Grindlay v Memelink
[2017] NZCA 520
•16 November 2017 at 2.30 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA592/2016 [2017] NZCA 520 |
| BETWEEN | ROBYN GRINDLAY |
| AND | HARRY MEMELINK |
| Hearing: | 24 July 2017 (further submissions received 17 October 2017) |
Court: | French, Simon France and Toogood JJ |
Counsel: | J D Haig for Appellant |
Judgment: | 16 November 2017 at 2.30 pm |
JUDGMENT OF THE COURT
AThe appeal is allowed, the decision of the High Court is set aside and the proceedings are remitted to the High Court for rehearing.
BThere is no award of costs.
____________________________________________________________________
REASONS OF THE COURT
(Given by French J)
Introduction
Robyn Grindlay’s husband signed a written agreement to purchase shares in a scrap metal company from Mr Memelink. Although Mrs Grindlay was not a signatory to the agreement, her name appeared with that of her husband on the front page as the purchaser.
In the High Court, Collins J held Mrs Grindlay was a party to the contract.[1] The Judge further found that Mr and Mrs Grindlay had breached the contract and were liable in damages to Mr Memelink in the sum of $176,786.67.
[1]Memelink v Grindlay [2016] NZHC 2589 [HC decision].
Mrs Grindlay now appeals that decision. Mr Grindlay is bankrupt and took no part in the appeal.
Background
Mr Memelink was the sole director and shareholder of a scrap metal recycling company called DM Recyclink Ltd (DM Recyclink). The company operated from premises in Lower Hutt at Seaview Road. The property was owned by a trust associated with Mr Memelink (the Link Trust).
In early 2013, Mr Malcolm Grindlay approached Mr Memelink and expressed an interest in buying the business. Negotiations then ensued. There were face to face discussions and email exchanges. Mrs Grindlay was involved in some but not all of the discussions. She was copied into some of the emails and also accompanied her husband on at least one visit to the scrap yard. She was also present at a meeting held with Mr Memelink at the Grindlays’ home prior to the contract being signed.
According to Mr Memelink’s evidence, Mr and Mrs Grindlay made it clear they would both be buying the business. According to the Grindlays’ evidence however, they both made it clear to Mr Memelink from the outset that Mrs Grindlay would not be a party to any purchase. The Grindlays claimed it was always understood Mrs Grindlay’s only role in the business would be administrative and that she was adamant to Mr Memelink about not wanting to be a purchaser.
On either 12 or 13 April 2013, Mr Memelink and Mr Grindlay signed an agreement for the sale of Mr Memelink’s shares in DM Recyclink. The front page was headed “[a]greement made this 12th day of April 2013”. Most of the front page was typed, with some handwritten notations. It recorded amongst other things the following:
· Harry Memelink was the vendor (his name was in type);
·Malcolm and Robyn Grindlay were the purchaser (those names both being handwritten, not typed);
·Mr Memelink agreed to sell his 500 shares in DM Recyclink for $200,000;
·payment of the purchase price was to be made by way of instalments of $5,000 per month, payment in full to be made by 12 April 2014;
· the settlement date was 12 April 2013;
·Mr Memelink would remain a director of the company until the purchase price was paid in full; and
·at the very bottom of the page, there was a handwritten note stating “see all amendments page 3”.
Page two consisted solely of the signatures of Mr Memelink and Mr Grindlay.
Page three (the amendment page) was typed and initialled at the bottom. It was headed “[a]mendments to Sales Agreement between Harry Memelink (Vendor) and Malcolm Grindlay (Purchaser)”. It contained a number of provisions, with the numbering of all but two of the provisions corresponding to a clause on the first page. The amendment provisions included provision for an interest rate of 6.5 per cent, a provision the shares were to be sold in two lots, the first lot being 300 shares — to be transferred to the purchaser on payment of the first two $5,000 instalments — and the remaining holding of 200 shares to be transferred “at an agreed time”. The first monthly instalment of $5,000 was to be paid on the settlement date of 12 April 2013. Finally, there was also a clause regarding the condition of three trucks, their servicing and maintenance.
