Cleary v Ewart & Ewart
[2015] NZHC 3259
•16 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2014-404-001672 [2015] NZHC 3259
BETWEEN WILLIAM GEORGE GRAHAM
CAMERON CLEARY Plaintiff
AND
EWART & EWART Defendant
Hearing: 11 December 2015 Appearances:
P Fee/L Fraser for the Applicant
L Hertzog for the RespondentJudgment:
16 December 2015
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
16.12.15 at 4:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
WGGC CLEARY v EWART & EWART [2015] NZHC 3259 [16 December 2015]
Background
[1] The defendant has applied for a stay based on non payment of a costs order, and also an application for striking out the plaintiff’s first cause of action. This judgment deals only with the strike out application.
[2] That application was filed on 2 October 2015. On 5 October 2015 the plaintiff served a fourth amended statement of claim dated 30 September 2015.
[3] Earlier on 2 February 2015 the defendant filed an application seeking an order for the plaintiff to provide further particulars of the pleading contained in the second amended statement of claim. The application was heard on 12 May 2015 and on 29 May 2015 Judge Doogue ordered the plaintiff to particularise the source of rights that he implicitly asserted arose under the Option Deed in respect of which he claimed the defendant provided negligent advice.
[4] On 8 July 2015 the plaintiff filed a third amended statement of claim. On 21
July 2015 the defendant requested further particulars of the third amended statement of claim.
[5] On 4 September 2015 the defendant again requested particulars and on 16
September 2015 the plaintiff responded.
[6] Although the strike out application was filed in regard to the third amended statement of claim it will be dealt with by reference to the fourth amended statement of claim. It is simply about claims that the first cause of action is incapable of pleading a claim that can succeed.
[7] The focus of the strike out application is upon the first cause of action as indeed it was the focus of Judge Doogue in relation to the second amended statement of claim. Then, as now in the fourth amended statement of claim it is alleged the defendant provided negligent advice including that an Option Deed did confer rights on the plaintiff.
[8] When Judge Doogue considered pleading issues with regard to the second amended statement of claim he commented upon the ambiguous way in which the pleading of negligence was set out. He noted Mr Hertzog had explained to him that the primary claim was that the defendant wrongly advised that the agreement did not confer any rights on the plaintiff when, in fact, it did provide such rights.
[9] Judge Doogue noted it was next alleged that as a result of the defendant’s negligent advice the plaintiff executed a settlement deed and thereby lost the opportunity to settle the agreement for sale and purchase which caused loss in a sum similar to that now claimed.
[10] Judge Doogue held:
[16] …It is implicit in the amended statement of claim that the advice that the defendant gave about the binding nature of the Option Deed and annexed agreement for sale and purchase was wrong. Further, the advice that the plaintiff should execute the settlement deed was not justified. Thus, in both cases, the solicitor allegedly fell below the standard required of a reasonably competent practitioner.
[17] …However, apart from pleading that the defendant’s advice was wrong in saying that no rights were conferred by the Option Deed, the plaintiff does not say what those rights were. In order to understand the claim, the defendants need to know what those rights were. This information must be provided to decide the question of inaccuracy and negligence. The Court and opposing counsel require that information to understand the plaintiff’s case. The proposition that the Option Deed conferred rights on the plaintiff is at the heart of the first cause of action. The plaintiff alleges he was induced to execute the settlement agreement and therefore suffered loss because the advice given was wrong (along with other advice specified in paragraph 7 of the amended statement of claim). The plaintiff states at paragraph 13 that it was “as a result of the defendant’s negligent advice” that he took those steps.
…
[19] …In my view, it is incumbent upon the plaintiff to identify the rights that he claims were the subject of negligent advice and, in particular, to provide greater particulars of the rights which he says the Option Deed conferred on him. The documents which are produced are substantial in length. To ensure that the parties identify correctly the precise issue, which this part of the pleading brings into play, I consider that the plaintiff ought to be required to identify the provisions of the agreement which he relies upon and which he is referring to in paragraph 12(a) of the amended statement of claim.
