Birnie v Outward Limited
[2023] NZHC 3008
•26 October 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-759
[2023] NZHC 3008
BETWEEN WILLIAM GEORGE PORTER BIRNIE
First Plaintiff
CHARLES GILBERT PEARCE
Second PlaintiffAND
OUTWARD LIMITED
First Defendant
PRICEMAKER LIMITED
Second DefendantROB DACRE ROGERS
Third Defendant
PLAYMAKER LABS LIMITED
Fourth Defendant
Hearing: 20 September 2023 Appearances:
R Latton for Plaintiffs
T G H Smith for First, Second and Fourth Defendant Appearance of the Third Defendant excused
Judgment:
26 October 2023
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] Before me is an application by the plaintiffs against the first, second, third and fourth defendants for summary judgment on liability in respect of the alleged breach by the defendants of a settlement agreement providing for the sale and purchase of shares.
[2]The first, second and fourth defendants oppose the application.
BIRNIE v OUTWARD LIMITED [2023] NZHC 3008 [26 October 2023]
[3] The third defendant has not filed a notice of opposition, but he has advised the Court that he adopts the position of the first, second and fourth defendants. In the circumstances, if the application for summary judgment on liability against the first, second and fourth defendants is successful, then it will also be successful against the third defendant. Mr Latton, for the plaintiffs, acknowledged that if the application for summary judgment on liability is unsuccessful against the first, second and fourth defendants, then it would also be unsuccessful against the third defendant.
Background
[4] The plaintiffs allege that they were induced to invest in convertible note agreements (CNA) issued by the first defendant, Outward Ltd (Outward), by misrepresentations made by Outward, the second defendant, Pricemaker Ltd (Pricemaker), and the third defendant, Rob Rogers.
[5] Since the commencement of the proceeding in December 2020, the plaintiffs’ CNAs have been converted into shares of Pricemaker. Subsequently, the shares in Pricemaker have been converted into shares of the fourth defendant, Playmaker Labs Ltd (Playmaker).
[6] In August 2022, the defendants approached the plaintiffs with an offer to settle the proceeding. After some negotiation, a settlement agreement was agreed on or about 5 September 2022 (Settlement Agreement).
[7]In summary, the Settlement Agreement provided that:
(a)The plaintiffs would transfer all of their shares in Playmaker to Playmaker and Mr Rogers in three tranches as follows:
(i)Playmaker would pay the sum of $100,000 on 20 October 2022 as consideration for a total of 222,704 shares in Playmaker;
(ii)Playmaker would pay the sum of $100,000 on 30 November 2022 as consideration for a total of 222,704 shares in Playmaker;
(iii)Mr Rogers would pay the sum of $100,000 on 23 December 2022 as consideration for a total of 200,000 shares in Playmaker.
(b)Once the share purchases had been completed, the plaintiffs would have no claim against the defendants, and they would instruct their lawyers to withdraw their claim and accept the $300,000 paid as full and final settlement of the proceeding.
(c)The plaintiffs undertook not to progress any legal action or proceeding of any kind regarding the plaintiffs’ claim, unless Playmaker and/or Mr Rogers failed to make a payment by a due date and failed to remedy the situation within three working days of the due date.
[8] The payments required to be made under the Settlement Agreement have not been made. To date, the plaintiffs have only received $10,000. The plaintiffs say that they have taken all steps necessary for settlement under the Settlement Agreement to occur.
[9] On 17 November 2022, the plaintiffs amended their statement of claim to include a fifth cause of action against all defendants, alleging breach of the Settlement Agreement. The plaintiffs sought specific performance of the Settlement Agreement or, alternatively, equitable damages in the amount of the sums unpaid under the Settlement Agreement. The plaintiffs also applied for summary judgment on the fifth cause of action at that time.
[10]On 9 February 2023, the plaintiffs cancelled the Settlement Agreement.