Curiously there was no evidence at trial about the circumstances in which the amendment page had come into existence. As regards the first page, Mr Memelink said the handwriting on the first page was Mr Grindlay’s handwriting including the writing of his wife’s name. This was denied by Mr Grindlay who said it was Mr Memelink who had inserted her name.
In addition to the share agreement, Mr Grindlay and Mr Memelink also signed a deed of lease of the Seaview premises. The deed was dated the same as the share agreement: 12 April 2013. The names of both parties were inserted in handwriting, the landlord being shown as the Link Trust and the tenant as Malcolm Rex and Robyn Anne Grindlay. The lease was for a term of six years. The annual rent was $69,600.
Under the deed, the lease was expressed to commence on 1 May 2013. Mr Memelink however agreed to the Grindlays taking possession before that date. The Grindlays operated two businesses from the Seaview premises, one called “Seaview Scrap” and the other “Hoarders Heaven”. Although they used stock belonging to DM Recyclink, and used its GST number, they never traded under the name DM Recyclink and they did not use that company’s bank account.
On 16 April 2013, two cheques totalling $15,000 drawn on a joint bank account in the name of Mr and Mrs Grindlay were paid to Mr Memelink on account of the shares. On 10 May 2013 a cheque for $2,900 drawn on the same joint account was paid to the Link Trust on account of rent.
This was the only money ever received by either Mr Memelink or the Link Trust.[2]
[2]The Grindlays claimed they paid another $5,000 in cash which Mr Memelink denied ever receiving. The Judge did not expressly resolve the conflict but the $5,000 was not taken into account in his calculations of the balance owing under the contract so was implicitly rejected. The point was not taken on appeal.
Although the relationship between Mr Memelink and the Grindlays was cordial at the time the documents were signed, it rapidly deteriorated to the point where, by letter dated 12 November 2013, the Grindlays purported to cancel the share agreement and the lease. They did so primarily on the grounds that Mr Memelink had breached the contract by supplying plant and equipment that was not fit for purpose. The Grindlays vacated the Seaview premises and continued trading elsewhere under the name of Seaview Scrap.
Mr Memelink strongly denied the allegations of breach. He issued proceedings in November 2013 against both Mr and Mrs Grindlay in the High Court seeking specific performance of the sale contract.[3] He also sued Mrs Grindlay in defamation for statements she had made about him on a Facebook page.
[3]Separate proceedings were also issued on behalf of the Link Trust against Mr and Mrs Grindlay for unpaid rent. The Link Trust obtained judgment against the Grindlays by default: Memelink v Grindlay DC Hutt Valley CIV-2013-096-520, 3 November 2014. Mrs Grindlay successfully appealed on the ground it was arguable she was not a party to the lease, but Mr Grindlay’s appeal failed: Grindlay v Memelink [2015] NZHC 1135.
The Grindlays incorporated Seaview Scrap / Hoarders Heaven Ltd on 11 December 2014. Mrs Grindlay was a 49 per cent shareholder. Mr Grindlay was adjudicated bankrupt in June 2015 and the assets of Seaview Scrap were sold.
The High Court decision
Justice Collins made the following key findings:
(a)Mrs Grindlay was a party to the share contract.[4]
(b)The Grindlays were not entitled to cancel the contract and their purported cancellation was therefore a repudiation.[5]
(c)Although Mr Memelink did not accept the repudiation, but affirmed the contract, he effectively cancelled the contract when he commenced these proceedings and was therefore entitled to damages in the sum still owing under the contract.[6]
(d)The three trucks referred to in the contract were not in a fit and proper state of repair and their value — fixed by reference to their book value of $8,213.33 at the time the contract was signed — should be deducted from any monies owing to Mr Memelink.[7]
(e)Mr Memelink was entitled to damages in the sum of $176,786.67, being the $185,000 still owing under the contract less the value of the three trucks.[8]
(f)The Grindlays were jointly and severally liable to pay those damages, together with interest at the contract rate of 6.5 per cent per annum from 12 April 2014.[9]
(g)Mrs Grindlay had defamed Mr Memelink and should pay nominal damages of $100.[10]
[4]HC decision, above n 1, at [53].
[5]At [62] and [66].
[6]At [72]–[76].
[7]At [69]–[71] and [74].
[8]At [74].
[9]At [74] and [88].
[10]At [85].
