English v Foley

[2023] NZHC 84

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2022-425-40

[2023] NZHC 84

IN THE MATTER

of a claim for breach of contract

BETWEEN

CONOR JOSEPH ENGLISH

Plaintiff

AND AND

WAYNE ANTHONY FOLEY

First Defendant

KOKO RIDGE LIMITED

Second Defendant

Hearing:	13 December 2022
Appearances:	T Mijatov and J S Trevella for Plaintiff A S Olney for Defendants
Judgment:	3 February 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER

(in relation to partial strike out application and further particulars)

ENGLISH v FOLEY [2023] NZHC 84 [3 February 2023]

[1]    This proceeding is borne out of a proceeding initiated in 2018 between the same  parties  which  settled  in  2019.  Two  issues  arise  in  this  application   by  the defendants to strike out part of the statement of claim.

[2]    The first issue is whether the full and final settlement of the 2018 proceeding is fatal to aspects of the present proceeding. The second issue is whether Mr English’s claim for damages on a restitutionary basis is tenable. Mr English was the plaintiff in the 2018 proceedings with Mr Foley and Koko Ridge Limited (Koko), then known as Ladies Mile Property Limited, the defendants. Mr Foley and Koko also apply for particulars of one aspect of Mr English’s claim which I address after their strike out application.

What was in issue in the 2018 proceeding?

[3]    The following brief summary of the 2018 proceeding is paraphrased from my April 2019 judgment declining Mr Foley and Koko’s application for summary judgment as defendants.1

[4]    Mr Foley was the successful tenderer in relation to a development block of land known as at Ladies Mile in Queenstown. The issue in the 2018 proceeding was whether Mr Foley had submitted the tender  on  behalf  of  himself,  on  behalf  of Mr English alone, or jointly on behalf of himself and Mr English. Koko was incorporated  to  complete  the  purchase  of  the  land  after  Mr Foley’s  tender    was accepted. Mr English sought a variety of orders in the 2018 proceeding including a declaration Koko held the Ladies Mile land on trust for him or, an account of profits from the development or damages.

[5]    The April 2019 judgment sets out the history of how Mr Foley and Mr English, who were previously unknown to each other, were brought together through a mutual connection with a third party.

[6]    Later in 2019, the parties attended mediation and completed a settlement agreement dated 29 November 2019 (the settlement agreement).

1      English v Foley [2019] NZHC 928.

The 2018 proceedings settled

[7]    The settlement agreement, in its background, refers to the dispute between the parties over the purchase and development of the land at Ladies Mile. It notes that Mr English had lodged a caveat against the land (which he lifted to allow Koko to settle its purchase).

[8]    Under the settlement agreement, Mr Foley had to pay Mr English $200,000 including GST, if any. Koko was to give Mr English a $300,000 credit, inclusive of GST, on the purchase price of a lot created by the subdivision of the Ladies Mile Land. Koko is required to give Mr English the first option to purchase any of the lots offered for sale seven days prior to them being offered  to the public.  Koko is to provide   Mr English with a list of the lots and the prices at which they are being marketed to the public, with the credit to be applied to that price.

[9]    In the event Mr English considers the offer price does not reflect the property’s true market value, the settlement agreement sets out a process for Mr English to challenge the price. Finally, Mr Foley and Koko agreed to “propose and support” that the main street in the development would be named “subject to [Mr English’s] confirmation, … Tom Coughlan Avenue”. Mr English’s family has a connection to Mr Coughlan who was an All Black.

[10]   The settlement agreement provided that upon the $200,000 being paid (which was paid), a notice of discontinuance would be filed with costs to lie where they fall. The settlement agreement concludes by reciting it records the entire agreement between the parties. Following payment of the $200,000, the 2018 proceeding was discontinued.

The current proceeding – a dispute over the settlement agreement

[11]   Mr English alleges Mr Foley and Koko have breached the settlement agreement in three ways:

(i)by offering certain lots to the public without first giving him the opportunity to exercise the option provided for in the agreement;

(ii)in respect of three lots he was offered, he says that Koko required him to identify a “lot of his choice” in terms of the settlement agreement, before Mr English could challenge the asking price; and

(iii)by not taking steps to complete the road naming as agreed and failing to notify him that the application to name the road had gone to the Council.

