875 Frankton Road Limited v Dandekar
[2014] NZHC 937
•7 May 2014
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV 2011-425-33 [2014] NZHC 937
BETWEEN 875 FRANKTON ROAD LIMITED
Plaintiff
AND
SURESH V DANDEKAR Defendant
Hearing: 5 May 2014 Appearances:
S N McKenzie for Plaintiff
No appearance by or for DefendantJudgment:
7 May 2014
RESERVED JUDGMENT OF MANDER J
Introduction
[1] This proceeding arises out of a failed property transaction involving two recently developed apartments in a complex known as “The Marina Baches” situated in Queenstown. The complex was built by Wensley Developments the Marina Limited (“Wensley”).
Factual allegations
[2] In October 2007, the defendant, Mr Suresh V Dandekar, entered into a sale and purchase agreement with Wensley in respect of two apartments, Units 303 and
304 of the Marina Apartments Development. The agreements provided for a purchase price of $1,136,250 and a deposit payable of $113,625 for each of the apartments. The date of possession was to be determined in accordance with the terms of the contract which also provided for an interest rate for late settlement of
16% per annum.
[3] Specific terms of the sale and purchase agreements included:
875 FRANKTON ROAD LIMITED v DANDEKAR [2014] NZHC 937 [7 May 2014]
New Title Provision
3.1.2 (1) Where:
(a) the transfer of the property is to be registered against a new title in the course of issuing (including a new or provisional title following the loss of the outstanding copy of the title); and
(b) a search copy, as defined in section 172A of the Land Transfer Act 1952, of that title is not obtainable by the fifth working day prior to the settlement date –
then, unless the purchaser elects that settlement shall still take place on the agreed settlement date, the settlement date shall be deferred to the fifth working day following the later of the date on which:
(c) the vendor has given the purchaser notice that a search copy is obtainable; or
(d) the requisitions procedure under clause 5.0 is complete. (2) This subclause shall not apply where it is necessary to register
the transfer of the property to enable a plan to deposit and
title to the property to issue.
(3) Deferment of the settlement date under this subclause shall not constitute deferment of the possession date unless the parties so agree.
9.0 Notice to complete and remedies on default
9.1 (1) If the sale is not settled on the settlement date either party may at any time thereafter serve on the other party notice (“a settlement notice”) to settle in accordance with this clause; but (2)
The notice shall be effective only if the party serving it is at the time of service either in all material respects ready able and willing to proceed to settlement in accordance with the notice or is not so ready able and willing to settle only by reason of the default or omission of the other party….
…………
9.2Upon service of the settlement notice the party on whom the notice is served shall settle:
(i) On or before the 12th working day after the date of service of the notice; or
(ii) On the first working day after the 20th day of January if the period of twelve working days expired during the period
commencing on the 6th day of January and ending on the 20th
day of January, both days inclusive ……
…………
9.4If the purchaser does not comply with the terms of the settlement notice served by the vendor then:
(1) Without prejudice to any other rights or remedies available to the vendor at law or in equity the vendor may:
(a) Sue the purchaser for specific performance; or
(b) Cancel the Agreement by notice and pursue either or both of the following remedies namely:
(i) Forfeit and retain for the vendor’s own benefit the deposit paid by the purchaser, but not exceeding in all 10% of the purchaser price; and/or
(ii) Sue the purchaser for damages.
(2) Where the vendor is entitled to cancel this agreement the entry by the vendor into a conditional or unconditional agreement for the resale of the property or any part thereof shall take effect as a cancellation of this agreement by the vendor if this agreement has not previously been cancelled and such resale shall be deemed to have occurred after cancellation.
(3) The damages claimable by the vendor under subclause
9.4(1)(b)(ii) shall include all damages claimable at common law or in equity and shall also include (but shall not be
limited to) any loss incurred by the vendor on any bona fide resale contracted within one year from the date by which thepurchaser shall have settled in compliance with the settlement notice. The amount of that loss may include:
(a) Interest on the unpaid portion of the purchase price at the interest rate of late settlement from the settlement date to the settlement of such resale; and
(b) All costs and expenses reasonably incurred in any resale or attempted resale.