[11] On 14 May 2023, the plaintiffs filed a third amended statement of claim. The fifth cause of action was amended. Specific performance is no longer sought. The plaintiffs now seek an enquiry into damages suffered by the plaintiffs as a result of the defendants’ alleged breach of the Settlement Agreement. The plaintiffs also amended their application for summary judgment. Incidental orders sought by the plaintiffs as
part of the amended application for summary judgment have been made by consent. The only outstanding order sought by the plaintiffs is an order that:
b.Summary judgment be entered against all defendants as to their liability on the fifth cause of action in the plaintiffs’ third amended statement of claim (using the defined terms in the third amended statement of claim) for:
(i)breach of the Settlement Agreement;
(ii)Costs.
Legal Principles – Summary Judgment
[12] The plaintiffs’ application for summary judgment is made under r 12.2(1) of the High Court Rules 2016 which provides as follows:
12.2Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[13]The application is also made under r 12.3, which provides that:
12.3Summary judgment on liability
The court may give judgment on the issue of liability, and direct a trial of the issue of amount (at the time and place it thinks just), if the party applying for summary judgment satisfies the court that the only issue to be tried is one about the amount claimed.
[14] The principles that govern summary judgment are now very well settled. In Krukziener v Hanover Finance Ltd, the Court of Appeal summarised the principles as follows:1
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26]–[27].
uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. In the end the court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
Under r 141A of the High Court Rules the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.
[15] Other ways of expressing the notion of “no defence” are: no bona fide defence, no reasonable ground of defence, and no fairly arguable defence.2
[16] The Court will deal with questions of law on a summary judgment application,3 and this includes issues of contractual interpretation.4 This is so even where the question of law is difficult and requires argument, including reference to authority.5
Issues for determination
[17] Mr Latton confirmed that the plaintiffs seek summary judgment against all the defendants as to their liability for breach of the Settlement Agreement entitling the plaintiffs to cancel the Settlement Agreement. Specifically, the plaintiffs contend that the defendants’ breach entitled the plaintiffs to cancel the Settlement Agreement under s 37(1)(b) of the Contract and Commercial Law Act 2017 (CCLA) on the basis that a term in the Settlement Agreement was breached and:
(a)under s 37(2)(a) of the CCLA, the parties expressly or impliedly agreed that the performance of that term was essential to the plaintiffs; or
(b)under s 37(2)(b) of the CCLA, the effect of the breach was:
2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
3 At 4.
4 Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383 at [37].
5 At [37] citing International Ore & Fertilizer Corp v East Coast Fertiliser Co Ltd [1987] 1 NZLR 9 (CA) at 16.
(i)substantially to reduce the benefit of the Settlement Agreement to the plaintiffs; or
(ii)substantially to increase the burden of the plaintiffs under the Settlement Agreement; or
(iii)in relation to the plaintiffs, to make the benefit or burden of the Settlement Agreement substantially different from that represented or contracted for.
[18] Based on the documents filed and the parties’ submissions, the following issues arise:
(a)whether time was of the essence under the Settlement Agreement such that the defendants’ failure to make the payments required under the Settlement Agreement by the stipulated dates amounted to breach of a term of the Settlement Agreement entitling the plaintiffs to cancel under ss 37(1)(b) and 37(2)(a) of the CCLA;
(b)whether the effect of any breach of a term of the Settlement Agreement by the defendants was substantially to reduce the benefit of the Settlement Agreement to the plaintiffs, or substantially to increase the burden of the Settlement Agreement to the plaintiffs, or in relation to the plaintiffs to make the benefit or burden of the Settlement Agreement substantially different from that represented or contracted for, entitling the plaintiffs to cancel under ss 37(1)(b) and 37(2)(b) of the CCLA;
(c)if there was a breach of a term of the Settlement Agreement by the defendants which entitled the plaintiffs to cancel the Settlement Agreement, whether the plaintiffs affirmed the Settlement Agreement; and
(d)whether the first and second defendants are parties to the Settlement Agreement.
[19]I now turn to consider these issues.
Whether time was of the essence under the Settlement Agreement?