[12]   Mr English alleges the above breaches have caused three forms of loss; only one of which is subject to the strike out application, being the loss of opportunity to pursue and possibly succeed  on  the  claims  he  made  in  the  2018  proceeding.  Mr Mijatov, counsel for Mr English, submits that Mr English is able to qualify his damages claim for breach of the settlement agreement on a restitutionary basis, that is, he can seek to  recover  the  benefit  he  lost  under  the  settlement  agreement.  Mr Mijatov submits Mr Foley and Koko have taken the benefit of the settlement agreement without fully performing it. It is pleaded that in respect of this form of loss, damages are sought for “a portion of $12,250,000” representing Mr English’s lost opportunity to participate in and profit from the development.

Limited scope of strike out application

[13]   The strike out application is directed at the parts of the statement of claim relating to the loss of opportunity claim, that is, the restitutionary damage claim.

[14]   Mr English accepts that the settlement agreement is valid and remains in force. Mr English has not cancelled the settlement agreement.

[15]The paragraphs of the statement of claim sought to be struck out are:

40.Had the Plaintiff known that the Defendants would breach the Settlement Agreement he would not have entered into it.

41.Had he not entered into the Settlement Agreement, the Plaintiff would have remained free to pursue the underlying proceedings.

42.Had the underlying proceedings succeeded, the Plaintiff would have been entitled to participate in and profit from the property development venture.

43.The venture is profitable in the order of $24.5 million.

Particulars

43.1To be further particularised following discovery but believed by the Plaintiff to be profitable on the following basis:

a.The total purchase price of lots offered to the Plaintiff was approximately $20.2 million.

b.There are 26 lots in total with 12 appearing to remain available for sale.

c.Taking an average asking price of $1.1 million per lot, total revenue from remaining lots would be approximately $33.4 million.

d.Each lot is estimated by the Plaintiff to have a cost of approximately $150,000 and so a cost of approximately $3.9 million, which with the purchase price of $5 million is a total cost of approximately

$8.9 million.

e.Accordingly,     net     profit     is     approximately

$24.5 million. `

44.As a result of the Defendants’ breaches of the Settlement Agreement, the Defendants have caused the Plaintiff loss, namely:

44.1An inability to participate in the property development venture following the continued pursuit of the underlying proceedings, which has resulted in a loss of opportunity to profit from the development, having a value to the Plaintiff as one of two participants of approximately $12,250,000; and

What Mr Foley and Koko must show to have the paragraphs struck out – strike out principles

[16]   The strike out application is brought pursuant to rule 15.1 of the High Court Rules 2016 (the Rules). The criteria for strike out were summarised by the Court of Appeal in Attorney-General v Prince and Gardner as follows:2

(a)Pleaded facts, whether or not admitted, are assumed to be true.

(b)The cause of action or defence must be clearly untenable.

(c)The jurisdiction is to be exercised sparingly, and only in clear cases.

(d)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.

2      Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.

(e)The Court shall be particularly slow to strike out a claim in any developing area of law.

[17]   The principles set out in Attorney-General v Prince and Gardner were affirmed by the Supreme Court in Carter Holt Harvey v Minister of Education.3 In cases where the strike out application relates to part of the claim only, a careful assessment is required as to whether the time and expense of the application will, overall, be         a compelling and efficient use of the resources of all involved.4

[18]Mr Mijatov referred to the following from Marshall Futures Ltd v Marshall:5

It must be perfectly clear that the plaintiff cannot succeed as to the cause of action or causes of action in question. As it is sometimes put, the defendant must show that the plaintiff’s cause of action cannot by any possibility be maintained.

Why strike out is said to be appropriate

[19]   The first submission on behalf of Mr Foley and Koko is that Mr English voluntarily gave up the ability to pursue damages arising from the “subject matter of the Dispute”. The Dispute concerned the purchase and development of the Ladies Mile land. That Dispute and damages arising from it were settled on a full and final basis and for Mr English to now claim damages arising from the 2018 proceeding and Dispute is an abuse of process.

[20]   The second submission is nothing it is alleged Mr Foley and Koko have done, has caused  Mr English  to  have  lost  the  benefit  of  the  settlement  agreement.  Mr English maintains the settlement agreement remains in force meaning, at least as concerns the purchase of a lot at a discount, it may still be performed. Mr English has received the $200,000 and is still entitled to what he bargained for as regards the discounted lot.  Therefore it is premature to say  Mr English has been deprived of  the benefit of the settlement agreement.

