Great Northern Land Company Limited v Daji HC Auckland CIV-2009-404-8510
[2011] NZHC 916
•16 August 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-8510
BETWEEN GREAT NORTHERN LAND COMPANY LIMITED
Plaintiff
ANDYVONNE DAJI First Defendant
ANDREALTIES BUSINESS BROKERS LIMITED
Second Defendant
CIV-2009-404-8514
AND BETWEEN GREAT NORTHERN LAND COMPANY LIMITED
Plaintiff
ANDGAVIN DAJI AND PARVATI BIKLEY AS TRUSTEES OF THE G DAJI FAMILY TRUST NO 2
First Defendants
ANDREALTIES BUSINESS BROKERS LIMITED
Second Defendant
CIV-2009-404-8520
AND BETWEEN GREAT NORTHERN LAND COMPANY LIMITED
Plaintiff
ANDGAVIN DAJI First Defendant
ANDREALTIES BUSINESS BROKERS LIMITED
Second Defendant
GREAT NORTHERN LAND COMPANY LTD V DAJI HC AK CIV-2009-404-8510 16 August 2011
Hearing: 8 and 10 August 2011
Appearances: Mr A Commons for GNLC Limited
Mr L Ponniah for Mr and Mrs Daji
Mr A Ross and Ms M Wisker for second defendant (abides the decision of the Court)
Judgment: 16 August 2011 at 5:00 PM
JUDGMENT (NO. 1) OF LANG J
[on application for order substituting GNLC Limited as plaintiff and
application by defendants for order permitting new evidence to be adduced]
This judgment was delivered by me on 16 August 2011 at 5 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
[1] The trial of this proceeding concluded on 7 July 2011, at which point I reserved my decision. I was not aware at that stage that Associate Judge Bell had made an order on the same date appointing interim liquidators to take control of the assets of the plaintiff, Great Northern Land Company Limited (“Great Northern”).1
[2] Subsequently, on 18 July 2011, a company called GNLC Limited (“GNLC”) applied without notice for an order substituting it as plaintiff in each of these proceedings in place of Great Northern. It filed an affidavit by its director, Mr Andrew Edwards, in support of each application.
[3] When I received the applications, I directed that GNLC was to serve them forthwith on the defendants. I then listed them for mention before me on 22 July
2011.
[4] When the applications were called on 22 July 2011, counsel for Mrs Daji indicated that it was likely that his client would oppose the application to substitute GNLC as plaintiff in the proceeding against her. I therefore set a timetable for the filing of documents in opposition to the applications. Both Mr and Mrs Daji subsequently filed documents in opposition to the application.
[5] On 2 August 2011 Mr and Mrs Daji also filed an application seeking an order that Mr Edwards’ evidence should be taken into account in determining the substantive proceeding. They contended that the matters disclosed in his evidence provided a complete answer to the claims against them. GNLC opposed this application on the basis that Mr Edwards’ evidence was irrelevant to the issues the Court was required to determine in the substantive proceeding.
[6] I heard both applications on 8 and 10 August 2011.
1 Transfield Services (New Zealand) Ltd v Great Northern Land Company Ltd HC Auckland –CIV-
2011-404-3997, 7 July 2011.
The applications for substitution of GNLC as plaintiff
[7] These applications became necessary because on 22 June 2011 Great Northern entered into an agreement to sell GNLC certain of its assets (“the June 22 agreement”). These included the sections that are the subject of the present proceedings. Great Northern also sold GNLC:
Any and all benefits in any contract relating to the certificates of title whether or not the due date for performance has passed under those contracts.
[8] GNLC became the registered proprietor of the sections on or about 22 June
2011.