[20] In considering whether payment of the amounts required to be paid under the Settlement Agreement by the stipulated dates was essential to the plaintiffs, the approach to be taken is set out by the Supreme Court in Mana Property Trustee Ltd v James Development Ltd (considering s 7(4)(a) in the Contractual Remedies Act 1979):6
[24]Subsection (4)(a) contemplates that the parties either have expressly agreed that a particular term in their contract is to be regarded as essential (to the cancelling party or to both of them) or must be taken to have impliedly so agreed. In both cases it is a matter of interpretation of the contract. The use of words such as “performance being essential” or “strict performance being required” would plainly fall within the former category, but no special form of words is necessary provided that it can be seen that the parties have indeed agreed that adherence to the provision in question is being treated by them as essential. The latter category, of implied agreement on the essentiality of a term which appears in the contract, may sometimes be more difficult to establish. But, again, it will be a question of interpretation, that is, ascertaining the intention of the parties as to the essentiality of the particular term from its language read in the context of the whole of the contract and the surrounding circumstances when the contract was made. Of particular importance will be what must then have been in the contemplation of the parties concerning the likely effect of a breach of the term. It will include whether a term of the same kind has customarily been treated as a condition or as an essential term under the Act, such as, in relation to a land sale agreement, a requirement for payment of a deposit within a particular time. It will also include a consideration of the type of contract and whether it is one, like a mercantile contract, which normally requires strict performance. The court must ask itself whether, without expressly stating that the term is essential – that is, using a form of words equivalent to the expressions of which we have given instances
– the parties can be seen, in context, to have intended that that should be the position. Obviously there will be some cases where what is express shades into what must be taken to be implied.
[25]In the end, the preferable approach is to ask whether, unless the term in question was agreed at the time of contracting to be essential, the cancelling party would more probably than not have declined to enter into the contract. That question must be answered by an objective contextual appraisal which disregards what a party may unilaterally have said about its intention in that regard.
6 Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 90, [2010] 3 NZLR 805 at [24]-[25] (footnotes omitted).
The Settlement Agreement
[21]It is useful to outline relevant sections of the Settlement Agreement.
[22]Clause 1.3 of the Settlement Agreement provided that:
This offer is made on behalf of Pricemaker, Outward, Rob and Playmaker and is made on the condition that, if the Agreement is entered into by all parties and performed by Pricemaker, Outward, Rob and Playmaker, William and Charles must discontinue their Claim with no issue as to costs, and without admission of liability by any party to the Claim.
[23]Clause 2.3 provides that:
The offer consists of three payments for the shares with the transaction to be completed by the end of 2022 (the Buy-out Period).
[24] Clauses 3 of the Settlement Agreement provides for the transfer of the shares in three tranches with payments to be made by Playmaker and Mr Rogers by specific dates, as set out in [7(a)] above.
[25]Clause 5 of the Settlement Agreement provides as follows:
5. No proceedings during Buy-out Period
Each of Charles and William undertake not to progress any legal action or proceeding of any kind regarding the Claim during the Buy-out Period, unless Playmaker and/or Rob (as appropriate) has failed to make a payment due under clause 3.1(a) to (c) above and failed to remedy the situation within three working days of the due date. The parties agree to deal with any court-imposed deadlines or attendances relating to the Claim during the Buy-out Period in the spirit of this Agreement and with the aim of minimising costs to all parties to the Claim.
[26]Clause 6 of the Settlement Agreement provides as follows:
6.0Full and Final Settlement of the Claim
6.1Charles and William agree that once the Buy-out Period is complete that they will have no claim against Playmaker, Pricemaker, Outward, or Rob and they will instruct their lawyers to withdraw the Claim and accept the $300,000 paid to them as full and final settlement of the Claim and all potential claims, known or unknown, past or arising in the
future, on any basis whatsoever, against Playmaker, Pricemaker, Outward, and/or Rob.
6.2Charles and William must forward to Pricemaker, Outward and Rob a completed notice of discontinuance, with costs to lie where they fall, no later than 30 January 2023. Playmaker and Rob must ensure the notice is signed and return to Charles and William by 7 February 2023, after which Charles and William must file it in the Court.
Discussion
[27] The Settlement Agreement does not contain words to the effect that performance of the terms is “essential”, or that “strict performance” is required.