3      Carter Holt Harvey v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [10].

4      Whitman v Airways Corporation of New Zealand Ltd (1994) 8 PRNZ 155 (HC) at 4.

5      Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC) at 323.

Mr English’s position

[21]Mr Mijatov submits:

Another significant loss in value of the [settlement] agreement to Mr English arises from the fact that he has settled (and then duly discontinued) the underlying proceedings. Those proceedings if successful would have provided  him   with   the  opportunity  to   participate  in   and  profit   from a significant property development. He would plainly not have given up that valuable opportunity if he had known that the defendants would breach any settlement agreement. The defendants have retained the benefit of not being sued in the underlying proceeding, but have not paid  the  agreed  price, being the $500,000 and other terms of the settlement agreement. As a result, he now sues to recover these losses.

[22]   Mr Mijatov submits the difficulty for the strike out application is that it proceeds on the basis of the pleadings alone, that is, that the pleaded facts are capable of being proven. He submits the pleaded facts are that Mr English had a valuable opportunity, that is, to pursue the 2018 proceeding, but lost that opportunity by settling that proceeding, which opportunity he would not  have lost  if he had  not  settled. Mr English would not have settled if he had known Mr Foley and Koko were not going to honour the settlement agreement. Mr Mijatov submits that all the legal ingredients for a valid but contested claim for damages for loss of opportunity exists. He submits that part of the claim cannot be struck out.

[23]   Mr Mijatov further submits further  that  strike  out  is  not  appropriate  as  Mr Foley and Koko have obtained a windfall. Mr English’s 2018 proceeding, if successful, would have entitled him to relief which would have returned him to the position he  would have  been  in,  had  he  not  been  wrongfully  excluded  from  the development of the Ladies Mile land.

[24]Mr Mijatov submits:

By entering into the settlement agreement, Mr English surrendered his claim and therefore his valuable opportunity to participate in the profits of the development by obtaining a successful judgment and receiving compensation. But not only did Mr English lose this opportunity; the defendants gained the valuable benefit of not having to defend the underlying proceeding and, consequently, risk being subject to a court order requiring them to account for their profits, or endure increased holding costs and time delays that such      a court action would entail for the development. This was priced into the settlement agreement. Accordingly, by entering  into  and  then  breaching the settlement agreement, the defendants have kept the benefit of Mr English

discontinuing the underlying proceeding for himself but have not paid the price for that benefit. In other words, they have obtained a windfall.

[25]   Mr Mijatov submits that Mr Foley and Koko gained the valuable benefit of not having to defend the 2018 proceeding. Mr Mijatov therefore submits Mr Foley and Koko have kept the benefit of Mr English discontinuing the underlying proceeding but they have not paid the price for that benefit.

[26]   Mr Mijatov’s submission is that Mr English’s claim is restitutionary in nature. Mr English “… is seeking to recover the benefit he provided, and the defendants obtained, under the agreement”. This builds on the submission already outlined, that Mr Foley and Koko gained the valuable benefit of not having to defend the underlying proceeding. Mr Mijatov submits the policy grounds vindicating a restitutionary approach are strong here because there is both a loss to the innocent party and a gain to the defaulter.

[27]In short, Mr Mijatov submits:

Mr English has conferred a valuable benefit on the defendants and lost the value of that benefit himself. As a result of the breach Mr English has neither the benefit, nor the bargain under the contract. He has a principled claim that he should receive restitutionary damages to compensate him for his lost opportunity to pursue the underlying proceeding, on the basis that compensating him by reference to “his expectation interest” would be insufficient.

[28]   Mr Mijatov submits that it is a fact specific question whether restitutionary damages are appropriate and therefore a matter for trial.

[29]   Mr Mijatov submits the factual propositions supporting the availability of restitutionary damages is supported by the following factors:

First, the circumstances of the contract, namely that the defendants were aware of Mr English’s poor health at the time the contract was entered into. Secondly, the contract was not purely monetary for Mr English, but conferred the important benefit of naming rights to a street to preserve his and his wife’s family legacy. This is a benefit he has been denied, and was an essential component of the original bargain. There is a clear argument that he should not be bound by the “expectation” measure of damages where an important benefit of the contract cannot be provided. Similarly, lots in the development that should first have been offered to Mr English have already been offered to other purchasers, so it is impossible to provide him with the true value of the

original bargain. Thirdly and finally, Mr English’s agreement to discontinue his claim was clearly tied to the benefits he was to receive under the settlement agreement but cannot now receive. In those circumstances, he should be entitled to recover his “payment” back – this being the value of his original claim.

