Culverden Retirement Village v Hill HC Auckland CIV-2008-404-5281

[2008] NZHC 2534

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-5281

UNDER  the District Courts Act 1947

BETWEEN  CULVERDEN RETIREMENT VILLAGE Applicant

ANDEDNA MAY HILL Respondent

Hearing:         27 August 2008

Appearances: Mr A G Rowe for Applicant

Mr E Telle for Respondent

Judgment:      27 August 2008

(ORAL) JUDGMENT OF LANG J

[on application for leave to appeal out of time]

Solicitors:

Wells & Co, Remuera

McVeagh Fleming, Onehunga

CULVERDEN RETIREMENT VILLAGE V  HILL HC AK CIV-2008-404-5281  27 August 2008

[1]      In or about October 2000 Mrs Hill and her late husband, Cyril Hill, became the owners of Unit 20 in a retirement village operated by Culverden Retirement Village Limited (“Culverden”).    At the time that they took possession of the unit they executed a series of contractual documents that defined the relationship between themselves and Culverden.   These comprised an agreement for sale and purchase of the unit, a management agreement and a mortgage.

[2]      In the First Schedule to the agreement for sale and purchase Mr and Mrs Hill gave Culverden an option to re-purchase the unit.   The terms upon which it could re- purchase the unit were set out in the Third Schedule.   The Third Schedule specified the situations in which Culverden could exercise its option.    These included any situation in which Culverden, in its absolute discretion, had determined that Mr and Mrs Hill were in breach of any rule set out in the body corporate rules or the management agreement.

[3]      In or about March 2002 Culverden  gave Mr  and Mrs Hill notice that it considered that they were in breach of the management agreement.     The breach consisted of a failure to pay Culverden weekly management fees in the sum of

$77.00.   The statement of claim avers that up until this time Mr and Mrs Hill had no knowledge that they were in default.

[4]      The statement of claim alleges that Mr and Mrs Hill then consulted solicitors. Then, in October 2002, Culverden purported to exercise the option.    In or about October 2002 Mr and Mrs Hill executed a series of documents under which Culverden re-purchased title to the property.   The arrangement was such that Mr and Mrs Hill retained the right to dispute the consideration paid by Culverden for the re- purchase and to bring proceedings to recover a sum greater than the consideration that Culverden had provided.

[5]      Sadly,  Mr  Hill  has  now  passed  away.      Mrs  Hill,  however,  has  issued proceedings in the District Court in which she alleges inter  alia that Culverden wrongfully exercised the option.    She alleges that in doing so Culverden acted in breach of both express and implied terms contained in the documents that defined the parties’ relationship.

[6]      Culverden applied to strike out a cause of action alleging that the contractual arrangement contained an implied term requiring Culverden to act in good faith in its dealings with Mr and Mrs Hill.    After a defended hearing on 21 November 2007, His Honour Judge A Swaran Singh delivered a ruling in which he dismissed the application.    He did not, however, deliver reasons for his ruling at that time.    He indicated instead that he would deliver his written reasons at a future date.   He made directions, however, for the progression of the proceeding towards a fixture.

[7]      The time for lodging an appeal against Judge Singh’s decision expired 20 working days after 21 November 2007.   By the expiration of that period Culverden had not filed an appeal although it had signalled an intention that it was likely to do so.   The Judge did not in fact deliver the reasons for his decision until 25 July 2008, some nine months after the original ruling.

[8]      In the interim, the proceeding in the District Court has progressed further. On 3 July 2008 Mr and Mrs Hill applied successfully for an order that Culverden provide documents to them by way of particular discovery.   Culverden has appealed against that decision, and the appeal is due to be heard in this Court on 12 November

2008.

[9]      Culverden now seeks leave to appeal out of time against the ruling that Judge Singh delivered on 21 November 2007.     It says that it can explain the delay in lodging its appeal, that the proposed appeal has real merit and that the interests of justice require leave to be given.

[10]     I deal with each of these issues in turn.

(i)       Explanation for the delay

[11]     Culverden submits that it could not realistically and conscientiously appeal against the Judge’s decision until such time as the Judge delivered his reasons.    It accepts that it considered from the outset that the Judge’s decision was wrong, but says that until it knew the basis on which the Judge reached his decision it could not in good conscience file an appeal.

[12]     Counsel for Mrs Hill takes issue with this.   He points out that Culverden has always been of the view that the Judge’s decision was wrong, and that it could have lodged its appeal immediately after the hearing on 21 November 2007.

[13]     I have  reached  the  conclusion  that,  although  it  took  a  risk  in  doing  so, Culverden acted responsibly in withholding the filing of the appeal.   Until such time as it knew the basis on which the Judge had reached his decision it could not realistically have pursued an appeal.   I accept that, in principle, it could have lodged an appeal and then waited for the Judge to deliver his reasons.    In practical terms, however, that would not have advanced matters a great deal further.

[14]     The situation that has arisen in the present case demonstrates the very real difficulties that can arise when a Judge delivers a ruling and then does not issue reasons  for  that  ruling  promptly.      Whilst  the  Judge’s  desire  to  advance  the proceeding expeditiously is understandable, he did not bring finality to the present application until such time as he issued his reasons.   With the benefit of hindsight, it would have been much better for the Judge to have reserved his entire decision and then to have delivered it in toto.

