Jacques v Gribble HC Auckland CIV-2010-404-4094
[2011] NZHC 579
•2 June 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-4094
BETWEEN PATRICIA JACQUES Plaintiff
ANDGRAHAM BRETT GRIBBLE Defendant
Hearing: 30 May 2011
Appearances: Mr K F Gould for plaintiff
Mr M J Koppens for defendant
Judgment: 2 June 2011 at 10:00 AM
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
This judgment was delivered by me on 2 June 2011 at 10 am , pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
JACQUES V GRIBBLE HC AK CIV-2010-404-4094 2 June 2011
[1] This is an application for summary judgment by the plaintiff for damages arising out of breach of an agreement for sale and purchase dated 5 July 2007 by which the defendant agreed, unconditionally, to purchase from the plaintiff a property at Lake Road, Takapuna for $3.1 million. The defendant did not settle on due date. The plaintiff issued a settlement notice and the defendant did not comply with it. The plaintiff cancelled the contract and attempted to re-sell the property. Some time later it resold for $1.69 million and that contract has been settled. Accordingly, the plaintiff ’s claim is for the loss on resale, interest, expenses incurred on resale, City Council and Regional Council rates, and legal fees. The total sum claimed is $2,193,457.10.
[2] Initially the defendant denied liability, but at the beginning of the hearing counsel withdrew all grounds of opposition to liability. The defendant opposes the entry of summary judgment on the ground that the plaintiff has failed to mitigate her loss by reselling the property at a price under its market value. The sole issue in this case is whether the defendant has raised an arguable defence in relation to the quantum of the claim.
The resale
[3] The sale from the plaintiff to the defendant was arranged privately. Documentation was prepared by the vendor’s solicitors after discussions and negotiations involving the plaintiff, her solicitor, the defendant and the defendant’s partner, a legal executive of considerable experience in conveyancing with an Auckland law firm. After the defendant failed to settle there were further meetings to discuss the position and proposals for settlement were invited. From the time of default the plaintiff liaised with a real estate agency specialising in the sale of high valued properties in the Takapuna area and after the contract was cancelled the property was listed with that firm. Mrs Jacques said in her affidavit that her instruction to the firm was “to heavily market the property”, and she allocated a budget of $15,000 which was paid to the firm for marketing.
[4] On 20 October 2009, a conditional offer for the property was made by Tui
Island Limited for a purchase price of $2,100,000.00. The offer was accepted, but
the contract was not confirmed. On 9 March 2010 a further conditional offer was received from a Mr Tan Chen, for a purchase price of $1,680,000.00, again on conditions. Once more, however, the contract was not confirmed. On 15 March
2010 a third offer was received from a Mr Tony Bunting in the sum of
$1,690,000.00. This contract was confirmed, an agreed deposit of $500,000.00 was paid, and settlement took place in April 2011.
[5] An agreed commission in the sum of $50,000.00 was paid to the real estate agency by the plaintiff and advertising and promotional expenses were debited from the plaintiff’s lodgement, in a sum of just under $3,600.00 with the balance being returned to her.
[6] Clearly the achieved sale price was significantly below the price in the contract between the plaintiff and the defendant. Mrs Jacques explained in her affidavit that the property is a cliff top site and the North Shore City Council requires considerable geotechnical input before granting resource and building consents for subdivision of the property and erection of multiple dwellings. In her second affidavit she said that she had learned that the investigations undertaken by the defendant disclosed that works required to enable grant of resource and building consents were estimated to cost in excess of $1 million. Counsel for the plaintiff, Mr Gould, argued that this level of potential expenditure was one of the factors which had a negative impact on the final sale price.
[7] The plaintiff did not call any independent valuation evidence to give an independent professional opinion to the Court on the market value of the property at the time it was sold.
The defendant’s evidence on the resale process
[8] In his affidavit in opposition, the defendant deposed:
9. While I accept that the property market deteriorated between the date of the agreement in 2007 and the date of resale by the plaintiff, I say it did not deteriorate to the extent suggested by the quantum of claim on the shortfall on resale.