[28] However, Mr Latton submits that the plain words of the Settlement Agreement indicate that time is essential, particularly the reference in cl 2.3 to the transaction having to be completed by the end of 2022, the payment dates stipulated in cl 3.1, the requirement in cl 6.2 for a signed notice of discontinuance to be filed by 7 February 2023, and the fact that cl 5 allows the plaintiff to progress their proceeding if any payment was more than three days late.
[29] Mr Smith, for the first, second and fourth defendants, submits that while particular dates are clearly set out in the Settlement Agreement, there is no basis, either in the text or the context, to think that the dates were in any way essential to the plaintiffs. He submits that the dates in the Settlement Agreement were simply dates put forward by the defendants.
[30] This raises a contextual issue as to the surrounding circumstances when the Settlement Agreement was entered into. I understand from the submissions that the Settlement Agreement was the subject of negotiation between the parties. However, there is no evidence before the Court of the negotiations. It seems to me that this evidence may be relevant as it may indicate or reflect a common mutual understanding as to whether performance by the stipulated dates in the Settlement Agreement was essential to the plaintiffs.7
7 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at 6.3.4(e).
[31] Mr Latton further submits that the Settlement Agreement was a contract designed to settle a proceeding, not just for the sale and purchase of shares. He refers to the fact that the proceeding had been set down for trial on 1 August 2022 with the trial commencing on 12 February 2024, the close of pleadings date on 25 September 2023 and the plaintiffs’ evidence due on 20 November 2023. Mr Latton submits that in these circumstances, time was essential. He submits that if the time of performance was not essential then the Buy-out Period would still be in place and cl 5 of the Settlement Agreement would operate to stop the plaintiffs taking any steps to progress the proceeding including preparatory steps before trial.
[32] However, the Settlement Agreement was entered into on 5 September 2022, and required a signed notice of discontinuance to be filed by February 2023. The close of pleadings date was not until 25 September 2023. While Mr Latton submits that there were potentially a number of steps to be taken by the parties prior to 25 September 2023 which may require time to complete, and the plaintiffs would have to commence preparation of their evidence well in advance of 20 November 2023, I do not consider that this necessarily means that time was of the essence under the Settlement Agreement.
[33] Further, it seems to me to be reasonably arguable that, during the Buy-out Period, and even if it remained in place beyond the end of 2022, cl 5 allowed the plaintiffs to progress this proceeding in the event of failure by Playmaker and/or Mr Rogers to make the relevant payments within three working days of the due dates.
[34] Mr Latton submits that the plaintiffs would more probably than not have declined to enter into such an open-ended settlement agreement which may have required them to wait for some indeterminate time for Playmaker and/or Mr Rogers to make payment or sue for specific performance. However, it is arguable that the remedy available to the plaintiffs where any payment was more than three days overdue was to give notice requiring payment on or before a certain date thereby making time of the essence. As the Supreme Court found in Steele v Serepisos:8
The purpose of such a notice in each situation is twofold. First, the notice warns the other party that the notice giver requires performance by a stated
8 Steele v Serepisos [2006] NZSC 67, [2007] 1 NZLR 1 at [55].
date. Secondly, the notice indicates that the notice giver will regard the other party as being in repudiation, and hence vulnerable to cancellation on that account, if the terms of the notice are not observed. Provided the notice is valid, its non-fulfilment allows the giver of the notice to elect to bring the contract to an end. That is different from a party being allowed to treat the contract as discharged when, through no fault of that party, a condition has not been fulfilled.
[35] Another relevant case in this regard is Aymes International Ltd v Nutrition 4U BV.9 That case dealt with the issue of when time might be of the essence in the context of the sale of shares. Having found that time was not of the essence for completion, the Court found that:10
Had they [the defendants] wished to put an end to the option contract for failure to complete on or before 29 May 2020, the remedy properly available to them was to serve notice fixing a reasonable time for completion, and making time of the essence of completion by that date.
[36] For the reasons set out above, including that there may be relevant evidence with regard to the negotiation of the Settlement Agreement that is not before the Court at this stage, I am not satisfied that the defendants have no defence to the fifth cause of action on the basis that time was not of the essence.
