J v J
[2013] NZHC 2759
•22 October 2013
PUBLIC VERSION
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2012-404-7152 [2013] NZHC 2759
BETWEEN J Plaintiff
ANDJ Defendant
Hearing: 1 October 2013
Appearances: T J G Allan and A L Credin for plaintiff
M J W Lenihan for defendant
Judgment: 22 October 2013
JUDGMENT OF ALLAN J
In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 2.15 pm on Tuesday 22 October 2013
Solicitors/counsel : Grove Darlow, Auckland
Allan Bowie, Bowie Yorke, Auckland
Michael Lenihan, Auckland
J v J [2013] NZHC 2759 [22 October 2013]
Introduction
[1] The parties in this proceeding were formerly husband and wife. They were married on 20 December 1998 and separated in January 2008. There were two children of the marriage, now 11 and 9 years old. The marriage was formally dissolved on 18 September 2012. Agreement was reached in respect of care of the children, child support and spousal maintenance and relationship property. The terms of the agreement are recorded in a Separation and Relationship Property Agreement (the agreement), dated 4 July 2008.
[2] In terms of the agreement, the former family home was sold, settlement taking place on 28 August 2008. The agreement contained provisions requiring the husband to make stipulated weekly payments in respect of spousal maintenance and child support, and for rent.
[3] Within 12 months of the date of settlement of the sale of the property, the wife was to purchase a new home for herself and the children. The acquisition was to be funded principally by the husband either in cash or by way of a mortgage advance secured over the new home. As between the parties, the husband was to be responsible for discharging the obligations arising out of the mortgage. The sum to be contributed by the husband was calculated by reference to a formula contained in the agreement.
[4] The husband was unable to comply with his obligation to fund the purchase of a new home. The wife later purchased a property jointly with her parents, utilising in part a capital contribution made by them, and in part the proceeds of a bank first mortgage secured over the property.
[5] The husband has still not complied with his obligation to funds the purchase of a home for the wife. In this proceeding, she seeks specific performance by the husband of his obligation to do so, or alternatively judgment for the cash equivalent. She now applies for summary judgment on her claim. The husband opposes summary judgment. Although he accepts that he has failed to comply with his obligation to fund the purchase of the new home, he says that he ought to receive a credit for certain payments made by him since the date of the agreement, and further
that in the light of developments since that date, his overall liability ought to be substantially further reduced. He also argues that the case is not suitable for summary judgment because the Court is unable, at this stage, to assess properly all of the discretionary factors that need to be considered in the course of determining a claim for specific performance. He argues that the parties need further discovery and inspection and the Court needs more detailed oral evidence, with cross-examination, before a claim for specific performance can be properly determined.
The agreement
[6] Under clause 3.1(a) of the agreement, the husband agreed to pay to the wife by way of child support (until each child attained the age of 18 years) and spousal maintenance, the sum of $1,225 per week until settlement of the sale of the family home. Settlement of that sale occurred a few weeks after the date of the agreement.
[7] Clause 3.1(b) dealt with the period following settlement of the sale of the former family home. It provided that from the date of settlement, the husband was to pay the wife $1,500 per week:
…made up of $800 for rent (to be paid regardless of the Wife’s living arrangements), $300 per week for spousal maintenance, and $400 per week for child support.
That obligation was to inure until the purchase of a new home for the wife.
[8] The husband’s obligation to pay $800 per week in respect of rent was to cease from the date of settlement of the purchase by the wife of a new home. Clause
3.1(c) further provided that from the date of settlement of the purchase of that new home, questions of spousal maintenance and child support would need to be reviewed and renegotiated by the parties.
[9] On 3 December 2008, the husband’s obligation to pay the wife $300 per week for spousal maintenance was varied by an order of the Family Court directing that spousal maintenance was to cease once the wife started full time work, defined by the Court as being 32 hours or more per week.
[10] The agreement contained detailed provisions for the contribution to be made by the husband to a new home for the wife. It is necessary to set out the relevant provisions of clauses 4.7 and 6.1 in full.
4.7 In settlement of the Wife’s entitlement in respect of the property being retained exclusively by the Husband, the Husband agrees to pay to the Wife a sum, referred to as the “Adjustment Sum”. In the event that the Wife receives not less than $50,000 from the proceeds of sale of the Family Home, the Adjustment Sum shall be $650,000. To the extent that the Wife receives less than $50,000 (net of expenses) from the proceeds of sale of the Family Home, the Adjustment sum shall be increased dollar for dollar up to a maximum of $700,000. For example if the Wife shall receive only
$25,000 from the sale of the Family Home, the Adjustment sum shall in turn be increased from $650,000 by $25,000 to $675,000. The Adjustment Sum shall be paid in accordance with clause 6.1.
