Booth v Dean Ca252/01
[2002] NZCA 375
•1 August 2002
| IN THE COURT OF APPEAL OF NEW ZEALAND | CA252/01 |
| BETWEEN | ROBIN GRAHAM BOOTH |
| Appellant |
| AND | JOHN ANDREW DEAN |
| Respondent |
| Hearing:: | 31 July 2002 |
| Coram: | Gault P Robertson J Paterson J |
| Appearances: | R G Booth – Appellant in person R C Laurenson for Respondent |
| Judgment: | 1 August 2002 |
| JUDGMENT OF THE COURT DELIVERED BY GAULT P |
This is an appeal against the various orders made by Ellis J in the High Court at Wellington after disposing of the substantive issues in favour of the appellant (the defendant in the High Court). The appellant, Mr Booth, is a businessman who in 1990 obtained an option from the late Mrs Pell to purchase her Lyall Bay property for $115,000. The respondent, Mr Dean, was Mrs Pell’s solicitor and is the executor of her estate. The substantive issues concerned the validity of the option agreement and a collateral property management agreement between Mr Booth and Mrs Pell in the face of an allegation of unconscionable bargain.
Ellis J found for Mr Booth and ordered specific performance on terms. He further ordered that Mr Booth pay interest to Mrs Pell’s estate on unpaid purchase money at 11% from the date settlement was tendered. Costs were awarded to Mr Booth on the Schedule 2B basis in respect of those parts of the proceedings where he was represented by a solicitor. In respect of other parts of the proceedings where he represented himself the Judge ordered that he be entitled to recover all disbursements. Mr Booth now appeals to this Court.
Background facts
Mrs Pell and her husband purchased 251 Queens Drive, Lyall Bay in 1970. After their marriage ended various consent orders were made in the Family Court in 1990 relating to matrimonial property. One of those orders was that 251 Queens Drive become the sole property of Mrs Pell. The property was in a very poor state of repair and was subject to flooding by the sea. Prior to 1989 it had come to the attention of the Wellington City Council building inspector Mr Cole. Because it was in three flats it was required to have an apartment licence. The Council informed Mr and Mrs Pell of this requirement and, when nothing was done about it, commenced proceedings against Mr Pell. The Council’s investigations culminated in an April 1989 report which was produced in the High Court setting out the substantial amount of work that needed to be done to the property to obtain the licence. Nothing was done so that by the time Mrs Pell secured ownership of the property it was run down, poorly let and the subject of official demands. Having no funds with which to have the work done Mrs Pell contemplated selling.
Around October 1990 Mr Booth found the property and was interested in buying it. He found out from the occupants who the owner was and telephoned Mrs Pell. They arranged to meet. Mrs Pell told Mr Booth she had over the years managed some eight investment properties, disliked her lawyer and wanted a simple agreement she could understand. For these reasons she rejected his suggestion that she consult a solicitor before committing herself. She told Mr Booth that it might take some time, perhaps a year, for the Family Court order to be registered so that she could give title. Mr Booth then wrote out a form of option which they both signed on 25 October 1990. According to its terms the option was to be exercised within five days from the date of registration of the whole title in Mrs Pell. The option was followed up by a collateral management agreement written out by Mr Booth and signed by them both on 5 December 1990.
“05/12/90 R.G. Booth x Linda M. Pell
I Linda Marie Pell, half owner in title and full owner in equity (having been awarded full ownership by the family court) hereby grant Robin G. Booth the right to manage and collect all rents at the property 251 Queens Drive Lyall Bay Wellington DP 11082 Lot 2 and DP2282 Lot 2 – Land area 364 metres squares. This property consists of a house in three flats.
As manager Robin Booth agrees to pay to Mrs Pell the sum of two hundred dollars a week for the first four months and the sum of two hundred and fifty dollars a week for the following two years. As manager and the holder of an option to purchase this property for the sum of one hundred and fifteen thousand dollars Robin Booth has the right to do all repairs necessary to restore to this property the Wellington City Councils Apartment Licence standard and to put whatever tenants in and out of the flats as he decides necessary.
Mrs Pell agrees to allow Robin Booth access to the flats free of charge for x4 weeks to evict any tennants he thinks necessary, rebuild the seawall, fix broken windows, repair leaks in the roof, repair low pressured plumbing, fix rotten stairs, refurbish, renovate and improve the property wherever possible. This also applys to any of his employees.