[20] Mr Herzog claimed that if the plaintiff were to be required to point to the provisions of the Option Deed which give rise to his rights, he would
have to specify every clause in the contract. That submission is in error. There will be certain provisions of the contract which contain the primary rights of the plaintiff and other ancillary-type provisions which are concerned with the machinery for putting those rights into effect. I consider that if the plaintiff’s advisors approach this matter in a commonsense way, there will be no difficulty in deciding what is required to be supplied.
The fourth amended statement of claim
[11] By way of background to the two causes of action pleaded it is stated that on or about 7 June 2013 the plaintiff entered into an agreement (Option Deed) with a Fiji company (Vunabaka), the vendor. The Option Deed conferred on Vunabaka the right to sell to the plaintiff a section of land in Fiji for USD550,000. Pursuant to the agreement the plaintiff paid USD165,000 seemingly as a deposit on the purchase price that would be payable if the vendor exercised the Option Deed and the transaction proceeded to settlement.
[12] On 11 April 2014 the plaintiff entered into a verbal agreement with Vunabaka to surrender what he says were the plaintiff’s rights under the Option Deed to Vunabaka for the sum of USD440,000. Then on 16 April 2014 he engaged the defendant’s legal services in relation to the surrendered agreement.
[13] The plaintiff says on 6 May 2014 the defendant advised him the Option Deed conferred no rights on him and that the defendant had drafted a deed of release. Then on 14 May 2014 the plaintiff said the defendant advised Vunabaka’s solicitor that Vunabaka would get nothing in return if it executed the deed or release and paid the plaintiff USD440,000; that the Option Deed conferred no rights on the plaintiff and Vunabaka had no obligation to sell Lot 38 to the plaintiff; and that if Vunabaka did not exercise the option it did not have any obligation to refund the option fee.
[14] On 19 May 2014 the plaintiff instructed the defendant to advise Vunabaka that he did not want to proceed with the surrender agreement but would proceed with the agreement under the Option Deed.
[15] On 20 May 2014 Vunabaka advised it was not going to exercise the option to sell Lot 38 to the plaintiff and was not obliged to repay the option fee of UD165,000
but would pay that if an agreement was entered into to pay the option fee back to the plaintiff.
[16] The facts as pleaded by the fourth amended statement of claim they are assumed to be correct for the purposes of this application. A summary of those has already been provided.
First cause of action
[17] The first cause of action pleads negligence by the defendant by not providing the plaintiff with proper advice of his rights under the Option Deed. The plaintiff says the defendant wrongly advised him the Option Deed conferred no rights on him. The plaintiff pleads those rights existed including the right to compel Vunabaka to carry out its obligations to apply for iTLTB (i Taukei Land Trust Board) approval to lease Lot 38 to the plaintiff and to do all things necessary and reasonable during the option period to execute all documents as maybe necessary or desirable to obtain that approval. The plaintiff pleads those rights included an obligation for the repayment to him of the option price of USD165,000 together with interest if iTLTB approval was not obtained within 36 months.
[18] The plaintiff pleads that because of the wrongful advice received he executed the settlement agreement and lost the opportunity to settle the sale of Lot 38 with Vunabaka and that had he settled that sale he would not have suffered loss of USD1,050,000 being the difference between the purchase price of Lot 38 he would have had to pay of USD550,000 and its market value of USD1,600,000 in October
2014.
Second cause of action
[19] The second cause of action pleads that had not the defendant advised Vunabaka’s solicitor of the defendant’s views that the Option Deed conferred no rights upon the plaintiff, that Vunabaka would have executed the deed of release and paid the plaintiff USD440,000 instead of the USD165,000 that he received. Therefore damages are claimed in the sum of USD275,000.
[20] The focus of the second cause of action is directly upon claims of providing unsolicited advice to Vunabaka’s solicitors. The focus of the first cause of action is upon the plaintiff’s claims that the Option Deed did confer rights to the plaintiff to compel Vunabaka to obtain iTLTB approval to lease Lot 38 to the plaintiff within 36 months and to complete all necessary documentation to give effect to the exercise of that option.
[21] The plaintiff’s first cause of action is pleaded by reference to clauses 4.1, 4.3,
7 and 8 of the Option Deed.
[22] It is to be borne in mind that by Fiji law rights to purchase Fiji land are very limited. It was contemplated that if the development proceeded that the plaintiff would take a sublease of land from Vunabaka. Hence it was that Vunabaka was described in the Option Deed as the vendor, and the plaintiff as the purchaser.
