD 2015 had no reasonably arguable defence to the claim of 7 Farms. Mr Thomas is liable as a principal for this amount under the guarantee.

[20]I accordingly make an order awarding damages against Mr Thomas of

$244,000 together with interest.

Result

[21]I make the following orders and directions:

(a)An order dissolving the specific performance order;

(b)An order cancelling the agreement;

(c)An order that Mr Thomas, the second defendant, must pay the plaintiff, 7 Farms Ltd, $244,000 together with interest at the rate provided by the Interest on Money Claims Act 2016; and

(d)The second defendant, Mr Thomas, is to pay the costs of 7 Farms associated with the application on a 2B basis.

Andrew J