Due to the difficult nature of the relationship between Mrs Pell and Mr Pell and the fact that Mrs Pell is paying both the rates and the insurance, as well as having been awarded full ownership of the property by the family court Mrs Pell signs as owner, and as authorised agent on behalf of her husband. This is a contract based on goodwill and trust between both parties, Robin Booth and Linda Pell.
Signed x Linda M. Pell
R.G. Booth
Date 05/12/90
Mrs Pell agrees to alter this contract so as to extend it so that I will continue managing the above property for as long as it takes for the caveats to be removed from the above property so that I can exercize my option to purchase the place.
20/12/90 L.M. Pell”
Mr Booth commenced work on the property shortly afterwards. He let the property for around $450 per week. Pursuant to the agreement he paid $200 per week of that to Mrs Pell and used the rest to fund the repairs and for his own purposes. This continued until the Court order was presented for registration on 23 December 1993 and duly registered on 1 February 1994. Mr Booth exercised his option on 2 March 1994 and proposed, through his solicitor, to tender settlement on 10 August 1994. Acting through Mr Dean, Mrs Pell repudiated the transaction although negotiations continued. It was eventually accepted by Mr Dean in the High Court that the option and the management agreement were genuine and that the option was validly exercised, subject to the comprehensive challenge that they were together an unconscionable bargain.
The claim
On behalf of Mrs Pell’s estate Mr Dean claimed that the agreement was void as unconscionable. He therefore required Mr Booth to account for the rents collected under the collateral management agreement between December 1990 and 11 October 2000.
Mr Booth counter-claimed seeking specific performance of the option for sale and purchase along with associated orders including interest and costs on a solicitor client basis.
The High Court judgment
Ellis J set out the history of the property and of the dealings between Mrs Pell and Mr Booth in some detail. He then proceeded to consider the allegation of unconscionable bargain under the various heads addressed by the evidence. The Judge concluded that Mr Booth’s offer of $115,000 for the property was a fair and reasonable market price in October 1990. There was some suggestion that Mrs Pell lacked the capacity to enter into contractual relations but the Judge rejected this. After reviewing the applicable legal principles in relation to unconscionability the Judge concluded that the contracts were fair and bona fide. He then went on to address the issue of an appropriate remedy, ordering specific performance on the following terms:
(a)Up to the 10th August 1994 [the settlement date] the Defendant shall account to the Plaintiff for rental at rate of $200 per week.
(b)From the 10th August 1994 the Defendant shall pay the Plaintiff interest at the rate of 11% per annum on the unpaid purchase price.
(c)From the 10th August 1994 the Defendant shall pay the Plaintiff rates, insurance, proper outgoings paid on the property since 10th August 1994.
(d)The defendant is entitled to all rents received from letting from 10th August 1994.
Ellis J recognised that there was a dispute as to the amount of rent paid by Mr Booth, namely the $200 per week over the years. He therefore ordered that if the parties could not agree or arrange a method of settlement he would order an enquiry. Settlement was to take place within forty days of the date of the judgment.
As previously mentioned, Mr Booth was awarded costs in respect of those parts of the proceedings for which he was represented by a solicitor, and disbursements in respect of other parts of the proceedings where he represented himself.
It is apparent from a minute of Ellis J dated 22 April 2002 that the parties were unable to reach agreement over the settlement figure. The source of this dispute was that recognised by the Judge in his substantive judgment, namely the amount of rent in fact paid by Mr Booth pursuant to the collateral management agreement. Mr Booth had provided a schedule of his payments he considered that he made up to 11 October 2000, the date on which the estate took over rent collection. That calculation was supported by bank statements and other receipts. Ellis J noted that the estate agreed to check those calculations immediately and advise Mr Booth of the results. Three months later it appears that this has not yet occurred. In the meantime there was a consent order that settlement would take place on 3 May 2002, the settlement figure to be based on the formula set out in a settlement statement prepared by the estate’s solicitors. To allow for the resolution of the outstanding disputes Ellis J made the following order:
The estate will retain $35,000 in its solicitor’s trust account for a period of six weeks from settlement against the settlement of the following disputes:
(a) The claim for $2,976.40 for rental commission claimed by the solicitors.
(b) The calculation of the total amount paid by Mr Booth to Mrs Pell and the estate in respect of the agreement to pay her $200 per week.
(c) The question of interest that is the subject of appeal to the Court of Appeal.
Settlement occurred on 3 May 2002.
The present appeal
The principal submission made by Mr Booth in this Court was that the rate of interest of 11% awarded in respect of the purchase price owing was excessive. He submitted that equitable principles dictated that the rate should have been 5% to reflect what Mrs Pell/the estate could have earned had she invested the purchase price in a secure investment over the same period. In a related submission Mr Booth argued that Ellis J erred in failing to award him interest on the rents paid by him to the respondent after 10 August 1994.