When damages on a restitutionary basis are available?

[30]   Mr Mijatov referred to Attorney-General v Blake as one of the key authorities supporting the availability of  restitutionary  damages  for  a  breach  of  contract.6  Mr Mijatov noted that Lord Nicholls of Birkenhead concluded there was no reason, in principle, why the Court must in all circumstances rule out an account of  profits as  a remedy for breach of contract.7 Lord Nicholls referred to “restitutionary damages” as being an unhappy expression and said:8

When, exceptionally, a just response to a breach of contract so requires, the court should be able to grant the discretionary remedy of requiring a defendant to account to the plaintiff for the benefits he has received from his breach of contract. (my emphasis)

[31]Further on, his Lordship said:9

When the circumstances require, damages are measured by reference to the benefit obtained by the wrongdoer.

[32]   His Lordship noted later that: “An account of profits will be appropriate only in exceptional circumstances”.10 He suggested:

A useful general guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit.

[33]   Mr Mijatov also referred to Denaro Ltd v Onyx Bar & Café (Cambridge) Ltd,11 where the Court referred to the following passage from Tipping J’s judgment in Premium Real Estate Ltd v Stevens taken into the judgment:12

6      Attorney-General v Blake [2001] 1 AC 268 (HL) at 285 and cited in Premium  Real  Estate Ltd v Stevens [2009] NZSC 15, [2009] 2 NZLR 384 (CA).

7      At 285.

8      At 285 (emphasis added).

9      At 285.

10     At 285.

11     Denaro  Ltd  v  Onyx   Bar  &   Café   (Cambridge)   Ltd   HC   Hamilton,   CIV-2010-419-777, 7 February 2011 at [19].

12     Premium Real Estate Ltd v Stevens [2009] NZSC 15, [2009] 2 NZLR 384 (CA).

[102]    Against that background I return to the terminology of damages.      I leave aside nominal damages and exemplary damages, which have their own particular features. On that basis the three types of monetary relief with which the courts are concerned as a response to civil wrongs can be described as compensatory damages, disgorgement damages and restorative damages. Compensatory damages are loss based. Disgorgement damages are based on giving up a gain. Restorative damages are based on restoring to the plaintiff value transferred. As the Privy Council affirmed in Tang Man Sit, compensatory and disgorgement damages are generally, indeed almost always, inconsistent. An election is required between them. Compensatory and restorative damages are not necessarily inconsistent. Conceptually they are capable of being cumulative, even if they arise from the same wrong.

[34]   In Denaro, adopting the above analysis, Allan J he was concerned with restorative damages involving the restoration to a plaintiff of value transferred to     a defendant. His Honour noted that the term “restitutionary damages” denotes the same type of remedy.

[35]   Burrows, Finn and Todd on the Law of Contract in New Zealand notes that the question of exactly what a plaintiff has lost as a result of a breach of contract is a subtle one.13 The  authors  refer  to  the  terminology  used  by  Fisher  J  in  Newmans  Tours Ltd v Ranier Investments Ltd, where his Honour said:14

Following a breach of contract the innocent party may have:

(i)a restitution interest, namely the right to restoration of a valuable benefit conferred on the other party, the object being to prevent unjust enrichment.

[36]   The tenor of Mr Mijatov’s submission in some parts read as if Mr English’s claim is for restitution as opposed to restitutionary damages. The distinction is important as to obtain restitution, that is, the “… restoration of a valuable benefit conferred on the other party …”, the failure of consideration must be total.15 Restitutionary damages focus on restoring to the plaintiff the value transferred.16 Here, Mr English does not claim he has the right to actually revive and pursue the 2018 proceeding, he seeks damages representing the likelihood of him succeeding in

13     Matthew Barber and Stephen Todd Burrows,  Finn  and  Todd  on  the  Law  of  Contract  in  New Zealand (7th ed, LexisNexis, Wellington, 2022) at 21.2.2.

14     Newmans Tours Ltd v Ranier Investments Ltd [1992] 2 NZLR 68 at 86.

15     Peter Blanchard Civil Remedies in New Zealand (2nd ed, Thomson Reuters, 2011) at 51.1.6.1.

16     At 51.1.6.6

that proceeding but in a real sense, that is what he gave up – the chance to claim relief for being excluded from the development.