[9] By letter dated 24 June 2011 GNLC required Great Northern to continue to prosecute these proceedings “in the name of Great Northern as trustee for and on behalf of GNLC”. Following the appointment of the interim liquidators, however, GNLC wrote to Great Northern on 11 July 2011 revoking the requirement that it had imposed in the letter dated 24 June 2011. GNLC advised Great Northern that it would henceforth proceed in its own name in respect of all matters that were the subject of the 22 June agreement. As a consequence, it became necessary for GNLC to apply to be substituted as plaintiff in each of the proceedings.
Legal basis for applications
[10] Rule 4.52 of the High Court Rules permits the Court to add a party to a proceeding if, after the proceeding has commenced, an event causes a change or transmission of interest making it necessary or desirable that the party be added. An application under r 4.52 may be made without notice to any other party.2
[11] GNLC points out that it is now the owner of the properties in respect of which orders for specific performance are sought against the defendants. The June
22 agreement also assigned to GNLC the benefit of any contracts relating to those
2 Rule 4.52(2)
properties. For that reason GNLC contends that the Court should make an order under r 4.52 substituting it as plaintiff in each of the proceedings.
[12] As counsel for GNLC pointed out, the June 22 agreement took effect immediately as between GNLC and Great Northern. At that stage, however, there was only an equitable assignment of the agreements for sale and purchase that are the subject of these proceedings.3 GNLC did not become the legal owner of the rights conferred on it pursuant to those agreements until the defendants received notice of the assignment.4 That occurred when Great Northern served copies of the present applications upon them.
[13] GNLC contends that the equitable assignment has become a legal assignment, and that GNLC is now obliged to enforce the agreements in its own name. Great Northern no longer has any interest in those agreements.
[14] Subject to dealing with the arguments raised by Mr and Mrs Daji in opposition to the applications, I accept GNLC’s argument on this point. GNLC is now the legal owner of all rights vested in the vendor pursuant to the agreements for sale and purchase. Included in these is the right to sue to enforce those agreements. As a consequence, it should be substituted as plaintiff in each of the proceedings. Great Northern has no further interest in any of the agreements with which the proceedings are concerned.
Grounds of opposition
[15] Mr and Mrs Daji oppose the application on several grounds. First, they contend that Great Northern ought to have provided them with a copy of the June 22 agreement as part of its ongoing discovery obligations in each of the proceedings. I reject this submission. The June 22 agreement affected only the rights of GNLC and Great Northern. It did not affect the defendants’ rights in any way, and was not
relevant to the issues raised in any of the proceedings. Great Northern’s discovery
3 S 50(5) Property Law Act 2007.
4 S 51(4) Property Law Act 2007. See in this context Mountain Road (No. 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 at 339 and Brazier v Bramwell Scaffolding (Dunedin) Ltd CA222/99 3 May 2000 at [14].
obligations did not require it to alert the defendants to the existence of the June
22 agreement.
[16] Next, Mr and Mrs Daji contend that they may be prejudiced in the event that they are now forced to purchase the sections from GNLC. They base this argument on the fact that the interim liquidators are presently reserving their position in relation to the appropriateness of the June 22 agreement. There remains the possibility that the liquidators may seek to set the agreement aside if they consider that it resulted in the assets of Great Northern being transferred to GNLC for less than their true value.
[17] Whether or not GNLC paid an appropriate price for Great Northern’s assets is, however, a matter to be determined between Great Northern’s liquidators and GNLC. If the liquidators succeed in proving that GNLC paid less than the true market value for Great Northern’s assets, GNLC will be required to pay the liquidators the difference between the purchase price and the true market value.
[18] That issue cannot affect Mr and Mrs Daji’s position. If they complete the purchase of the sections, they will become registered as proprietors and will thereby obtain indefeasible title to them. GNLC has also confirmed that it will hold all funds that it receives from the sale of the sections in trust pending determination of any challenge to the propriety of the 22 June agreement. There is therefore nothing in this point.
[19] These arguments are not sufficient to warrant dismissal of the application.
Conclusion
[20] When Mr and Mrs Daji entered into the agreements to purchase their sections they agreed to the insertion of the following condition:
9.3The Vendor shall be free to assign, transfer, or otherwise dispose of or alienate the benefit of this Agreement to a third party on such terms and conditions as it considers fit.