(c) All outgoings (other than interest) on or maintenance expenses in respect of the property from the settlement date to the settlement of such resale.
(4) Any surplus money arising from a resale as aforesaid shall be retained by the vendor.”
15.0 Purchase Price and Deposit
15.1The deposit is to be paid to the Vendor’s solicitors trust account immediately upon the signing of this Agreement and will be held on interest bearing deposit in the Vendor’s solicitors trust account pending settlement. The interest on the deposit (less withholding tax if applicable and bank commission) shall accrue to the party to whom the deposit is disbursed in accordance with this Agreement.”
[4] The deposits were arranged through New Zealand Home Bond Limited and after an extension to the original clause of the agreement arrangements regarding the deposit were finalised on 14 January 2008.
[5] On 12 December 2008, Wensley provided the defendant with advice that a certificate of title had issued for Unit 303 and in accordance with the sale and purchase agreement that settlement was to take place on 23 December 2008. It further advised the defendant that a certificate of title had issued in respect of Unit
304, and accordingly settlement would also take place on the same day. Copies of the certificates of practical completion were also provided to the defendant.
[6] On 19 December 2008, Wensley provided the defendant with a settlement statement specifying the total amount required to settle on 23 December, being
$1,141,279.94 in respect of each apartment. On 22 December 2008, Wensley provided the defendant with a copy of the code of compliance certificate issued in respect of the Marina Apartments. The same day, the defendant raised queries about that certificate, the practical completion certificates, and in particular issues in relation to the apartments’ balustrades.
[7] On 23 December, the date of settlement, Wensley advised the defendant that issues relating to the balustrades had been rectified and confirmed that settlement was to take place that day. In response, the defendant communicated to Wensley that he was cancelling the agreements. The defendant claimed misrepresentations had been made by Wensley as to the nature, quality, investment return and overall construction and completion standards of the apartments. The defendant therefore did not settle the purchase of the apartments on 23 December.
[8] At the close of business on that day, Wensley served a settlement notice pursuant to clause 9 of the agreements requiring the defendant to settle the agreements on or before 22 January 2009.
[9] In the new year, on 7 January 2009, Wensley responded to each of the matters raised by the defendant in his communication of 23 December 2008. The allegations of misrepresentation were denied and the defendant was informed that he was in default of the agreements and that penalty interest was accruing.
[10] The defendant did not settle the agreements on or before 22 January 2009 in accordance with the settlement notices. On 30 January, Wensley confirmed that the settlement notices had expired and that penalty interest was continuing to accrue. On 5 March, the deposits of $113,625 in respect of each of the units the subject of the agreements were disbursed by Home Bonds New Zealand Limited to Wensley. The following day, 6 March, Wensley advised the defendant that the agreement in respect of Unit 303 was cancelled as a result of the defendant’s failure to settle in breach of the sale and purchase agreement. On 19 May, Wensley provided similar advice in respect of Unit 304.
[11] On 27 October 2010, Wensley sold the apartments to the plaintiff, 875
Frankton Road Limited. Unit 303 and 304 were part of a transaction involving the transfer of several apartments in the Marina Baches complex to the plaintiff. At that time, Wensley assigned all of its rights pursuant to the agreements with the plaintiff. Unit 303 was sold for $590,625 (GST inclusive) and Unit 304 for the same price. The defendant was advised by letter of 10 November 2010 that Wensley had assigned all its rights pursuant to the agreements to the plaintiff.
[12] In January 2011, the plaintiff commenced proceedings against the defendant to recover losses it alleged resulted from the defendant’s breach of the agreements. A statement of defence was filed by the defendant in which he contested the purchase price for each apartment. He alleged that on 23 December 2008, when Wensley served settlement notices upon him such notices were invalid as Wensley was not ready, willing and able to settle in accordance with its obligations under the agreements.
