DDL Limited v Greig
[2019] NZHC 2306
•23 September 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-354
[2019] NZHC 2306
BETWEEN DDL LIMITED
Plaintiff
AND
DAVID GREIG
Defendant
Hearing: 12 September 2019 Appearances:
P Withnall for plaintiff Defendant in person
Judgment:
23 September 2019
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction
[1] On 25 May 2012, two companies, Galatea Holdings Ltd (Galatea) and Nova Holdings Wellington Ltd (Nova), and the defendant, Mr David Greig in his capacity as the trustee of the Nelson Rock Trust, executed a deed entitled “Buy Back Deed”. The plaintiff, DDL Ltd, is the nominee of Galatea pursuant to a deed of nomination executed on 20 July 2012 and stands in Galatea’s shoes in this litigation. On its face, the Buy Back Deed was completed in all respects in accordance with the requirements of a deed as provided for in s 9 of the Property Law Act 2007.
[2] DDL now sues Mr Greig alleging that he is in breach of the Buy Back Deed. It seeks an order for specific performance and ancillary relief. It applies for summary judgment pursuant to pt 12 of the High Court Rules 2016 on its claim for specific performance.
DDL LIMITED v GREIG [2019] NZHC 2306 [23 September 2019]
Background
[3] The background to the Buy Back Deed does not emerge especially clearly from the pleadings. However, essentially, Galatea was the beneficial and Nova the legal owner of a property in McFarlane Street, Wellington. In breach of its obligations to Galatea as a trustee, Nova borrowed money for its own purposes from Westpac Banking Corporation (Westpac) and granted Westpac security over the property. Galatea wished to sell McFarlane Street, but Nova did not have the funds to discharge the debt to Westpac. To regularise the situation, it was arranged that Nova would sell other property and use the proceeds of sale to clear its debt and discharge the security over McFarlane Street. The Buy Back Deed was part of these arrangements.
[4]The recitals record:
(a)Galatea has agreed to sell to Preston Investment Trust (“Preston”) and Preston … has agreed to sell to [Mr Greig in his capacity as trustee of the Nelson Rock Trust], and [Mr Greig] has agreed to purchase the properties described in the Schedule hereto.
(b)Galatea has only agreed to sell the properties to Preston and for Preston to on-sell to [Mr Greig] on certain terms and conditions.
(c)Preston and [Mr Greig] have only agreed to purchase the properties from Galatea on certain terms and conditions.
(d)The parties are entering into this Deed collaterally with the Agreements for Sale and Purchase of the properties, to record the terms and conditions relating to those transactions, particularly in respect of Unit W2.05.
[5] The Preston Investment Trust (Preston) was associated with Mr Barrie Skinner, one of the directors of Nova.
[6] The operative parts of the Buy Back Deed set out the terms on which Mr Greig in his capacity as a trustee was to acquire the scheduled properties. These included a flat identified as Unit W2.05 in a block situated on Torrens Terrace, Wellington.
[7] The sale and purchase transactions all proceeded as contemplated in the Buy Back Deed so that Mr Greig became the registered owner of Unit W2.05.
[8] The critical clause in the Buy Back Deed — and, indeed, the clause that explains why the parties called it that — is clause 4, which provides as follows:
4.In the event that either:
(i)Nova defaults on its obligations under the loan facility advanced to it by Westpac Bank giving Westpac Bank cause to issue mortgagee sale proceedings in respect of the property at 48 McFarlane Street; or
(ii)[Mr Greig] has not sold Unit W2.05 within 18 months of this Agreement;
then Galatea shall have an option to buy back Unit W2.05 from [Mr Greig] for the sum of $405,000 (inclusive of GST).
[9] Nova defaulted on its obligations under the Westpac loan facility on 25 July 2012 and the McFarlane Street property was later sold by mortgagee sale.
[10]The Buy Back Deed included no temporal constraint on the option in cl 4(ii)
— Galatea was entitled to exercise its option at any time after the expiry of 18 months. Mr Greig still owns Unit W2.05.
The plaintiff’s case
[11] DDL’s case could not be more straightforward. It says that it is entitled to require Mr Greig to sell Unit W2.05 back to it at the price of $405,000 including GST pursuant to cl 4 of the Buy Back Deed both because Nova defaulted on its obligations under the Westpac loan facility and because Mr Greig retains ownership following the expiry of the 18-month period.
[12] In support of DDL’s application, one of its directors, Mr Vladimir Barbalich, has sworn an affidavit. His uncontradicted evidence is that DDL has given formal notice and taken all other appropriate steps to bring this about but Mr Greig refuses to sign the necessary conveyancing documentation. Effectively, DDL seeks to compel him to do so.
The defendant’s case
[13]Mr Greig is self-represented.