Effect of breach
[37] Even if time is not of the essence, Mr Latton submits that the plaintiffs were entitled to cancel the contract under s 37(2)(b) of the CCLA.
[38] Mr Latton submits that, in relation to the plaintiffs, the benefits and burdens of the Settlement Agreement were that:
(a)the plaintiffs would receive money for the shares they had (in essence) paid for and owned as a result of misrepresentations;
(b)they would not need to expend further money on legal fees prosecuting the proceeding; and
9 Aymes International Ltd v Nutrition 4U B.V. [2023] EWHC 1452 (Ch).
10 At [109].
(c)they had the certainty of ending the proceeding and ending any litigation risk.
[39] Mr Latton submits that the burden for the defendants was that they had to pay the plaintiffs, and would also get the benefit of the proceeding being at an end.
[40] Mr Latton submits that, because of the defendants’ breach, the situation is substantially different. The plaintiffs no longer have the certainty of knowing that the litigation is at an end; they have to prepare for trial given the timetable that is in place and incur additional legal fees. Mr Latton contends that, if the plaintiffs had not cancelled the Settlement Agreement, they would not have been able to prosecute the proceeding.
[41] However, as discussed above, it is arguable that the plaintiffs did not have to cancel the Settlement Agreement to progress the proceeding. Clause 5 of the Settlement Agreement arguably provides that, if any payment was more than three working days late, then the plaintiffs could continue to progress the proceeding. Therefore, it is arguable that the situation prior to cancellation by the plaintiffs on 9 February 2023 was contemplated by the parties, and the effect of the breach, being failure to pay the sums in cl 3.1 on the stipulated dates, did not make the benefit or burden of the Settlement Agreement for the plaintiffs substantially different from that contracted for. It is arguable that it was the plaintiffs’ decision to cancel the Settlement Agreement on 9 February 2023 which meant that there was no longer any prospect that the plaintiffs would receive money for the shares and that the litigation was at an end.
[42] I am not satisfied that the defendants have no defence to the fifth cause of action on the basis that the effect of the breach did not make the benefit or burden of the Settlement Agreement for the plaintiffs substantially different from that contracted for.
Affirmation
[43] Even if the plaintiffs were otherwise entitled to cancel the Settlement Agreement under s 37(1)(b) and 37(2)(a) or (b) of the CCLA, the defendants contend
that the plaintiffs affirmed the contract and lost the right to cancel and/or that plaintiffs waived any rights to rely on and/or are estopped from relying on any breaches.
[44]Section 38 of the CCLA provides that:
38 No cancellation if contract is affirmed
A party is not entitled to cancel the contract if, with full knowledge of the repudiation, misrepresentation, or breach, the party has affirmed the contract.
[45]Burrows, Finn and Todd states that:11
Thus, the innocent party is presented with an election. He or she may either affirm the contract by treating it as still in force, or on the other hand treat it as finally and conclusively discharged, that is, cancel it.
[46] In Jansen v Whangamata Homes Ltd, Randerson J held in respect of affirmation that: 12
… it must be shown that the electing party has made a firm and settled choice and does not intend to go back on it. Putting it another way, the electing party must be shown to have committed irrevocably to one of two inconsistent courses of action…
[47]In this regard, Burrows, Finn and Todd states that: 13
Conduct which is more equivocal and less decisive than this will not amount to affirmation, and the court may be inclined to hold that the innocent party is still keeping his or her options open.
[48] The defendants submit that the plaintiffs affirmed the Settlement Agreement in the exchanges between the solicitors for the parties between 20 October 2022 and 1 November 2022 after Playmaker failed to make the payment due on 20 October 2022. The latter part of that exchange is set out below.
[49] On 25 October 2022 at 7.10 pm, the solicitors for the first, second and fourth defendants sent an email outlining what was causing the “hold-up” which related to anti-money laundering requirements and stated:
11 Burrows, Finn and Todd, above n 7, at [18.3.1].
12 Jansen v Whangamata Homes Ltd HC Hamilton CIV-2003-419-1511, 29 November 2004.
13 Burrows, Finn and Todd, above n 7, at [18.3.2].
Our client appreciates that this delay is less than ideal and that your clients will be anxious to receive the payments as soon as possible. They are doing all they can to advance matters so your clients are able to be paid. I will let you know if I receive any update on timing – at the moment our client expects the funds this week.