Mrs Grindlay does not seek to challenge the defamation finding. She does however — through counsel, Mr Haig — challenge each of the other findings on the grounds that they were not supported by the evidence and/or were wrong in law.
Analysis
Was Mrs Grindlay a party to the contract?
Justice Collins said he was able to determine from contemporaneous documentation that Mrs Grindlay was a party to the contract. The Judge said his reasons could be distilled to four points, namely:[11]
(a)Mrs Grindlay was named in the contract as a purchaser, it being inconceivable Mr Grindlay would have permitted her name to be recorded on the contract as a purchaser if her being a purchaser was not what she and him had intended.
(b)Mrs Grindlay was named as a tenant in the lease.[12]
(c)Mrs Grindlay signed the two cheques in part payment for the shares which were drawn on a joint account.[13]
(d)The cancellation letter and letters that preceded it listing various complaints against Mr Memelink were sent in the names of both Mr and Mrs Grindlay.[14]
[11]At [53].
[12]At [54].
[13]At [55].
[14]At [56].
Unfortunately, there are a number of gaps in this analysis. We have four key concerns.
First, there was a very stark conflict in the evidence about what was said to Mr Memelink regarding Mrs Grindlay being a purchaser and about who was responsible for inserting her name on the first page. The conflict on those critical issues was such that either the Grindlays were lying or Mr Memelink was lying. The evidence required a detailed assessment of the competing evidence and a credibility finding, especially when there was other contemporaneous documentation that was ambiguous and/or arguably supported the view it was Mr Grindlay alone who was purchasing. Unfortunately, the judgment does not examine that evidence and does not make an express credibility finding.
Secondly, it is unclear how the finding that Mrs Grindlay was a party was reconciled with the undisputed evidence she never signed the contract and was probably not present when it was signed.[15] A person can of course be bound by a written contract without having personally signed it but the issue of what significance should be attributed to the absence of Mrs Grindlay’s signature needed to be addressed. On what basis was Mr Grindlay authorised to sign on his wife’s behalf if that is what happened? Was he acting as her agent? If so, was it an ostensible agency? Or did he have actual authority? Or did the written document simply record an already concluded contract and a signature was not necessary to signify an intention to be bound? Or was Mrs Grindlay estopped from relying on the absence of her signature?
[15]The evidence is vague as to whether Mrs Grindlay was present.
Thirdly, the judgment does not analyse the significance of the amendment page to the agreement. It will be recalled that this described the purchaser as Mr Grindlay and made no mention of Mrs Grindlay. The amendment page purported to record agreed variations to some of the provisions in the first page. Did that include the identity of the purchaser? Elsewhere in the judgment, the amendment page is treated as enforceable, including the provision for interest and the provision relating to the three trucks.[16] What significance (if any) therefore attached to the fact that on the amendment page Mrs Grindlay was not named as a party?
[16]See at [69]–[71] and [88].
Fourthly, the Judge made an error of fact about the two cheques. They were signed by Mr Grindlay, not Mrs Grindlay. Related to this, the credibility of the Grindlays’ explanation for the use of a joint account was also not addressed.
The fact of omissions or errors in reasoning by a judge at first instance is not necessarily determinative of an appeal. As an appellate court, we are empowered and indeed duty bound to evaluate the evidence ourselves and independently reach our own conclusions.[17] That is so even when there are issues of credibility to be resolved.
[17]Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
Having reviewed all the evidence, we have identified evidence that supports the Grindlays’ position. This includes an email to Mr Memelink dated 20 March 2013 from Mr Grindlay detailing “my offer” for the purchase of the business;[18] the reference to Mr Grindlay as the sole purchaser on the amendment page; the absence of Mrs Grindlay’s signature; and the fact that most of Mr Memelink’s communications both before and after 12 April 2013 were solely with Mr Grindlay and written in terms that arguably suggest Mr Memelink considered he was selling or had sold the business to Mr Grindlay and Mr Grindlay alone. Two of these communications are emails in October 2013 telling Mr Grindlay he has to sign a share transfer form which has been prepared. The emails make no mention of Mrs Grindlay. The share transfer form does not appear to have been discovered.
[18]Emphasis added.