6. Purchase of a new home for the Wife and payment of the
Adjustment Sum
6.1The Adjustment Sum payable to the Wife pursuant to this agreement will be paid as follows:
(a) No later than 12 months after the Settlement Date a new home will be purchased in the Wife’s name or in a family trust nominated by her.
(b) Subject to clause 6.2 the Adjustment Sum can be funded in part or in whole by a bank loan to the Husband and:
(i) The Wife will use the Adjustment Sum to purchase a new freehold home (“New Home”) for her and the children to live in, (it being acknowledged that the Wife may, if she wishes, acquire a new freehold home for more or less than the Adjustment Sum, provided she funds any additional amount, that is required on such purchase out of her own means, it being further acknowledged that should the Wife wish to sell the New Home at any time prior to the mortgage on it having been fully repaid and purchase a subsequent home, she shall be permitted to do so in which case the provisions of this clause shall apply with the same intent to that subsequent home).
(ii) The New Home (and any subsequent home) will be available for security for a first ranking registered mortgage to enable the Husband to meet the Adjustment Sum.
(iii) The New Home (and any subsequent home) will be registered in the Wife’s name (or that of her trust as the case may be) but the Husband will be the principal debtor pursuant to all indebtedness (Husband’s Share of Indebtedness”) secured over the New Home, or any subsequent home, (provided however that the Husband shall have no liability for any indebtedness incurred by the Wife or by her trust to fund any amount on purchase of the New Home or subsequent home over and above the Adjustment Sum).
(iv) The Wife agrees to do all things necessary to ensure that the Husband is able to meet the security requirements for the Husband’s Share of Indebtedness and shall comply with any requirements under the security requirements other than mortgage and interest payments eg use of the property and payment of rates and insurance.
(v) The Husband will pay all interest in regard to that loan and any other costs associated with it, whether in regard to costs of obtaining the loan or of discharging the mortgage.
(vi) Any mortgage is to be transferable if the Wife sells and buys another house during the term of repayment.
(vii) The Husband will repay the Husband’s Share of Indebtedness within fifteen years of Settlement Date, if necessary by refinancing using his own property as security.
(viii) The Husband will, from Settlement Date of the purchase of the Wife’s new home, ensure that he has arrangements in place for life insurance to repay the mortgage in respect of the Wife’s New Home or any subsequent home in the event of his death or earning incapacity.
(ix) The parties recognise that payment of the mortgage obligation by the Husband is important to secure the future of the couple’s children and the Wife. Therefore, in the event that the Husband breaches this Agreement in terms of payment of the
mortgage secured over the Wife’s property, or failure to repay the Husband’s Share of Indebtedness with fifteen years of Settlement Date, then the following terms will apply:
(A) The parties agree that this agreement was made in accordance with and shall be expressly governed by the laws of New Zealand and the courts of New Zealand shall have exclusive jurisdiction over any dispute arising from this agreement, including enforcement of the payment of the Husband’s Share of Indebtedness by the Husband.
(B) The Husband expressly and hereby authorises Jones Young, solicitors of Auckland, to accept service on his behalf in regard to any proceedings relating to this agreement issued by the Wife.
(C) The Husband agrees that in the event that a breach of this agreement is established, relating to the payment by him in full of the adjustment sum or any interest and the Wife incurs legal fees as a result, then he will pay her full solicitor costs incurred in the event of enforcement proceedings, including the cost of correspondence being required to obtain a remedy.
[11] The agreement is couched in somewhat awkward language in places. Nevertheless, the intention of the parties is readily apparent. The wife and the children were to be maintained and housed in the family home until the sale of that property was settled. Thereafter, it was envisaged that she would rent a home for up to a year. By the end of that period the agreement contemplated that she would have purchased a new home for herself and the children. Until the settlement date of the purchase of the new home, the husband was to pay $800 per week to the wife on account of rent, regardless of the precise living arrangements she actually made during that period.
[12] The agreement plainly contemplated the possibility that the wife may have been entitled to a relatively small sum from the sale of the property, and acknowledged that she was at liberty to apply that balance (and indeed any other funds), towards the purchase of the new home.
[13] Clause 4.7 provided a formula by which the Adjustment Sum payable by the husband was to be calculated in the light of the actual amount finally received by the wife on the sale of the home.