What has Mr English arguably lost as a result of the breach of the settlement agreement?

[37]   Mr Mijatov’s submissions state: “Before entering into the settlement agreement, Mr English had the valuable chance to profit from the development:

By entering into the settlement agreement, Mr English surrendered his claim and therefore his valuable opportunity to participate in the profits of the development by a successful judgment and receiving compensation.

[38]   Mr Mijatov submits that not only did Mr English lose this opportunity, but Mr Foley and Koko gained the valuable benefit of not having to defend the underlying proceeding and the risk of being subject to an account for profits. They also avoided delay in undertaking the development. Whilst true, this was also the point of the settlement of the proceeding – it is what Mr English had to bargain with – it was what he put into the deal.

[39]Mr Mijatov submits:

… by entering into and then breaching the settlement agreement, the defendants have kept the benefit of Mr English discontinuing the underlying proceeding for himself but have not paid the price for that benefit. In other words, they have obtained a windfall.

[40]   Mr Mijatov  submits it  is  not  appropriate for a  party to  seek to  maintain   a windfall. He submits:

… it is reasonably arguable that Mr English is entitled to damages for the benefits he would have enjoyed had he continued his claim, and the defendants should be disgorged of their windfall.

[41]   With respect, in my view, Mr Mijatov’s submission incorrectly treats the settlement agreement as now conferring no benefit on Mr English notwithstanding that Mr English maintains the settlement remains on foot. The difficulty for Mr English’s claim is that if he is right, it deprives Mr Foley and Koko of the benefit of the settlement agreement but leaves them subject to all of its obligations as Mr English maintains the settlement agreement remains in force.

[42]   Whether or not the settlement agreement was breached, Mr English lost the opportunity to pursue his claim relating to the development of the land when he signed the settlement agreement or, at least, when the settlement agreement came into effect upon the payment of the $200,000. Whether the settlement agreement was conditional on payment of the $200,000 I need not decide as it was paid. Mr English discontinued the 2018 proceeding on a full and final basis. His ability to pursue damages for being excluded from the development opportunity was gone once and for all upon his signing the agreement. With Mr English retaining the $200,000 and maintaining the settlement agreement remains in force, which may yet see him receiving a discounted lot, how can it be said he has been deprived of the benefit of the settlement agreement?

[43]   The breaches of the settlement agreement complained of by Mr English in these proceedings did not cause him to lose the right to sue for being excluded from the development opportunity; he gave up that right in the settlement agreement. Nor was the discontinuance of that litigation a benefit received by Mr Foley and Koko from their breach of the settlement agreement. Mr Foley and Koko enjoy that certainty as a result of the settlement agreement which remains alive.

[44]   As pleaded in the statement of claim, as set out above, Mr Mijatov submits that Mr English would:

… obviously not have entered into the agreement had he known that the defendants would not comply with it. However, that is in fact what occurred. It is not hypothetical and speculative to plead that if a party to a contract was aware that the other party would not comply with its terms, they would not enter into the contract. Clearly, it is not appropriate for a party to seek to maintain a windfall when the parties have concluded a contract with the understanding that the agreement therein will be complied with.

[45]   The difficulty with this submission is that the settlement agreement remains in force. Mr English is entitled to hold Mr Foley and Koko to their bargain and that is what he is doing. However, while Mr English holds Mr Foley and Koko to their bargain, he nonetheless says that he should be released from the consideration he provided for the settlement as he says Mr Foley and Koko should pay damages calculated by reference to the likelihood of his success in the original proceeding

[46]   Mr English does not claim that Mr Foley and/or Koko entered into the agreement not intending to perform it from the outset, that is, that he was tricked into entering into the settlement agreement. Mr English has not cancelled the settlement agreement which would allow him to seek wide ranging relief under the Contract and Commercial Law Act 2017.17

[47]   Mr English is holding Mr Foley and Koko to the contract. That means Koko must continue to offer Mr English the opportunity to purchase lots they become available, prior to those lots being offered for sale to the public. Mr English can take up the option to buy a lot if he wishes. Notwithstanding Mr English maintaining the settlement agreement is on foot, he also claims damages for the $300,000 credit he says he has been deprived of. He also claims damages based on a loss of opportunity to pursue the 2018 proceeding. Mr English cannot both “approbate and reprobate” in relation to the settlement agreement but that is what he is doing in maintaining he is entitled to the benefits of the settlement agreement but rejecting the burden.