[50] On 1 November 2022 at 2.04 pm, the solicitor for the plaintiffs sent the following email in response, stating:
…
It is now a week since your email below. In our discussion yesterday I invited you to have your client do something tangible (either in terms of an interim payment or the provision of documentation even if on a counsel only basis) to endeavour to persuade my client from deferring taking further action in respect of your clients’ default under the Settlement Agreement. I have not heard anything further and in view of that my clients’ continued patience with the matter has evaporated.
I have now received instructions to formally instruct counsel in respect of the default – which I confirm I have now done.
Please note that as part of any settlement of either proceeding (existing or proposed) my clients will be seeking an additional payment for costs.
[51] Later on the same day, at 3.19 pm, the solicitor for the plaintiffs sent a further email stating:
…
Further to our discussion my clients will agree to put instructions to counsel on hold for this week if:
1.A payment of $5,000 is made to each of my clients’ accounts this afternoon.
2.The balance of the amounts owed to each (which were due 23 October 2022) are paid to my clients this week.
3.Your client agrees to pay a contribution of $5,000 plus GST towards additional costs incurred – again this week. I will forward invoices in that regard.
For the sake of certainty I record the relevant share transfers will be sent upon the above payments being made.
I look forward to your urgent response
[52]At 4.14 pm, the solicitor for the defendants responded, stating:
…
Thanks for this. I am instructed as follows:
1.Payment of $5,000 to each of the bank accounts previously nominated is being made tonight, and I will confirm when my client has sent me a payment confirmation. The payments are on account of the full
$100,000 due.
2.It is up to your clients whether and when they wish to instruct counsel. Our clients have been very clear about the reasons for the delay. It is simply a matter of timing before the funds arrive. Our clients have been doing everything they can to complete that process (including following up with the counterparty several times a day, every day) and we have kept you updated. Your clients have been on notice that further costs incurred instructing counsel are likely to be wasted.
3.It is difficult to see a basis for agreeing to pay additional costs in the circumstances. We further note your clients have caused our clients to incur costs on this agreement, including by not accepting it until a week after the offer expired (during which time we had follow up with Rob Latton). They also did not provide the bank or transfer details as required, and you know, we had to follow up on the execution of the resolutions that were required under the agreement. Our clients have taken a pragmatic approach to those events but will need to revisit that position if your clients maintain that they are entitled to costs.
4.Payment of the balance of the $100,000 will be made as soon as that is possible (and sooner than Friday if our client receives the transfer sooner). As noted above, our clients are following up several times a day on the funds and doing everything they can to expedite the process.
[53]At 5.14 pm, the solicitor for the plaintiffs responded, stating:
…
Thanks for your reply.
I will simply reserve my clients’ position pending the receipt or otherwise of the payments promised and due
[54]At 7.33 pm, the solicitor for the defendants replied, stating:
…
Further to my last email, my client has sent me screenshots of payment confirmations to your clients today. If for it hasn’t showed up by tomorrow, can you please let me know.
[55]As noted above, the amount of $10,000 was paid to the plaintiffs.
[56] Subsequently, on 17 November 2022, the plaintiffs amended the statement of claim to add a fifth cause of action, alleging breach of the Settlement Agreement and seeking either specific performance of the Settlement Agreement, or alternatively, equitable damages in the amount of the unpaid sums.
[57] There is no evidence before the Court as to what happened between 17 November 2023 and early February 2023. Mr Latton indicated that there were further exchanges between the parties in relation to the payments due on 30 November 2023 and 23 December 2022. However, the payments were not made.
[58] On 9 February 2023, the solicitor for the plaintiffs sent an email to the solicitor for the defendants, stating:
…
As you know Playmaker Limited and Rob are both in breach of their respective obligations in respect of the settlement recorded in the Settlement Letter dated 5 September 2022, and Pricemaker and Outward are therefore also in breach as a result.