[13] The defendant further alleged that on or around 21 October 2008, Wensley’s sales manager and duly authorised agent agreed to release him from the agreements and that he was no longer therefore under an obligation to perform the agreements. By way of counterclaim, the defendant alleged that he had been induced to enter into the agreements as a result of misrepresentations by Wensley. It was as a result of these misrepresentations that the defendant cancelled the agreements on 23
December 2008 and, it was claimed, entitled to a refund of the deposits paid. A
similar claim was pleaded in relation to the Fair Trading Act 1986.
Procedural background
[14] The matter proceeded as a defended proceeding which was confirmed ready for trial in August 2013. In December last year, counsel for the defendant advised the Court that he no longer had instructions which enabled him to progress the matter on a defended basis. Subsequently, notice of the defendant’s intention to act in person was filed and served under r 5.40(3)(c) HCR. By minute of Associate Judge Osborne dated 4 December 2013, the matter was set down for hearing in the likelihood that it would proceed by way of formal proof in the assumption the defendant would not be appearing or actively participating.
[15] In April 2014, the Registry received confirmation that the defendant was unable to attend the hearing. He did not seek to have the hearing adjourned and did not oppose the matter proceeding by way of formal proof. Apart from an unsworn letter from Mr Dandekar and an affidavit as to his financial position, no evidence has been filed by the defendant. Accordingly the defendant has not been able to support his contentions in dispute of the plaintiff’s claim or advance his counterclaim. In the absence of any evidence in support of his allegations and counterclaim, I have heard the evidence of the plaintiff without contest.
Evidence
[16] The plaintiff’s claim rests on a failure by the defendant to settle in accordance with clause 9 of the agreement for sale and purchase. On behalf of the plaintiff, Ms Jack, the manager of the plaintiff company and a previous manager of Wensley involved in the selling of the apartments has sworn an affidavit dated 2 May 2014.
Apart from Mr Dandekar’s affidavit as to assets and means it is the only sworn or deposed evidence before the Court in these proceedings. Ms Jack gave evidence and confirmed her affidavit in the witness box. She states that Wensley was ready, able and willing to settle at the time it served the settlement notices on the defendant.
[17] In the case of each of the sales of Units 303 and 304, Ms Jack confirms in her affidavit that the provisions of the standard third edition agreements of sale and purchase of real estate used by the Law Society and Real Estate Institute formed the basis of the contracts in October 2007. She has confirmed in her evidence the facts on which the allegations made by the plaintiff in its statement of claim rest. In particular that the defendant failed to settle in accordance with the terms of the agreements on the original settlement date of 23 December 2008 and subsequently after settlement notices had been issued. In response to the defendant’s defaults on settlement, Ms Jack confirmed that notices of cancellation were issued to the defendant by Wensley and that subsequently the rights of Wensley arising from the agreements were assigned to the plaintiff with notice provided to the defendant on 10
November 2010.
[18] Ms Jack has refuted the defendant’s allegations contained in his original pleading that Mr Dandekar had the right to cancel the agreements for misrepresentation or that at any stage he was released from his contractual obligation by an agent of Wensley. I note in regard to the latter that such a contention did not feature in correspondence from the defendant’s solicitors in December 2008 as a reason for not settling the transactions.
Decision
[19] I am satisfied that the plaintiff has proved that the defendant in respect of each of the agreements failed to settle either on the settlement date or prior to the expiry of the settlement notices. Wensley had the right under the terms of the agreements and the Contractual Remedies Act 1979 to cancel the contracts and then to proceed to recover the losses caused by the defendant as a result of his breaches. The plaintiff assumed those rights after the execution of a deed of assignment by Wensley to it in October 2010.