In reply, Mr Laurenson for the respondent points to the 15% interest rate provided for late settlement in an unrelated sale and purchase agreement dated 5 September 1994. He submits that in electing 11% Ellis J was taking into account any adjustments that might flow from the resolution of the disputed settlement figure and the fact that the estate has had the use of a yet to be determined amount of Mr Booth’s money since 10 August 1994. It was further contended that Mr Booth had provided no evidence to support his allegation that 11% was an inappropriate rate.
Next, Mr Booth submitted that Ellis J should have ordered costs against Mr Dean personally. This submission was accompanied by allegations of professional misconduct against Mr Dean that are apparently the subject of a Law Society complaint.
Mr Laurenson firmly opposes this submission. He referred us to the very high threshold necessary to order costs against a solicitor personally and the complete lack of evidence proffered by Mr Booth to support his very serious allegations. More generally he drew the Court’s attention to the nature of an appeal against costs awards and the well established rule that a lay litigant is not entitled to recover costs except in exceptional cases (Re Collier (A Bankrupt) [1996] 2 NZLR 438).
Mr Booth appeals also on the ground that the Judge erred in not awarding damages for worry and strain and punitive damages for contumelious conduct by the solicitor and counsel for the estate. In response Mr Laurenson argued that such damages were not sought in the High Court and have no evidential foundation.
Decision
There is nothing in the judgment of Ellis J to support the contention that, in fixing the interest rate on the unpaid purchase price at 11%, he was accommodating the liability of the estate for interest on the rental paid to Mrs Pell or her estate by Mr Booth in the period after the nominal settlement date of 10 August 1994.
We are not able to resolve the issue whether the Judge indicated an intention to award interest on the rent paid to Mrs Pell or her estate after 10 August 1994. But we are satisfied that if that was not his intention it was an oversight. Mrs Pell and the estate have had the use of the money now held rightly the entitlement of Mr Booth. We consider the appeal must be allowed on this point.
We are not in a position to settle the issue of the amount of rent paid by Mr Booth. That is a matter still before the Judge. We express the view, however, that it is time this matter was resolved. It is not sufficient for the respondent simply to do nothing and contend that the amount received has not been established.
We can understand Mr Booth’s frustrations that so much time has been taken for him to establish his right to the property. That now has occurred. He has been put in the position of enjoying the fruits of ownership from 10 August 1994. Subject to the accounting he has been fully vindicated. He must understand the responsibilities of solicitors handling the estates of deceased persons and the need to ensure claims against estates are valid. The time taken in this case is unacceptable, but there is not before us sufficient evidence to warrant punitive measures of costs against solicitor or barrister nor costs on an indemnity basis.
The position is clear, litigants in person may recover disbursements but not awards of costs. There have been awards of costs at earlier stages when Mr Booth was represented and it is not for us to re-visit those.
The claims for damages for “worry, strain and punitive damages for contumelious conduct” were not separately pleaded when Mr Booth was represented. The counter-claim sought in the prayer for relief “Damages in a sum to be quantified at trial”. That indicates special damages. No statement of quantification including items under the heads of damage now claimed was submitted. We are not persuaded of error by the Judge in not awarding general damages.
That leaves the appeal against the rate of interest of 11% on the unpaid purchase price. This was not a case in which Mr Booth was in default and, in any event there was no contract rate of interest specified. The Judge took the view that since Mr Booth was in possession of the property he should pay interest on the unpaid purchase price. There can be no dispute with that. We think the appropriate rate to have awarded is not what Mrs Pell or the estate might have earned had the money been paid but the rate Mr Booth would or should have earned on the money held by him pending settlement. Without evidence of the actual rate received or of prevailing rates the Court must do the best it can. We are not convinced that the rate should be fixed by reference to the amount Mr Booth agreed to pay under the management agreement and while he had merely an option. We are satisfied 11% is too high, albeit the maximum the Judicature Act rate prevailing over the period.
We allow the appeal in this respect. We substitute the interest rate of 7%. That same rate is to apply in respect of the rental paid by Mr Booth for the period after 10 August 1994 and is to be paid once the amount of such rental is fixed.
In all other respects the appeal is dismissed.
Mr Booth is entitled to recover from the respondent any disbursements paid in connection with this appeal including any travel and accommodation expenses incurred in attending the hearing. These can be fixed, if necessary, by the Registrar.
Solicitors
John Dean Law Office, Wellington, for Respondent
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