Decision in relation to damages

[48]   I am satisfied that Mr English’s claim for restitutionary damages for the alleged breaches of the settlement agreement is untenable. It is untenable as the benefit he seeks to have disgorged from Mr Foley and Koko and restored to him is not a benefit received by them as a result of the alleged breaches Mr English now asserts. The benefit Mr English seeks to have restored to him, that is, the value of the ability to pursue  the  2018  litigation,  is  something  Mr Foley  and  Koko  received  under  the settlement agreement which remains on foot. This proceeding does not seek the restoration to Mr English of value transferred to Mr Foley or Koko as a result of    the breaches pleaded.

[49]Mr Foley has performed one of his obligations, that is, payment of the

$200,000. Koko is obliged to continue to offer lots to Mr English and if he elects to purchase one, he will be entitled to the $300,000 credit. That aspect of the settlement agreement  may yet be performed; whether that  is  the case  depends on whether   Mr English exercises his option to purchase a lot at the discounted price.

17     Contract and Commercial Law Act 2017, s 43.

[50]   Mr English does not plead that had he been offered one of the lots, he was not given the opportunity to buy, he would have purchased one of them. If Mr English would not have purchased one of those lots in any event, then the alleged failure to give him that opportunity has caused him no loss.

[51]   As noted above, Mr English also complains that when he sought to invoke the price testing process provided for in the settlement agreement in relation to three further lots, he was told he had to opt for one lot only, which he says was a breach of the settlement agreement. However, the fact that Mr English wanted to test the listing price for those three lots shows the loss of the opportunity to buy one of the sections he was not offered was not fatal to the settlement agreement. Another lot would have been suitable to him, subject to the price being confirmed.

[52]   The present case is very different from Denaro relied on by Mr Mijatov. In Denaro, upon the sale of a restaurant the vendor breached the restraint of trade but nonetheless the plaintiffs as owners of the new restaurant, were able to meet the turnover warranties in the agreement for sale and purchase.18 Nonetheless, the vendor was required to account for the profits he had made as a result of the breach of contract.

[53]   Mr English, with the benefit of advice, elected to substitute his rights to pursue the 2018 proceeding for the rights under the settlement agreement. Had the obligations under the settlement agreement been performed, it could not be suggested the benefits Mr English received under the settlement agreement were “insufficient”. The benefits to Mr English under the settlement agreement do not become “insufficient” because Mr English has to sue for them. Mr English remains able to take up the option to purchase a lot with the $300,000 credit and he retains the $200,000 cash payment.

[54]   Either Mr English did not consider the breaches he asserts warranted cancellation or, he elected to keep the settlement agreement on foot. However, his pursuit of the loss of opportunity claim assumes he is released from the commitments he gave in the settlement agreement yet he maintains the settlement agreement remains in force. Put another way, on Mr English’s case what benefit under the settlement

18     Denaro Ltd v Onyx Bar & Café (Cambridge) Ltd, above n 11.

agreement is left to Mr Foley and Koko, if Mr English can maintain his loss of opportunity claim?

[55]   At the heart of Mr English’s case is that he has been deprived of the benefit of the settlement agreement while Mr Foley and Koko have had the windfall of retaining the benefit they gained under the settlement agreement. In my view, that proposition is not borne out by the facts or the law. If Mr English is right and the breaches he alleges caused him to lose the benefit of the settlement agreement, then he had the option of cancelling that settlement agreement. Mr English elected not to cancel – so much is clear from the fact he pleads the agreement remains in force. In other words, Mr English has affirmed the settlement agreement. An innocent party in a position to cancel is presented with an election they:19

… 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.

[56]   Having elected not to cancel, Mr English may not do so now unless there is   a further breach that would entitle him to do so.  In respect of the separate breach   Mr English asserts arising from his invoking the price testing process, he has again elected to keep the settlement agreement alive, assuming that breach would have entitled him to cancel.

[57]   Koko remains obliged to continue to offer lots to Mr English. If Mr English takes up the option to purchase, then he will have been ‘made whole’, that is, he will have received what he bargained for under the settlement agreement in relation to     a discounted lot. As that possibility remains, Mr English cannot at this time maintain he has lost the benefit of the settlement agreement he elected to affirm. The right to be offered a lot, remains alive and enforceable. If Mr English elects not to exercise that option then that is a matter for him.