The Option Deed
[23] Recitals to the Deed included:
A. The Purchaser has agreed to grant to the Vendor an option to enter into the Agreement.
B. The option is an option to execute the Agreement.
[24] Relevant clauses provided:
3.EXERCISE OF THE OPTION AND EXECUTION OF THE AGREEMENT
3.1 Exercise the Option
The Vendor may exercise the Option by notice to the Purchaser at any time after iTLTB Approval has been obtained but before the expiration of the Option Period by delivering to the Purchaser or their solicitors the Notice together with the Agreement executed by the Vendors. The Purchaser or his solicitors shall, upon receipt of the Notice and executed Agreement and within 14 days of such receipt, deliver to the Vendor or its solicitors a properly executed Agreement.
4.OBLIGATIONS OF THE PARTIES DURING THE OPTION PERIOD
4.1 iTLTB approval
The parties shall during the Option Period do all things necessary and reasonable and execute all documents as may be necessary or desirable to obtain the iTLTB Approval. If for any reason (other than a default on the part of the Purchaser), the iTLTB Approval is not obtained within thirty six months of the date hereof, the Purchaser may be notice terminate this Deed and this Deed shall be deemed to have terminated ab initio and the parties shall have no rights in law or equity against the other and the Option Price shall be repaid to the Purchaser together with any interest paid thereon (if any).
4.3 Application for iTLTB Approval
The Vendor shall be the party responsible for seeking the iTLTB
approval.
7. FURTHER ASSURANCES
Each party agrees to do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the provisions of this Deed and the transactions contemplated by it.
8. RESOLUTION OF DISPUTES
8.1 Reference to Expert
If a dispute between the parties with respect to this Deed or other related documents has not been resolved within 21 Business Days of it arising, it shall be referred to an Expert for resolution.
Considerations
[25] Mr Hertzog submits the first cause of action in the fourth amended statement of claim pleads allegations of negligence by reference to Vunabaka’s obligations and the plaintiff’s rights provided by, in particular, the Option Deed clauses already identified in this judgment.
[26] The plaintiff’s case is that the first cause of action contains a pleading of negligent advice and in particular advice that the Option Deed conferred no rights upon the plaintiff; but which advice was wrong.
[27] However here, as it was before Judge Doogue, the first cause of action is focussed upon the nature of legal advice provided by the defendant; and claims that
but for that advice, Vunabaka would have exercised the option after iTLTB sublease approval had been given and would have settled the sale to the plaintiff.
[28] Of difference in the fourth amended statement of claim is the plaintiff’s description of those rights which the Option Deed provided to the plaintiff to compel Vunabaka to carry out its obligations – by reference in particular to clauses 4.1 and
4.3.
[29] Whilst clearly the pleadings identify a dispute regarding critical facts for proof upon this claim – and therefore that should be a matter for evidence in due course, it is not inappropriate at this time for the Court to consider the proper construction of the Option Deed in order to evaluate what rights the plaintiff had because until an analysis of the bundle of rights available under the Option Deed the Court cannot assess claims of negligence.
[30] The Court agrees with Ms Fees submission regarding the rights of the parties under the Option Deed and that these include:
(a) The parties agree to act reasonably to obtain the approval of iTLTB
and Vunabaka as the party which applies for that approval.
(b)If iTLTB approval is not obtained after three years the plaintiff can by notice terminate the Option Deed and obtain a refund of the deposit.
(c) If iTLTB approval is given the option period of 30 days begins within which Vunabaka may exercise its option to enter into an agreement to sell the property to the plaintiff by giving notice of the exercise of the option within the 30 day period.
[31] The Court agrees as Ms Fee submits that as a consequence of the above the plaintiff could wait for up to three years and then find that Vunabaka does not exercise the option and, in this event, Vunabaka is not obliged to repay the plaintiff the deposit. Ms Fee submits and the Court agrees it is common ground Vunabaka
advised the plaintiff that this was in fact what it intended to do – not to exercise the option to sell and, in that event, it was not obliged to repay the option fee.