10. I say that the limited amount spent on marketing the property has resulted in a sale at under value.
[9] To support these opinions the defendant filed an affidavit from one Gregory Burgess, who described himself as a real estate agent. Whilst it was submitted from the bar that he is not an agent, but a salesman, there was no evidence to substantiate that claim.
[10] Mr Burgess said he was practising on Auckland’s North Shore and that he was familiar with the values of property in Takapuna. He said he had inspected the property and was familiar with it. He then said:
3. I have completed some research as to values in the area and from that research and my own experience I am able to say that in my view this property had a conservative value as at April this year of no less than $2.5 million. Accordingly I believe that if the property was sold at that time at less than that figure it has been sold at an undervalue.
4. This property has an area of 2527 square metres. It is virtually unheard of for land in a prime location such as this to sell at under $1000 per square metre.
…
6. I am also able to say that to properly market this property the normal expenditure on marketing would be in the order of $20,000, and if less than that is spent this will compromise the value achieved.
[11] Mr Burgess did not give any details of the research he said he had undertaken nor of property sales or information within his own experience.
[12] Mr Burgess did not give any indication of his own qualifications, his employment present and past, of relevance to the matter, or any details of the experience on which he relied in order to be able to competently express the views he gave. Further, and importantly, Mr Burgess made no reference whatever to the Code of Conduct for expert witnesses required by r 9.43 of the High Court Rules. Hence there was no evidence that he had read it or that he agreed to comply with it, let alone that he had done so in preparing his written statement of evidence.
[13] Rule 9.43(3) provides that the evidence of an expert witness who has not complied with these requirements may be offered only with the leave of the Court.
The defendant relied heavily on Mr Burgess’ evidence. The plaintiff objected to it
being considered.
[14] I am prepared to admit the evidence of Mr Burgess, but I discount its weight for its shortcomings which I have summarised.
Legal argument for the defendant on mitigation
[15] Counsel for the defendant referred me first to British Westinghouse v
Underground Electric Railways:1
The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach: but this principle is qualified by a second, which imposes on a claimant the duty of taking all reasonable steps to mitigate on the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.
[16] Counsel then submitted that the duty to mitigate loss for breach of contract in the circumstances of this case is commensurate to that imposed on mortgagees in exercising their power of sale under s 176(a) of the Property Law Act 2007. Counsel then referred me to cases interpreting and applying that duty.
[17] This argument was raised in Sullivan v Darkin in the Court of Appeal.2 The
Court rejected it. The Court said3:
The purchaser in the present case, however, seeks to impose upon the vendors higher obligations than those contained in the contract and as justified by the requirement to mitigate damages and submits that the obligations on the vendors are to be equated with those of a mortgagee selling under a power of sale. Such obligation has been variously expressed as being "to act in good faith and to take reasonable care to obtain whatever is the true market value of the mortgaged property at the moment he chooses to sell it" or "to obtain a proper price" see Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] 1 Ch 949; also Alexandre v New Zealand Breweries Ltd [1974] 1 NZLR 497: or "to obtain the best possible price in the circumstances" see Standard Chartered Bank v Walker [1982] 3 All ER
938; or "to obtain the best price reasonably attainable at the time of sale" see
Tse Kwong Lam v Wong Chit Sen & Ors [1983] 3 All ER 54.
1 [1912] AC 673 at 689
2 [1986] 1 NZLR 214
But what justification is there for the Court to imply such an obligation upon the vendors who are not selling as mortgagees but as owners suing under their particular contract? There are substantial differences between sales made by owners and sales made by mortgagees. Owners sell their own property and it is their concern how they sell the property subject only to the provision of the contract and to. the duty to mitigate any loss which might be claimed from the defaulting purchaser. Mortgagees, on the other hand, sell not their own property but the property of defaulting owners and are responsible to account to the owners for any surplus resulting after repayment of the mortgage debt. These different circumstances alone in my judgment justify stricter obligations being placed on mortgagees than upon owners.