[58]   If Mr English can establish a breach of the obligation in relation to the lots already sold, then he will be entitled, in all likelihood, to nominal damages for the breach in the event he would not have elected to buy one of those lots. If he would

19     Matthew Barber and Stephen Todd Burrows,  Finn  and  Todd  on  the  Law  of  Contract  in  New Zealand (7th ed, LexisNexis, Wellington, 2022) at 18.3.

have purchased one of those lots then he could seek loss of bargain damages but given the offer price was meant to be the market price, such may not be significant. However, if acquiring one of those lots , which I understand are now sold, was essential to Mr English then, as I have said, he has elected not to cancel for that breach and is left with a damages remedy.

[59]   I can see no outcome with the  settlement  agreement  still  on  foot  where  Mr English can claim damages based on being deprived of the benefit of the settlement agreement and being free from the obligations it places on him, however, such is the rationale for the restitutionary/loss of opportunity damages claim.

[60]   I find Mr English’s claim for damages based on a loss of opportunity to pursue the 2018 proceeding is untenable in these circumstances. I therefore grant the defendant’s application for partial strike out.

Does the full and final settlement bar the loss of opportunity claim?

[61]   The point of a full and final settlement is to prevent further claims by the parties to the agreement provided a further claim is within the scope of the settlement; hence the practice of drafting settlement agreements in broad terms. Mr Mijatov accepted the settlement agreement here used wide language. However, Mr Mijatov submits the settlement agreement did not apply to Mr English’s claim which is for breach of the settlement agreement itself.

[62]   It is therefore necessary to examine what is barred by the terms of the settlement agreement. The relevant provisions are:

2.1 Disputes have arisen between the parties in relation to the purchase of and development of land at Ladies Mile in Queenstown (Dispute). The legal description of that land is Lot 1 Deposited Plan 431492 and Lot 2 Deposited Plan 325561 being the land contained in computer freehold registers 522182 and 103217 (Otago Registry) (Land).

…

2.3Subsequently, the Plaintiff:

2.3.1commenced a proceeding against the Defendants in the Invercargill Registry of the High Court with proceeding number CIV-2018-425-75 (Substantive Proceeding); and

…

2.4In this deed, Claims means any and all claims, potential claims, counterclaims, potential counterclaims, causes of action, rights of set-off, indemnities, liabilities, demands, damages, costs, charges, expenses, rights or interests of any kind, whether known or unknown, contingent or actual, however arising and in whatever capacity, whether previously asserted, and arising out of the Dispute, the Caveats, the lodging of the Caveats, the Substantive  Proceeding,  the Caveat Proceeding and the subject matter of the Dispute, the Substantive Proceeding, and the Caveat Proceeding.

(emphasis added)

[63]   The settlement agreement records that it is in full and final settlement of the claims.

[64]   The settlement agreement provides that all claims for damages, however arising, out of the subject matter of the Dispute or the Substantive Proceeding are barred.

[65]   Mr Mijatov submits that Mr English is not suing for anything arising from the dispute but for breach of the settlement agreement. Mr Mijatov submits the focus of Mr Olney, counsel for Mr Foley and Koko, on the settlement agreement was therefore misplaced.

[66]   Mr English seeks damages for the loss of opportunity to pursue what is defined in the settlement agreement as the “Substantive Proceeding.” The quantum of that claim is to be assessed by his prospects of  success in the Substantive Proceeding.  Mr Mijatov submits expert evidence would be required to determine those prospects. In my view, that evidence would have to canvas the merits and weaknesses of the Substantive Proceeding, that is, it would  have  to  review  the  subject  matter  of  the Dispute.

[67]   In my view, Mr English’s proposed method of quantifying his damages claim for loss of opportunity to pursue the dispute means he is seeking damages arising from the subject matter of the Dispute.

[68]   The definition of “Claims” includes causes of action and damages however such arise from the Dispute or the 2018 proceeding. The express inclusion of damages means damages however arising from the 2018 proceeding are not claimable as well as causes of action relating to the land development. The full and final settlement clause limits what damages (as well as causes of action) can be pursued by either party. Even if, as Mr Mijatov submits, (in substance), the cause of action asserted here is independent of the Dispute as defined, the claim for restitutionary damages are not. The damages Mr English claims, arise from not being able to pursue the 2018 proceeding.

[69]   Neither counsel referred to any authorities relating to the definition of “arising out of”. There is authority in the context of whether disputes are caught by arbitration agreements that the words “arising out of” is a wide term.20 The breadth of “arising out of” is confirmed by the word being proceeded by “however”.