[21] Clause 9.3 makes it plain that both parties anticipated that Great Northern might wish to assign its interests under each agreement to a third party. By agreeing to the insertion of the clause, each purchaser acknowledged that Great Northern was free to take that step if it wished to do so. It is not now open to Mr and Mrs Daji to alter their stance. They cannot prevent GNLC taking the benefit of the agreements that Great Northern has assigned to it.
[22] The application to substitute GNLC as plaintiff in each proceeding must therefore succeed.
The application for an order that Mr Edwards’ evidence shall form part of the evidence in the substantive proceeding
[23] Mr Edwards’ evidence is certainly relevant to the extent that it provides a factual basis for GNLC’s substitution as plaintiff in each proceeding. I agree that it should be admitted as part of the evidence given in the substantive proceeding for that purpose.
[24] Mr and Mrs Daji contend that Mr Edwards’ evidence should also be admitted as evidence in the substantive proceeding because the transfer of the sections to GNLC amounts to a total bar to any claim for specific performance.
[25] Mr and Mrs Daji rely for this submission upon clause 9.4(2) of the General Conditions of each of the agreements for sale and purchase relevant to the present proceedings. Clause 9.4(2) provides:
9.4If the purchaser does not comply with the terms of the settlement notice served by the vendor then:
…
(2) Where the vendor is entitled to cancel this agreement the entry by the vendor into a conditional or unconditional agreement for the resale of the property or any part thereof shall take effect as a cancellation of this agreement by the vendor if this agreement has not previously been cancelled and such resale shall be deemed to have occurred after cancellation.
[26] Counsel for Mr and Mrs Daji contends that, when it entered into the June
22 agreement, Great Northern effectively re-sold each of the properties to GNLC. As a result, clause 9.4(2) operates to have each re-sale take effect as a cancellation of the relevant agreement for sale and purchase. It follows that it is no longer possible for GNLC (or Great Northern) to obtain orders for specific performance.
[27] Mr and Mrs Daji go further than this. They contend that the re-sale of the properties also prevents GNLC and Great Northern from obtaining damages against them. They base this argument on clause 9.4(3) of each agreement, which provides:
9.4 …
(3) The damages claimable by the vendor under subclause
9.4(1)(b)(ii) shall include all damages claimable at common law or in equity and shall also include (but shall not be limited to) any loss incurred by the vendor any bona fide resale contracted within one year from the date by which the purchaser shall have settled in compliance with the settlement notice. The amount of that loss may include:
(a) interest on the unpaid portion of the purchase price at the interest rate for late settlement from the settlement date to the settlement of such resale; and
(b) all costs and expenses reasonably incurred in any resale or attempted resale; and
(c) all outgoings (other than interest) on or maintenance expenses in respect of the property from the settlement date to the actually of such resale.
…
[28] I have considerable doubt whether the argument based on the alleged effect of clause 9.4(3) is tenable, but the plain wording of clause 9.4(2) means that Mr and Mrs Daji’s argument in relation to the effect of that clause must be arguable. Mr Edwards’ evidence is therefore relevant to an issue that I will need to determine if I am required to consider whether I should grant GNLC the remedy that it seeks. Mr Edwards’ evidence should therefore be admitted in the substantive proceeding for that purpose as well.
Result
[29] The application for an order under r 4.52 substituting GNLC as plaintiff in each proceeding is granted.
[30] The application for an order that Mr Edwards’ evidence shall form part of the
evidence given at trial is also granted.
Costs
[31] Both parties have succeeded in their respective applications. I therefore direct that costs in relation to each application are to lie where they fall.
Lang J
Solicitors:
Hornabrook Macdonald Lawyers, Auckland
Keegan Alexander, Auckland Chapman Tripp, Auckland Counsel:
Mr A Commons, Auckland
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