On the other hand, there is also significant evidence which at least on the face of it supports the finding that Mrs Grindlay was indeed a party to the contract. In addition to the fact of her being named as a purchaser and tenant, we point to the following.
Email sent on 24 March 2013
The email was sent by Mr Grindlay to Mr Memelink. Mrs Grindlay is shown as carbon copied. The email expressly purports to record an agreement reached that day at a meeting and states “[t]otal will be $200000.00 on a 60/40% share between you and us only”.[19] The rest of the email discusses other terms some of which are contained in the amendment page. The email also uses the pronoun “we”. The email is later in time than the “my offer” email referred to above.
[19]Emphasis added.
Mr Haig conceded it appeared from this email of 24 March that it may have been intended at the time it was written that both Mr and Mrs Grindlay were to be parties. But he argued that in the three or so weeks that followed before the agreement was signed, the Grindlays appear to have reverted to their original plan.
The difficulty with that submission is that it is contrary to the Grindlays’ evidence that they consistently told Mr Memelink Mrs Grindlay was not a purchaser. There was no suggestion in their evidence of any change. Quite the contrary.
The absence of any explanation as to why Mr Grindlay signed without removing his wife’s name
In evidence, Mr Grindlay acknowledged that before signing the contract, he noticed his wife’s name was there. He claimed he made it clear she was not a purchaser and emphasised to Mr Memelink that he was not signing on her behalf. In cross-examination, his account changed slightly, suggesting his wife knew beforehand that her name was there and had told him she would not sign and to remove her name.
He was unable to offer any explanation as to why he did not ask for her name to be removed.
Contradictory evidence about Mrs Grindlay’s knowledge that her name was on the contract
Contrary to Mr Grindlay’s evidence that his wife knew her name was there before he signed, Mrs Grindlay testified she only learned about her name being on the contract after it was signed.
Mrs Grindlay’s failure to object
There was no evidence that at any time despite knowing her name was on the contract, Mrs Grindlay made any objection or demanded her name be removed. This arguably sits uneasily with her claims about how insistent she was to Mr Memelink about not being a purchaser.
Mrs Grindlay also never denied being a purchaser when in an email sent to her on 10 November 2013 Mr Memelink expressly asserted the business was sold to them both and in a second email to her of 11 November 2013 claimed she was a shareholder and leaseholder.[20]
[20]These emails both concerned the failure to pay monies owing. The second was sent in response to Mrs Grindlay’s refusal to engage with Mr Memelink.
The first time that Mrs Grindlay appears to have ever denied being a purchaser was after the proceedings had been issued.
Inconsistent evidence about the operation of the business
During the High Court hearing, the Grindlays attempted to distance Mrs Grindlay from the scrap metal business. It was put to Mr Memelink in cross‑examination for example that after the contract was signed, Mr Grindlay ran Seaview Scrap which was the business he had purchased from Mr Memelink and that Mrs Grindlay was running a separate business, Hoarders Heaven, which was not part of the sale.[21] This was confirmed by Mrs Grindlay who said she set Hoarders Heaven up in May 2013. For his part, Mr Grindlay said that even Hoarders Heaven was not Mrs Grindlay’s business and that she had no authority to sign cheques on behalf of Seaview Scrap.
[21]Mr Memelink claimed in evidence that he had invented the name Hoarders Heaven and that it was part of the sale.
Some of these claims were incorrect. Trade Me records for example showed that Hoarders Heaven had been a member since April 2013 so could not have been set up in May; Mrs Grindlay signed the cheque to Link Trust for the rent; there was a bank account in her sole name “trading as Seaview Scrap” and a website which very shortly after they shifted premises stated they both owned the Seaview Scrap business.
Mr Grindlay also gave contradictory evidence about the reasons he traded under the name Seaview Scrap instead of DM Recyclink. In one part of his evidence he said he had always intended to trade under the name Seaview Scrap and had done so from the beginning but in another passage said they only set up Seaview Scrap when the problems with Mr Memelink started. In answer to a question from the Court, he said they were in the process of registering Seaview Scrap as a limited liability company in April 2013. Company Office records however show it was only incorporated in December 2014.