[70]   Accordingly, even if the present cause of action is unrelated to the Dispute, the restitutionary damages claimed under that cause of action will be barred as they arise out of the Dispute. The cause of action for breach of the settlement agreement can be maintained, but the damages claimed must be calculated without reference to the subject matter of the Dispute.

[71]   I  am  satisfied  that  the  settlement  agreement  is  an  independent  bar  to Mr English’s loss of opportunity claim and I grant the strike out application on that basis as well.

Defendants’ application for further particulars of the statement of claim

[72]   The statement of claim names Mr Foley as first defendant and Koko as second defendant and contains one cause of action against both defendants, that is, breach of the settlement agreement. One of the heads of damage claimed against both defendants is $300,000 being the value of the lost credit.

20     McNaughton v Dobson HC Hamilton CIV-2005-419-1629, 4 May 2006, Hodgetts v Stephens and Anor HC Whangarei M98/92, 6 September 1993.

[73]   From the way the application developed at the hearing, what Mr Foley seeks is the legal basis it is said he is liable for Koko’s breach, concerning the first right of refusal for Mr English to purchase lots.

[74]   In my view, the statement of claim needs to be re-pleaded so as to plead separately against Mr Foley the breach of contract alleged against him. The only contractual obligation expressly applying to Mr Foley concerned the street naming. In respect of Koko’s obligations, the two outstanding obligations are in respect of the provision of the credit on the lots and the street naming.

[75]   If Mr English considers there is a basis to make Mr Foley liable for damages in respect of the contractual obligation of Koko, the basis for that needs to be pleaded.

[76]   Pursuant to rule 5.21(4) of the Rules, the Court can, on its own initiative, order a more explicit pleading. In my view, while the application in this case skirted around the real issue, I consider it appropriate that the particulars I have directed be provided in an amended statement of claim will also reflect the strike out orders I have made. That amended statement of claim is to be filed by the end of February 2023.

The street naming obligation

[77]Paragraph 3.2.5 of the settlement agreement provided:

In relation to the naming of the main street in the development, the Defendants will, subject to the Plaintiff’s confirmation, propose and support that the street be named Tom Coughlan Avenue. In relation to this clause, the Plaintiff:

(a)acknowledges that the final decision on the street name is a decision to be made by the Queenstown Lakes District Council; and

(b)will take all necessary steps to support the street being so named.

[78]   It will be noted the settlement agreement placed an obligation on Mr English to take all necessary steps to support the street naming. Mr English says he was not told when the application to name the streets in the development was lodged with the Queenstown Lakes District Council (the Council).

[79]   In my view, Mr English should plead that it was an implied term that Koko would give him notice that the application to the Council in respect of street names had been lodged, if that is what Mr English alleges. Rhetorically, unless Mr English was informed that the application had been made to the Council, how could he take all necessary steps to support it?

[80]   One of the particulars sought by Mr Foley and Koko was that Mr English give details of the loss arising from the main street in the development, not having the name proposed as set out in clause 3.2.5 above.

[81]   In response to this request, Mr Mijatov advised Mr Olney that the additional loss is an amount to be determined by the Court representing the non-pecuniary loss to Mr English in not having the full benefit of the settlement agreement. Mr Mijatov submits it was not appropriate for Mr English to quantify such a pecuniary loss, such being a matter for the Court. Mr Mijatov further submits that non-pecuniary damages exist to compensate a plaintiff for the non-financial loss associated with breach.

[82]   I accept this submission. No further particulars in respect of such non-pecuniary loss need to be pleaded.

[83]   While the street naming was a matter of importance to Mr English, he did not seek to cancel the settlement agreement for that breach, rather he claims the non-pecuniary damages.

[84]   I do not consider this additional alleged breach of the settlement agreement by Mr Foley and Koko is material to the strike out application.

Costs

[85]   Mr Foley and Koko have been successful in their strike out application and by a side wind successful in their application for particulars. I see no reason why costs should not follow the event on a 2B basis on the basis that there was one application that took a half day.

Associate Judge Lester

Solicitors:

Macalister Mazengarb, Wellington (for Plaintiff) AWS Legal, Queenstown (for Defendants)

Copy to counsel:

T Mijatov and J Trevella, Barristers, Wellington (for Plaintiff) A S Olney, Barrister, Wellington (for Defendants)