[14] The intention of the parties, as reflected in the agreement, was that by the end of a 12 month period following settlement of the sale of the property, the wife would have found a new home, and that the husband would have contributed to the purchase of that home the Adjustment Sum calculated in accordance with clauses 4.7 and 6.1. It is apparent from clause 4.7 that the Adjustment Sum was to be calculated at a figure pursuant to a formula devised to ensure that the wife obtained parity in respect of the overall property settlement. That is evident from the opening words of clause 4.7:
In settlement of the Wife’s entitlement in respect of the property being retained by the Husband, the Husband agrees to pay the Wife a sum, referred to as the Adjustment Sum.…
[15] The clear intention of the parties was that the wife would purchase, in consultation with the husband, a new home for herself and the children, the husband funding the whole of the purchase (in cash or by raising money on the security of a first mortgage over the new home if he so desired), up to the amount of the Adjustment Sum. the wife was however at liberty to buy a more expensive home if she could fund the difference herself.
Subsequent developments
[16] Following the sale of the property, the wife took a lease of a property in Meadowbank, where she lived for a time with the children. Under the agreement, the husband was to pay the Adjustment Sum within 12 months of the date of settlement of the sale of the former family home. Payment was therefore due on or before 28 August 2009.
[17] On 12 August 2009, the husband sent a long e-mail to the wife. It contained the following intimation:
… Please take this e-mail as notice that I will not be in a position to provide you with a contribution of $687,000 [Adjustment Sum] towards a new property on 13 August. I truly am sorry … Notwithstanding this fact I will of course continue to pay to you the sum of $1500 per week until such time as I do arrange for the funding …
[18] The husband went on to indicate that his position might well improve in the New Year, and he suggested to the wife that in the first instance she should continue to rent until say February 2010. She made inquiries of the landlord of her property but was told that if she renewed the lease, her rent would increase from $800 to
$1200 per week. She could not afford to pay rent at that level. She considered that she was left with no choice but to attempt to acquire a home without contribution by the husband of the Adjustment Sum, at least in the first instance. Her parents (the parents) were able to assist financially, although at some inconvenience to themselves because they had to put aside their plans to acquire a retirement property.
[19] On 17 September 2009, the wife’s trust, entered into an agreement to purchase a property at Stonefields, Auckland, at a price of $719,000. The parents were co-purchasers. They invested $359,500, being half of the purchase price. the wife contributed the remainder, taking out a first mortgage with the ANZ National Bank of $450,000, a figure in excess of her one-half share of the purchase price, so providing a surplus for her to purchase necessary items for the new house.
[20] The wife and the parents entered into a property sharing agreement, recording their mutual arrangements as to ownership and division of responsibilities in respect of the new property. The agreement was executed on 24 May 2012, although the typewritten document bears the figure 2010, rather than 2012, so that it is a proper inference that instructions in respect of the agreement were first given to the lawyers in 2010 rather than 2012.
[21] Settlement of the purchase of the Stonefields property took place on or about
29 January 2010. Title thereafter stood in the joint names of the wife and the parents as tenants in common in equal shares. The wife agreed to pay rental to her parents in
return for a sole right of occupation and to provide a return to the parents for the use of their money. Accordingly, from the date of purchase, the wife was both servicing the ANZ National Bank mortgage and paying rent to the parents.
[22] For a time the husband continued to make payments to the wife at the rate of
$1500 per week under clause 3.1 of the agreement, but from 18 June 2010, he unilaterally reduced his weekly payments to $1200 per week, on the basis that he could no longer afford to pay the higher sum. Although the wife did not agree to that, the reduction coincided more or less with her commencement of full time work (in excess of 32 hours per week), and so she simply accepted the reduced payments.
[23] There matters stood for two years or more, but in the middle of 2012, the wife decided to take the initiative in the light of the husband’s continuing failure to comply with his obligation to provide the Adjustment Sum. On 3 July 2012 her solicitors wrote to the husband. Subsequent correspondence proved to be inconclusive. On 23 August 2012, the wife’s solicitors made time of the essence for payment of the Adjustment Sum in cash, but ultimately the wife considered it necessary to issue the present proceeding.