[32] It follows the Court does not agree with how those rights have been pleaded in the fourth amended statement of claim. The plaintiff alleges rights under the Option Deed that would have allowed him to complete his land purchase. The Court considers a reading of the deed does not support that claim. Rather the focus of the plaintiff’s case is that advice he received from the defendant must have been wrong and that in giving that advice the defendant must have been negligent. Plainly the Option Deed was entered into without the involvement of the defendant.
[33] The Court does not agree the Option Deed provided the plaintiff with the means to compel Vunabaka to exercise the option. It follows that if the Option Deed did not give the plaintiff the right to require Vunabaka to exercise the option in its favour, therefore any failure to give advice on other clauses in the Option Deed (including clause 7) is irrelevant. An undisputed element of fact is that Vunabaka did not intend to proceed with the transaction. Clause 4.3 states it was Vunabaka’s responsibility when approval was sought. Clause 4.1 did not compel Vunabaka to procure that approval. In the Court’s view clause 4.1 is a mutual reasonable endeavours clause but if it was actionable as the plaintiff claims then it is clear from clause 3.1 that the ultimate decision on whether or not to exercise the option vested with Vunabaka even if clause 4.1 approval had been obtained.
[34] The plaintiff pleads clause 4.1 provided him the right to compel the return of the deposit if approval was not obtained within 36 months. However, that does not appear to be so because that clause required the return of the deposit only if the plaintiff elected to terminate the agreement after the expiration of 36 months, a period which still runs.
[35] Even if clause 7 provides the right to compel Vunabaka to take all necessary steps to give effect to the Option Deed it does not require Vunabaka to be compelled to exercise the option in respect of which approval had been provided.
[36] The Court has already summarised pleaded claims of wrongful advice provided by the defendant including that in terminating the agreement Vunabaka was merely exercising its rights under the deed whereas the plaintiff says that on 20 May
2014 Vunabaka had no rights. That claim needs assessment. The advice was provided when it was clear Vunabaka did not intend to exercise the option and could not be compelled to do so. Therefore and while the plaintiff did not have the unilateral right to cancel, his choices were only to agree to the surrender or to wait for the expiration of 36 months and then to cancel himself. It follows therefore that the compromise obtained on his behalf secured for the plaintiff the use of money (return of the deposit) at an earlier stage than otherwise would have been the case and therefore that did not cause loss.
[37] Regarding claims that the defendant failed to advise the plaintiff of rights under the clause 8 dispute resolution provision, it seems clear that there was at that time no dispute between the parties.
[38] Belatedly Mr Hertzog has raised submissions that because the Option Deed was governed by the laws of the Fiji Islands there was no probative evidence available to the Court on the proper construction of the Option Deed under those laws and therefore the strike out application must fail. Bearing in mind the directions of Judge Doogue earlier such a submission ought to have been provided which supported the plaintiff’s construction of rights contended for based on Fiji law. Nothing of that kind has been provided. There is nothing to show Fiji law could or would provide a different interpretation than that which this Court has concluded.
[39] In the Court’s view expert evidence on foreign law is not required in this case because the interpretation of the Option Deed is a straightforward matter. In any event, as Ms Fee comments, Fiji law follows the common law of England in respect of construction of contracts. Ms Fee is correct by her submissions that a vague assertion that Fiji law may lead to a different construction is insufficient to displace the onus on the plaintiff to establish a tenable construction which saves the first cause of action.
Conclusions
[40] The first cause of action concerns the plaintiff’s claims of having lost the ability to purchase the property. It assumes therefore he had that right to purchase provided by the terms of the Option Deed. However proper construction of that document shows the Option Deed provided an option to Vunabaka to enter into an agreement to sell the property and no right was given to the plaintiff to compel Vunabaka to exercise that option. The parties could wait for three years during which iTLTB approval was obtained but in that outcome there was no requirement upon Vunabaka to exercise the option in which event there was no obligation for repayment of the deposit to the plaintiff.
[41] The clear facts are that Vunabaka advised the plaintiff it would not exercise the option to sell and therefore the plaintiff would never be in a position to purchase the property from Vunabaka.
[42] In the Court’s view it is appropriate to strike out the first cause of action and there is an order accordingly.
[43] Payment of costs is fixed on a 2B basis.
Associate Judge Christiansen
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