[15]     For these reasons I am satisfied that Culverden has advanced an adequate explanation for its failure to lodge the appeal within the required time.

(ii)      Merits of the proposed appeal

[16]     Culverden proposes to advance its appeal on a two-fold basis.   First, it will argue that in the context of the particular contractual arrangement between Culvert and Mrs Hill, no implied duty to act in good faith could arise.   It will argue that case law is against the plaintiff’s argument and that the Court should intervene at this stage to strike out the claim.

[17]     In addition, however, it will argue that the particular circumstances that arose at the time that Culverden exercised the option now effectively estop Mrs Hill from pursuing her claim.

[18]     Culverden advanced the first of these arguments before Judge Singh, but it accepts that it did not specifically advance the second.

(a)      No duty to act in good faith

[19]     In his reasons Judge Singh referred to the leading authorities in this context. Some of those are to the effect that New Zealand law should recognise an obligation of good faith in contracts: see eg Livingstone v Roskilly [1992] 3 NZLR 235. Others have been to the opposite effect: see eg Bilgola  Enterprises  Ltd  v  Dymocks Franchise Systems (NSW) Pty Ltd [2000] 3 NZLR 169 (CA) and Court v McBreen HC ChCh CP73/00 Venning J 13 November 2001.

[20]     The Judge concluded, however, that in the factual matrix of the present case it is possible that Mrs Hill might be able to establish that a duty to act in good faith arose.  He considered this to be a developing area of the law, and was of the view that it would not be appropriate to strike the claim out at this stage.    Instead, the claim should proceed to a full hearing at which the factual matrix might be explored in much greater detail than is possible in a strikeout application.

[21]     Had this been Culverden’s only argument, I would have had no hesitation in finding that the proposed appeal had no merit.   This is indeed a developing area of the law, and a decision on such an issue is generally difficult to reach until such time as the factual circumstances have been explored at trial.   As the Court of Appeal has very recently commented, a strike-out application is hardly an auspicious occasion on  which  to  make  a  definitive  ruling  on  a  developing  area  of  the  law:    Body Corporate 20225 v Taylor CA205/06, 22 August 2008.   Based on the argument that Culverden raised before Judge Singh, therefore, I would not have granted leave to appeal.

(b)      The circumstances surrounding the exercise of the option

[22]     The second argument, however, gives me pause to consider.    I propose to traverse it only briefly because it is important that any view that I might indicate should not trammel the ultimate view taken by the Judge who hears the appeal.

[23]     In short, Culverden relies on the pleadings in the statement of  claim (at paragraphs 26 to 33) relating to the circumstances in which allegations   are made regarding the circumstances in which Culverden came to re-purchase the unit. Culverden says that the pleadings disclose that Mr and Mrs Hill acted throughout this period with the benefit of legal advice, and that they ultimately agreed to sell the property back to Culverden.     Moreover, the terms of the deed that they signed preserved only their right to challenge the level of consideration paid by Culverden for the transfer.     It did not preserve any right to challenge the basis on which Culverden had purported to exercise the option.

[24]     I consider that this particular issue is sufficiently arguable, notwithstanding the  fact  that  it  was  not  argued  in  the  Court  below,  to  enable  Culverden  to demonstrate that it has an arguable point on appeal.

[25]     It is in that context that I come to consider the interests of justice.

(iii)     The interests of justice

[26]     Counsel for Mrs Hill contends that his client should not be put to the further expense of arguing yet another appeal on an interlocutory matter.    He submits that the matter should be left to trial, when the existence of the alleged implied term can be traversed more fully.

[27]     I accept that a further appeal may add to the expense of this proceeding.   It will not, however, necessarily delay the proceeding because the other appeal is due to be heard on 12 November 2008 and the present appeal can be heard at the same time.    It should not add significant cost either, because counsel have effectively formulated their arguments in relation to the issues already.

[28]     From Culverden’s perspective I accept that it is important that it be permitted the opportunity to challenge a cause of action which it contends has no factual or legal basis.     Moreover, it is clear that the existence of this claim will have a significant impact on the scope and length of both interlocutory procedures and the

trial itself.   If the cause of action is found not to be tenable, it may save the parties considerable time and expense at trial.

Result

[29]     For these reasons I am satisfied that the interests of justice require leave to appeal to be given.   I make an order accordingly.

Costs

[30]     Mrs Hill is legally aided.   As I have said, Culverden took a risk in not filing the appeal within the required period.     In a sense, therefore, it has obtained an indulgence from the Court in being permitted to pursue the appeal out of time.   For that reason costs are to lie where they fall.

Directions

[31]     I direct that the appeal in this proceeding is to be heard on 12 November 2008 at the same time as the appeal in CIV-2000-404-4828.   In order to bring the appeal to a state of readiness for trial, I now direct in both proceedings:

a)        The written submissions for the appellant are to be filed and served no later than 30 September 2008.

b)The written submissions of the respondent are to be filed and served by 5 November 2008.

[32]     Counsel have already prepared a bundle of documents so directions are not required in relation to that.

Lang J