[14] Apparently unassisted by a solicitor, he has filed a statement of defence responding to DDL’s statement of claim, a notice of opposition responding to DDL’s application for summary judgment and an affidavit in response to Mr Barbalich’s affidavit. With some assistance, during the course of the hearing, Mr Greig was able to articulate the bases upon which he opposes summary judgment.
[15]I understand these to be threefold.
[16] First, Mr Greig says that Galatea or its representatives — essentially Mr Barbalich — subjected him to duress and it was only as a result of this that he executed the Buy Back Deed. There is no evidence directed at this. However, Mr Greig told me that the sale and purchase arrangements were all but complete when Mr Barbalich proposed that the parties execute the Buy Back Deed. He said this proposal occurred after his sale and purchase agreement had gone unconditional, but prior to settlement.1 He said Mr Barbalich threatened to refuse to settle if he did not agree to the Buy Back Deed. He said he felt he had no choice but to agree to the Buy Back Deed. Mr Greig suggested this alleged duress rendered the Buy Back Deed unenforceable by DDL against him.
[17] Mr Greig also suggested Mr Skinner, who signed the Buy Back Deed on behalf of Nova, did so under duress. The basis for this suggestion was that Mr Skinner was, at the time, subject to bail conditions that prevented him from associating with his former clients, including Mr Barbalich. Just how this is said to have resulted in duress, Mr Greig did not explain.
[18] Second, Mr Greig told me that in the course of the negotiations leading to this transaction Galatea proffered a valuation of the property. He said that the valuation was inflated and that this inflated valuation induced him to enter into the transaction in the first place. He said that had it not been for this valuation he would have not entered into the transaction. Again, there is no evidence before the Court to support this allegation — not even a copy of the valuation of Unit W2.05.
1 Although Mr Greig referred to the sale and purchase agreement as being his, he appears to have been referring to the sale and purchase agreement between Galatea and Preston.
[19] Mr Greig has provided a copy of a valuation of another unit, W1.01, which was completed by a firm called Valuation Consultants (N.Z.) Ltd for Preston on the date of the sale and purchase agreement between Galatea and Preston. Mr Barbalich’s evidence was that Galatea never provided a valuation and was not privy to the terms on which Preston on-sold Unit W2.05 to Mr Greig. Mr Barbalich suggested that it was Preston who obtained the valuation for Mr Greig. In response, Mr Greig said that the valuation must have been based on information provided to Valuation Consultants (N.Z.) Ltd by Galatea or Mr Barbalich. Mr Greig also said that Valuation Consultants (N.Z.) Ltd was Galatea’s preferred valuer and was used on their instruction.
[20] Mr Greig also referred to historic rental information for three units in the Torrens Terrace block provided to Nova by Taylor Property Plus (2006) Ltd on 11 February 2011. Mr Greig said that Taylor Property Plus (2006) Ltd was Galatea’s property management company, which was operated by Mr Barbalich’s solicitors. Mr Greig claims the rental information was misleading and deceptive because he says has not received rent at those level from his unit at any point in the past seven years.
[21] Third, and following on from the last point, Mr Greig pointed to cl 6 of the Buy Back Deed under which Galatea guaranteed that Mr Greig would receive a certain rental from the property during his ownership. As I have said, he told me that he had not received this level of rental. His argument was that this constituted a breach by Galatea (for which DDL must assume responsibility), which he said precludes it from exercising its rights under the Buy Back Deed. The shortfall in rental is unquantified.
Summary judgment principles
[22] The established principles in relation to summary judgment were summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd:2
[26] The principles are well settled. 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 at 3 (CA). 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
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.
(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 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 331 341 (PC). 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 Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[23] Where discretionary relief is available, the Court may exercise that discretion on summary judgment. As Casey J said in Pemberton v Chappell, “if the Judge thinks it inevitable that such a discretion will be exercised, there is every reason to save time and expense by dealing with the matter on the spot”.3
Discussion
[24] I am far from satisfied that any of the defences put forward by Mr Greig can succeed.
[25] As to duress, the first difficulty is of course that there is no evidential foundation for the defence. My description of the argument is based on what Mr Greig told me in the course of his submissions. Putting that aside, as Mr Withnall submitted, in order to rely on duress as entitling a party to avoid liability under a contract, that party must establish that the other party to the transaction exerted illegitimate pressure.4 Generally such pressure will be unlawful.5 The pressure must also be demonstrated to have had such an effect on the party seeking to avoid his or her obligations so as to leave him or her with no effective choice.6 Here, even on Mr Greig’s own description of events, he was hardly deprived of his free will. He might simply have elected not to go ahead with this investment unless the proposed collateral arrangement was abandoned or amended in some way. If it is correct that the sale and purchase agreement was already unconditional, Mr Greig might also have sought to have Preston enforce its rights under that agreement.