[20] Clause 9.4 of the agreements provides that in the event of the purchaser not complying with the terms of the settlement notice the vendor was entitled to cancel the agreement by notice to the purchaser who forfeits the deposit paid and may sue the purchaser for resulting damages.
[21] When the defendant purported to cancel the agreement on 23 December
2008, it was apparent that he did not intend to perform his obligations under the agreements. In effect, the defendant repudiated the contracts which entitled Wensley, after the defendant failed to comply with the settlement notices, to cancel the agreements in respect of each of the apartments under s 7(2) of the Contractual Remedies Act 1929.
[22] It is uncontested that the plaintiff sought to cancel the agreement on 23
December 2008. Thereafter, the defendant proceeded on the basis of his purported cancellation and took no further step in furtherance of the purchase of the apartments. Wensley did not accept the validity of the cancellation and was entitled to conclude that the defendant’s refusal to complete the purchase indicated his intention not to perform any further obligations under the agreement. Non- compliance with the settlement notices was a clear manifestation of that intention. Absent any evidence that Wensley was not ready, willing and able to settle in accordance with its obligations under the agreements, or of misrepresentations on the part of Wensley which had induced him to enter into the agreements, or any evidence of the defendant being released from the agreements, Wensley was entitled to cancel the agreements and recover its losses arising out of the defendant’s failure to settle, including the shortfall in the ultimate sale price achieved from that the subject of the agreements with the defendant.
[23] In respect of each apartment, the plaintiff as the assignee of Wensley’s rights under the agreements with the defendant has claimed the difference in the purchase price and the market value of the respective apartments at the time the contracts were cancelled less the forfeited deposits and rental from the apartments in 2009 and
2010. Ms Jack exhibited market valuations prepared by a registered valuer used for the purpose of fixing the purchase price for the sale by Wensley to the plaintiff. Additionally, interest is claimed from 23 December 2008, the original settlement
date to the respective dates when the sale and purchase agreements were cancelled. Further interest is claimed pursuant to s 87 of the Judicature Act 1908 at the applicable rate from the date of cancellation to the date of judgment.
[24] The plaintiff in the absence of evidence before the Court in opposition to these claims including as to quantum is entitled to judgment in respect of the amounts claimed each of which appear to be in order.
Orders
[25] Judgment is therefore entered in favour of 875 Frankton Road Limited in respect of the following sums:
(a) The principal sums of $409,160 and $404,042, being the differences between the purchase prices under the agreements less the deposits and rental income received and the resale values of Units 303 and 304 respectively.
(b) Interest on the sums of $409,160 and $404,042 at the penalty rate of
16% per annum as per the agreements for sale and purchase, being
$13,093.28 for the period between 23 December 2008 and 6 March
2009, when the agreement in respect of Unit 303 was cancelled; and
$26,035.17, being the period between 23 December 2008 and 19 May
2009, when the agreement in respect of Unit 304 was cancelled.
(c) Interest from 6 March 2009, when the agreement in respect of Unit
303 was cancelled to 30 June 2011, on the principal sum of $409,160 at the rate of 8.4% per annum (846 days at $94.16 per day) -
$79,659.36; and interest from 19 May 2009, being the date of cancellation of the agreement in respect of Unit 304 to 30 June 2011, at the rate of 8.4% per annum (772 days at $92.99 per day) -
$71,788.28; and
(d) Interest on the principal sum of $409,160 from 1 July 2011 to the date of judgment at the rate of 5% per annum; and interest on the principal
sum of $404,042 from 1 July 2011 to the date of judgment at the rate
of 5% per annum.
Costs
[26] The plaintiff in succeeding in this proceeding is entitled to an award of costs on a 2B basis together with reasonable disbursements. If costs are to be pursued, the plaintiff should file and serve memoranda on the defendant. Having given the defendant an opportunity to make representations and in the absence of any agreement, the matter can be referred to the Court.
Solicitors:
Preston Russell, Invercargill
Copy to:
S Dandekar
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