The husband’s position
[24] Mr Lenihan advanced a multi-layered argument on behalf of the husband. In summary he says:
(a) Events occurring after August 2009 amount to a variation of the agreement between the parties, or alternatively give rise to an estoppel in the husband’s favour such that the wife is not now entitled to succeed in the proceeding, or at least is not entitled to a decree of specific performance;
(b) Since the date of the agreement the husband has substantially performed his obligations under it, and ought not to be regarded as in breach;
(c) Questions of delay, acquiescence, affirmation and estoppel by the wife arise to the extent that the discretion to grant a decree of specific performance should not be exercised;
(d) There are issues as to quantum. The wife claims $688,439.91. The husband considers the correct figure to be $627,097.33, or arguably a much lower figure (dependent upon whether Mr Lenihan’s variation argument is successful). To fix the figure at more than $627,097.33 would, in Mr Lenihan’s submission, amount to unjust enrichment.
Summary judgment principles
[25] The proper approach to summary judgment applications has long been established. A helpful summary of the applicable principles appears in the judgment of the Court of Appeal in Krukziener v Hanover Finance Ltd:1
[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; (1986) 1 PRNZ 183 (CA), at p 3; p 185. 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 (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; [1979] 3 WLR 373 (PC), at p
341; p 381. 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).
[26] Further, the Court should be prepared to determine legal questions, even difficult legal questions, after adequate argument, provided that the facts are sufficiently clear.2 It is common ground that disputes arising out of relationship property agreements may be enforced by civil proceedings and are eligible for
summary judgment in the usual way.3
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
2 International Ore Fertiliser Corporation v East Coast Fertiliser Co Ltd [1987] 1 NZLR 9 (CA) at
16.
3 Under rr 12.1 and 12.2 of the High Court Rules.
[27] It is appropriate to note that in the present case, there is no real factual contest. Nothing in the affidavits is the subject of a significant challenge. Rather, the competing arguments ask the Court to draw different inferences and to reach legal conclusions in the light of the evidence.
Variation and estoppel
[28] Mr Lenihan submits that it is seriously arguable (and therefore a matter for trial) that in the course of their communications following execution of the agreement, the parties have varied the agreement, with the result that the Adjustment Sum has been substantially reduced. The variation issue must be resolved at trial, he argues.
[29] While during the course of argument he was inclined to raise the possibility that the Adjustment Sum might be reduced to $450,000 (being the amount of the loan raised by the wife to purchase the new home), he concluded by accepting that the lowest possible figure was of the order of $627,000.
[30] Although he suggested that further evidence might be required in relation to the variation argument, Mr Lenihan did not identify any document or class of documents, or any evidence not already before the court, that might be relevant to the determination of the variation question.
[31] In my view, the court already has sufficient information to deal with the argument on this point. The relevant evidence falls within a narrow compass. The wife says that in the six months prior to the date for payment of the Adjustment Sum, she broached with the husband the topic of providing her and the children with a home. When she identified a house he refused to commit himself, saying that he was unable to comply with his obligation under the agreement. She did not pursue the matter with him at the time of his August 2009 e-mail, not having the fortitude to engage confrontationally with him.
[32] There is a dispute in the affidavits about the extent to which the wife was aware of the detail of the husband’s deteriorating financial position. But I do not consider the discrepancies to be material. It is common ground that on 12 August
2009, the husband sent an e-mail in which he told the wife that he was not going to be able to organise a mortgage to cover the Adjustment Sum. The wife says that on subsequent occasions when she attempted to raise her entitlement to the Adjustment Sum, he became aggressive and refused to discuss the matter.
[33] For his part, the husband says that there were discussions over the months following the 12 August 2009 e-mail, during which he put several alternative suggestions to the wife. But he accepts that:4
These discussions did not lead anywhere however. I simply could not get a mortgage and there was no other way I could get [the wife] into a house. That was the end of the story at that time.
[34] There is nothing to suggest that the wife ever agreed to reduce or waive the husband’s obligation to pay the Adjustment Sum.
[35] Mr Lenihan argues however, that it is seriously arguable that a variation of the agreement occurred by virtue of:
(a) The wife’s continued acceptance of weekly payments of $1500 until such time as the husband could procure a mortgage to fund payment of the Adjustment Sum;
(b) Her acceptance without formal protest or reservation of rights or any other action, of the husband’s unilateral reduction of the weekly payments from $1500 to $1200;
(c) The wife’s purchase of a new home and the raising of a first mortgage security of $450,000. It is said that this unilateral action on the wife’s part constituted a variation of the agreement by reducing the Adjustment Sum to $450,000 (albeit that in the course of argument Mr Lenihan accepted that the Adjustment Sum could not in any
circumstances be less than $627,000).
4 the husband’s affidavit in opposition of 4 April 2013 at [36].