The terms of the cancellation letter
The letter of cancellation was signed by Mr Grindlay but underneath his signature was typed “Malcolm and Robyn Grindlay.” The letter stated “we” are now cancelling both the lease and the contract. It also refers to relying on Mr Memelink’s expertise and honesty “when we decided to sign the contract”.[22]
Affidavit evidence of Mr Grindlay
[22]Emphasis added.
In 2014 Mr Memelink obtained judgment against both Mr and Mrs Grindlay by default. The Grindlays applied successfully to have the judgment set aside.[23] In support of the application, Mr Grindlay swore two affidavits one dated 17 March 2014 and the other 13 May 2014. The two affidavits were part of the evidence before Collins J.
[23]Memelink v Grindlay [2014] NZHC 2009, [2014] NZAR 1151.
In these affidavits, Mr Grindlay claimed that both he and Mr Memelink regarded the 12 April 2013 agreement as a preliminary agreement only. He also claimed he never initialled the amendment page.
The affidavits and some of the other matters we have detailed above in [29] to [41] were never put to the Grindlays by Mr Memelink who was self represented. On the other hand, the amendment page on which Mr and Mrs Grindlay now rely and which the former previously disavowed on oath was a major plank of the appeal. In those circumstances, we are not convinced it is proper to ignore the affidavit evidence completely. We also query what weight can properly be attributed to the amendment page as evidence of the identity of the purchasers in the absence of any explanation as to why, how or when it came into existence. At the hearing before Collins J, Mr Grindlay never once suggested for example that it was intended to rectify the alleged error regarding Mrs Grindlay’s name on the front page.
What should happen now?
This Court is thus faced with the unsatisfactory situation where there has been an incomplete analysis by the decision maker, gaps in the evidence and a failure to put material matters to witnesses. The case called for a credibility analysis that has not been made and which we consider unable to do ourselves with any degree of confidence based on the written record.
We agree with Mr Haig that the judgment cannot stand. But we are also satisfied it would be equally unjust for that to be the end of the matter. The evidence before Collins J established that both Mr and Mrs Grindlay appear to have been unjustly enriched. They received the benefit of the stock belonging to DM Recyclink and sold a large portion of it. Yet only a fraction of the purchase price was ever paid. Moreover, there is significant evidence tending to suggest Mrs Grindlay was indeed a party to the contract as found by the Judge.
In all those circumstances, we consider the only just solution is to allow the appeal, set aside the judgment and order the proceedings to be remitted to the High Court for a complete rehearing.
This conclusion means it is not strictly necessary for us to address the other issues raised by Mr Haig. However, apart from one issue, we consider it may well be helpful to the parties and the judge rehearing the matter if we indicate our views.
Were the Grindlays entitled to cancel the contract, or did their purported cancellation letter of 12 November 2013 constitute repudiation?
The Judge held the Grindlays were not entitled to cancel the contract because by November 2013 they themselves were in breach of the contract having failed to pay the set rate of $5,000 per month.[24] In reaching this conclusion, the Judge purported to rely on the decision of this Court in Noble InvestmentsLtdv Keenan.[25] In that case, this Court confirmed that the common law rule requiring a cancelling party to be ready, able and willing to perform had survived the enactment of the Contractual Remedies Act 1979.[26]
[24]HC decision, above n 1, at [66].
[25]Noble Investments Ltd v Keenan [2006] NZAR 594 (CA).
[26]At [44]–[45].
However, as Noble also makes clear, the rule is not an absolute one. Its purpose is to ensure that a party does not benefit from their own wrong. It therefore only applies where the cancelling party would so benefit. For example, where there is a causative effect between the breach of the cancelling party and the grounds relied upon for cancellation, or where the cancelling party is seeking to avoid liability for their own default.[27]
[27]At [47].
Applied to the facts of this case, that meant the question needed to be asked — did Mr Memelink need the money from the sale of the shares in order to be able to bring the trucks up to an acceptable standard? Alternatively, if that was not the case (and there was no evidence it was) were the Grindlays seeking by cancellation to avoid liability for their own breach?
We therefore accept the Judge erred in treating the rule as a rule of universal application. There were factual issues that needed to be addressed.