3 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 5.
4 McIntyre v Nemesis DBK Ltd [2009] NZCA 329, [2010] 1 NZLR 463 at [20]
5 At [30].
6 At [64].
[26] Similarly, it is not obvious how Mr Skinner could have been under duress because of his bail conditions. It is unnecessary to dwell on the point as Mr Skinner is not a party to this proceeding, and has not provided sworn evidence. In any event, the relevance of this contention to Mr Greig’s defence is unclear.
[27] Turning to the alleged misrepresentation as to the value of Unit W2.05, including the level of rent. Even assuming Mr Greig could establish that it was misrepresented to him by Galatea that the value of Unit W2.05 was greater than its actual value at the time, it is very difficult to see where that would take him in terms of challenging the validity of the Buy Back Deed. It might conceivably entitle him to cancel the agreement for sale and purchase of Unit W2.05, though that is the very last thing he is seeking. It might entitle him to damages reflecting the difference between the actual value of the property at the relevant time and its value as represented to him, but that would at most provide Mr Greig with a counterclaim and set-off. In short, even if Mr Greig were able to make out this allegation, it would not affect the validity or otherwise of the Buy Back Deed and the obligations of the parties thereunder.
[28] Turning to the alleged breach by Galatea of the guarantee, there is no evidence as to the rental actually received. In his affidavit evidence in reply dated 26 August 2019, Mr Barbalich produces the deed of guarantee. The guarantee was for a limited period of time expiring on 31 January 2013. Until this proceeding was issued, Mr Greig had not raised any issue relating to breach of this guarantee. As Mr Withnall submitted, any claim now would likely be time-barred.7
[29] For the above reasons, I am satisfied to the point of having no doubt or uncertainty that Mr Greig has no defence to the substantive claim for breach of contract.
[30] All that the plaintiff seeks is summary judgment on its application for an order for specific performance compelling Mr Greig to execute the necessary documentation to effect the transfer of the property. Summary judgment is not sought on the ancillary relief.
7 Limitation Act 2010, s 11.
[31]That brings me to what I perceive to be the only real issue in this case.
[32] At common law the only remedy for breach of a contractual obligation is damages. However, where the circumstances justify it, equity will make an order for specific performance — that is to say, an order compelling a party to perform a contractual obligation. This being an equitable remedy, it is discretionary. The question in this case is whether the Court should exercise its discretion to grant such a remedy. It is well established that the Court will usually exercise its discretion to enforce a contract for the sale and purchase of land.8 Land is unique, and, generally, damages are not regarded as being adequate to compensate the purchaser. I see no reason to treat the Buy Back Deed any differently from a sale and purchase agreement.
[33] Although Mr Greig did not put the argument in this way, when I explained to him that the Court had a discretion, if it reached this point, to make an order for specific performance or in the alternative grant the plaintiff damages, he expressed a strong preference for the latter.
[34] Any award of damages would presumably take as its starting point that DDL is entitled to acquire this property for $405,000. Obviously, if that is the current market value of Unit W2.05, then damages would be nil. If, however, as seems likely, the current value of the property is greater than that figure, then the measure of damages would be the difference between $405,000 and the current value. Mr Greig himself suggested the property was now worth approximately $690,000.
[35] If Mr Greig’s contention that Galatea’s — and therefore DDL’s — breach of the rent guarantee could be made out, ignoring any time-bar issue, the damages might be reduced marginally.
[36] The argument against an order for specific performance in this case might be advanced based on the fact that the original sale and purchase took place in May 2012, that Mr Greig has owned the property since then and since then has expended money on its upkeep in the expectation that Galatea or DDL would not exercise the option to purchase.
8 Loan Investment Corporation of Australasia v Bonner [1970] NZLR 724 (PC) at 735.
[37] In the absence of any organised argument, I have considered the force of such a contention.
[38] As against this, it is apparent to me from the material that is before the Court that this was a commercial investment by Mr Greig.
[39] In the end, the view I have reached is that these commercial parties should be held to their bargain.
[40] For those reasons, the plaintiff is entitled to the order it seeks for specific performance.
[41] Costs are reserved, as I have not heard argument in relation to them. My preliminary view, subject to hearing from counsel and Mr Greig, is that the plaintiff is entitled to its costs on a 2B basis together with such disbursements as may be allowed by the Registrar. If counsel and Mr Greig are unable to settle costs between them, then memoranda may be filed and I will deal with them on the papers. In this regard, any memorandum seeking costs is to be filed and served within 15 working days of the date of this judgment and any reply is to be filed and served within a further 10 working days.
Associate Judge Johnston
Solicitors:
Gault Mitchell Law, Wellington for plaintiff
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