[36] None of these considerations comes remotely close to constituting a variation of the relationship property agreement in respect of the husband’s obligations to pay the Adjustment Sum. There is not a scintilla of evidence to suggest that at any point, the wife even contemplated agreeing to a variation of the husband’s obligation in respect of the Adjustment Sum, let alone communicated any such possibility to him. The reality of the matter was that the wife had, as she said, “no choice in the
matter”.5 She simply had to accept, at least for the time being, both the unilateral
reduction in the husband’s weekly payments, and his on-going failure to pay or secure the Adjustment Sum. She was not financially or emotionally able to bring court proceedings at that stage in order to enforce the terms of the agreement.
[37] It is quite impossible, out of that unpromising material, to construct a seriously arguable claim that the parties had varied the agreement in the manner for which Mr Lenihan argues. Moreover, there is an insuperable procedural obstacle. The provisions of s 21A of the Property (Relationships) Act 1976 applied to the agreement. Accordingly, the formal requirements of s 21F of that Act were engaged. They required each party to an agreement (or any variation of it) to have independent legal advice, and prescribed certain formalities for the signing of any agreement in respect of relationship property. Those formalities were not observed here. Any variation of the agreement was accordingly void unless an order was made under s
21H of the Act, validating the agreement.6 No application for a s 21H order has been
made. In the circumstances no such application could possibly succeed in any event.
[38] I am satisfied that there is no possibility that Mr Lenihan’s variation argument could succeed at trial. It is therefore not seriously arguable and does not constitute a ground for refusing summary judgment.
[39] Next, as an alternative to his variation argument, Mr Lenihan suggests that it will be seriously arguable at trial that the wife is estopped from relying on her rights under the agreement, by reason of her silence in the face of the husband’s intimation that he could not pay or secure the Adjustment Sum in August 2009, and his
continuing failure to do so up to the present time.
5 the wife’s affidavit in reply dated 6 June 2013 [2(c)].
6 Property (Relationships) Act 1976, s 21F(1).
[40] In general terms, the elements of an estoppel (in the sense contended for by
Mr Lenihan) are:
(a) A belief or expectation by the husband that the wife would not enforce or rely upon her right to have the Adjustment Sum paid or secured to her, created or encouraged by the omission on her part to advise the husband that she continued to rely on her rights under the agreement, in respect of the Adjustment Sum;
(b) That belief or expectation by the husband has reasonably been relied upon by him;
(c) Detriment will be suffered if the belief or expectation is departed from; and
(d) It would be unconscionable for the wife to act in a manner contrary to the husband’s belief or expectation.
[41] The estoppel argument relies entirely on the wife’s failure to speak out when notified of the husband’s inability to pay or secure the Adjustment Sum. In other words, it is a case of estoppel by silence. Silence and inaction are of their nature equivocal and will generally not actively create a belief or expectation. But the circumstances of a particular case may be such that the silent party has a duty to warn the mistaken party that the latter is relying on a mistaken assumption.7
[42] There is no settled test in this country for determining the circumstances in which a duty to speak may arise.8 The test in the United Kingdom as to whether a duty exists is whether the circumstances give rise to a reasonable expectation that the
party against whom the estoppel is raised would have acted honestly and reasonably
7 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009)
at [19.5.2].
8 But see generally the discussion in Andrew Butler Equity and Trusts in New Zealand (2nd ed
Thomson Reuters, Wellington 2009) at paras 19.2-19.5.
by bringing the facts to the attention of the other party.9 It is appropriate also to refer to the extended discussion in Waltons Stores (Interstate) Ltd v Maher.10
[43] It is unnecessary to discuss the precise legal position in further detail in my view, because I am satisfied that the elements of estoppel simply do not arise here.
[44] In his e-mail of 12 August 2009, following the passage reproduced earlier at
[17] of this judgment, the husband told his wife:
You are of course entitled to take whatever course of action you wish. However, you will be aware of the consequences that any actions on your part will have on my ability to generate income and secure your mortgage in the future, and to continue to pay you your $1500 per week.
[45] In my view, that passage indicates that the husband was well aware of the legal position (unsurprisingly given that he is a practising lawyer), and that, having asked the wife to delay exercising her rights under the agreement, he was pointing out the consequences of taking precipitate action. There is nothing in the August
2009 e-mail to suggest that the husband did not contemplate paying the Adjustment Sum to the wife eventually. In other words, there is no indication that at that time he believed that his failure to pay the Adjustment Sum timeously might somehow relieve him in whole or in part of his obligation to do so in the future.