While probably self-evident please treat this email as confirmation that the settlement agreement is cancelled.
Discussion
[59] Mr Latton submits that the conduct of the plaintiffs cannot amount to affirmation because there was no unequivocal choice, or firm and settled choice, made by the plaintiffs. He submits that all that happened was the plaintiffs pushed for payment for a short period of time after 20 October 2022 and then reserved their position. Mr Latton submits that the plaintiffs were clearly keeping their options open.
[60] The plaintiffs’ solicitor stated that he was reserving the plaintiffs’ position in the email dated 1 November 2022 at 5.14pm. However, it is not clear whether that reservation was seeking to keep open the option of cancellation or whether it was reserving the plaintiffs’ position regarding instructing counsel to seek enforcement of the Settlement Agreement. Arguably, it was the latter. On 1 November 2022 at 7.33pm, payment of the $10,000 interim payment sought by the plaintiffs was confirmed, and then, on 17 November 2017, when the balance of the amounts due had not been paid, the plaintiffs amended their statement of claim to seek specific performance of the
Settlement Agreement (and alternatively, equitable damages in the amount of the unpaid sums). The claim for specific performance was maintained by the plaintiffs even though the further payments due on 30 November 2022 and 23 December 2022 were not made.
[61] Mr Latton submits that applying for specific performance does not necessarily amount to affirmation of contract. He refers to a number of cases cited in Burrows,
Finn and Todd,14 including Chatfield v Jones.15
[62] Chatfield v Jones involved an agreement for the sale and purchase of shares. The purchasers did not pay the balance of the purchase price on the due date, or by an extended date for payment. The vendors ultimately sought specific performance of the contract, or in the alternative an inquiry into damages. The purchasers argued that the vendors had affirmed the contract and lost the right to cancel. The Court of Appeal held that, even if the vendor’s conduct in applying for specific performance amounted to affirmation of the contract, this did not deprive them of the right to cancellation because of the continuing repudiation of contract by the purchasers. In particular, the purchaser continued to reiterate that there was no binding contract for the sale and purchase of the shares. The Court of Appeal held that any previous affirmation could not deprive the vendors of the right to take advantage of the continuing repudiation.
[63] It is apparent from the case law and commentary that the issue of whether applying for specific performance amounts to affirmation will depend on the circumstances of each case.16
[64] In the present case, I consider it is arguable that the plaintiffs’ overall conduct amounted to affirmation, based on:
(a)the exchange of emails and discussions between the solicitors from 20 October 2022 until 1 November 2022 during which the plaintiffs’
14 Burrows, Finn and Todd, above n 7, at [18.3.2].
15 Chatfield v Jones [1990] 3 NZLR 285 (CA).
16 Burrows, Finn and Todd, above n 7, at [18.3.2]; Oxborough v North Harbour Builders Ltd [2002] 1 NZLR 145 at [10]; and see AAA Development (Ormiston) Ltd v Ormiston Group Ltd (2010) 12 NZCPR 329 at [152].
solicitors continued to seek payment under the Settlement Agreement, and proposed that interim payments be made; and
(b)the plaintiffs then applying for specific performance of the Settlement Agreement and maintaining that cause of action despite non-payment of the amounts due on 20 November and 23 December 2023.
[65] Further, there is an absence of evidence before the Court as to what happened in the period between 17 November 2022 and 9 February 2023, including any exchanges between the parties around the payments due on 30 November 2022 and 23 December 2022. It seems to me that such exchanges may be relevant to the issue of affirmation.
[66] There is no suggestion by the plaintiffs that the defendants at any time repudiated the Settlement Agreement or that there was a continuing repudiation in the period between November 2022 and early February 2023, thereby giving the plaintiffs a right to cancel even though they had applied for specific performance, as in Chatfield v Jones.
[67] For the reasons set out above, including that there may be relevant evidence that is not before the Court at this stage, I am not satisfied that the defendants have no defence to the fifth cause of action on the basis of affirmation.
Are Outward and Pricemaker parties to the Settlement Agreement?