However, there is a more fundamental reason why the obligations imposed upon vendors reselling under a contract of sale do not necessarily equate with those of mortgagees selling under a mortgage security. It is that vendors reselling under their contract of sale are bound by the contract which they have entered into as also is the defaulting purchaser. And where the parties have by the terms of their contract specified how the resale is to be made and the losses which may be recovered, then it is not for this Court to impose upon that contract obligations that the parties have not themselves seen fit to express.
[18] This case has been followed and applied subsequently; see eg Hare v Kershaw Enterprises Ltd;4 Sanders v O’Connor;5 Dawson v Belsham;6 McAlpine Snowline Ltd v Wethby.7
[19] Accordingly, I reject the defendant’s submission.
[20] Clause 9.4(3) of the agreement for sale and purchase between the plaintiff and the defendant provides that the damages claimable by a vendor, where a purchaser has defaulted, “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 on any bona fide resale contracted within one year from the date by which the purchaser should have settled in compliance with the settlement notice”. In this case, the deadline to comply with the settlement notice was 23 April 2009. The
resale contract was entered on 15 March 2010, within the required one year period.
4 HC Auckland CP513/89, 4 May 1989
5 HC Hamilton A122/82, 3 November 1986
6 HC Invercargill CP53/86, 4 September 19867 HC Auckland A1203/84, 13 May 1986
[21] In Sullivan v Darkin the Court stated that this term of the contract is to apply, together with the ordinary contractual duty to mitigate loss.8 At the latter reference Somers J described the duty on the vendor thus:9
He must take such steps as are reasonable in the circumstances, including those in which he is placed by the purchaser’s default, to obtain a proper price. In assessing what is reasonable the conduct of the vendor is not to be weighed in nice scales.
[22] In an application for summary judgment the onus of satisfying the Court that a defendant does not have an arguable defence lies throughout on the plaintiff. That said, it is necessary for a defendant to lay a creditable foundation for any defence which is alleged to exist. My appraisal of the facts of this case must be approached on this basis.
[23] In my opinion, the Court can give only limited weight to the evidence of Mr Burgess. I have already described the shortcomings in his evidence. Against his views, and the views of the defendant, I weigh up the fact that as the defendant accepts, the property market had deteriorated since the sale. Secondly, the property was on the market for sale in the hands of an agency specialising in expensive properties in the Takapuna area from the time of the defendant’s default until the resale contract was achieved. Thirdly, three offers were received during that time, the highest of which was $2,100,000.00, and the lower two were for almost identical sums. Fourthly, there is evidence that expenditure of up to a million dollars might be necessary for the works required to be able to proceed to place buildings on the site. Although no professional analysis from, for example, a valuer was given to me on this issue, I am satisfied that this is a feature which would impact negatively on the value of a piece of land. In essence, it is a sum which has to be spent before building can commence.
[24] Assessing the matter as directed by Somers J in Sullivan v Darkin, I am satisfied that the plaintiff has taken the steps required of her to mitigate her loss in this case. Whilst I cannot, obviously, exclude the possibility that had there been
more advertising, as Mr Burgess believes there should have been, another buyer
8 At 219 and 223
prepared to pay more might have been identified, three were in fact identified, and I am not satisfied that his view on that issue, and the view of the defendant to similar effect, lays the foundation for the defence on which the defendant relied.
Outcome
[25] I enter judgment for the plaintiff in the sum of $2,193,457.10. The plaintiff is entitled to costs on a 2B basis plus disbursements which, if not agreed, can be fixed
by the Registrar.
J G Matthews
Associate Judge
Solicitors:
DMG Solicitors, Auckland
Dyson Smythe and Gladwell, WarkworthCounsel:
Mr K F Gould, Auckland
Mr M J Koppens, Warkworth
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