Where we consider the Judge was on stronger ground was in relation to his factual finding that although Mr Memelink breached the contract by failing to deliver trucks of the agreed standard, the breach was not sufficiently serious or important to justify cancellation.[28] On the evidence that was before the Judge, we agree with that finding. It follows we agree that on the evidence the letter of 12 November 2013 constituted a repudiation and not a lawful cancellation.
Did Mr Memelink cancel the contract when he issued the proceedings?
[28]HC decision, above n 1, at [68].
The Judge held it was Mr Memelink who effectively cancelled the contract when he commenced the proceedings.[29] It appears the Judge considered it necessary to make that finding in order to overcome any jurisdictional impediment to giving Mr Memelink a remedy. Mr Memelink’s only claim as pleaded was for specific performance and that was a claim that could not succeed because, apart from anything else, DM Recyclink no longer existed. Unless a damages award could be made, Mr Memelink would therefore be remediless.
[29]At [72].
In our view, Mr Memelink’s statement of claim is not capable of being interpreted as a cancellation of the contract. On the contrary, the statement of claim affirms the contract. It seeks a declaration the contract was not validly cancelled and “remains in force” as well as an order for specific performance. It does contain an application for an inquiry into damages sustained by Mr Memelink “[i]n the event the contract is found to be cancelled”. But that is clearly referable to the purported cancellation by the Grindlays, not Mr Memelink.
It is well established the Court has the power to award damages as a substitute for specific performance.[30] In our view, the real issue in this case was whether a failure to specifically plead a damages claim in the alternative to the claim for specific performance was fatal to damages being awarded and if so whether Mr Memelink should have been granted leave to amend his claim.
[30]See Judicature Act 1908, s 16A; Senior Courts Act 2016, s 13; and Cockburn v CS Development No 2 Ltd [2013] NZCA 78, [2013] 2 NZLR 413.
When we raised the possibility of our amending the claim, Mr Haig argued Mrs Grindlay would be prejudiced. He said there was evidence she would have adduced had she known Mr Memelink was seeking damages in the alternative. She would for example have wanted to adduce evidence about Mr Memelink’s failure to mitigate his losses.
We consider the arguments about prejudice are overstated. But in any event they are now rendered academic by our ordering a rehearing which will give Mr Memelink an opportunity to amend his pleadings to include a claim for damages for breach of contract.
Was the quantum of the damages award correct?
In addition to arguments about mitigation of loss, Mr Haig also takes issue with the Judge’s reliance on the book value of the trucks. Mr Haig further submits that some account should have been taken of the value of assets retained by Mr Memelink after the Grindlays vacated the premises.
We consider this is such an intensely factual matter that it is more appropriately left to the judge conducting the rehearing. We therefore do not express any views.
Was the role played by the McKenzie friend prejudicial?
As mentioned, Mr Memelink represented himself at the hearing before Collins J. He did however have the assistance of a McKenzie Friend, his then fiancée Ms Terpstra.
Mr Haig complains that the Judge failed to set any boundaries for Ms Terpstra and as a result her participation in the hearing went far beyond the proper bounds for a McKenzie Friend, to the point where the hearing became unfair. Mr Haig drew our attention to passages in the transcript where Ms Terpstra was permitted to interact with Mr Memelink while he was being cross-examined and supplement the evidence he was giving, as well as being allowed to cross-examine Mr and Mrs Grindlay on a tag team basis with Mr Memelink.
The Judge was faced with a difficult situation. Mr Memelink is dyslexic and as the transcript reveals Ms Terpstra was articulate and had a good working knowledge of the case. In those circumstances, it is understandable the Judge looked to her for some assistance. We agree it would probably have been better for the Judge to have placed some limits on Ms Terpstra’s role, but do not consider the failure to rein her in a ground of appeal warranting appellate intervention. Mrs Grindlay was represented by counsel (not Mr Haig) and significantly he did not raise any objections. We note too that Mr Haig was unable to identify any specific prejudice to Mrs Grindlay.
Outcome
The appeal is allowed, the decision of the High Court is set aside and the proceedings are remitted to the High Court for rehearing.
As regards costs, we consider these should lie where they fall. The outcome of the appeal is for the parties to begin again and, in our assessment, both contributed by their conduct of the trial to this being necessary. There is no award of costs.
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt for Appellant
Q H Law, Levin for Respondent
4
0