[68] A further issue that arises is whether Outward and Pricemaker are parties to the Settlement Agreement, and whether they can be liable for the specific pleaded breach in the amended fifth cause of action, being failure to make the payments specified in cl 3.1 of the Settlement Agreement.
[69] In this regard, the plaintiffs rely on cl 1.3 of the Settlement Agreement which states that:
The offer is made on behalf of Pricemaker, Outward, Rob and Playmaker and is made on the condition that, if the Agreement is entered into by all parties
and performed by Pricemaker, Outward, Rob and Playmaker, William and Charles must discontinue their Claim with no issue as to costs, and without admission of liability by any party to the Claim.
[70]However, cl 10 of the Settlement Agreement provides as follows:
10. Privity
This Agreement confers benefits on and is intended to be enforceable by Pricemaker and Outward, notwithstanding that they are not parties to this Agreement.
[71]Also, the Settlement Agreement was not signed by Outward and Pricemaker.
[72] Mr Latton submits that cl 10 is inconsistent with cl 1.3. He also submits that as well as conferring benefits on Outward and Pricemaker, the Settlement Agreement imposes obligations. Mr Latton refers to cl 5 of the Settlement Agreement which imposes an obligation on the parties to deal with any court-imposed deadlines or attendances relating to the claim. He submits that this obligation must include Outward and Pricemaker.
[73] In my view, Outward and Pricemaker have an arguable defence that they are not parties to the Settlement Agreement based on cl 10 and the fact that they did not sign the Settlement Agreement. With regard to the inconsistency between cls 10 and 1.3, as discussed above, there is an absence of evidence before the Court with regard to the negotiation of the Settlement Agreement. It seems to me that this evidence may be relevant as it may indicate or reflect a common mutual understanding as to whether Outward and Pricemaker were intended to be parties to the Settlement Agreement.
[74] It seems to me that Outward and Pricemaker also have an arguable defence that, even if they are parties, there was no obligation on them to make any payments under the Settlement Agreement, and therefore they cannot be liable for the pleaded breach in the amended fifth cause of action in respect of which summary judgment is sought. Clause 3.1 of the Settlement Agreement provides that the payments were to be made by Playmaker and Mr Rogers.
[75] For the reasons set out above, including that there may be relevant evidence that is not before the Court at this stage, I am not satisfied that Outward and Pricemaker
have no defence to the fifth cause of action on the basis that they are not parties to the Settlement Agreement and/or they are not liable for the pleaded breach.
Summary
[76] In summary, the plaintiffs have not satisfied me that the defendants have no defence to the plaintiffs’ amended fifth cause of action in the third amended statement of claim dated 14 May 2023. I consider that the defendants have an arguable defence that time was not of the essence under the Settlement Agreement and/or that the effect of any breaches did not, in relation to the plaintiffs, make the benefit or burden of the Settlement Agreement substantially different from that contracted for.
[77] Even if the plaintiffs were entitled to cancel the Settlement Agreement under ss 37(1)(b) and 37(2) of the CCLA, I consider that the defendants have an arguable defence that the plaintiffs affirmed the Settlement Agreement.
[78] Outward and Pricemaker also have an arguable defence that they are not parties to the Settlement Agreement and/or are not liable for the pleaded breach, being failure to make the payments under cl 3.1 of the Settlement Agreement.
Result
[79] The plaintiffs’ application for summary judgment against the first, second, third and fourth defendants is dismissed.
[80] As to costs, my preliminary view is that costs should be reserved in accordance with NZI Bank Ltd v Philpott.17 If either party disagrees with that preliminary view, then memoranda may be filed (not exceeding three pages – excluding costs schedules) and costs will be dealt with on the papers.
[81] The matter is to scheduled for a further case management conference in the Associate Judge’s chambers list in November 2023. The parties are to file a joint memorandum or separate memoranda three working days prior to that conference
17 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).
dealing with all relevant items in sch 5 to the High Court Rules 2016.
Associate Judge Skelton
Solicitors:
Palmer Macauley Solicitors, Kerikeri for Plaintiffs
Morrison Mallett, Wellington for First, Second Defendants and Fourth Intended Defendant
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