[46] That is important when attention is paid to the question of whether the wife was under some sort of duty to speak up. She says that she did not engage confrontationally with her husband for reasons largely to do with her personal health and her emotional condition at the time. It is a logical inference that the husband would have been aware of the state of his wife’s emotional health at that time. There was absolutely no reason for him to believe that by her silence she was accepting that his breach of the agreement would lead to some sort of permanent diminution in his liability to pay or secure the Adjustment Sum. In my view, it is quite impossible to conclude that in those circumstances, the wife was under any duty to speak up in order to avoid losing her rights under the agreement by reason of her husband’s
breach of it.
9 The Lutetian [1982] 2 Lloyd’s Rep 140 at 157.
10 Waltons Stores (Interstate) Ltd v Maher (1987) 164 CLR 387 at 407 and 428.
[47] Given the contents of the husband’s August 2009 e-mail, there is no basis whatever for concluding that the wife must have been aware of some misapprehension on her husband’s part about the consequences of his breach of the agreement. He was plainly under no misapprehension at all. He correctly assumed in his August 2000 e-mail, that he remained liable to pay or secure the Adjustment Sum. So he has not been misled by his wife’s silence.
[48] In summary therefore, I do not accept that the wife was under any duty to speak up rather than remain silent as she did; moreover, the husband was under no misapprehension as a result of her silence. He knew perfectly well that he remained liable for the Adjustment Sum following his breach of the agreement.
[49] There is a further consideration. As a matter of public policy, the Courts should be cautious about entertaining estoppel arguments in circumstances such as these. Had such an argument succeeded here, it would in effect have resulted in a variation of the agreement without compliance with the procedural safeguards laid down the Property (Relationships) Act.
[50] I have earlier rejected Mr Lenihan’s variation argument on grounds which included non-compliance with s 21F of the Act.11 Only in the rarest of circumstances could the Court contemplate upholding an estoppel argument where to do so would effectively permit the variation of an agreement without requiring compliance with s 21F.
[51] For these reasons I conclude that Mr Lenihan’s estoppel argument is not seriously arguable.
Substantial performance
[52] Mr Lenihan submits that the husband has substantially performed his obligations under the agreement, and that it is seriously arguable that he is not in
breach of the agreement at all.
11 At [37].
[53] The argument for the husband is that the relevant provisions in the agreement were aimed at enabling the wife to purchase her own home, on the basis that the husband would secure a first mortgage and be responsible for mortgage payments. In essence, that is what occurred, Mr Lenihan submits. The wife has purchased her own home. From that time onward, the husband has made weekly payments to her which effectively incorporate a substantial figure for rent or equivalent outgoings. the wife used those funds to service the mortgage. In other words Mr Lenihan submits:
… there was substantial compliance by the defendant of his obligations …
under the agreement.
[54] Mr Lenihan submits that this proceeding is in reality founded on a complaint as to the form of the contribution made by the husband, rather than the substance of it. The submission is that so long as the husband was making mortgage payments (indirectly through his weekly payments to the wife) he was carrying out the substance of his obligation under the agreement and is accordingly not in breach of it.
[55] I reject that submission. It was of the essence of the agreement that the husband would, unless he paid the Adjustment Sum in cash, provide a first mortgage security over the new home, becoming the principal debtor in respect of that mortgage, and solely responsible for discharging it as between himself and the wife. That has not occurred. She has been obliged to raise her own mortgage, for which she is directly liable to the mortgagee, and for which she enjoys no explicit right of indemnity or contribution from the husband under the terms of the agreement. He has not substantially complied with the provisions of clauses 4.7 and 6.1. Mr Lenihan’s argument is in reality a further variation argument in disguise.
The husband’s remaining arguments
[56] It remains to deal with issues of delay, acquiescence and unjust enrichment. The first two of these considerations are relevant to the discretionary remedy of specific performance (as Mr Lenihan came to accept during the course of argument), while his unjust enrichment argument addresses the question of quantum. I will accordingly deal with these arguments under those separate headings. I note
however, that, as Mr Allan points out, issues of delay, acquiescence and unjust enrichment were neither pleaded in the husband’s statement of defence, nor are they referred to in the notice of opposition to the application for summary judgment. In some cases the court will decline to deal with matters not raised on the pleadings. In this case however, Mr Allan was able to deal satisfactorily with the issues raised (all having been notified to him prior to the hearing) and I am satisfied the wife has not been prejudiced.
Specific performance
[57] Specific performance is a discretionary remedy. The discretion is exercised on well established principles, the key consideration being where the justice of the case lies.12
[58] Specific performance will not normally be available if damages are an adequate remedy, if the plaintiff is in substantial breach of contract or unable or unwilling to perform his or her obligations under the contract, or if the plaintiff has acquiesced or has unnecessarily delayed his or her proceeding.13
[59] Mr Lenihan submits that issues of acquiescence and delay arise here, and that in consequence the wife ought not to get a degree of specific performance.
[60] I would not have upheld those arguments for reasons largely associated with the discussion earlier in this judgment in respect of Mr Lenihan’s variation and estoppel arguments. But it has nevertheless become clear that the plaintiff cannot in any event have a decree of specific performance. During the course of argument I raised with Mr Allan the position of the parents, who are tenants in common in equal shares with the wife of the Stonefields property. A decree of specific performance would require that the title to this property be cleared to the extent that a first
mortgage security could be raised in the terms specified in the agreement.
12 Loan Investment Corporation of Australasia v Bonner [1970] NZLR 724 (PC) at 735; Gurney v
Gurney (No.2) [1967] NZLR 922 (CA) at 97.
13 See generally Andrew Butler, Equity and Trusts in New Zealand, above n 7, at [24.1].
[61] Mr Allan did not have instructions as to the position of the parents, but undertook to file a memorandum on the topic once they had had an opportunity of receiving advice from their own lawyer. Mr Allan duly filed a post-hearing memorandum to which he annexed a letter of advice received by the parents from their lawyer. It contains strong advice to the parents not to relinquish their interest in the Stonefields property. The advice is unsurprising. If they transferred their share to the wife and the property was refinanced up to the level of the Adjustment Sum, there would be a significant shortfall between the amount that could be paid to the parents from the increased principal sum, and the present value of their investment in the property. They would become unsecured creditors for the difference. That would plainly be an unsatisfactory state of affairs from their point of view.
[62] The result is that the wife is unable to clear the title so as to enable the property to be refinanced in order to give effect to the provisions of clauses 4.7 and
6.1 of the agreement. Accordingly, specific performance is not available. The wife is unable to comply with her obligation to provide a clear title over the Stonefields property in order to provide security for the new first mortgage which a decree of specific performance would require.
Money judgment
[63] In those circumstances, Mr Allan submits that the wife is entitled to judgment for the cash equivalent of the Adjustment Sum. The wife seeks judgment for
$688,439.91 which is the agreed amount of the Adjustment Sum, calculated in accordance with clause 4.7.
[64] Mr Lenihan accepts that, if the Court concludes that the husband remains in breach of the agreement, then the wife is entitled to judgment for that figure. However, he argues that the husband has, in effect, substantially complied with his obligations under the agreement by continuing to pay $800 per week on account of rent. If that figure is notionally applied against the wife’s outgoings in respect of the mortgage of $450,000 actually raised by her, then there is a substantial surplus. The argument for the husband is that the payments of $800 ought to be regarded as substantial compliance with the husband’s obligations under cls 4.7 and 6.1, and that
he ought to receive a significant credit by reason of those payments. Mr Lenihan argues in support of that approach that the obligation to pay rent came to an end once the purchase of the Stonefields property had settled.
[65] Each party has filed an affidavit from an accounting expert setting out a number of calculations as to the husband’s residual liability, based on certain assumptions. In the circumstances, these affidavits are not particularly helpful. For one thing they assume an actual mortgage of $400,000, when the true figure is
$450,000. For another, I am not sure that the treatment of the wife’s natural obligations to her parents is entirely correct. Moreover, the figures have not been brought up to date.
[66] In my view, the husband has been in breach of his obligations under clauses
4.7 and 6.1 from August 2009. His payments of $800 per week since that time do not discharge his obligations to the wife, nor in my view ought they to be applied in reduction of his liability to her.
[67] Under clause 6.1 of the agreement, the husband had two options. He could pay the Adjustment Sum in cash in August 2009, or he could become the principal debtor in respect of a mortgage securing the Adjustment Sum to be raised on the security of a house to be purchased for the wife and the children. He was unable to comply with either of those requirements in August 2009. Although he suggested that the wife continue renting for a period, she found that the rental of the house she was currently leasing would increase substantially if she stayed on there. In the light of her husband’s default, she was entitled to take any reasonable step aimed at mitigating her loss. In particular, she was entitled to take all reasonable steps to purchase her own house, that being the principal objective of clause 6.1 of the agreement. She could not raise enough capital to purchase a suitable house on her own. In my opinion it was reasonable for her to purchase the Stonefields property jointly with her parents. Indeed, it is not suggested for the husband that the purchase was otherwise than a fair and reasonable response to the husband’s breach.
[68] Had the husband secured the Adjustment Sum by making himself responsible for a first mortgage of that amount over the Stonefields property, then the wife would
have become the sole owner of that property, entitled to have the mortgage serviced in its entirety by the husband. Instead, she is directly responsible for payments under the existing first mortgage of $450,000, and she has a further obligation to pay occupation rental to her parents, calculated at the rate of 4% on their capital contribution. She says that her total weekly outgoings are $1,002, well in excess of the husband’s payments of $800 per week.
[69] In these circumstances, I cannot agree that the husband ought to have any credit at all against his obligation to pay the Adjustment Sum. It is to be remembered that that sum represented the wife’s share of the relationship property.
[70] The husband’s obligation was to pay rent at the rate of $800 per week until either the wife was paid the Adjustment Sum in cash, or alternatively she became the sole owner of a property financed by a first mortgage to be serviced entirely by the husband. Until either of those events occurred, the husband’s obligation was to pay
$800 per week for rent.
[71] In fact, the wife is still paying rent because she must pay rental to her parents for the sole right of occupation of a house jointly owned by them. Properly construed, the agreement required the husband to make payments of $800 per week, to be paid regardless of the wife’s actual living arrangements, until such time as a house was acquired for her and the children, in the circumstances stipulated in
clause 6.1.14 That has still not occurred. There has been no acquisition of a property
in the manner and on the basis contemplated by that clause.
[72] Mr Lenihan’s argument, if upheld, would deprive the wife of her entitlement to a portion of the Adjustment Sum, simply because the circumstances, as they have transpired, have been necessitated by the husband’s breach of the agreement.
[73] Mr Lenihan argues that to conclude that the wife remains entitled to the whole of the Adjustment Sum would be to give rise to an unjust enrichment by her. I
cannot accept that submission. Where a party is legally entitled to the sum
14 Clause 3.1(b).
concerned, in the sense that it is owed under a valid legal obligation, there can be no liability to make restitution, because the enrichment is not unjust.15
[74] I am satisfied that the wife is entitled to recover the whole of the Adjustment
Sum, namely $688,439.91. There will accordingly be judgment for that sum.
[75] The judgment is however to lie in Court for a period of 30 days to enable the husband to organise the necessary funding, or alternatively to raise any consequential matter not presently apparent to the Court.
Costs
[76] Mr Allan seeks solicitor/client costs for the wife in reliance on the provisions of cl 6.1(ix)(C) of the agreement.16 Mr Lenihan submits that the terms of that clause do not cover the events which have occurred. I agree. The clause is directed at the incidence of costs in circumstances where the husband breaches the agreement in respect of payments under the mortgage secured over the wife’s property, or ultimate failure to repay principal within 15 years of the Settlement Date. The clause is perhaps not as well drafted as it ought to have been, but in my view it would not be right to extend its application to the circumstances that have arisen, namely a failure
by the husband to organise a mortgage at all. The provisions of (C) relating to payment of solicitor/client costs arise only out of a failure by the husband to meet the terms of the mortgage already secured over the wife’s property. That is not this case.
[77] In the alternative, Mr Allan seeks costs at a level 50% above scale on the ground that the husband has pursued arguments that are clearly unavailable for the purpose of delaying his obligation to pay the Adjustment Sum.
[78] I agree that certain of the arguments raised by Mr Lenihan were of comparatively little substance. But that will not be determinative in this case. I must take into account also the fact that the wife pursued summary judgment for a decree
of specific performance in circumstances where she could not make clear title
15 See Andrew Burrow The Law of Restitution (3rd ed, Oxford University Press, 2011 at 88); Portman Building Society v Hamlyn Taylor Leck [1998] 4 ELR 202 at 208; Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 408.
16 Reproduced at [10] of this judgment.
available. That would have become obvious had the issue been discussed with the parents prior to the summary judgment hearing. In the result, Mr Lenihan has been obliged to address an issue which ultimately fell away through no fault of the husband.
[79] I therefore consider the proper course is to order, as I do, that the wife have her costs according to scale, together with reasonable disbursements.
Leave
[80] Given the somewhat unusual course of this proceeding, I reserve leave generally to counsel to apply in respect of any matter arising from this judgment.
C J Allan J
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